JetBlue Hits Turbulence CASE STUDY
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 S99 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 self 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 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. Chief information officer 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 where 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 1.5 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....
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