April 11, 2018

An ice storm bit JFK Airport in New York on February 10, 2010, severely reducing airport capacity for more than 24 hours. The day before the storm hit, JetBlue Airways, based at JFK, had cancelled 386 flights scheduled for the following day, including all 261 flights scheduled to take off from JFK. The cancellation decision was made well in advance, based on weather forecasts-passengers and aircrews were notified up to 36 hours before their flights.

If we were going to change on this magnitude as quickly as we were trying to, we had to involve everybody that did the work in the work.

-Rob Maruster, JetBlue Airways Chief Operating Officer 1

An ice storm bit JFK Airport in New York on February 10, 2010, severely reducing airport capacity for more than 24 hours. The day before the storm hit, JetBlue Airways, based at JFK, had cancelled 386 flights scheduled for the following day, including all 261 flights scheduled to take off from JFK. The cancellation decision was made well in advance, based on weather forecasts-passengers and aircrews were notified up to 36 hours before their flights. Since

passengers on cancelled flights did not come to the airport, the level of stress generally experienced when boarding areas were full of people impacted by cancelled or delayed flights was greatly reduced. The airline adjusted plans for airplanes and aircrews so that it could quickly recover once the storm passed. The next day, operations resumed in an orderly way, although another 138 flights were cancelled. 2 The schedule was completely back to normal two days after the storm.

This was a far cry from the impact of a six-hour ice storm three years earlier. That event, called by some the “Valentine’s Day Massacre,” had stranded nine JetBlue planes, full of passengers, on the tarmac for more than six hours. The company had delayed making cancellations, hoping the weather would clear, but eventually had to cancel 1,195 flights over a period of six days, costing about $41 million. 3 JetBlue was pilloried in the press and called before Congress-a shocking turn of events for a company predicated on the idea of “bringing humanity back to air travel,” and consistently rated as one of the best (if not the best) airline for passenger service.

1 Quotations are from interviews with the author (Hoyt) unless otherwise specified.

2 Cancellation statistics from JetBlue Airways.

3 John Harvey, JetBlue CFO, in “QI 2007 JetBlue Airways Earnings Conference Call-Final,” Voxant FD Wire,

A ril 24, 2007.

David Hoyt and Professors Charles O’Reilly, Hayagreeva Rao, and Robert Sutton prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2010 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: [email protected] or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns about any material appearing in this case study, please contact the Case Writing Office at [email protected].

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 18TW3 taught by Lindsay Conole, Southern New Hampshire University from

January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17 p.2

The dramatic turnaround was the result of a company-wide effort, involving more than 200 people from all levels and departments, working on 100 cross-functional projects. The initiative,

called “IROP Integrity,” not only transformed the way JetBlue addressed disruptive events, or

irregular operations (IROPs), but established a model for large-scale change in the company, and instilled confidence among employees that they could work together to solve even the most challenging problem.

JETBLUE AIRWAYS

JetBlue Airways was founded in 1999 to provide low-cost flights to previously underserved markets. It would use technology both to improve the customer experience and to increase employee and aircraft productivity. The company was founded by David Neeleman, who had

previously cofounded Morris Air, a low-cost airline based in Salt Lake City, Utah, which he sold to Southwest Airlines.4 To balance his visionary leadership as JetBlue’s founding chairman and CEO, Neeleman brought in an experienced airline executive with strong operational expertise, David Barger, as the company’s chief operating officer.

JetBlue was quickly successful, beating the long odds faced by airlines, particularly airline start ups. Of the 51 U.S. airlines that were founded in the 1980s,just two were still operating by the

time JetBlue began flying-and one of these had experienced several near bankruptcies. Of the 39 jet airlines that began operations between 1989 and 1999, just 17 were still flying in 2000.

The company’s flight operations were based at New York’s John F. Kennedy (JFK) airport. As it grew, JetBlue adopted a route structure that was a hybrid between the “hub-and-spoke” system used by most legacy carriers, and the “point-to-point” system used by many discount airlines.

By 2010, JetBlue had five “focus” cities (New York/JFK, Boston, Orlando, Fort Lauderdale, and Long Beach) that provided direct service from the east and west coasts, and from the northeast to the southeast. Flights to other cities originated from one of these airports.

Several aspects of JetBlue’s development are important to understanding the conditions leading

to the problems surfaced by the February 2007 ice storm, as well as the steps taken to address those problems. These include the company’s rapid growth, its financial history, and its culture and values.

Rapid Growth

From inception until the February 2007 ice storm, growth was seen as a key imperative for the company. Rob Maruster, who was senior vice president of airports and operational planning at the time, recalled: “Leading up to 2007, quite honestly, the focus was on when the next city was

opening, and when the next plane is getting here.”

4 For additional details about the founding of JetBlue, see Jody Gittell and Charles O’Reilly, “JetBlue Airways:

Starting from Scratch,” HBS Case 9-801-354. 5

Information on the early days of JetBlue from Jody Gittell and Charles O’Reilly, “JetBlue Airways: Starting from

Scratch,” HBS Case 9-801-354.

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 18TW3 taught by Lindsay Conole, Southern New Hampshire University from January 2018 to April 2018.

JetBlue Airways: A New Beginning: Ir17 p.3

JetBlue’s first revenue flight, on February 11, 2000, flew from JFK to Fort Lauderdale, Florida. The next week, it began service between JFK and Buffalo, NY. In March, it started flying from JFK to Tampa, Florida, followed by service from JFK to Orlando in June. By the end of 2000, it had 10 Airbus 320 jets (A320s), had flown 1 million customers, and had generated revenue of $100 million.6 By the end of 2001, JetBlue had 21 A320s flying 102 flights daily to 16 cities. Almost half of its flights (50) were between JFK and Florida, with 18 between JFK and cities on the west coast. 7

By the time of the February 2007 ice storm, JetBlue was the eighth largest passenger carrier in the U.S. It flew two types of airplane, the A320, which carried 156 passengers,8 and the Embraer 190 (E190) regional jet, which carried 100 passengers. It had implemented the hybrid “focus city” route system, with 502 flights daily to 50 cities. Its fleet had increased to 121 planes (98 A320s and 23 E l90s). At the time, it planned to add another 80 A320s and 78 E l90s by the end of 2014.9 (See Exhibit 1 for a graph of the growth of JetBlue’s fleet through 2009.) JetBlue also rapidly increased the number of cities served-in 2006 alone, it added an astonishing 16 destinations, bringing the total cities served to 49 by December 31, 2006 (it added a 50th

destination in January 2007) (Exhibit 2). 10

Early Profitability, Financial Stress

JetBlue’s financial model was based on flights to underserved markets and large cities, where existing carriers (if any) charged relatively high prices. By offering lower fares and more frequent flights, JetBlue stimulated travel to these destinations. The company’s costs, as measured by cost per available seat mile, were typically the lowest of any major U.S. carrier. It kept costs down in a number of ways, including: flying only one type of plane (initially, a second model was later added for lower-capacity routes) with a single class of service; maintaining high utilization of its planes; a highly productive, flexible, non-union workforce; and low distribution costs due to extensive use of online booking and electronic ticketing.

JetBlue began passenger flights in February 2000, and was profitable the following year, with net income of $39 million on $320 million of revenue. It was profitable for the next three years (Exhibit 3). In 2005, however, the company posted a loss of $20 million, with revenue of$ l.7 billion. The loss was largely due to an increase in fuel prices-the price of jet fuel increased by 52 percent in 2005 compared to 2004, resulting in $167 million of increased costs, which the company could not fully offset by increased revenues. 11

With higher fuel costs expected to be a fact of life, and facing increased competition, JetBlue initiated a “Return to Profitability” program in 2006. This involved “improved capacity

6 JetBlue website, “Our History,” http://www.jctblue.com/about/ourcompany/history/about ourhistory.html �accessed May 19, 2010).

JetBlue SEC Form S-1, dated February 12, 2002, p. l . 8 At this time, JetBlue A320s were in the process of converting from 156 to 150 passengers, by removing one row and providing passengers with additional legroom. 9 JetBlue SEC Form 10-K for 2006, p. l. 10

0 . 6 p. Cit., p. . 11 Op. cit., p. 27.

JetBlue Airways: A New Beginning: L-17 p.4

management, revenue opt1m1zation, [and] cost reductions.” 12 lt reaffirmed, however, its commitment to delivering the “JetBlue Experience” of outstanding customer service. While suffering a loss in the first quarter of 2006, the company was profitable for the rest of the year, reporting a full-year loss of just $1 million.

Company Culture and Values

ln founding JetBlue, Neeleman wanted to “bring humanity back to air travel.” There was only one class of service in JetBlue planes-all passengers sat in leather seats with more leg room than provided by other airlines, and every seat had a television system providing a wide variety of channels. The company was extremely reluctant to cancel flights-it believed that passengers preferred to get to their destinations late, rather than have their flight cancelled. As a result, cancellation was a last resort for JetBlue prior to the February 2007 ice storm. This was seen in industry statistics, which showed JetBlue had an exceptionally high flight completion rate, while at the same time having a relatively poor rate of on-time arrivals.

