Organizational Change
Organizational Change
In the months following the terrorist attacks on September 11, 2001, the airline industry struggled to remain afloat. Even with promises from the United State government to financially assist the industry, many airlines filed for reorganization through bankruptcy or ceased to exist all together. There was one airline that did not feel the devastating effects of the terrorist attacks: JetBlue. What makes JetBlue so different? Why was JetBlue able to record a $38.5 million dollar profit in 2001 (Overby, 2002)?
Although JetBlue was not completely unscathed by the terrorist attacks, the organization was able to rebound by the end of 2001 (Overby, 2002). In the first quarter of 2002, JetBlue recorded a $13 million dollar profit on $133.4 million in revenue (Overby, 2002). JetBlue had originally been scheduled to take its organization public on September 11, 2001 but, due to the attacks, was forced to wait. The company finally went public on April 12, 2002 and recorded a 67% gain on the first day of trading (Overby, 2002).
The founder and CEO of JetBlue, David Neeleman, had developed a sound business plan to provide high-quality, low-cost flights to U.S. travelers. Neeleman then hired David Barger, formerly of Continental Airlines, and set out to create a “high-tech, high-touch” airline, from leather seats with mini televisions in the headrest to laptops in the cockpits (Overby, 2002). Neeleman and Barger implemented several technologies to assist in the simplification of operations.
In a time when most airlines were cutting their IT budgets, JetBlue doubled theirs (Overby, 2002). Neeleman invested in Microsoft software and hired Jeff Cohen to lead in-house IT projects. Cohen was tasked with automating everything, from ticket sales to flight plans.
The automation of ticket sales originally began while Neeleman was co-founder of Morris Air, which was bought out by Southwest Airlines in 1984 (Overby, 2002). Neeleman worked with college student David Evans to design ticket-less travel or e-tickets. After Southwest purchased Morris Air, Neeleman and Evans decided to create a company to sell the unified accounting and reservation system, Open Skies. During his time with Open Skies, Neeleman was developing his plan of a low-cost, low-price airline which later became JetBlue.
In addition to e-tickets, JetBlue developed and utilized electronic baggage tracking, internet reservations, a paper-less environment from the office to the cockpit, and implemented a voice-over IP system for telephone reservations. JetBlue avoids the use of travel agency’s as a means of reservations and instead relies on internet sales from its JetBlue.com website or from its 600 at-home reservationists. The costs involved with using a travel agency run about $14 dollars per ticket. In comparison, the cost of using an at-home operator is only about $4.50 per ticket and only .50 cents per ticket through the website (Overby, 2002).
The reduction in costs for reservations coupled with the efficiency of being fully automated has allowed JetBlue to reduce its costs by 30% over other airlines (Overby, 2002). Having a fully automated cockpit also allows for pilots to receive information in real-time. Each pilot is equipped with a laptop to access electronic flight manuals and make pre-flight load and balance calculations (Overby, 2002). This technology saves about 15 minutes per flight and allows the flights to be on-time more often.
In 2001, JetBlue boasted an 84.5% on-time record which is 7.1% above the industry average (CIO, 2002). In addition to being on-time, the innovations and technology have assisted JetBlue in having 50% less lost baggage and 50% less customer complaints than the industry averages (CIO, 2002).
Employees at JetBlue are provided with comprehensive training on all technologies and are able to use a “retraining” program if needed. Since full automation is one of JetBlue’s primary goals, workers must have or gain knowledge of computers, software, customer likes and dislikes, and other social skills.
JetBlue built a new training facility in Orlando, Florida in 2005. The facility, an 80,000 square foot building, contains eight flight simulators and two cabin simulators, classrooms, equipment, a pool, a fire-fighting training station, and administrative areas (JetBlue, 2007). The facility is used for in-flight crew as well as customer service and technical operation employees (JetBlue, 2007).
JetBlue remains one of the few non-unionized airlines in the United States. Taking care of its customers, stockholders, and employees is another enormous part of Neeleman’s plan. Having at-home reservationists not only saves money for JetBlue but also allows employees to have flexible schedules in order to provide work-family balance (Fingar, 2004).
JetBlue