David Neeleman: Flight Path of a Servant Leader (A)

9-409-024 REV: MAY 2, 2011

BILL GEORGE

MATTHEW D. BREITFELDER David Neeleman: Flight Path of a Servant Leader (A)

David Neeleman was deeply frustrated as he reflected on the events that followed JetBlue’s operational collapse on February 14, 2007. On Valentine’s Day, JetBlue, the airline that aspired to bring “humanity back to air travel,” suddenly became the poster child for inhumane treatment of its passengers. When an ice storm hit the East Coast, passengers on nine flights were stranded on the runways at New York’s John F. Kennedy International Airport for up to 10 hours. During the next five days, JetBlue canceled over 1,000 flights, inconvenienced thousands of passengers, and bore the brunt of relentless negative coverage by the media.

Since its founding in 1999, Neeleman had built JetBlue on the basis of superior customer satisfaction. With the Valentine’s Day problems, JetBlue’s customer goodwill seemed to evaporate almost overnight. JetBlue went from longtime media darling to the butt of jokes on late night television.

Neeleman understood that he had a steep hill to climb to restore the confidence of his customers and his board of directors and get JetBlue back on track. He also believed his decisions had to be based on his personal values. As a seventh-generation Mormon and a public figure, Neeleman acknowledged that he would be held to a high standard. “I have to be an example and live my life in the business world the way people believe I should,” he said. 1

Neeleman had built his career on the idea that serving others was a noble calling. He created JetBlue around the proposition that his airline would set a new standard in customer service. Now he grappled with how to restore the confidence of the people he had worked so hard to serve.

The March 5, 2007, issue of BusinessWeek that ranked the best U.S. companies for customer service should have been one of Neeleman’s crowning achievements. In an industry known for its abysmal treatment of customers, JetBlue ranked number-four across all U.S. industries for quality of customer service. This was a major accomplishment for any company, let alone an airline, and a sign of how far Neeleman and JetBlue had come in the seven years since its founding. Unfortunately, the cover story had a line drawn through JetBlue’s ranking and a phrase that pained Neeleman to his core, “. . . and one extraordinary stumble.” (See Exhibit 1 for a copy of the BusinessWeek cover.)

Neeleman responded immediately to the crisis by implementing plans to regain customer goodwill. He took personal responsibility for the failures, saying he was not going to fire anyone due to the crisis, because “the responsibility rests with the CEO.” He posted an apology on JetBlue’s website stating, “Words cannot express how truly sorry we are for the anxiety, frustration and

______

Professor Bill George and Matthew D. Breitfelder (MBA 2002) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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inconvenience that you, your family, friends and colleagues experienced.” (See Exhibit 2 for the text of Neeleman’s letter.)

Next he took the unprecedented step of announcing a Customer Bill of Rights that committed JetBlue to paying approximately $30 million in compensation to passengers who had been stranded during the storm and thereafter.2 (The complete Customer Bill of Rights is shown in Exhibit 3.) It was a bold, expensive move and vintage Neeleman. To announce the new bill of rights, he went on the Today Show and Late Night with David Letterman to express his regret. On the Today Show, Neeleman admitted that “we had a weakness in our system. . . . We were overwhelmed.” In response to concerns that the bill of rights would be costly, Neeleman said, “It is going to be expensive, but it is far more important to win back people’s confidence.”

Because he took responsibility for the crisis, Neeleman received high scores from the public and from crisis communications experts. However, certain members of the JetBlue board had doubts about his actions, suggesting to Neeleman that he had gone overboard in apologizing and in admitting JetBlue’s shortcomings.3 Although he recognized the board’s qualms, Neeleman felt he couldn’t have handled the crisis any other way. As he noted, “I learned from this experience that I had a board I wasn’t communicating with.” He explained:

I felt I had to apologize for what had happened. How could I face our customers and our crew members if I didn’t take accountability for our problems? It was definitely the right thing to do. Most importantly, our brand image recovered. JetBlue was voted the number-one crisis management company by 2,400 investment analysts because of the way we handled that crisis. Our actions are seen as a textbook response, but certain members of my board were quite critical.4

Now that Neeleman faced his biggest challenge ever, he wasn’t confident that he had the support of his board of directors. How should he have handled the board’s concerns about the way he responded to the crisis? Had he been too passionate and too involved emotionally, or had this been required to lead JetBlue out of the crisis? For its part, what process should the JetBlue board have followed to ensure that the operational and leadership deficiencies exposed by the Valentine’s Day crisis were corrected? How engaged should the board have been in this situation?