As a result of its focus on the customer experience, the company had received many awards for outstanding service. The public regarded the “JetBlue Experience” highly, and saw it as a different type of airline. (See Exhibit 4 for a partial list of awards.)

JetBlue’s workforce was not unionized, a rarity in the airline industry. The company strongly wanted to maintain the non-union environment. As Neeleman said, “We’re always concerned about unions; the minute we stop being concerned about them is the time we will be unionized.” 13 To maintain a non-union workforce, JetBlue tried to provide a good working environment, from small things such as providing high-quality coffee, to giving employees (referred to as “crewmembers”) the opportunity to interact with senior management through regularly scheduled “pocket sessions,” where they were encouraged to ask tough questions. Building and maintaining trust between crewmembers, at all levels of the company, and across organizational disciplines, was a high priority.

JetBlue crewmembers prided themselves on their “can-do” attitude-using their creativity and skill to deal with problems. In part, this was a legacy of the early days of the airline, when crewmembers would all pitch in to help turn an airplane around when it arrived, regardless of their regular job assignments.

IRREGULAR OPERATIONS (IROPs)

The airline industry is incredibly complex. In February 2007, JetBlue’s 121 planes flew 502 flights daily, for an average of more than four daily flights per plane. Each plane also had to be taken out of service periodically for scheduled maintenance-and the plane had to be at a specific location for that maintenance. Each member of the flight crew also had to be scheduled (a process called “pairing”), with schedules complying with strict limits imposed by FAA regulations. There were limits on the length of time that a pilot could be on duty in a 24-hour period (defined as beginning when the pilot checked in one hour prior to his/her first flight of the

12 JetBlue 2006 Annual Report letter to shareholders.

13 “JetBlue,” GSB No. E-150, p. 9.

JetBlue Airways: A New Beginning: L-17 p. 5

day, and ending 15 minutes after s/he arrived at the gate on the final flight of the day), the number of hours a pilot could fly in any day or month, and other restrictions. If beginning a flight would cause a pilot to exceed the FAA limits (“timing out”), a plane would be forced to return to the boarding gate, even if it was next in line to take off.

Schedule modifications were often complex, but had to be handled quickly. Suppose, for instance, an airplane was scheduled to fly from Boston to JFK, then continue on to Orlando, but its departure from Boston was delayed due to bad weather. Passengers connecting at JFK for other JetBlue flights might miss their connections, and have to be rescheduled. The aircrew might time out, and be unable to fly the continuation to Orlando, requiring another crew to be assigned or the flight to be cancelled.

Events that triggered cancellations or delays of multiple flights, such as bad weather, resulted in “irregular operations” (IROPs). Even after a triggering event had passed, and the initial wave of cancellations had been addressed, the impact of the IROP was not necessarily over. Planes, and the aircrews scheduled for them, might be in different cities, making it difficult to immediately resume normal flight schedules. Pilots and flight attendants might have logged many more hours than originally planned, impacting their availability to fly. Airplanes needing maintenance might have been routed to cities that were not equipped to perform the needed service. As one maintenance scheduler put it, “My IROP begins three days after [the rest of the company’s] is over,” 15 since airplanes needing maintenance were scattered among the cities served by JetBlue, rather than being routed to the service centers.

The Ice Storm of February 14, 2007

Wednesday, February 14, 2007 was expected to be a busy day for JetBlue. Flights leaving JFK were full, with many passengers travelling early for the upcoming Presidents Day holiday. The weather forecast was for snow, turning to rain. JetBlue loaded its planes, which pushed back from the gates to prepare for takeoff. However, the snow changed to ice pellets, which closed the airport. With its strong bias against cancelling flights, and in hopes that the storm would abate, JetBlue continued to load passengers and push planes back from the terminals. Eventually, it was clear that the planes would not be able to take off. To compound the problem, they could not get back to their gates-the runways were frozen (as was the equipment used to de-ice and move planes), and the gates were occupied by other planes. Nine planes full of passengers were stranded on the tarmac for more than six hours each. 16 That day, 356 flights were cancelled-more than 70 percent of JetBlue’s schedule. Most of the flights were cancelled after their scheduled departure times, stranding more than 30,000 passengers at airports across the country. The problems did not end when the weather cleared. Many flight crews were no longer able to work due to FAA duty time restrictions. Many others were out of position, and could not be assigned to flights. Planes were not in the proper locations to resume service. Over the next five

14 For calculating duty time, the scheduled length of a pending flight was used. For instance, if a pilot had already

been on duty for 14 hours, s/he could take off on a flight scheduled to take 1 hour, but not for a flight scheduled to take 2.5 hours. If the flight actually took longer than anticipated (due to weather, for instance), there was no penalty. 15

This quotation was made at a JetBlue meeting, later related to the author during an interview. 16

Jeff Bailey, “Long Delays Hurt Image of JetBlue,” The New York Times, February 17, 2007.

JetBlue Airways: A New Beginning: L-17 p.6

days, JetBlue cancelled an additional 839 flights. Normal flight operations did not resume until February 20, six days after the original storm. Altogether, the storm cost JetBlue about $41 million-$24 million in vouchers issued to affected passengers, and $17 million in lost revenue due to flight cancellations. 17 Other airlines were impacted by the ice storm, but most cancelled flights early, and recovered relatively quickly.

The “Valentine’s Day Massacre” shook the company to the core, and shocked the flying public. JetBlue, previously viewed by passengers as one of the best (if not the best) airlines, took a pounding in the press. Neeleman apologized, both to the public and before a congressional bearing. On February 21, JetBlue issued its Bill of Rights, promising to compensate customers for inconveniences within the company’s control. (The Bill of Rights, as it appeared in 20 l 0, is presented in Exhibit 5.)

No one at JetBlue at the time ever wanted to endure the experience again, yet the disaster was not a surprise within the company. JetBlue had outgrown its operations infrastructure. The complexity of an airline increases dramatically as it becomes larger. Maruster commented, “Somewhere between 50 and 100 airplanes, complexity gets to the point that becomes unmanageable with very simplistic operating systems in place.”

The company’s “can do” attitude, and heroic efforts of crewmembers, had previously overcome technical and procedural shortcomings. Previous efforts to address difficulties in dealing with IROPs had focused on reducing ground time for planes, rapidly turning them around. Jenny Dervin, JetBlue’s director of corporate communications, observed that these efforts:

…. were very much focused on the spirit of ‘just get it done,’ instead of truly understanding the roadblocks to operating a great airline. The assumptions built into those programs were that we weren’t going to cancel. We were basically putting the entire burden of getting the operation back on track on the ground crew, on the airport crew. We made pretty posters and put them in the break rooms, but it really didn’t go anywhere.

The drum beat had been going since Christmas 2005. We had a significant weather event, and we plowed through it. We didn’t cancel. It took a couple of days to get the operation back, and it was very messy, but we were a much smaller airline. Even back then, pilots were telling us, ‘Look, this is no way to run an airline.’

A JetBlue pilot, commented: “It [the February 2007 problem] wasn’t a surprise to anybody except people outside JetBlue. I remember the year and a half leading up to it, knowing it was going to happen. I just didn’t know how or when. We were going to have a spectacular meltdown. Our operation was wound so tightly that it was going to unwind pretty spectacularly, and it just happened to coalesce on that one day.”

17 John Harvey, in April 24, 2007 conference call, loc. cit. Harvey also stated that incremental expenses incurred

due to the storm were offset by cost savings from not operating aircraft.

JetBlue Airways: A New Beginning: L-17 p. 7

In addition to two initiatives to reduce airplane turnaround time, the company had also done an extensive benchmarking study with other airlines and companies that had complex operations.

However, there had not been a serious attempt to upgrade the operations infrastructure. Instead, the focus had been on sustaining the company’s rapid growth and on returning to profitability.

Changes After the February 2007 Ice Storm

JetBlue made a number of management changes after the February 2007 ice storm. The most important was the appointment of Russell Chew as chief operating officer in March. 18 Chew had been chief operating officer of the FAA, and before that was managing director of American Airlines’ System Operations Center. 19 Chew brought in experienced managers from other airlines, particularly those with operations expertise. The most immediate change was to

recognize that cancelling flights early could benefit both the customer and the company. Bonny Simi, an E190 captain and JetBlue’s director of customer experience and analysis, commented on the impact of pre-cancellations, saying:

If you pre-cancel 50 flights going into an IR.OP, and you make the right call, you will end up cancelling 50, maybe 55 flights in the end. If you don’t cancel, you may end up cancelling more. You might cancel 100, and they’ll all be painful. They’ll all be when the customers are there at the airport, sitting there for six

hours. So, if you pre-cancel, you cancel less-as long as you make educated decisions.

The company began to change its focus from reacting to problems and overcoming them by heroic efforts, to preparing for disruptions. Dervin commented that the change “forced us to pour our energy into pre-event rather than post-event. It took us about a year to figure out how to work together to prepare for something, because we were so good at reacting to things.”

