JetBlue Tries to Bounce Back from Storm of Trouble

After Valentine's Day debacle, management team gets new faces


Already, "a lot of good things have happened since Valentine's Day." One month later, on March 16, he says, an ice storm shut down operations at JFK. Yet, because of operations changes made before Chew arrived, Barger says, "The next day ... we had a flight completion factor of 98%. I'm very proud of that."

That didn't happen Feb. 14.

JetBlue's astonishingly slow response to a surprisingly severe storm stranded more than 1,000 passengers on nine planes stuck on taxiways at JFK for six or more hours.

Less noticed was the fact that several thousand travelers were stuck for hours -- days in some cases -- inside JetBlue's terminal, where food, water and clean restrooms were quickly in short supply.

The nightmare spilled over into a second, then a third, then a fourth day. It was a week before JetBlue's operations returned to normal. In all, about 1,200 flights were canceled. It cost the airline $41 million in lost revenue, extra costs and vouchers for free travel.

A month later, Chew came onboard and began rewiring the airline's central nervous system -- called the System Operations Control center -- with new technology, policies and people.

The airline has beefed up its weather-forecasting capabilities. The first steps have been taken to allow customers who buy their tickets via the company's website to rebook themselves or get refunds in the event of flight disruptions. New managers and procedures are in place at the carrier's key choke point, JFK.

Chew also has set out to change the airline's mindset to instill what he calls "corporate discipline."

For example, JetBlue officials used to proclaim that they rarely canceled flights because of weather. Flights might be hours late, but passengers eventually reached their destinations. That philosophy won the loyalty of many travelers. But while well-intentioned, Chew says, that policy betrayed a lack of corporate discipline.

The old way placed the needs of several hundred people to get to their destinations ahead of the larger imperative of preventing delays from piling up and disrupting the carrier's entire operation, a situation that affects thousands.

"JetBlue had grown so quickly that they were really unaware of how vulnerable they were to what I call a 'zero departure rate,'" Chew says. Unlike its early days, when its departures were few and spaced out, JetBlue today sees about 1,500 passengers arrive at JFK in an hour, and 1,500 others depart. When delays happen, "In two hours, the number of people at the airport goes to 6,000. In three hours, it's like 9,000. Before long, you've gridlocked the entire airport and crippled our entire operation for a day or longer."

Barger says the biggest lesson from the Feb. 14 storm has been that "sometimes, Mother Nature wins," but when she does, "Make sure it's just a one-day event."

Not so shiny now

JetBlue once was a Wall Street darling, both for its promise and its early profitability. Both began fading after its wildly successful 2003, when it earned $103 million. Profits dropped to $46 million in 2004.

Then a $20 million loss in 2005 set in motion the change process already underway when the Valentine's Day disaster struck. Since November 2005, JetBlue has replaced or transferred within the company not only its CEO and COO but executives in charge of marketing, technology, planning, finances, law, purchasing, flight, government affairs and human resources.

Its declining results have been, in part, the result of factors beyond JetBlue's control -- the run-up in fuel prices, the resurgence of conventional airlines that lowered their costs, rapid expansion by rival low-cost airlines and a slowdown in the growth of domestic air travel demand. But JetBlue's missteps have been a factor, too.

It lost money taking on the likes of American, United and Delta on transcontinental routes, and fighting Delta's now-defunct Song unit, US Airways, AirTran and others on leisure-oriented routes along the East Coast. JetBlue actually won or held its own in all those market battles. But during that time, Southwest, the big kahuna of discounters, was able to establish itself in Philadelphia and Denver, potential JetBlue growth markets.

Worse, JetBlue's own costs rose sharply by the industry's key measure: flying a single seat one mile. In the first quarter of this year, JetBlue's cost for every seat mile rose to 8.43 cents, up from 6.1 cents in 2003, a 38% jump in about three years.

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