Struggles in School

Neeleman was born in Brazil into a Mormon family of seven and spent his first five years there before he and his family moved back to their hometown of Salt Lake City. His father Gary had been a missionary in Brazil who had fallen in love with the country, returning years later as Latin America Bureau Chief for UPI. The family regularly went back to Brazil for visits and formed a strong bond with the Brazilian people and culture.

From an early age, Neeleman was known in his family for being full of ideas and energy—a gregarious and extroverted child. The transition back to the United States at the age of five was not easy for him. Having spoken Portuguese in Brazil, he felt like a fish out of water in the U.S. as he struggled in school to grasp concepts and the fundamentals of reading and writing. His father referred to him as “a window gazer who constantly fell behind on his lessons and was always looking out the window, thinking of something else.” 5 His third-grade teacher recommended holding him back a year, suggesting that “what he needs is an assistant to organize his life and then he’s going to be really successful one day.”6

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Neeleman had a great deal of anxiety about school due to his struggles with the basics of reading and writing. Even today, he cannot recall a single book that he read during high school. While applying to college, he scored so poorly on the ACT admissions test that his counselor said that he would have scored better if he had simply answered “C” on every question.

It was not until many years later that Neeleman was diagnosed with attention deficit disorder (ADD). Once he came to terms with his condition, Neeleman could see the pros and cons of the ways in which ADD had shaped him. In coping with ADD, Neeleman also realized how it had affected his success, especially in sparking his creativity and fueling his competitive drive. He openly acknowledged, “A lot of what drives me is an inferiority complex. I never feel satisfied that I have done enough or achieved enough.”7 Even now, Neeleman refused to take medication to control his ADD because he felt it would make him just like everyone else.

Neeleman first developed a passion for business at age nine, while working in his grandfather’s convenience store in Salt Lake City. His grandfather had strong ideas about the importance of customer service. When a customer requested an item that the store did not carry, his grandfather would frequently ask Neeleman to keep the customer occupied while he went out the back door to obtain the item from another store, without letting the customer know about his creative supply chain. Neeleman explained, “My grandfather taught me a lot about business. I used to stand on a milk crate and talk to customers. I learned how pricing worked and found I had an aptitude for business.”

Mission to Brazil

As part of a Mormon family, Neeleman received his first opportunities for leadership and public speaking through his church. Consistent with Mormon tradition, he joined the Mormon priesthood at the age of 12. After an uneventful first year of college at the University of Utah, at age 19, Neeleman embarked on a common calling for Mormon boys, two years of service as a missionary. The church called him back to Brazil, the country where he was born. Neeleman refers to his missionary period as “the defining moment in my life that put me on the path to success. I didn’t do anything in my high school years that distinguished me, other than responsibilities within the home and church. My mission put me on the path that I’m on today and gave me a sense of focus and structure in my life.”

Neeleman credits the structure of the two-year mission as extremely helpful in keeping his ADD under control—getting up at 5:30 a.m. each morning and going to bed at 10:00 p.m. each night. He achieved tremendous success as a missionary, converting some 200 Brazilians to Mormonism during his two-year stay. He noted, “My mission saved me. It was the first time in my life that I ever felt like I had some talent.”8

His mission also fundamentally affected his views on class, as he learned valuable lessons about the nature of service and happiness. He was struck by the fact that the poor people he ministered to in the slums of Brazil seemed happier and more generous than the rich people he had grown up with in his early years. He also found himself to be happier living there, because he received so much fulfillment from his work. He noted, “My missionary experience obliterated class distinctions for me, as I learned to treat everyone the same. Being in a culture where the economically disadvantaged were oppressed and not treated fairly enraged me. I developed a compassion for poor people, and an intolerance for those who thought they were better than others just because of their financial standing in life. I haven’t found a correlation between money and happiness; only between service and happiness.”9

His mission also provided Neeleman a pivotal leadership experience when he served as assistant to the Mormon mission president for seven months. “I learned the value of people and how to appreciate them,” he noted. “I also learned that to lead people, they have to buy into your vision and respect you so they want to perform for you. People do a better job if they respect the leader of the company.”10

Taking Flight with Morris Air

When Neeleman returned from his mission, he had a new sense of confidence. He started achieving straight A’s in college as an accounting major, but ultimately found his studies boring. He said, “I still didn’t like school, but I learned how to focus.” While still in school, he married Vicki, his college sweetheart, and they had the first of their nine children. But when a classmate told him of an opportunity to get into the Hawaiian travel business, he jumped at the challenge.