As the winter of 2007-2008 approached, in Dervin’s words, “everybody held their breath, because we lived in fear that we wouldn’t be able to fix it.” However, despite some challenges, JetBlue made it through the winter without serious problems, seemingly validating the change in cancellation philosophy and the company’s ability to prepare.

August 2008: Thunderstorms Cause More IROP Havoc

There is a large difference between the nature of irregular operations in winter and in summer, however. In winter, storms can be fairly accurat�ly forecast, and pass relatively quickly. With advance notice, flights can be cancelled in an orderly manner. In summer, storm cel1s can develop with little warning, and their paths are difficult to predict. Rather than completely shut

down the airport, thunderstorm activity causes delays that reduce the airport’s overall capacity. Airlines can adapt to this by cancelling the appropriate number of flights to match this new, lowered, capacity.

18 Barger had been appointed president in August 1998, and also served as COO until Chew joined the company. In

May 2007, Barger replaced Neeleman as CEO, and Chew became both president and COO. Neeleman remained as chairman until May 2008, when he was replaced by Joel Peterson. 19

JetBlue press release, “JetBlue Names Russell Chew Chief Operating Officer,” March 7, 2007.

JetBlue Airways: A New Beginning: L-17 p.8

In the summer of 2008, a series of thunderstorms and air traffic control departure procedure changes caused havoc with JetBlue’s operations. From July 23 to August 16, the company

cancelled 814 flights. 20 This period of stress led to a renewed interest in addressing problems in handling IROPs.

After stepping over customers sleeping in the JFK terminal one night, Joel Peterson, who had become JetBlue’s chairman in May 2008, told Maruster, “For a company that has fun as one of its values, this surely doesn’t feel like a lot of fun.” On August 10, Peterson was returning to California after attending operational meetings at the company’s New York headquarters. While he did not sense an acute IR.OP problem, he had a feeling of unease about the general level of urgency and focus of the operations team. He boarded the JetBlue plane for San Jose.

That same day, Bonny Simi was commuting home after spending the week working in New York. Each Friday before heading to the airport, she would go downstairs from her office and visit the System Operations Center (SOC). As a pilot, who also had experience as a dispatcher, she was comfortable in the SOC. She would talk to the dispatcher about the flight she wanted to take, the customer load, and the weather. Then she would go to crew services, just a few feet away, and find out if there were any issues with crew timeouts in the event of a delay. She

noticed that the two groups used different systems, and each had information that was unavailable to the other.

That day, there was a large weather front approaching New York. Simi could take flights to any of three airports in the San Francisco Bay Area. After talking with crew services, she knew that the San Francisco and Oakland flights would be cancelled due to crew timeouts, even though system operations did not yet have this information, and had not yet cancelled the flights. The San Jose flight would probably get out, but a delay of more than three hours would also result in its crew timing out. She went to the airport and boarded the flight to San Jose. On her way to the rear jump seat, she passed Peterson. As she had anticipated, there was a long delay, and Simi talked to Peterson about what was happening, including showing him the weather front on the JetBlue LiveTV at his seat.

The storm shut the airport down for awhile, and when they eventually started taxiing, Simi went to the jump seat and contacted the plane’s captain. From her earlier conversations at the SOC, she knew he was close to timing out, and now she learned how close that was-he would timeout in 10 minutes. The plane was far back in the line for takeoff-if it stayed in the queue it would not depart before the pilot timed out, and would have to return to the terminal. She called the JetBlue air traffic coordinator at the SOC, and told him that the flight would have to be cancelled and return to the terminal unless it could be moved to the front of the takeoff line. Soon, the plane pulled out of line, taxied to the front of the queue, and took off with two minutes to spare. The JetBlue coordinator had contacted the FAA air traffic coordinator, who had moved the plane to the front of the queue.

Simi told Peterson what had happened behind the scenes, and how vulnerable the airline was with its current operations infrastructure: “I’m telling Joel this story. It’s not scalable, when you

20 JetBlue Airways.

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 1 BTW3 taught by Lindsay Conole, Southern New Hampshire University from January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17 p. 9

have 600 flights a day, to manage it like that, right at the individual level. But that’s the

challenge. He saw and understood the complexity of it.”

After this experience, Peterson recalled:

I started talking with crew members, pilots, and others to learn the hoops they have to go through. I recognized how completely disruptive and demoralizing it was. There’s nothing you can do to change the weather. There are always going to be irregular operations, so it wasn’t that. But, could we get a more efficient, better response? I realized at that point how many interfaces there were, how many pieces of information, how many people had to get involved. It was a cross-functional thing. I was concerned and felt, wow, we’ve really got to get a task force. We have to get cross-functional energy behind this, with a sense of urgency.

At about the same time, Maruster knew that major change was needed. During a conference call with the airport general managers that summer, one said, “We’re dying out here. Help us figure out how to solve the challenges.”

The Birth of IROP Integrity

After this experience, Peterson wrote in the company’s weekly Jet to the Point communication to crewmembers that bow the company dealt with IROPs as an urgent problem that must be solved. In his message, he said:

In observing first-band what Crewmembers regularly deal with, I’m-above all else-impressed with your dedication to “doing the heroic” on behalf of our Customers. This is not sustainable, however, nor is it fair to continuously expect Crewmembers to bear the brunt of IROPs. Your professionalism and grace under pressure is impressive, but we have to find a way around outmoded space,

inadequate technology, gaps in leadership, coordination between various functions and the necessity for on-the-fly decisions. The “uncontrollables” (such as thunderstorm activity, FAA regulations and general crowding at JFK) are part of life, but we can do better in managing around them. 21

Maruster went to Chew, now JetBlue’s president, and Barger, now the CEO, with a proposal to address the company’s operational problems. He observed that: “We didn’t have the internal

infrastructure. We didn’t have the communication infrastructure. We didn’t have the correct operations procedures in place to actually execute the complexity of the operation that we were being asked to run.” He told Barger and Chew that, “I’ll put my career on the line, because I believe in this so much. If we don’t make change in a dramatic fashion, I don’t know if this is the kind of company I can work for. I see it as actually harming our brand. Crawling over people who sleep in the terminal, that’s not the kind of airline we are.” Later addressing the risk of taking on such a high-profile project that had the potential for spectacular failure, he said, “In

21 Joel Peterson, “Jet to the Point: A Board’s-Eye View,” JetBlue Airways, September 4, 2008.

JetBlue Airways: A New Beginning: L-17 p. 10

my view, doing nothing, or not putting myself out there, would have been the most risky thing I could have done.”

With Barger and Chew’s support, Maruster then met with Peterson. As he recalled, after explaining all the complications of a project to improve performance during IROPs, Peterson summed it up, saying, ‘”I think what you’re trying to say is that you’re trying to: effectively cancel flights when there is bad weather; recover the airline very, very quickly; and communicate to all stakeholders what those plans are.’ I said, ‘That’s exactly it.’ And so that became our tagline: improving how we cancel, recover and communicate during disruptive events.” The target was to have the improvements in place by June 20, 2009-before the start of the peak summer travel season (and also the summer thunderstorm season).

Peterson commented on the courage required to take on such a project:

It’s not self-evident when you take on a big messy problem that’s cross-functional, and you’ve got the FAA, and you’ve got the Port [Authority], and you’ve got all the complexities, that you’ll be successful. … I think courage is an element that is sometimes underestimated, and I think it took a lot of courage to step up and say, ‘Look, this is on my shoulders. I’m not backing away from it. We’re going to make this happen.’

During this period, Maruster had also been talking with Simi, who worked for him at the time and had similar feelings about the urgent need for change. The two began scoping out a project that would address the company’s deficiencies in dealing with disruptive events, which would eventually be called “lROP Integrity.” As they discussed approaches, Simi realized that in addressing the problem they needed to take advantage of the experience of people from throughout the organization. She bought Maruster a copy of James Surowiecki’s book, The Wisdom of Crowds, saying, “Read this. You’ll know what I’m talking about.” Rather than recruit a small task force to address the problem, they proposed a large-scale effort involving many people from throughout the organization. They also reviewed previous change initiatives at JetBlue, which supported this approach-those that were driven from the top tended to fail, while those that involved front-line crewmembers tended to succeed. (See Exhibit 6 for biographical sketches of Peterson, Maruster, and Simi.)

The project began to take shape. With the support of Peterson, Barger, and Chew, Maruster became the executive sponsor, dedicating about half his time to the effort. He described his role:

My role was to be the unflappable executive sponsor of the initiative itself. That meant rallying the troops, showing up for the big offsites, encouraging them that anything is possible, encouraging them to be skeptics but not cynics, and to participate and throw their heart and soul into this, because great change is possible if we actually pour our heart and soul into it. Do we have the people involved at the right levels? Are we really making this a priority?

I also found my role to be plowing the path forward with the senior leadership team, keeping them updated on the work, as well as the importance of the work,

JetBlue Airways: A New Beginning: L-17

arranging whatever money or resources we needed, not making that an issue, so that people would actually believe in what we were doing. Whether it was through finance or through IT, whatever those groups were that were support functions to this process, it became my role to make sure that those resources were available to us.

