Essentials of MIS Additional Cases 1 BUSINESS PROBLEM-SOLVING CASE JetBlue Hits Turbulence In February 2000, JetBlue started flying daily to Fort Lauderdale, Florida and Buffalo, New York, promising top-notch customer service at budget prices. The airline featured new Airbus A320 planes with leather seats, each equipped with a personal TV screen, and average one-way fares of only $99 per passenger. JetBlue was able to provide this relatively luxurious flying experience by using information systems to automate key processes, such as ticket sales (online sales dominate) and baggage handling (electronic tags help track luggage).
Jet Blue prided itself on its “paperless processes. ” JetBlue’s investment in information technology enabled the airline to turn a profit by running its business at 70 percent of the cost of larger competitors. At the same time, JetBlue filled a higher percentage of its seats, employed non-union workers, and established enough good will to score an impressive customer retention rate of 50 percent. Initially, JetBlue flew only one type of plane from one vendor: the Airbus A320. This approach enabled the airline to standardize flight operations and maintenance procedures to a degree that resulted in considerable savings.
CIO Jeff Cohen used the same simple-is-better strategy for JetBlue’s information systems. Cohen depended almost exclusively on Microsoft software products to design JetBlue’s extensive network of information systems. (JetBlue’s reservation system and systems for managing planes, crews, and scheduling are run by an outside contractor. ) Using a single vendor provided a technology framework in which Cohen could keep a small staff and favor in-house development of systems over outsourcing and relying on consultants. The benefit was stable and focused technology spending. JetBlue spent only 1. percent of its revenue on information technology, as opposed to the 5 percent spent by competitors. JetBlue’s technology strategy helped create a pleasing flying experience for passengers. As president and chief operating officer Dave Barger put it, “Some people say airlines are powered by fuel, but this airline is powered by its IT infrastructure. ” JetBlue consistently found itself at the top of J. D. Power and Associates customer satisfaction surveys. JetBlue believed it had learned to work lean and smart. The big question was whether JetBlue would be able to maintain its strategy and its success as the airline grew.
By the end of 2006, the company was operating 500 flights daily in 50 cities and had $2. 4 billion in annual revenue. Along the way, JetBlue committed to purchasing a new plane every five weeks through 2007, at a cost of $52 million each. Through all of this, JetBlue remained true to its formula for success and customers continued to return. February 14, 2007, was a wake-up call. A fierce ice storm struck the New York City area that day and set in motion a string of events that threatened JetBlue’s sterling reputation and its stellar customer relationships.
JetBlue made a fateful decision to maintain its schedule in the belief that the horrible weather would break. JetBlue typically avoided pre-canceling flights because passengers usually preferred to have a delayed arrival than to camp out at a terminal or check into a hotel. If the airline had guessed correctly, it would have kept its revenue streams intact and made the customers who were scheduled to fly that day very happy. Most other airlines began canceling flights early in the day, believing it was the prudent decision even though passengers would be inconvenienced and money would be lost.
The other airlines were correct. Nine JetBlue planes left their gates at John F. Kennedy International Airport and were stranded on the tarmac for at least six hours. The planes were frozen in place or trapped by iced-over access roads, as was the equipment that would de-ice or move the aircraft. Passengers were confined inside the planes for up to ten and one-half hours. Supplies of food and water on the planes ran low and toilets in the restrooms began to back up. JetBlue found itself in the middle of a massive dual crisis of customer and public relations.
JetBlue waited too long to solicit help for the stranded passengers because the airline figured that the planes would be able to take off eventually. Meanwhile, the weather conditions and the delays or cancellations of other flights caused customers to flood JetBlue’s reservations system, which could not handle the onslaught. At the same time, many of the airline’s pilots and flight crews were also stranded and unable to get to locations where they could pick up the slack for crews that had just worked their maximum hours without rest, but did not actually go anywhere.