He initially achieved success in renting time-share condominiums in Hawaii, as his business grew rapidly. Eventually, he expanded the time-shares to include discounted airfare tickets as part of larger package deals. By his junior year in college, he had 20 employees and $8 million in sales.11 When one of his partners, Hawaii Express Airlines, filed for bankruptcy, he found himself financially exposed. He lost all the deposits his customers had made for planned trips and did not have adequate reserves to cover the losses. Having dropped out of college to focus on the business, Neeleman said,

I lost everything overnight. It was a devastating blow that has stuck with me ever since. Here I was, twenty-four years old, driving a Beemer, with a house, a wife, and two kids. I went from up to down just like that. It was a devastating time for me, as I learned my lesson about capital and reliance on other companies. Since that time, I have overcapitalized everything I’ve done. I have a fear of failure, but I have never failed since.12

Having seen his dreams of building the travel business collapse, Neeleman started working for his in-laws’ window-covering business as well as his grandfather’s convenience store. At the age of 24, he experienced his first professional renaissance. June Morris, founder of Morris Travel, had been impressed by his work in the Hawaiian travel business and asked him to come work for her. Neeleman’s first reaction was viscerally negative. He recalled his first reaction to her offer: “No, I hate this business. Stay away from me.”13

Neeleman quickly recognized that the travel business excited him a lot more than the drapery business, however, and he and Morris clicked. He negotiated a deal with her to earn a part of the equity if he could successfully expand the business. He then created a tour operator, Morris Air Charter. It morphed into a charter airline, Morris Air Service, which eventually became an airline, Morris Air.

Morris also gave him the structure and empowerment he needed to be successful. Searching for role models for Morris Air, Neeleman analyzed the emergence of People Express and Southwest Airlines. He was also inspired by Jan Carlzon’s book, Moments of Truth, which chronicled the transformation of SAS Airlines into a customer-focused company. Neeleman added two important innovations to the mix: ticketless travel and home-based customer service.

In 1992, he developed a ticketless technology system that reduced costs and improved the customer service experience, as Morris Air became the first ticketless airline. Neeleman credits his ADD for his ability to come up with creative ideas. “My mind is always in search of a better mousetrap,” he said. “I kept worrying about leaving my airline tickets at home because I’m so

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forgetful. I asked myself, ‘Why do we need airline tickets anyway?’ I’m always trying to figure out why do we do things this way, and why don’t we do things that way. I come out of left field with ideas that seem obvious to me, but aren’t always as obvious to everyone else.”

A lack of capacity in Morris Air’s call-center operation led to the idea of staffing call-center agents out of their homes. Neeleman and his team realized that Salt Lake City had a large number of educated women who were out of the workforce but who would be willing to work from home. The experiment was very successful, achieving higher productivity, lower attrition, and lower cost than traditional call-center operations.

Rough Landing at Southwest

In 1993, Southwest Airlines acquired Morris Air for $130 million. Given his equity stake, Neeleman instantly became a multimillionaire. “I was 33 and had $25 million in stock in a company that I idolized. Southwest CEO Herb Kelleher told me, ‘We need a guy like you.’ The world was my oyster.”14

Kelleher and Neeleman, who joined Southwest as an executive vice president, developed a strong personal chemistry. Kelleher was a living legend—an airline industry pioneer known as much for his innovative business practices as for his love of drinking, smoking, and stunts like challenging a competitor to a public arm-wrestling match. Neeleman became known as “The Smokeless Herb,” a potential successor to Kelleher. “Herb and I hit it off, and we were finishing each other’s sentences. It was a dream, and I just assumed that when I got to Dallas it would be a love fest,” he explained.15

Neeleman was put in charge of the integration of Southwest and Morris. He successfully concluded the integration in just five months, well ahead of the three-year timetable that Kelleher had anticipated. However, Neeleman soon learned he didn’t fit in at Southwest. Driven by his ADD, he couldn’t resist proposing a steady stream of new ideas to his colleagues, who were in no mood to disrupt the winning Southwest success formula. As he explained, “They basically wanted me to sit there and listen for two years. I was always asking, ‘Why do you want to do it that way?’ I was driving them crazy.”16