I think there are way too many initiatives that lack senior level support. Once I knew that I had the COO and the CEO’s support, it became so much easier.

p. 11

While Maruster provided the executive sponsorship, Simi provided day-to-day leadership as the project’s full-time director. Peterson recalled how Simi overcame the challenges of running a large cross-functional project: “I don’t think Bonny was empowered as much as it was that she just grabbed the controls and had the energy, and made things happen. Nobody slapped her down, so she kept moving forward. I think from that, the team learned that you don’t have to have every element buttoned down.”

She recruited a small team to help plan the project. This team included crewmembers from various parts of the company, as well as an industrial engineer to guide LEAN process improvement sessions, and a consultant to lead organizational and cultural change efforts.

The communications strategy for the project was a departure from that used in previous change initiatives-JetBlue had previously launched projects for large-scale change with heavy publicity throughout the company. Often, the projects had failed to make an impact. Rather than raise expectations before improvements had been made, IROP Integrity would speak through its actions. Dervin recalled the philosophy adopted at the start of the project, “We will not spin or package this as a communications campaign. This is about muscle, not message.” Senior management agreed, but it was sometimes difficult not to promote the project. When pressured to publicize, Dervin said, “The refrain from corporate communications was, ‘It doesn’t matter until people start feeling the difference.”‘

The specific objectives of the project, as stated in the project’s after-action report, were: 22

• To improve how we cancel, recover, and communicate before, during and after IROPs.

• Identify talent within the organization. • Build cross-departmental relationships through cross-functional and cross

level working teams. • Build internal capability for project management and process improvement

(LEAN tools), by providing crewmembers and crewleaders at all levels the guidance, tools and opportunity to “learn by doing” in a collaborative, supportive, corporate sponsored program.

22 Objectives quoted from Shawn Overcast and Jason Lei, “IROP Integrity After Action Report,” JetBlue Airways

internal document, October 5, 2009, p. 4.

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 181W3 taught by Lindsay Conole, Southern New Hampshire University from January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17 p. 12

Process Mapping, Working Teams, and Offsite Meetings

The project was scheduled to be completed by June 20, 2009, and was planned around three offsite meetings. Before the first offsite, groups of crewmembers met to identify issues that interfered with efficiently canceling, recovering, and communicating during IROPs. At the first offsite, all participants in these sessions shared their findings, and were assigned to teams to address the issues. They then developed recommendations to present at the second offsite. At the second offsite (attended by all team members working on the project, plus other key individuals), teams presented their recommendations, and also met with crewmembers from other parts of the company that could help with their issues. They then finalized their changes. The third offsite was a wrap-up and celebration.

Maruster and Simi brought several people into the planning process. They wanted leaders, but also skeptics. As Maruster explained, “A cynic is somebody who questions the motives of others. A skeptic is somebody who says, ‘prove to me that we can actually do this, and I’ll believe it.”‘ They knew that once a skeptic was involved in the process and became a believer, s/he could become a powerful force for change. They also wanted the project to establish a culture of change. To help meet that objective, one of the initial members was Brian Glaser, a former JetBlue crewmember who had formed gothamCULTURE, a consulting firm that focused on organizational culture and change. One essential contribution made by Glaser was to design the three off-site meetings that established a series of milestone events for the project.

The group identified many areas that needed attention, and set up sessions for further in-depth exploration. Each session involved about 20 people, with each participant having a direct involvement in the subject being discussed. Some individuals were asked to participate due to their expertise or critical role in the process being addressed. Others responded to invitations sent to a large number of crewmembers, asking for volunteers. Gus Nicoll, a pilot and one of the early leaders of the project, noted that, “We weren’t solving for what we thought the problems were. We needed to know from everyone who touched metal and moved people and moved information what the problems were.”

The process mapping sessions, led by industrial engineer. Michelle Lofgren, began with a training exercise in which participants worked as teams to make a product. In the first phase of the exercise, roles were strictly defined and communication between team members was limited. The facilitator then “mapped” the process, with input from the participants. Starting with the final step, each activity and input was recorded on a yellow Post-it Note (“sticky”). Going backwards through the process, all activities and inputs were identified. 23 At the same time, impediments, pain points, and other obstacles were recorded on pink stickies. (In fact, the term “pink stickies” became institutionalized as a way of describing a challenge or problem within JetBlue.)

Following this exercise, the facilitator taught a short session on lean processes, identifying sources of waste and inefficiency, using the exercise as an example. The teams then repeated the exercise, but were free to organize their efforts as they chose, and to communicate openly. In

23 The process was mapped from last to first step because identifying the inputs to each step prevented activities

from being overlooked, as sometimes happened when evaluating a process from first step to last.

JetBlue Airways: A New Beginning: L-17 p. 13

doing so, teams removed many of the obstacles, and saw improvements in both quality and throughput.

The participants were divided into groups that performed similar functions, and were given several scenarios common to IROPs. Each group was asked to map the processes they used to deal with these scenarios, and the pain points they encountered. This identified many sources of waste, inefficiency, and frustration. It also led to many simple solutions. For instance, many obstacles were the result of a lack of information. The person facing the obstacle did not know that the necessary information existed within the company. Someone else in the room would often have the information, but did not know that it was needed by other groups. Hearing that their information was needed, they modified the distribution: problem solved. Other problems required more study, such as evaluating technology, working with other parts of the company, or analyzing what other companies did.

Five process mapping sessions were held before the first offsite. Simi and her core team also conducted interviews with key stakeholders to identify additional issues and to get a deeper understanding of issues surfaced in the process mapping sessions. The process mapping sessions and interviews identified more than 1,000 issues and challenges (pink stickies). Prior to the first offsite, Simi and her team evaluated these to determine the ones that IROP Integrity would address. Glaser described the evaluation process: “It was based on looking at the vision, looking at the capacity for the business to handle, exploring the topic, and then figuring out how much of an impact it would have on the organization’s performance.” They also checked the list of issues against the executive team’s key initiatives. Ultimately, Simi made the final decisions as to those issues that the project would address-the original list of more than 1,000 was trimmed to 400, which were further grouped into 100 projects that touched all working groups. These were then grouped into 12 buckets, each of which would be addressed by an IROP Integrity team. 24

This structure helped break down complex problems into more simple and manageable pieces. Before the first offsite, leaders for each of the teams were recruited, with an eye toward developing future talent by tapping front-line crewmembers with the capability of taking on additional responsibility.

The first offsite was held November 20-21, 2008 in a hotel near the company’s New York headquarters. The meeting was attended by 120 JetBlue crewmembers.2 Project leaders presented the findings, in Glaser’s words, as: “Here’s what we’ve heard, and here are some of the trends, patterns, and themes.” After the participants had been briefed on the issues and the topics that each team would address, they had time to rotate through stations where they could learn more about topics and sign up to work on any of the 12 teams that most interested them.

That night, Simi and Glaser made team assignments. As Glaser described, “It was a late night. But when they arrived the next day, we handed them a personalized envelope from Rob [Maruster], as sponsor.” The envelope included the person’s team assignment, as well as the schedule for each team’s kickoff meetings. Some people were assigned to two teams, with a few assigned to three. Kickoff meetings were scheduled so that crewmembers on multiple teams could attend each of their team meetings. In addition to these teams, Simi appointed two task

24 Overcast and Lei, op. cit, p. 6.

25 Ibid.

JetBlue Airways: A Ne”‘ Beginning: L-17 p. 14

teams to directly support those groups most impacted by IROP Integrity: the SOC and crew services (Exhibit 7). Throughout the project, Glaser worked with team leaders to help drive change through their teams.

After the first offsite, the teams met to work on their assigned issues. Simi managed the process by holding weekly telephonic meetings with a core group of seven that reviewed the overall status of the project. There was also a weekly telephonic meeting with the leaders of the 12 teams and key stakeholders, in which they reviewed the status of their projects, discussed milestones and obstacles, and requested feedback. Keeping with the theme of simplicity, Simi developed a standardized, one-page format for team leaders to report on their status and tracked the projects on a dashboard (Exhibits 8 and 9).

The second offsite meeting was held on February 26-27, 2009. One purpose of this meeting was to demonstrate the large amount of progress that had been made, as well as to acknowledge that they still had challenges to overcome in order to meet the June 20 deadline. The meeting allowed participants to share information about their work, and to interact with others who might provide useful input. In spending two days together, teams could partner with other teams, or with other individuals, to get information needed to make decisions on critical questions, or get different perspectives on issues they had been wrestling with. They could also touch base with groups whose work might be impacted by changes that a team was considering. The goal was to expand the “wisdom of crowds” philosophy, and tap all 120 crewmembers’ experiences to fmd solutions to the vexing problems.

One particularly motivational part of the second offsite was a speech by Peterson. He wrote the speech in the form of a Fortune magazine article, dated three years in the future. The article described bow JetBlue excelled at dealing with disruptions, though this had not always been the case. It then gave examples of many specific individuals, and the changes they bad implemented that made JetBlue excel–examples which Simi bad provided. In his speech, Peterson said:

An airline, above all, is a bewildering array of teams, of systems, of complex logistics. By coming together across work groups, JetBlue crewmembers discovered efficiencies, learned from each other, came deeply to trust each other and developed a hard-to-replicate culture of cooperation and support.