Moreover, JetBlue did not have a system in place for the rested crews to call in and have their assignments rerouted. The glut of planes and displaced or tired crews forced JetBlue to cancel more flights the next day, a Thursday. And the cancellations continued daily for nearly a week, with the Presidents’ Day holiday week providing few opportunities for rebooking. On the sixth day, JetBlue cancelled 139 of 600 flights involving 11 other airports. 2 76 Part I: Information Systems in Hits Digital Age JetBlue the Turbulence
JetBlue’s eventual recovery was of little solace to passengers who were stranded at the airport for days and missed reservations for family vacations. Overall, more than 1,100 flights were cancelled, and JetBlue lost $30 million. The airline industry is marked by low profit margins and high fixed costs, which means that even short revenue droughts, such as a four-day shutdown, can have devastating consequences for a carrier’s financial stability. Throughout the debacle, JetBlue’s CEO David G. Neeleman was very visible and forthcoming with accountability and apologies.
He was quoted many times, saying things such as, “We love our customers and we’re horrified by this. There’s going to be a lot of apologies. ” Neeleman also admitted to the press that JetBlue’s management was not strong enough and its communications system was inadequate. The department responsible for allocating pilots and crews to flights was too small. Some flight attendants were unable to get in touch with anyone who could tell them what to do for three days. With the breakdown in communications, thousands of pilots sand flight attendants were out of position, and the staff could neither find them nor tell them where to go.
JetBlue had grown too fast, and its low-cost IT infrastructure and systems could not keep up with the business. JetBlue was accustomed to saving money both from streamlined information systems and lean staffing. Under normal circumstances, the lean staff was sufficient to handle all operations, and the computer systems functioned well below their capacity. However, the ice storm exposed the fragility of the infrastructure as tasks such as rebooking passengers, handling baggage, and locating crew members became impossible. Although Neeleman asserted in a conference call hat JetBlue’s computer systems were not to blame for its meltdown, critics of the company pointed out that JetBlue lacked systems to keep track of off-duty flight crews and lost baggage. Its reservation system could not expand enough to meet the high customer call volume. Navitaire, headquartered in Minneapolis, hosts the reservation system for JetBlue as well as for a dozen other discount airlines. The Navitaire system was configured to accomodate up to 650 agents at one time, which was more than sufficient under normal circumstances.
During the Valentine’s Day crisis, Navitaire was able to tweak the system to accomodate up to 950 agents simultaneously, but that was still not enough. Moreover, JetBlue could not find enough qualified employees to staff its phones. The company employs about 1,500 reservation agents who work primarily from their homes, linking to its Navitaire Open Skies reservation system using an Internet-based voice communications system. Many ticketholders were unable to determine the status of their flights because the phone lines were jammed.
Some callers received a recording that directed them to JetBlue’s Web site. The Web site stopped responding because it could not handle the spike in visitors, leaving many passengers with no way of knowing whether they should make the trip to the airport. JetBlue lacked a computerized system for recording and tracking lost bags. It did have a system for storing information such as the number of bags checked in by a passenger and bag tag identification numbers. But the system could not record which bags had not been picked up or their location.
There was no way for a JetBlue agent to use a computer to see if a lost bag for a particular passenger was among the heap of unclaimed bags at airports where JetBlue was stranded. In the past, JetBlue management did not feel there was a need for such a system because airport personnel were able to look up passenger records and figure out who owned leftover bags. When so many flights were canceled, the process became unmanageable. JetBlue uses several applications provided by outsourcing vendor Sabre Airline Solutions of Southlake, Texas to manage, schedule, and track planes and crews and to develop actual flight plans.
Sabre’s FliteTrac application interfaces with the Navitaire reservation system to provide managers with information about flight status, fuel, passenger lists, and arrival times. Sabre’s CrewTrac application tracks crew assignments and provides pilots and flight attendants access to their schedules via a secure Web portal. JetBlue uses a Navitaire application called SkySolver to determine how to redeploy planes and crews to emerge from flight disruptions. However, JetBlue found out during the Valentine’s Day emergency that SkySolver was unable to transfer the information quickly to JetBlue’s Sabre applications.