As much as Kelleher saw Neeleman as a positive force, the team dynamics simply didn’t work. Kelleher’s team had been together for years and had gelled, but Neeleman didn’t fit the Southwest mold. As a company, Southwest prided itself on perfecting and refining ideas that others had developed, rather than being the first in the industry to adopt innovations. Neeleman, on the other hand, wanted to push the boundaries of the airline business. He noted, “The Southwest management team wanted no part of me. What surprised me about Herb is that he didn’t want to ruffle feathers.”

Neeleman soon realized that he and the Southwest team fundamentally disagreed on how to run the business. He explained, “Southwest was a prisoner of its success.” He continued:

There are two axioms in business. One of them says that when you figure out what makes you successful, just stick to it. Don’t deviate, and don’t diversify. The other axiom says that business is constantly changing, and you have to change with it.

I would sit in meetings and could see they had a train wreck brewing, and I couldn’t keep my mouth shut. They didn’t have a ticketless offering, as they had to mail tickets out to everybody. So I was trying to convince them that we had to do the ticketless thing.

One day, Kelleher told Neeleman that every member of the management team wanted him to leave. “It was my dream job, but I was fired,” explained Neeleman, “and I was devastated.”17 As part of the sale of Morris Air to Southwest, Neeleman had agreed to a noncompete provision that would keep him out of the U.S. airline industry for the next five years.

Ann Rhoades, Southwest’s head of human resources, met with Neeleman to finalize his departure. She observed, “He was hurt. He loved Southwest. But David being David, he actually started pitching his next company while he was getting fired.”18 His idea was to start a chain of dental practices to bring new efficiencies to an inefficient industry. He proceeded to experiment with a number of different businesses, including a pretzel company, a fitness company, and a first-aid business.19 None of these businesses took flight.

Neeleman could have comfortably retired and focused his time on his family, church, and community service. But given the way his experience at Southwest had ended, Neeleman had a deep desire to prove the naysayers wrong. “I had $25 million, and I was completely miserable,” he said. “I wanted to build a company again but I had signed that non-compete agreement.20 What drives me is my tremendous competitive streak. I don’t want to lose. Deep down in my gut I hate it when someone does something better than me.”21

Neeleman eventually reemerged on the aviation scene with two new businesses: Open Skies, a software system to process e-tickets, and WestJet, a discount airline in Canada. Open Skies, which was sold to Hewlett-Packard in 1998, provided the platform to spread Neeleman’s e-ticket innovation to many other airlines, as it became standard practice in the industry. WestJet’s IPO took place in June 1999, the same month that Neeleman’s noncompete agreement with Southwest expired. Its success demonstrated that he could repeat his success at Morris Air with another entrepreneurial airline.

Creating a New Airline

Neeleman was convinced that he could “out-Southwest” Southwest Airlines. He felt that the U.S. airline business was ripe for innovation and that an entrepreneurial operation with a clean slate could avoid almost entirely the mistakes of the major players, most of which were in, or flirting with, bankruptcy. Neeleman made a list of all the things he hated about flying and the airline business and started thinking about how to fix them. He felt strongly that much of airline conventional wisdom could be turned on its head: “Just because airlines have been doing things in a certain way for decades doesn’t mean it’s the best way or the right way to do it.”22 When assessing the state of customer service in the industry, Neeleman observed, “The bar is so low you can crawl over it.”

Brainstorming with Tom Kelly, his longtime legal adviser, and Michael Lazarus, his longtime financier, Neeleman considered all the ways a new airline could break the negative cycles of the business. What if an airline viewed customer service as a source of competitive advantage, not a lowest-common-denominator cost center? What if building a people-centric corporate culture could not only increase pride and productivity, but also avoid a unionized workforce that every major airline had, including Southwest? What if you could build a discount airline that had an entirely new fleet of planes? What if you could create an almost entirely paperless airline, with ticketless flying as the only option?

Neeleman slowly constructed a pitch to potential investors, drawing equal measures of inspiration from Southwest and from Virgin Atlantic, the international airline that Richard Branson made successful, against all odds. Neeleman saw Branson as an ideal business partner in his new

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venture—marrying his vision of a low-cost, high-service airline with Branson’s unmatched marketing prowess.