Peterson had mocked up a reprint of the story, which was distributed to the offsite participants. This speech was vividly, and fondly, recalled by many participants long afterwards. After the second offsite, teams continued work on their specific projects.

The third offsite was held on June 30, 2009. In this meeting, attendees were briefed on the results of the work done by the teams, and fmal decisions that had been made. Participants left the meeting with an understanding of the company’s plan for dealing with disruptions. This meeting also provided an opportunity for company leaders to thank those that had worked on IROP Integrity project for their efforts.

JetBlue Airways: A New Beginning: L-17 p.15

IROP Integrity in Action: The Cancellation Processing Desk

Addressing recovery and communication related to crew scheduling after flight cancellations provides an example of the IR.OP Integrity project in action.

One of the more difficult problems during IROPs was the impact of flight changes or cancellations on pilots and flight attendants. When flights were changed or cancelled, “pairings”-the assignment of crews to aircraft and routes-had to be revised. This was a difficult process, as the assignments had to be made so that crews would be properly positioned for subsequent flights, and so that assignments complied with FAA regulations and company work rules on duty and flight time. During normal operations, much of this was done using computerized scheduling programs. These were ineffective, however, in dealing with large-scale rescheduling during IROPs, resulting in substantial manual effort. Once the crews’ revised flight assignments were determined, their logistics arrangements (such as hotel reservations) had to be made. This information had to be communicated to the affected crewmembers.

Prior to the IROP Integrity project, JetBlue made pre-cancellation decisions four hours prior to the scheduled departure time. This was based on the telecom capacity that required two hours to notify passengers. The goal was to contact passengers at least two hours prior to their scheduled departure, requiring that the decision be made four hours prior to scheduled departure (allowing two hours for notification, with all notifications made at least two hours before scheduled departure). If passengers were notified earlier than two hours before scheduled departure, they could often be reached before they left for the airport, reducing the number of people showing up at the boarding gate for cancelled flights. Thus, cancellations were made four hours prior to scheduled departure.

This created a serious problem for the crew services group, which was responsible for pairings and crew logistics. Modified pairings could be processed at about 10 per hour. If a 50-flight cancellation “package” was issued, it would be five hours before the changes could be made and the affected crewmembers notified-or one hour after the first scheduled departure. There was no prioritization about notifying crews-for example, a pilot for a flight scheduled to depart 10 hours after the cancellation decision might be notified before the pilot for the first scheduled departure. It was not uncommon for crews to arrive at the airport, only to learn that their flight had been cancelled and that they were being reassigned to a different flight–even if the decision had been made hours earlier. Andrew Paul, a pilot who was heavily involved in the IROP Integrity project, observed:

A good number of pilots and in-flight crewmembers have been embarrassed by the fact that our customers, at times, would be notified of a flight cancellation before we would. They would see us in the gate areas and say, ‘Hey, I just got a message from JetBlue saying: This flight has been cancelled.’ There we are, standing at the gate, knowing less than the passengers.

Communicating with aircrews was also a problem during an IROP. While crew services worked hard to redo the pairings, pilots and flight attendants who had heard about potential cancellations would call to find out if they were affected, and if so, what they should do. Others would be calling to tell crew services where they were, in case they were needed. Still others, unaware of

This document is authorized for use only by Ian Lansberry in MGT� Resource Planning and Decision Making 18TW3 taught by Lindsay Conole, Southern New Hampshire University from January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17 p. 16

the IROP, would call to conduct routine business, such as discussing future assignments. All of these calls would go to the people who were trying to redo the pairings, further delaying their work. Finally, when pairings were changed, and affected crewmembers needed to be notified, they would be called. If they did not answer, a message was left asking them to call in-and their incoming calls would join the huge number of other incoming calls. This communications overload led to extremely long hold times.

The problem was exacerbated by the fact that calls were not prioritized to so those with the earliest scheduled departure time were notified first. Karen Cozzie, director of inflight service, observed, “There was no urgency as to who needed to be notified first because the technology did not exist, and the crew services team was multitasking during the pairing modifications. This made timely communication to crews difficult. We had crewmembers coming to work when we knew hours before that their flight was cancelled or delayed, resulting in duty limitations that would further impact the operation.” She summarized the impact of the communications problem on morale: “It was a huge sense of :frustration with our flight attendants and pilots. It built this wall of distrust that crew services didn’t know where they were, or didn’t care enough to call.”

During the early phases of IROP Integrity, before the first offsite meeting, crew services held a process mapping session, also attended by representatives of other affected groups, including flight attendants and pilots. Cozzie commented, “We knew that we bad issues. But, until we completed the process mapping, I don’t think we understood the impact the current process was causing for our crews.” They had previously believed that technology limitations restricted them from efficiently dealing with IROPs. Through the IROP Integrity project, they now looked at ways crew services could improve their processes, even with the technology limitations. 1n fact, 90 percent of IROP Integrity projects involved no technology improvements-they involved processes, policies, or training, all at relatively low cost.

At the first offsite, a team was assigned to work on crew services, headed by Cozzie. Following the offsite, they divided the work further, into three subsets: crew logistics, call volume, and crew services process technology. They conducted process mapping sessions for each of these three areas, facilitated by industrial engineer Michelle Lofgren. The sessions were attended by supervisors, pilots, flight attendants, crew services leadership and front-line crewmembers, IT, and personnel from the reservations group (who had expertise in communications and running a call center). After these sessions, they had 164 actionable process items, with an additional 35 items related to information technology. Some of these items could be immediately implemented, while others required further work.

After these sessions, they expanded the group to include more crew services crewmembers that actually did the work, and met to discuss solutions. Cozzie presented the problems that had been surfaced, together with some possible solutions. She described how she asked the questions:

‘How would that process change affect your work environment? Tell us how we can meet this goal in a more structured and efficient way.’ There were 18 of us brainstorming all of the different ideas and possible solutions, identifying the

JetBlue Airways: A New Beginning: L-17

constraints on the floor, and evaluating the crew services staffing model. We had to take a11 of that into consideration when identifying potential solutions.

p. 17

After brainstorming, they formed a smaller group to work through the processes and issues in detail, and make a recommendation. The group came up with a “cancellation desk,” which would be activated when a package of 10 or more cancellations was issued. A standard e-mail was released by crew services, notifying pilots and flight attendants that they were in an IROP, and the number of flights that had been cancelled, with a list of the cancelled flights. The e-mail also informed the crews when crew services expected to have new pairings completed. At the same time, the voice recording that played for all incoming phone calls was changed to say that an IROP was in process and that cancellations were being processed. Callers were requested to call back if they did not need immediate assistance.

When the cancellation desk was activated, crewmembers assigned to the desk were physically moved to a different area, away from day-to-day operations, where they could work together to process the cancellations. After a pairing was modified, it was handed to another group that focused on logistics ( e.g. booking a hotel). Finally, the modifications were given to a third group that called the pilots and flight attendants to notify them of the details of their revised schedules, using standardized scripts that provided all the necessary information. Each step of the process would be completed without the interference of unnecessary incoming phone calls. If the reassignment process took longer than anticipated, e-mail updates would inform the crews. The process was further enhanced by a technology upgrade in June 2010, in which crews were automatically notified by text message ( or other method, as selected by the crewmember, such as e-mail or an automated phone call) of changes as they were made, eliminating the need for verbal notification by phone.

They proposed this solution at the second offsite in February 2009, and received approval. They then tested the approach during a couple of IROPs, using specially trained crewmembers. When the tests were successful, they formalized the procedures, which became standard in April 2009.

While the cancellation desk effectively addressed many of the problems posed by IROPs communications overload, prompt notification of crews, dedicated focus on processing cancellation packages-it did not address the basic throughput time of processing cancellations. In order to process 20, 50, or 100 cancellations per hour, substantial improvements would be needed to the computer tools available, to automate much of the manual process. This would be a subject for future improvement.

Result of the Initiative

IROP Integrity was officially finished on June 20, 2009, in time for the summer thunderstorm season. By this time, 85 of the projects that had been identified to improve performance during IROPs had been completed by the working teams. An additional 15 projects were in the process of being completed. Many other small, but helpful, changes, such as adding groups to e-mail distributions, had been immediately implemented following the early process mapping sessions. Still other improvements had occurred simply as the result of people from different parts of the organization getting to know each other and understanding their responsibilities.

