commentary

Business Travel Executive

March 2007

Insight: More Bad Judgments

By Kevin Mitchell

On February 14, 2007, JetBlue’s high-flying public image lost considerable altitude due to management inaction amidst a severe winter storm and near-cruel conditions for some passengers stuck in aircraft for up to 11 hours. The hue and cry was intense; the demand for a Passenger Bill of Rights thrust forward.

JetBlue CEO David Neeleman promptly apologized, offered remuneration and was frank about a management meltdown that underlay the day's problems. No matter how sincere Neeleman’s mea culpa was, however, it represented little consolation for many offended passengers. But is Congressional legislation to regulate airline industry customer service standards the answer?

"The questions I wished politicians asked themselves," says aviation attorney Susan Jollie, "are 'Is there a significant persistent market failure that can only be remedied by government involvement?' And perhaps more importantly, 'Why do I believe that government personnel would have the necessary background, intelligence, integrity and dedication to make better decisions than those in industry whose role they would be taking over?'" BTC agrees.

In 1999, BTC testified in Congress against proposed passenger rights legislation. The progenitor then was a Northwest Airlines’ plane and its passengers stuck on the tarmac in Detroit during a horrendous January snow storm. The culprit: managerial incompetence manifest in a series of poor decisions and a customer service disaster.

Transportation committees in Congress decided against bringing passenger rights legislation forward in return for a commitment by the airline industry to implement customer service reforms.

Progress against service metrics was recorded for several quarters. But suddenly a fundamental marketplace shift caught the airlines off guard in early 2001. Then the tragedy of 9-11 and new security requirements struck, followed by SARS, the Iraq war, sky-high jet fuel prices and $40 billion dollars in losses. Painful restructurings eliminated more than 147,000 airline industry jobs — many were customer-facing. During this period, cutbacks in customer service and passenger amenities were implemented just for basic survival. Airlines, passengers, press and government all lost their focus on the industry customer service commitment.

The good news is that since 1999, there have been some 88 million commercial airline flights within the U.S., and just 330 instances in which passengers were kept on a plane for more than 5 hours.

The bad news is that to improve financial results, and to survive, airlines have cut capacity in a growing marketplace, leading to packed planes and little wiggle room when operations begin to fail. What’s more, the ability today to sell off perishable inventory via the Internet virtually guarantees that empty middle seats, ample overhead storage and smiling customer service representatives are often just distant memories.

In the first of two recent tarmac incidents, passengers were stranded on a Dallas-bound American Airlines aircraft diverted to Austin when a huge storm swept Texas. At any point if the pilots had returned to a gate they would have been decommissioned and a new crew ordered up. However, the only crews available were stuck at DFW in the same storm, and holiday flights over the next few days were sold out. There was no wiggle room in the system.

The upshot: those passengers would have had to spend the weekend in Austin. Once you have 3 or 4 hours vested in a takeoff slot, with incoming reports that the weather might break, the inclination is to stick it out a little longer so as to avoid a weekend away from family. In hindsight, if the pilots could have known it would be 7 or 8 hours, they likely would have abandoned all plans to get home.

Contributing to the problem was questionable guidance given to the pilots by regional American Airlines dispatchers. But where American apparently really failed was in abrupt treatment of passengers once they returned to the gate — where there was confusion and a lack of information and customer service recovery plans. What’s more, it took too many days for American to apologize to those stranded passengers. Yes, it was the holiday period and staffing was low, but it is what it is: American failed. To its credit, American soon after implemented several changes to its policies and procedures.

Perhaps learning from American’s mistakes, JetBlue’s Neeleman was prompt with an apology, forthcoming with the root cause of the problem and appropriate in his compensation offer to affected customers. His just-announced retroactive customer bill of rights is going over well, and will likely blunt calls for new regulations.

"This is a positive step by JetBlue to signal that it is taking the events of the past week very seriously," states U.S. Congressman Jerry Costello (D-IL), chairman of the House Aviation Subcommittee. "Other airlines need to follow the lead of American and JetBlue and put coordinated plans in place to make sure that they are meeting the needs of their customers, in good times and bad."

Notwithstanding Costello's views, there are bills being written in Congress to re-regulate the airline industry. One would require planes to return to gates after 3 hours on the tarmac. This is a bad idea and ties the hands of airport and airline managers.

Consider this Friday afternoon scenario at O’Hare: arriving planes take up most of the gates, 50 jets are lined up, but unable to take off due to deteriorating weather. At the 3-hour point, like a line of dominos, the aircraft become paralyzed in regulatory limbo with nowhere to go. The impact would ripple through the system. Travelers would be stuck in Chicago for the weekend; those in distant cities would likewise be stranded as their aircraft are at O’Hare.

There is little doubt that such legislation would lead to higher airline staffing and operational costs, and increased business airfares.

JetBlue’s Neeleman is a smart, world-class entrepreneur. He will be driven to make sensible adjustments for the benefit of his customers and shareholders. The airline’s effectiveness in responding with changes to policies and procedures will determine its future success. The marketplace is holding JetBlue accountable, and like competitors before them, the pounding will likely lead to positive change.

Congress should not intervene.