And even if these systems had worked properly together, JetBlue would have probably been unable to locate all of its flight crews to redirect them. It did not have a system to keep track of off-duty crew members. Overtaxed phone lines prevented crew members from calling into headquarters to give their locations and availability for work. JetBlue’s response to its humiliating experience was multifaceted. On the technology front, the airline deployed new software that sends recorded messages to pilots and flight attendants to inquire about their availability.
When the employees return the calls, the information they supply is entered into a system that stores the data for access and analysis. From a staffing standpoint, Neeleman promised to train 100 employees from the airline’s corporate office to serve as backups for the departments that were stretched too thin by the effects of the storm. Chapter 2:of MIS AdditionalBusinesses Use Information Systems Essentials E-Business: How Cases 77 3 JetBlue attempted to address its customer relations and image problems by creating a customer bill of rights to enforce standards for customer treatment and airline behavior.
JetBlue would be penalized when it failed to provide proper service, and customers who were subjected to poor service would be rewarded. JetBlue set the maximum time for holding passengers on a delayed plane at five hours. The company changed its operational philosophy to make more accomodation for inclement weather. An opportunity to test its changes arrived for JetBlue just one month after the incident that spurred the changes. Faced with another snow and ice storm in the northeast United States on March 16, 2007, JetBlue cancelled 215 flights, or about a third of its total daily slate.
By canceling early, management hoped to ensure that its flight crews would be accessible and available when needed, and that airport gates would be kept clear in case flights that were already airborne had to return. In the wake of its winter struggles, JetBlue was left to hope that its customers would be forgiving and that its losses could be offset. Neeleman pointed out that only about 10,000 of JetBlue’s 30 million annual customers were inconvenienced by the airline’s weather-related breakdowns.
On May 10, 2007, JetBlue’s Board of Directors removed Neeleman as CEO, placing him in the role of non-executive chairman. According to Liz Roche, managing partner at Customers Incorporated, a customer relationship management research and consulting firm, “JetBlue demonstrated that it’s an adolescent in the airline industry and that it has a lot of learning and growing up to do. ” Sources: Doug Bartholomew and Mel Duvall, “What Really Happened at JetBlue,” Baseline Magazine, April 1, 2007; “JetBlue Cancels Hundreds of Flights,” The Associated Press, accessed via www. nytimes. om, March 16, 2007; Susan Carey and Darren Everson, “Lessons on the Fly: JetBlue’s New Tactics,” The Wall Street Journal, February 27, 2007; Eric Chabrow, “JetBlue’s Management Meltdown,” CIO Insight, February 20, 2007; Jeff Bailey, “Chief ‘Mortified’ by JetBlue Crisis,” The New York Times, February 19, 2007 and “Long Delays Hurt Image of JetBlue,” The New York Times, February 17, 2007; Susan Carey and Paula Prada, “Course Change: Why JetBlue Shuffled Top Rank,” The Wall Street Journal, May 11, 2007; Coreen Bailor, JetBlue’s Service Flies South,” Customer Relationship Management, May 2007; Thomas Hoffman, “Out-of-the-Box Airline Carries Over Offbeat Approach to IT,” Computerworld, March 11, 2003; and Stephanie Overby, “JetBlue Skies Ahead,” CIO Magazine, July 1, 2002. Case Study Questions 1. What types of information systems and business functions are described in this case? 2. What is JetBlue’s business model? How do its information systems support this business model? 3.
What was the problem experienced by JetBlue in this case? What people, organization, and technology factors were responsible for the problem? 4. Evaluate JetBlue’s response to the crisis. What solutions did the airline come up with? How were these solutions implemented? Do you think that JetBlue found the correct solutions and implemented them correctly? What other solutions can you think of that JetBlue hasn’t tried? 5. How well is JetBlue prepared for the future? Are the problems described in this case likely to be repeated? Which of JetBlue’s business processes are most vulnerable to breakdowns? How much will a customer bill of rights help?