JetBlue Airways: A New Beginning: L-17 p. 18

The changes came in many forms-some involved technology, others communications, others process flow; some involved the physical layout of critical facilities such as the System Operations Center (SOC); and still others involved changes of responsibility assignments during

IROPs. One of the critical changes was a philosophical change in system operations management. JetBlue used a matrix to provide guidance throughout the organization during IROPs. The matrix had four levels of severity-ranging from an “Operations Advisory,” impacting 5-20 percent of system departures to a “Level 3” IROP, in which more than 70 percent of departures were impacted. The IROP level was used to determine when various IR OP-related processes were activated throughout the airline. IROPs were called by the SOC manager on duty (MOD), who also specified the IROP level. Prior to IROP Integrity, the level for a weather event of a given severity would vary depending on which MOD was on duty at the time. As part of IROP Integrity, the matrix was refined, and much of the subjectivity removed-affected groups could be confident that a Level 2 event would be the same regardless of which person was

working as MOD at the time it was called, so they could implement plans that were appropriate to the level of disruption.

Another critical change related to the role of the MOD once an IROP was declared. Prior to IROP Integrity, the MOD retained control of the details of running the System Operation Center. This meant that while the MOD was concerned about tactical details, no one was focusing on the longer-term situation. Tactical details might be handled well, but the overall recovery might be poor. As part of the changes coming out of IROP Integrity, once an IROP was called, the MOD would be responsible for looking 24 to 48 hours into the future. Tactical decisions were delegated to others.

JetBlue crewmembers and passengers saw an immediate impact from the IROP Integrity changes. During the summer of 2009, IROPs caused much less disruption than had previously been the case-a fact noticed throughout the organization. (See Exhibit 10 for comments by crewmembers.) Perhaps the most dramatic change can be seen when comparing the disastrous ice storm of February 2007 with the impact of an even worse ice storm in February 2010. The 2007 storm had impacted JFK for about six hours, leading to a six-day nightmare for JetBlue crewmembers and passengers. On February 10, 2010 a more intense ice storm severely limited capacity at JFK for more than 24 hours. Rather than waiting to cancel, as had been the case in 2007, this time JetBlue cancelled all JFK flights the day before, in anticipation of the storm. Two days after the storm, the airline was running as if nothing had happened. The cost of vouchers issued as a result of the storm was less than $170,000, since almost all cancellations were done more than four hours before scheduled departures. 26 While the one-day storm in February 2007 had cost the company about $41 million ($24 million of which were vouchers), the estimated cost of all weather events in Ql 2010, cancelling 1,300 flights (524 of which were on February l 0-11 ), was just $10 million. 27 This was even more remarkable considering that the airline was larger and more complex in 2010 than it had been in 2007.

26 JetBlue issued vouchers only for cancellations within four hours of scheduled departure. All of the February

2007 cancellations had been within this window. 27

2007 cost from April 21, 2007 Earnings Conference Call, loc. cit. 2010 data from “Event Brief of QI 2010

JetBlue Airways Earnings Conference Call-Final,” CQ FD Disclosure, April 28, 2010.

JetBlue Airways: A New Beginning: L-17 p. 19

IROP Integrity was not intended to provide a static, permanent “solution” to the problems of cancellation, communication, and recovery from disruptions-the airline, and the aviation

environment, was continually changing, and the way that it dealt with IROPs would also need to evolve. As part of the process of continual improvement, immediately after each IROP, a formal

report was prepared detailing how the company dealt with the event. Maruster commented, “After every significant event, we debrief as a team. We don’t ask leadership what they think

occurred, we ask the crew members that are working it what they think we did well, and what they think we didn’t do so well.” By evaluating its performance during each IROP, JetBlue

could identify areas to improve, and ensure that newly implemented changes were producing results.

THE LEGACY OF IROP INTEGRITY AT JETBLUE

IROP Integrity changed JetBlue far beyond its ability to effectively deal with irregular operations–enormous as that impact might have been. The company had taken on a serious, cross-functional problem, and succeeded. It now had a model for implementing major change.

Brian Towle, JetBlue’s general manager at the San Diego airport and one of the original members of Simi’s team, recalled:

When I first looked at it [IROP Integrity] I thought, ‘How the heck can you break this down?’ When I was watching Bonny, I thought, ‘What kind of mind takes something so huge and just breaks it down to a pink sticky?’ It’s just amazing how impactful a little sticky can be. It’s taught me that nothing is impossible. If you have the right leaders, the right people who want to work, then you can do anything.

In January 2010, for instance, the company installed a new reservations system-a major cross functional change that it accomplished using some of the tools it had mastered during IROP Integrity.

Maruster noted the impact of the project on the company’s attitude toward large-scale change:

We asked the people who were doing the work, who, I think, had lost all hope that improvement was possible, ‘what do you think is wrong, walk me through the

process that you use to do this procedure every single day.’ I think that became a very JetBlue cultural defining moment in terms of how we work with labor, how

we work with one another, how we work on large-scale initiatives. It was engaging our crewmembers in large-scale change, whether it’s what type of new uniforms we should have, or what should our service model of tomorrow look like. The model that we used with IROP Integrity is now becoming a JetBlue model for any large-scale change.

The project also initiated an attitude of continual improvement. Maruster observed, “I think one of the biggest improvements I’ve seen is this drive to continually improve. I think this will be for the rest of JetBlue’s life-asking the questions, ‘Did we do that well enough? What could we have done better?’ Those are two great questions to always be asking.”

This document is authorized for use only by Ian Lansberry in MGT–600 Resource Planning and Decision Making 18lW3 taught by Lindsay Conole, Southern New Hampshire University from

January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17

Dervin noted another change she believed would have a long-term impact:

I don’t think we’re going to really appreciate the change in company culture until we look back five years from now, because based on our success with IR.OP Integrity, the entire company changed from the spirit of ‘just get ‘er done.’ We changed from that kind of heroics, to making data and information and thoughtful decision making a heroic activity.

p.20

The project also had an important impact on the individual participants. First, it exposed them to other parts of the company, and other people, that impacted their work, but that they otherwise would not have encountered. For some, it gave them confidence that they had more to offer than they realized, and inspired them to take on additional responsibility-and it enabled their talents to be recognized by their peers and leadership. Several front-line participants in the project used their experience to become first-level managers, and others took on even higher roles.

In June 2009, Maruster was promoted to become the company’s chief operating officer. While many factors were undoubtedly involved in this promotion, and Maruster had a strong background in airline operations, IR.OP Integrity provided an opportunity for him to demonstrate leadership of a large project involving all parts of the company, including functions that had not previously reported to him. His passion for the project also provided a clear indication of his priorities and his belief in the contribution of all JetBlue crewmembers.

When Maruster became COO, he retained the change process proven through IR.OP Integrity by establishing a function to focus on strategic projects. This was headed by Gus Nicoll, a front line pilot who became an important participant and ultimately a project lead in IR.OP Integrity. In mid-2010, Nicoll noted that “We now have several IR.OP Integrity-type corporate initiatives either [ completed] or in progress that in many ways are modeled after the capabilities we forged.”

Nicoll reported directly to Maruster in this role, but also continued to fly (much as Simi continued to fly while leading IR.OP Integrity and later as director of customer experience and analysis). One of the benefits of this arrangement was to bring front-line awareness into senior management decision making, in much the same way as IR.OP Integrity brought front-line crewmembers into the process of designing operational change. Nicoll commented, “What it says to our peers on the front line is, ‘your perspective is being represented. You have an advocate.’ There have been times when I’ve put on my captain’s hat and said, ‘Rob, let me tell you what that’s going to feel like to somebody on the front line.’ ”

One long-time crewmember observed, “One of our values, passion, was reignited during the IR.OP Integrity work. A lot of crewmembers felt as if they had a voice, a say in how to fix the problem.” Annette Hill, a reservation agent working from home, who was part of the project, put it this way: “It just makes you feel like the company is really interested, and everybody has a say. Faith in leadership comes by letting us in on the company’s plans and letting us be part of this company. This is our company-it’s not theirs-it’s ours.”

JetBlue Airways: A New Beginning: L-17 p.21

The legacy of IROP Integrity could be seen in many ways. To illustrate, during June and July 2010, JetBlue held six two-day sessions in downtown New York for flight attendants, as part of an initiative to determine the company’s vision for service in its second decade of operation. Each session included about 80 flight attendants and 20 managers, supervisors, and other personnel. The sessions combined motivational and inspirational aspects with information sharing and data gathering. During the data gathering, attendees brainstormed visions for future service related to several specific topics. They were then offered the opportunity to be part of task force teams that would meet later to refine these ideas. Similar sessions were planned for the other primary customer-facing groups: airport operations and reservations.

CONCLUSION

The IROP Integrity project had successfully met its objectives. JetBlue had become skilled at cancelling, recovering, and communicating before, during, and after IROPs. The project had identified talent throughout the organization, allowed crewmembers at all levels to grow, and built cross-departmental relationships. It had also established a model for future process improvement.

JetBlue would face continual challenges as it grew, and as the competitive and regulatory environment changed. For instance, effective May 3, 2010, the Congress instituted a fine to the airline of $27,500 per passenger if an airplane is delayed on the tarmac for more than three hours. Thus, if JetBlue had a full A320, with 150 passengers delayed past the three-hour deadline, it would face a fine of more than $4 million. To ensure that they complied with the three-hour requirement, JetBlue was reviewing the procedures put in place through IR.OP Integrity, and making changes where necessary.

