Companies & Industries

The Issue: JetBlue's Winter Blues


When winter travelers got stranded, former CEO David Neeleman went into high gear to show fliers that JetBlue took their complaints seriously

You had to give the guy some credit. It's not every day that the chief executive officer of a public company—especially one just emerging from a crisis like the one JetBlue Airways (JBLU) former CEO David Neeleman weathered back in February—shows up on the Late Show with David Letterman. But there he was on national TV just after midnight, suffering through guffaws at his expense ("We'll make him wait for a change," Letterman told Barbara Walters, who preceded Neeleman as a guest), and somberly promising that his airline would do better.

The Letterman appearance was just one of many mea culpas from Neeleman, whose airline had been digging out from an operational and public-relations quagmire after a devastating ice storm struck JetBlue's home base of New York City on Feb. 14. Most notably, JetBlue posted a video of Neeleman on its Web site and on YouTube (GOOG), which quickly found its way around the Web. In the video Neeleman described the storm as the most difficult time in the airline's history, outlined the company's planned changes, and told customers, "I want to assure you as the CEO of this company that the events that transpired last week and the way that they transpired will never happen again."

JetBlue's service recovery has all the makings of a Tylenol-caliber case study, starring a repentant CEO, a host of grand gestures to customers, and a few daring publicity coups (like the Letterman appearance). For JetBlue, the stunning operational breakdown—passengers were trapped on planes for hours and more than 1,000 flights were cancelled over six days—was especially difficult given that it had long touted itself as the carrier that was going to "bring humanity back to air travel." Interminable delays and service snafus, says UNC Kenan-Flagler Business School marketing professor Valarie Zeithaml, could have been "more detrimental [to JetBlue] than to a larger airline. It runs totally counter to who they are coming out and saying they are and what they live."

Neeleman knew the airline had to back up its apologies with changes—and knew the event would teach them plenty. "We should have acted quicker," Neeleman said at the time. "We should have had contingency plans that were better baked to be able to [unload] customers. We should have called the Port Authority [which runs JFK airport] quicker. These were all lessons learned from that experience." For starters, the airline offered immediate refunds and travel vouchers to customers stuck on planes for more than three hours—far more than Northwest Airlines (NWA) handed out following its infamous plane delays in 1999, and quicker than American Airline's (AMR) response when flights full of customers were stranded on the runway for as long as eight hours in December, 2006.

One of the centerpieces of Neeleman's recovery strategy was a "e;customer bill of rights,"e; a written policy JetBlue announced on Feb. 20. It requires the airline to dole out vouchers or refunds in certain situations, such as $1,000 for customers involuntarily denied boarding or $50 for any two- to four-hour delays caused by events under JetBlue's control. Neeleman promised other changes, too, including overhauling information systems that track crew whereabouts, upgrading JetBlue's Web site to allow online rebookings, and training workers at New York headquarters to help out at the airport in the event of future storms.

In the months that followed, the company bulked up its ranks of operational leaders, including a new vice-president for operations at JFK Airport, a new vice-president for flight operations, and a new chief operating officer with operations chops from both American Airlines and the Federal Aviation Administration. Neeleman was even asked by the board to step aside in May and was replaced by President Dave Barger, also noted for his operations experience. Neeleman became nonexecutive chairman of the board.

Since the February storm, much evidence points to a recovery in Jet Blue's operations and customer service. In March JetBlue weathered another major snow storm by canceling hundreds of flights up front, thereby risking far fewer passengers idling on the tarmac for hours. The airline slowed its expansion plans, dropping service to two cities and selling planes to get growth in line with profitability. By October, its third-quarter earnings beat analyst expectations and revenues rose by 22%.

But perhaps the best sign of the impact Neeleman's apology made on customers comes in another form. Since February, the airline has been named the best low-cost airline by OAG, a travel data firm, and the best U.S. airline by both Condé Nast Traveler and J.D. Power & Associates (like BusinessWeek, J.D. Power & Associates is owned by The McGraw-Hill Companies (MHP)).

Editor's note: Portions of this story (BusinessWeek, 3/5/07) originally appeared in BusinessWeek magazine.

Saying "I'm sorry" isn't enough when it comes to managing a crisis. Angry customers demand and deserve more

As with the fall-out from most crises, JetBlue Airways (JBLU) needed to do three things to manage its response to the ice storm that disrupted their operations back in February. They needed to defuse the outrage from customers, to show consumers that they had some control over their fates, and to be able to offer some kind of remedy for the chaotic situation.

That remedy had to go further than apologies, which I believe are vastly overrated. Apologies are just the price of entry when it comes to managing crises. Rather, JetBlue provided several remedies, reimbursing customers and passing a customer bill of rights that would give out flight vouchers when JetBlue erred. The reason this was so effective is that the airline took tangible actions—it wasn't just PR rhetoric. It showed customers there would be a price to be paid if JetBlue had the same operational breakdown again.

One important thing then-CEO David Neeleman did was to film an apology that was posted on YouTube. Again, the reason it's important is not because of the apology itself. Neeleman is a fundamentally likeable guy who also came across as being competent. Too many companies worry about strategy and plans when it comes to crisis management. More often, it comes down to the personality and character of the leader and whether people perceive him or her as someone committed to resolving the problem.

Despite how much Neeleman's likeability might have helped JetBlue weather the storm, in most crises the urge to blame someone remains very high. That seemed true in JetBlue's case—after all, in May, the board asked Neeleman to step aside and become nonexecutive chairman. The candid way he handled his departure—admitting he was more of a visionary than an operations whiz—reinforced the company's commitment to change.

The one decision for which I have a minor criticism is Neeleman's choice to appear on the Letterman show. That's a pop culture venue, and CEOs are often uncomfortable in entertainment situations, which require a specific set of skills. While he did all right on the show, viewers could also see that he was visibly conscious of staying "on message."

Still, that's a small offense. People think handling crises is all about public relations. But as JetBlue shows, it's not. It has to be a combination of rhetoric and remedies. The airline succeeded in defusing the outrage quickly, highlighting the character of its leaders, and taking very tangible actions that proved to customers the same problems wouldn't happen again.

McGregor is BusinessWeek's management editor.

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