Despite their obvious stylistic differences, Branson and Neeleman were kindred spirits. They prided themselves on their ability to find business opportunities in unconventional places. They both also had experienced an undiagnosed learning disability—Branson was dyslexic—that they believed boosted their creativity. They moved eagerly toward a match, even going so far as to sign a memorandum of understanding to build a new domestic airline under the Virgin brand. The deal collapsed because Neeleman wanted to launch quickly, but Branson insisted on waiting for change in U.S. federal regulations.23 Branson later admitted that this was one of the biggest mistakes of his business career.24

Meanwhile, Neeleman began pitching his audacious plan to a broad range of investors, including financier George Soros. He was able to persuade Soros’s Quantum Fund, Chase Capital, Weston Presidio, and others that he was uniquely positioned to deliver on a “Southwest-Plus” business plan. Neeleman was successful in raising $130 million, making JetBlue the best-funded start-up in airline history.

Building JetBlue

To build his new airline, Neeleman attracted a world-class management team of experienced airline veterans yearning for a once-in-a-lifetime opportunity to build an airline from the ground up. The team included Dave Barger, who had a strong operational track record at Continental Airlines, as JetBlue’s chief operating officer. Other key executives who signed on were Tom Kelly as general counsel, and Southwest veterans John Owen as chief financial officer and Ann Rhoades (who had helped fire Neeleman at Southwest) as head of human resources, along with several marketing experts from Virgin and a government affairs head who came from the U.S. Department of Transportation.

Neeleman persuaded this team of stars that they would have a unique opportunity to build a company they could believe in. At their first team meeting, they focused on core values. By putting people at the center—both customers and crew members—JetBlue felt it could deliver on its ambitious strategy to become both the lowest cost and highest quality provider. On the operational side, JetBlue took the unprecedented step of having all new planes in its fleet. Neeleman also used his favorite innovations at Morris Air, such as employing stay-at-home moms in Utah as the backbone of his reservation centers, achieving lower costs, high retention, and higher productivity.

For a start-up operation of any kind to put as much focus on the people side of the business as JetBlue did was unusual. But the management team decided at the outset that it considered itself in the customer service business first and foremost, not the airline business. They decided to banish references to “passengers,” calling them “customers” instead and referring to “employees” as “crew members.”

Neeleman felt strongly that his people practices must be reinforced at the top. “There are so many things you can do as a CEO to set an example,” he noted. “CEOs are often seen as money grubbers, who want to build the company on the backs of their people. But if the CEO is down there helping crewmembers tag bags and clean airplanes, they feel better about going to work. People will go the extra mile for you.”25

Neeleman made a practice of flying on JetBlue at least weekly, rolling up his sleeves to work alongside the flight crew on each flight. He would announce himself at the beginning of the flight

and invite passengers to provide comments and feedback on how JetBlue could increase customer satisfaction. This gave him a weekly customer focus group. Neeleman and Barger also made a tradition of addressing as many new crew-member orientation sessions as possible, to ensure that new hires were hearing about JetBlue’s culture from the top. Internally, they were known as the odd couple—the visionary founder and the operational guru—a complementary duo that could bring the best of both leadership worlds to the helm of JetBlue.

JetBlue’s first scheduled flight took off on February 11, 2000, from JetBlue’s hub at New York’s JFK Airport. In its first year of flying, JetBlue enjoyed a strong operational track record and did not cancel a single flight, with an on-time performance of 79%.26 JetBlue experienced its first crisis in January 2001, when one of its planes skidded off the runway during an ice storm. In response, the airline gave passengers breakfast and vouchers for a future flight, provided cell phones for phone calls, and delivered customers’ luggage later that day.

By August 2001, JetBlue had become the buzz of the airline industry for its operational efficiency and reputation for coolness that the company referred to as “cheap chic.” JetBlue was filling 80% of its seats (compared to an industry average of 68%27) with customers who fell in love with the idea of coupling lower prices with more pleasurable flying experiences, including features like live television at the seats and increased legroom. Based on JetBlue’s initial success, Neeleman and his team felt it was time to file an initial public offering (IPO) to fund continued expansion. JetBlue’s IPO was scheduled for the morning of September 11, 2001.

