Regaining Altitude after the

Valentines Day Massacre

of 2007

Agenda
1. JetBlue Takes Off
2. The Perfect Storm
3. JetBlack and Blue
4. Misery Loves Coverage
5. The Redemption Plan
6. Image Restoration Strategies
7. Discussion Questions

JetBlue Takes Off

JetBlue Airways Launched Operations in
1999
Improbable Early Success Despite:
Track Record of Start-Ups Since 1978
Barriers to Entry for Industry Newcomers
High Fixed Costs & Volatile Expenses
Intense Competition
Industry Sensitivity to Economic Cycles

September 11, 2001

JetBlue Takes Off

It is a business whose margins are so

razor thin that a couple of passengers
on each plane can spell the difference
between profit and loss and where a
one-cent rise in the price of jet fuel
can cost the industry an added
$180 million a year."
Airline Industry Expert Barbara Peterson

JetBlue Takes Off

Founder/CEO David Neeleman's Vision
Bringing the "Humanity Back to Air Travel"
Paperless Ticketing
Extra Legroom and Wide Leather Seats each
equipped with a personal TV Screen
Satellite TV Feeds
"Customers" not "Passengers"

JetBlue Takes Off

Q. How was JetBlue able to provide this
relatively luxurious flying experience?
A. By using IS to automate key processes
like

On line ticket sales

Baggage handling

Paperless processes

A. JetBlues investment in IT enabled the

airline to turn a profit by running business at
70% of the cost of larger competitors

JetBlue Takes Off

A. JetBlue filled higher percentage of its seats,
employed non union workers and established
enough good will to score an impressive customer
retention rate of 50%
A. Some good Business Strategies:
Flew only one type of plane from one vendor
Airbus 320
Helped standardize flight operations and
maintenance procedures which resulted in
considerable savings
CIO Jeff Cohen used the same simple-is-better
strategy for JetBlues Information Systems

JetBlue Takes Off

A. Some good Business Strategies:
Cohen used exclusively Microsoft software
products to design JetBlues extensive network
Information Systems
JetBlues reservation system and systems for
managing planes, crews, and scheduling are run
by an outside contractor
Using a single vendor provided a technology
framework where Cohen could keep small staff
and favor in-house development of systems over
outsourcing and relying on consultants
JetBlue spent only 1.5% of its revenue on IT as
compared to 5% spent by competitors

JetBlue Takes Off

By the end of 2006, the company was operating
500 flights daily in 50 cities
Along the way, JetBlue committed to purchasing a
new plane every five weeks through 2007, at a cost
of $52 Million each.
Operating revenue for 2006 totaled $2.36 billion
Represented 39% Growth Over 2005
By 2007 JetBlue Airways:
Served 52 Domestic and International
Destinations
Operated More Than 575 Daily Flights

The Perfect Storm

Q. What happened on February, 14, 2007 and what
wrong decisions were taken by JetBlue ?
A. February 14, 2007 was a wake up call
A. A fierce Ice Storm stuck the New York city area
that day
A. JetBlue made a fateful decision to maintain its
schedule in the belief that the horrible weather
would break
A. JetBlue avoided pre-canceling flights, while most
other Airlines began canceling flights early in the
day, believing it was the prudent decision even
though the passengers would be inconvenienced
and money would be lost

The Perfect Storm

Valentine's Day Winter Storm in Northeast
U.S.
Deteriorating Weather Conditions at
Airport

JFK

Gridlock on the Tarmac

Frozen Ground Equipment
Delay in Calling Port Authority for Assistance

Problems with JetBlue Reservations Hotline

Inaccurate Flight Info on JetBlue Web Site

The Perfect Storm

Passengers Stranded Inside Planes
Supplies of food and water ran low
Toilets in the restrooms began to back up

Horror Stories
9 JetBlue Flights Sat on the Tarmac at
JFK in Excess of 6 Hours

Hero Stories
Pilots and
Attendants
Creative
The $360 Cab Ride

Flight
Get

The Perfect Storm

According to Passengers Stranded Inside
JetBlue Planes
"This has been one of the worst
experiences of our lives."
"They are right on the edge of
human-rights violations They have
no contingency plan at all. When
they say no frills, they mean it."
"It was like whats the name of that prison in
Vietnam where they held [Senator John]
McCain? The Hanoi Hilton.

JetBlack and Blue

Lost Luggage Piles Up
JetBlue Planes and Flight Crews Out of Place
Throughout the U.S.
The "Reset" Plan
Cancellations
1,200 between February 14-19
$20 Million in Lost Revenue
$24 Million in Refunds and Vouchers

JetBlack and Blue

The Primary Culprits
Bad Weather
Flawed
Decision-Making
Inadequate
Communication
Processes
Overwhelmed Reservations System
Lack of Cross-Trained Personnel

Misery Loves Coverage

"Call it the perfect storm, the imperfect storm,
the Valentines Day Massacre."
A JetBlue Vice President

Media Interest in the

Crisis
5,000 Phone Inquiries
Over Six Days
Battling Misperceptions
Concern on Wall Street
Congress Comes Calling