Maruster reflected on the importance of the IR.OP Integrity process, saying, “We have not solved for everything, but we probably took several years’ worth of process change and accelerated it over a seven to eight month period. We still have things to work on. We’re not perfect, but I’m not sure we’d be here today had we not done that initiative.”

STUDY QUESTIONS

1. What made the IROP change effort successful? 2. How would you have organized the change effort differently?

JetBlue Airways: A New Beginning: L-17

Exhibit 1

JetBlue Fleet Size

p.22

JetBlue had the following number of planes in its fleet as of December 31 of each year from 2000-2009. The planned fleet, based on planes as of December 31, 2006 plus firm orders for

new planes through 2009, is also shown.

200 X

180 2006 Plan

160

Vl 140

I’ll 120

ci.

100 Airbus A320

80 E :,

z 60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: JetBlue S-1 and 10-K SEC filings. 2006 plan is based on firm orders as of the end of 2006, according to the

company’s 10-K filing for 2006. In addition, JetBlue had options for an additional 5 planes in 2008 and 12 planes in 2009.

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 18TW3 taught by Lindsay Conole, Southern New Hampshire University from

January 2018 to April 2018.

QJ C

‘+- 0 …. (1)

JetBlue Airways: A New Beginning: L-17

Exhibit 2

Number of Cities Served

Number of cities served by JetBlue flights at the end of each year:

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: JetBlue SEC Form S-1 and Form 10-K for 2002-2009.

p.23

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 18TW3 taught by Lindsay Conole. Southern New Hampshire University from January 2018 to April 2018.

60 — ————————–.

50 +——————==–r—-r-,:-r—-1

40 ——————

30 ;————==—–1

20 ———-

0 -+-…._……….,__._____,_—-r-_.__…..__…,,_…..JL-L……p–&..—i…-…-…&.-..&…-,……..&__.’—r-__._ ____ _.__ ……….. ,,_….,..__._–f

JetBlue Airways: A New Beginning: L-17 p.24

Exhibit 3

Revenue Growth and Profitability

JetBlue had the following revenue and profit (loss), beginning with 2000, its first year of flight operations. All values in millions of dollars.

Revenue Net Income (Loss)

2000 105 (21)

2001 320 39

2002 635 55

2003 998 104

2004 1,266 47

2005 1,701 (20)

2006 2,363 (1)

2007 2,842 18

2008 3,388 (76)

2009 3,286 58

Source: JetBlue 10-K SEC Filings.

JetBlue Airways: A New Beginning: L-17

Exhibit 4

JetBlue Awards

p.25

By July 2010, JetBlue had won more than 160 industry awards in its first 10 years of operation. A small sample of these awards include:

Year Award Source 2010 Top Low Cost Airline for Customer Satisfaction J.D. Power and Associates 2010 Best Coach-Class Experience SmarterTravel Editors’ Choice

Awards 2010 Most Customer Friendly Airline SmarterTravel Editors’ Choice

Awards 2009 Top Low Cost Airline for Customer Satisfaction J.D. Power and Associates 2009 Top-Rated Large Domestic Airline-Economy Zagat Airline Survey

Seating 2008 Best Large U.S. Economy Class Zagat Airline Survey 2008 Most Eco-Friendly Zagat Airline Survey 2008 Top Low Cost Airline for Customer Satisfaction J.D. Power and Associates 2007 Best Domestic Airline Conde Nast Traveler Readers’

Choice Awards 2007 Best North American Low Cost Airline Skvtrax World Airline Awards 2007 Best U.S. Airline Airline Quality Ranking Survey 2006 Best Domestic Airline Travel+ Leisure World’s Best

Values A wards 2006 Best Airline Value Entrepreneur Magazine 2006 Passenger Service A ward Air Transport World Magazine 2005 Best Airline Quality The Wall Street Journal Airline

Quality Survey 2005 Best Airline Service The Associated Press Annual

Survey 2005 Best Domestic Airline North American Travel

Journalists Association 2004 Best Low Cost Carrier in the World Global Traveler Magazine 2004 Best Company in North America Global Finance Magazine

Note: JetBlue won some of these awards for many years. Not all repeat wins are shown, in order to illustrate the range of awards won. For instance, JetBlue won customer satisfaction awards from J.D. Power and Associates each year from 2005 through 2010.

JetBlue was also listed as the #1 Airline Brand by the Brand Keys Customer Loyalty Engagement Index every year from 2003 to 2010.

Source: JetBlue website: Awards, http://www.jetblue.com/about/ourcompany/awards.asp (accessed July 6, 2010).

JetBlue Airways: A New Beginning: L-17 p.26

Exhibit S JetBlue Customer Bill of Rights

The JetBlue Customer Bill of Rights was published on the company’s website as follows. The site also provided definitions of terms, a compensation lookup table, a frequently asked questions section, and a link to the “Travel Bank” showing the balance of funds available to a customer as the result of compensation due to flight delays, cancellations, or other issues.

Customer Bill of Rights

Above all else, JetBlue Airways is dedicated to bringing humanity back to air travel. We strive to make every part of your experience as simple and as pleasant as possible. Unfortunately, there are times when things do not go as planned. If you’re inconvenienced as a result, we think it is important that you know exactly what you can expect from us. That’s why we created our Customer Bill of Rights. These Rights will always be subject to the highest level of safety and security for our customers and crewmembers.

Information

JetBlue will notify customers of delays, cancellations and diversions. Notification may be given in any of the following forms: via jetblue.com, via telephone, flight information display system, airport announcement, onboard announcement, email or text message.

Cancellations

All customers whose flight is cancelled by JetBlue will, at the customer’s option, receive a full

refund or reaccommodation on the next available JetBlue flight at no additional charge or fare. If JetBlue cancels a flight within 4 hours of scheduled departure and the cancellation is due to a Controllable Irregularity, JetBlue will also provide the customer with a $50 Credit good for future travel on JetBlue.

Departure Delays

1. Customers whose flight is delayed for 1-1 :59 hours after scheduled departure time due to a Controllable Irregularity are entitled to a $25 Credit good for future travel on JetBlue.

2. Customers whose flight is delayed for 2-4:59 hours after scheduled departure time due to a Controllable Irregularity are entitled to a $50 Credit good for future travel on JetBlue.

3. Customers whose flight is delayed for 5-5:59 hours after scheduled departure time due to a Controllable Irregularity are entitled to a Credit good for future travel on JetBlue in the amount paid by the customer for the oneway trip less taxes and fees ( or $50, whichever is greater).

4. Customers whose flight is delayed for 6 or more hours after scheduled departure time due to a Controllable Irregularity are entitled to a Credit good for future travel on JetBlue in the amount paid by the customer for the roundtrip ( or the oneway trip, doubled) less taxes and fees.

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 18lW3 taught by Lindsay Conole. Southern New Hampshire University from January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17 p.27

Delays (Departure Delays and Ooboard Ground Delays on Departure)

For customers whose flight is delayed 3 hours or more after scheduled departure, JetBlue will

provide free movies on flights that are 2 hours or longer.

Overbookiogs

Customers who are involuntarily denied boarding shall receive $1,000.

Ooboard Ground Delays

JetBlue will provide customers experiencing an onboard ground delay with 36 channels of

DIRECTV®*, food and drink, access to clean restrooms and, as necessary, medical treatment. JetBlue will not permit the aircraft to remain on the tarmac for more than three hours unless the

pilot-in-command determines there is a safety or security-related reason for remaining on the tarmac or Air Traffic Control advises the pilot-in-command that returning to the gate or another disembarkation point elsewhere in order to deplane would significantly disrupt airport operations.

Arrivals: 1. Customers who experience an Onboard Ground Delay on Arrival for 1-1 :59 hours after

scheduled arrival time are entitled to a $50 Credit good for future travel on JetBlue. 2. Customers who experience an Onboard Ground Delay on Arrival for 2 or more hours

after scheduled arrival time are entitled to a Credit good for future travel on JetBlue in the amount paid by the customer for the roundtrip ( or the oneway trip, doubled) less taxes and fees.

Departures: 1. Customers who experience an Onboard Ground Delay on Departure for 3-3:59 hours

after scheduled departure time are entitled to a $50 Credit good for future travel on JetBlue.

2. Customers who experience an Onboard Ground Delay on Departure for 4-4:59 hours after scheduled departure time are entitled to a Credit good for future travel on JetBlue in the amount paid by the customer for the oneway trip less taxes and fees ( or $50, whichever is greater).

3. Customers who experience an Onboard Ground Delay on Departure for 5 or more hours after scheduled departure time are entitled to a Credit good for future travel on JetBlue in the amount paid by the customer for the roundtrip ( or the oneway trip, doubled) less taxes and fees.

lntlight Entertainment

JetBlue offers 36 channels of DIRECTV®* service on its flights in the Continental U.S. If our LiveTV system is inoperable on flights in the Continental U.S, customers are entitled to a $15 Credit good for future travel on JetBlue.

JetBlue Airways: A New Beginning: L-17 p.28

*DIRECTV service is not available on flights outside the continental United States; however,

where applicable, movies from JetBlue Features are offered complimentary on these routes.