The first plane hit the World Trade Center less than 30 minutes before the filing of the prospectus for the IPO. At the time, there were eight JetBlue planes in the air, with passengers watching events unfold live on their seat-back television screens. “I wasn’t thinking about the IPO,” said Neeleman. “I was thinking about all those people.”28 Neeleman and Barger worked tirelessly in their command center to get all their passengers home safely. They instructed their crew members to spare no expense to do the right thing to help its customers.29

The September 11 attacks were devastating to the airline industry, but JetBlue responded in a typically contrarian manner. While other companies were cutting back dramatically, Neeleman refused to fire any of his employees. Instead, he embarked on a period of aggressive expansion. JetBlue ended 2001 with a profit of $38.5 million compared to a loss of $21.3 million in 2000, its start- up year.30 This set the stage for one of the most successful IPOs of 2002, when JetBlue went public the following April. By the end of the first day, JetBlue stock price was up 67% and was worth more than twice the value of United Airlines, which had 80,000 more employees and more than 50 times JetBlue’s sales.31

Neeleman and JetBlue piled up accolades in the media and customer service awards, regularly winning the Readers’ Choice Award from Condé Nast Traveler and the University of Nebraska’s national Airline Quality Rating, and achieving high scores in the J.D. Power and Associates customer satisfaction surveys.32 Time magazine named Neeleman one of the 100 most influential leaders in the world, and Dan Rather profiled him on 60 Minutes.

Neeleman’s biggest concern was how JetBlue could scale its success. A 2004 Fast Company cover story—entitled “And Now the Hard Part”—captured the challenge well: “Much that’s distinctive about this airline—from the enthusiasm of its employees to its relentless customer focus to its hip, slightly countercultural image—is precisely the sort of thing you can pull off when you’re small. It becomes far tougher the bigger you get. Can JetBlue maintain those qualities as it morphs from nimble startup into the bureaucracy that’s required to manage a vastly more complex operation?”33

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A Valentine’s Day to Remember

Nothing would test JetBlue’s—or Neeleman’s—limits more than the East Coast ice storm that began on February 14, 2007. When the storm hit, it was expected to be a cold rain. In keeping with its approach of avoiding flight cancellations, JetBlue allowed multiple flights at JFK Airport to depart their gates. As the storm worsened and the rain turned to ice, it became impossible for these airplanes to take off. They were also unable to return to their gates since other planes had occupied the slots in the interim. As a result, JetBlue stranded passengers on nine flights for up to six hours.

In the ensuing days, over 1,000 flights were canceled. Although other airlines suffered similar problems, the extremely negative press coverage that followed these events focused on JetBlue, severely damaging the customer goodwill that Neeleman had worked so hard to create.

From the founding of the company, Neeleman had delegated the day-to-day operations of the company to COO Barger. However, Barger was in Florida when the storm hit and remained there for the next several days. Operating without his longtime COO at his side, Neeleman became all too aware of how ill-equipped JetBlue was to handle a crisis of this magnitude. He became very frustrated that the operational processes were not in place to end the crisis. “This was an operational failure. We had an emergency control center full of people who didn’t know what to do, because they lacked the necessary systems and were ill-equipped to handle a crisis of this magnitude,” he said.34

Neeleman next focused on restoring customer confidence in JetBlue by apologizing directly to customers and by finding a way to address quickly JetBlue’s operational deficiencies. Less than a week after the crisis first hit, Neeleman took the unprecedented step in the industry of announcing the Customer Bill of Rights, committing JetBlue to spend $30 million to compensate passengers who had been stranded during the storm, as well as specific compensation levels for flight delays and inconveniences for future passengers of JetBlue.35 He noted, “In a sense, I sacrificed myself to save the brand—and it worked.” He continued: “I knowingly went out there and said we screwed up. We rode the wave of great publicity, but that turned on us really quickly. We had to do something drastic to pull it out, so we came up with the Customer Bill of Rights. I was so wrapped up in trying to save the business and the brand, and pulling us back together again, that I failed to communicate effectively with my board.”

Neeleman knew he had a steep hill to climb in order to restore the confidence of his customers and his board and get JetBlue back on track. His apology campaign received high scores from the public and from crisis communications experts as he took responsibility for the crisis. But the JetBlue board had serious concerns about whether he had made a mistake in apologizing for this crisis. Neeleman felt he couldn’t have handled the crisis in any other way. As he noted, “I personally felt I had to do it. How could I face our customers and our crew members if I didn’t take accountability for our problems?”36

To address the operational issues, Neeleman successfully wooed Russ Chew to join JetBlue as COO, with the charter to overhaul the operations function. At the time, Chew was COO of the Federal Aviation Administration and had previously headed American Airlines’ operational control center. “Chew got things back on track, and kept them there,” Neeleman said.