The Redemption Plan

"This is going to be a different

company because of this.
Its going to be expensive.
But whats more important is to win
back peoples confidence."
JetBlue Founder and CEO David Neeleman

Image Restoration Strategies

Shift the Blame to the Weather
Reduce the Perceived Magnitude of the
Crisis
Make Sincere and Repeated Apologies
Compensate Customers Impacted by the
Crisis
Take Corrective Action
Neeleman: Let's Issue a "JetBlue Airways
Customer Bill of Rights"

Image Restoration Strategies

Selected Key Publics
Customers Impacted by the Crisis
Unaffected JetBlue Customers
Employees
Shareholders
Government
Industry Authorities
Eager Legislators

Media

Case Study Questions:

1. What types of Information Systems and Business
Functions are described in this case?
A:
Transaction Processing Systems
Ticket Sales, Baggage Handling
Reservation System
Management Information Systems
System for managing planes, crews &
Flights Scheduling
DSS No evidence of one
ESS No evidence of one
Communication System There was one,
but it proved to be inadequate

Case Study Questions:

1. What types of Information Systems and Business
Functions are described in this case?
A. Contd.
There is no evidence of integrated systems like enterprise
applications, CRM etc.

Case Study Questions:

2. What is JetBlues Business Model?
A:
JetBlues Business Model is to provide luxurious flying
experience at a very low price.
Simplicity was JetBlues Mantra
It used a very lean, non union workforce
Flew only one type of plane from one vendor allowing it to
standardize flight operations and maintenance procedures
and streamlined its business processes to bare bones
minimum.

Case Study Questions:

3. How does its Information Systems support its
business model?
A:
Its Information Systems were simplified to a single vendor
that provided a technology framework in which the
supporting staff could develop systems in house rather than
use outsourcing or consultants.
JetBlue spent only 1.5% of its revenue on IT as opposed to
5% spent by Competitors

Case Study Questions:

4. What was the problem experienced by JetBlue in
this case? What people, organization and
technology factors were responsible for the
problems?
A:
The real problem JetBlue experienced wasnt with the
weather that was only a contributing factor. The Real
problems were:
Transaction Processing System was not scalable. The TPS
JetBlue used was good for normal traffic and normal
business conditions. Tech.
Reservation System was not adequate to handle the
increased no. of customers using it when the flights were
cancelled. Tech.

Case Study Questions:

4. A: Contd.
No MIS was available to manage crews Org.. and Tech.
Inadequate comm. System for crews to call and get new
assignments Tech. and Org..
Lean Staffing Org. and People
No system in place for managing stranded, lost or
unclaimed baggage. Org. & Tech.
Web Site was not scalable to handle the additional traffic
Tech.
Lack of DSS for managing crew assignments Tech. & Org.

Case Study Questions:

5. What kinds of systems and functions were
involved in JetBlues problem?
A.
TPS : Baggage Handling, Reservations, CRM
MIS : Crew Scheduling, Communications, Operations
Planning
DSS : Crew Allocation, Aircraft Allocation, Flight Planning
EIS : Weather Monitoring, Cancellations and Reallocation

Case Study Questions:

6. What solutions did the Airline come up with?
What other solutions can you think of that JetBlue
hasnt tried?
A. Solutions:
The Airline purchased new software to improve comm. With
Pilots and Crew members
It trained 100 employees from its corporate office to serve
as backups for Depts. that did not have enough staffing.
It created customer bill of rights to enforce standards for
customer treatment and Airlines behavior.
It changed its operational philosophy to accommodate
inclement weather situations.

Case Study Questions:

6. A. Solutions: Contd.
Recommendations:
Increase the number and type of Info. Systems in the
company.
DSS for crew management
TPS for Baggage
More scalable web site for reservations and customer
communications

Case Study Questions:

7. How well is JetBlue prepared for the future? Are
the problems described in this case likely to be
repeated? Which of JetBlues business processes are
most vulnerable to breakdowns? How much will
customer bill of rights help?
A.

JetBlue could experience similar problems in the next crisis

unless it ramps up its information systems

The company prided itself on a lean and mean simplified

IT infrastructure

Yet it is the very lack of infrastructure itself caused many

of its problems.

Case Study Questions:

7. A. Contd.

May be competitors are doing the right thing of spending

3.5 % more of their revenues on Information Systems /
Technology. Its necessary

Most of the same problems are likely to re-occur except

perhaps crew management.

Business processes which are most vulnerable to

breakdowns are Reservations, Baggage, Plane
Maintenance and Communications.

The new customer bill of rights is a step in the right

direction as far as sales, marketing and customer relations
are concerned.

But it wont mean much if the Airline does not create the
proper infrastructure to support the policy in the next
crisis.

Lessons Learned
Systems should be able to handle the crisis
Information Systems should be ramped up as the
need grow
IT Infrastructure should be adequate to handle
spikes in volumes
More scalable websites for reservations and
customer communications
Trained staff back ups should be available within the
Airlines
Decision support systems for crew management,
transaction processing for baggage must be in place
In today context, better option is Cloud Computing