These Rights are subject to JetBlue’s Contract of Carriage and, as applicable, the operational control of the flight crew, and apply to only JetBlue operated flights.

This document is representative of what is reflected in JetBlue’s Contract of Carriage, the legally binding document between JetBlue and its customers.

Source: JetBlue website, “JetBlue’s Customer Bill of Rights and Tarmac Contingency Plan,” updated May 27, 2010, http://www.jetblue.com/about/ourcompany/promise/index.html (accessed June 22, 2010).

JetBlue Airways: A New Beginning: L-17 p.29

Exhibit 6 Biographical Sketches of Key IROP Integrity Personnel

Joel Peterson, Chairman

Peterson is the founding partner of Peterson Partners, LP, a private equity firm focused on small to-medium sized growth companies. He is also founder of JCP Capital, which provides early stage capital to entrepreneurs. He has been a lecturer at the Stanford Graduate School of Business since 1992, teaching courses on real estate investment, entrepreneurship, and leadership. He has served on the board of JetBlue since 1999, and became chairman in May 2008. He also serves on a number of other boards. His is the former national managing partner of Trammell Crow Company, was the company’s CFO for 10 years, and was CEO of Trammell Crow Residential in the mid-1980s. He has an MBA from Harvard.

Rob Maruster, Executive Vice President and Chief Operating Officer

Maruster joined JetBlue in 2005 as vice president of operating planning. In 2006, he was promoted to senior vice president of airports and operational planning. In 2008, he took responsibility for the customer services group, which included airports, infligbt services, reservations, and system operations. In June 2009, he was promoted to executive vice president and chief operating officer. Prior to joining JetBlue, Maruster had worked at Delta airlines for 12 years, beginning as a gate agent and working his way to being the vice president responsible for all operations at Delta’s Atlanta hub. He has an MBA from Emory University.

Bonny Simi, E190 Captain and Director of Customer Experience and Analysis

Simi joined JetBlue in 2003 as a pilot, flying A320s, and later E190s. She also taught cockpit resource management in the JetBlue University. She took one year off and completed the Sloan Master’s program at the Stanford Graduate School of Business. While still flying, she has worked in a number of capacities including director of airport planning and director of customer service. In 2010, she was director of customer experience and analysis.

Prior to joining JetBlue, she was a senior captain at United Airlines, flying Boeing 737s. Simi (under her maiden name of Bonny Warner) is a three-time Olympian competing in luge, and later an Olympic television commentator. She is a graduate of Stanford University.

Sources: Peterson: Stanford Graduate School of Business Faculty Profiles, https://gsbapps.stanford.cdu/facultyprofiles/biomain.asp?id=55338009 (accessed July 2, 2010). Maruster: Interview

and JetBlue SEC Form 10-K for 2010, p. 21. Simi: Interviews.

This document is authorized for use only by Ian Lansberry in MGT-600 Resource Planning and Decision Making 18TW3 taught by Lindsay Conole, Southern New Hampshire University from

January 2018 to April 2018.

JetBlue Airways: A New Beginning: L-17

Exhibit 7

IROP Integrity Organization

The IR.OP Integrity organization, as of October 2009, was:

�-T-•-•T_Org_�f——111��

I I

SOCTIU!

CIII� ••O–

————

I -..i-.i, I ,..-i…..,_

IROP Integrity Organizational Structure

, I

I I

‘ I

I I

I OM’I- I : ,-OP…-,Pll : I I I I I I I I I I I I I I \ I

,, _____ }topfur.,itybnTirt ______ ,

◄– — — ——,, I

I I

I I I

►

p.30

◄•——, I

I I

: • 12 1Dn 1Nn>11’1

\. �—-� ,’ —————-soell.L��r..,.,.—————‘ EJ[::JEJ

Source: JetBlue Airways, reprinted with permission.

Ctl->’eKlf~ PfGM,IW

Bii61nl!G5>~

‘ ” – – – — – -s.eiv\::er, ——- – ,,

‘ I I I ,

JetBlue Airways: A New Beginning: L-17 p.31

Exhibit 8

Weekly Working Team Presentation Samples

IROP Integrity working teams used a standard format for presenting data during weekly telephonic update meetings. The following are the updates for two teams, prepared for the December 9, 2008 update.

‘

Call Volume

last Week

• Identified iow hang11g fruit” (pnl!Bcis already l.lldetway assigned Plll!ect leads and denbtied potenial stal<eholdets

Obstacles/Issues

• Sefflafolttle ……. �Cl,-..,SOCICl”,w

Sel.-#OCIMJl>er,gdlal&sed-,.chr-.,gloans –s,IA’I–

-uar,yo111e ……….. 1c1-� …… — Wlneedll><bllllft�aoalyllOIO _.,.,.lleslcrutedilCIICII.

Next Week

• Review Cal Process Flow aeated by Tiffany

• Discuss �talion of Blue Metncs

• Review lakea-Alays from la3t meeting

Support Needed

• Communicabon Plan/Collaborabon With other working teams

• Business case br Blue Melnc$ and Blue Dialer

IROP Customer Communication

–

Last Week • Team meebng

• Rewort:ed ks! of prqecb, rnergmg some and adding a fe-N olhers

• ldentdied sub-groups. lean leads and exlemal contads

• R� lnleine on prqects

Obstacles/Issues

• Budgeting for 2009 cormg to a close and may not be able b support a booget for wsl008 “oompermbon” for non-bi! of nght-

• PSS lransibon could prevent some of the ledlnology manges needed to support some of lhese initiabves.

–

Next Week

• Subteams wormg on thew prqects to identify more detailed action plal\5 and bmmg

• Reachng out to e:demal conlacb to educate them on the nibabve and gelllng llem looped into ihe spec:tlic proiect.

• Wormg on Int December deliverable of N!W!Wlng al emai and reservation SC11p1s br brand COIISl5tency

Support Needed

• External support ldenbfied at the proJect level and should not present an issue unless we get push bad: on !her �e involvement

Source: JetBlue Airways IROP Integrity After Action Report Appendices, October 5, 2009. Reprinted with permission.

JetBlue Airways: A New Beginning: L-17 p.32

Exhibit 9 IROP Integrity Project Dashboard

The status of projects was summarized on a dashboard, as shown below ( example is of April 27, 2009):

IROP Integrity Project Dashboard

Pre-Cancel

Prioritization

Manual

Commercial

Training

-Complete

ATC Portal

menlsi Jun.Oct I

Source: JetBlue Airways IROP Integrity Weekly Dashboard, June 9, 2009. Reprinted with permission.

JetBlue Airways: A New Beginning: L-17 p.33

Exhibit 10 JetBlue Crewmember Comments About IROPs – Before and After IROP Integrity

Comments from JetBlue crewmembers about IROPs, before IROP Integrity: •

•

“Sometimes you feel like you’re on quicksand.”

“It’s just overwhelming, sometimes, especially when we cancel a lot of flights. Then, the floor just goes crazy.”

“How many times can I say to a crewmember, ‘I’m sorry. We’re working on it. We’re

fixing it. It will get better? “‘

“They go through three days of IROPs, and you can see it on their faces. They say, ‘I don’t want to be here anymore. This is too much.’ ”

“Once we get all the information in, it’s difficult sometimes to communicate it out, because of all the phone calls coming in to us.”

“The phone is literally constantly ringing.”

“They’ll come to me and say, ‘I just dropped a 3 position crew recovery in Boston,’ and I’m looking at them and saying, ‘I’ve got nobody in Boston.’ And, we make that happen in the end. But then, 5 minutes later, I get another crew recovery crew member saying, ‘I need a 3 position [crew] in JFK, and I’ve got nobody in Kennedy.”‘

“I would say, definitely, chaos.”

“I’ve been waiting on hold forever, just to let you know I’m here to help. I can help you.”

“It was a nightmare. I would rather have been on the airplane for 18 hours than be in this room [during an IROP].”

Comments from crewmembers after IROP Integrity projects began to take effect: •

•

“The pre-cancel plan goes out. Our crewmembers are notified of pairing modifications . There’s no longer that ‘Hey, what am I supposed to be doing? I was supposed to be on an airplane 12 hours ago, but no one’s contacted me.”‘

“Ops updates us in a very timely manner. Everything’s getting done way ahead of time, and that takes a huge burden off the airports.”

”Now, with the pre-cancellation list, we can start calling people before they even show up at the airport.”

“I can definitely see an improvement.”

“We’ve cancelled 89 flights in one day, and it didn’t impact our operation at all.”

“[Before], it would have been intense-crowds of people at the podium, making announcements over and over. But that day [ after IROP Integrity], I went to my gate, made a couple of announcements. The customers were relaxed.”

“[An IROP] is like just another day.”

“The days of just complete madness have gone away.”

“This is the first time that I truly feel confident that I can wake up in the morning after having a major IROP and know that we have the confidence of 12,000 crewmembers out there on the line, that this room, System Operations, will reset the airline, unscathed, from the previous day’s event.”

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