Following the crisis, Neeleman reflected on JetBlue’s next chapter. How could he restore JetBlue’s previously golden reputation as a top customer service company? Would the Customer Bill of Rights prove to be a bold move in that direction or a costly overreaction? How should he handle Barger in light of his absence during much of the crisis? Were additional changes on his leadership team necessary to fix the problems that had been exposed so glaringly during the crisis?

Neeleman was especially concerned about his board’s reaction to his handling of the crisis. Could he continue to be effective as CEO without the unqualified support of his board? How should he handle his board’s concerns?

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Exhibit 1 Business Week Cover, March 5, 2007

Source: March 5, 2007 cover, http://www.businessweek.com/magazine/content/ 07_10/b4024002.htm. Reprinted from March 5, 2007 issue of BusinessWeek by special permission, copyright ©2009 by The McGraw-Hill Companies, Inc.

Exhibit 2 JetBlue Airways’ Apology Letter from David Neeleman

Source: Company data.

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Exhibit 3 JetBlue Airways’ Customer Bill of Rights

Source: Company data.

Endnotes

1 Jeff Benedict, “Author’s Note,” The Mormon Way of Doing Business (New York: Warner Business Books, 2007), p. XIII.

2 Robert Smith, NPR, “JetBlue Offers Passengers Rights, Compensation,” All Things Considered, February 20, 2007.

3 David Neeleman, interview by casewriter, April 2, 2008. (Subsequent quotations that are not sourced are from same interview.)

4 “10 Questions with David Neeleman,” States News Service, April 4, 2007.

5 James Wynbrandt, Flying High: How JetBlue Founder and CEO David Neeleman Beats the Competition . . . Even in the World’s Most Turbulent Industry (Hoboken, NJ: Wiley, 2006), p. 10.

6 David Neeleman, interview by CNN, February 10, 2000. 7 Benedict, The Mormon Way of Doing Business, p. 24.

8 Ibid., p. 5.

9 Ibid., p. 4. 10 Ibid., p. 1.

11 Wynbrandt, Flying High, p. 19. 12 Barbara S. Peterson, Blue Streak: Inside JetBlue, the Upstart that Rocked an Industry (Portfolio Trade, 2006), p. 10.

13 Wynbrandt, Flying High, p. 27.

14 Ibid., p. 61. 15 Ibid., p. 63.

16 Ibid., p. 66. 17 David Neeleman, interview by Road Trip Nation, September 7, 2006, http://www.roadtripnation.com.

18 Wynbrandt, Flying High, p. 67.

19 Ibid., p. 73. 20 Peterson, Blue Streak, p. 34.

21 Benedict, The Mormon Way of Doing Business, p. 23. 22 “10 Questions with David Neeleman.”

23 Peterson, Blue Streak, p. 55.

24 Ibid., p. 57. 25 Benedict, The Mormon Way of Doing Business, p. 2.

26 Peterson, Blue Streak, p. 133.

27 Rachel Beck, “JetBlue finds success marrying cheap tickets with hip appeal,” Associated Press, August 8, 2001. 28 Roben Farzad, “Will Success Spoil JetBlue?” Smart Money, June 1, 2002.

29 Peterson, Blue Streak, p. 144. 30 Amy Tsao, “Thinking of Taking Off with JetBlue,” BusinessWeek, April 8, 2002.

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31 Farzad, “Will Success Spoil JetBlue?” 32 Jena McGregor, “An Extraordinary Stumble at JetBlue,” BusinessWeek, March 5, 2007.

33 Chuck Salter, “And Now the Hard Part,” Fast Company, May 2004. 34 Jeff Bailey, “JetBlue’s CEO is ‘Mortified’ After Fliers Are Stranded,” New York Times, February 19, 2007.

35 Smith, NPR, “JetBlue Offers Passengers Rights, Compensation.”

36 “10 Questions with David Neeleman.”

This document is authorized for use only by Oleg Tsoy ([email protected]). Copying or posting is an infringement of copyright. Please contact [email protected] or 800-988-0886 for additional copies.