Case Study Questions: 1) What types of information systems and business functions are described in this case? In this case study, limitations in JetBlue’s Transaction Processing Systems (TPS) were an integral factor in the events that transpired in February 2000. JetBlue’s Transaction Processing System (TPS) is a computerized system that performs and records the daily routine transactions necessary to conduct business (Page 45). These transactions included flight reservations and baggage handling. JetBlue’s ability to automate many of the processes made them an innovative competitor in the airline industry. 2) What is JetBlue’s business model? A business model describes how a company produces, delivers, and sells a product or service to create wealth (page 13). JetBlue’s business model is to push innovation, keep labor costs down and have a strong commitment to developing software and equipment standards. JetBlue passes the savings to their customers in the form of lower airfare prices. 2.1) How do its information systems support this business model? JetBlue was able to automate the key processes behind ticket sales through improvements in their Transaction Processing Systems (TPS). For example, JetBlue’s website was described in the Case Study as the dominate tool for handling communication and ticket purchases. In addition, JetBlue’s baggage handling with the use of electronic tagging provided JetBlue with a paperless process that revolutionized the industry. 3) What was the problem experienced by JetBlue in this case? On February 14, 2000 a brutal ice storm hit the New York City area and resulted in 10,000 of JetBlue’s 30 million annual customers having their flights delayed or canceled. Many of these passengers lost their baggage as a result of catastrophic communication failures at multiple levels. Some customers were stranded in airplanes for up to ten and one-half hours. This incident became a
JetBlue Hits Turbulence: Case Study
JetBlue is an airline founded in 2000 by David Neeleman. The airline's initially serviced passengers between and but expanded rapidly. By the end of 2006, the airline had 500 flights operating in 50 different cities providing each passenger with amenities such as TV, and leather seats. This rapid expansion brought challenges the airline had not prepared for.
JetBlue was founded on the basis of offering luxurious flying with quality customer services at low price. The airline intended to offer this low cost service by cutting “unnecessary” expenses, and through the use of information technology and information systems. The airline automated all its services, employed a very lean non-union workforce, and standardized their planes and software. The airline only operated airbus A 320, and used almost exclusively Microsoft software for its information systems. This approach gave JetBlue a competitive advantage over other airlines such that the airline expanded more rapidly that the founders had envisioned. However, there we concerns in the business circles that the airlines infrastructure and workforce was inadequate to accommodate its rapid growth.
On February 14, 2007, area experienced an ice storm affecting flights out of . Most airlines started canceling their flights earlier in the day, but JetBlue did not and hoped to live by its reputation of providing excellent service to its passengers. The airline's management believed passengers were better off delayed to their destinations than have their flights cancelled altogether. Nine of JetBlue's planes left the JFK International airport gates and got stuck on the tarmac. This resulted in the passengers and the crew getting confined inside the planes for many hours without basic necessities such water, food and good toilets access. Upon realizing the gravity of the problem, JetBlue management started canceling flights leading to many customers rescheduling their flights or canceling them altogether. Because of so many passengers rebooking, canceling, or tracking their baggage the airlines automated system and staff could not handle all the traffic. In addition, the airline did not have a system in place to effectively communicate with its employees in case of such emergencies. Laudon & Laudon (2010) states that “With the breakdown in communications, thousands of pilots and flight attendants were out of position, and the staff could neither find them nor tell them where to go” (p.73). Overall, the airline's problems were best summed up by their chief executive, David Neeleman, who admitted that “JetBlue management was not strong enough and its communication system was inadequate. The department responsible for allocating pilots and crews to flights was too small” (Laudon &Laudon, 2010, p.73). This was a wake up call for the company that had relied on low cost technology, and a skeleton workforce.
Response to crisis evaluation
Despite the ordeal, JetBlue remained true to its business model of excellent customer service. The response to the crisis was a somber one. The airline's CEO took personal responsibility and was openly apologetic. He expressed deep regret that good intentions had gone totally wrong. As a result of the crisis, airline management introduced numerous changes to deal with inadequate staffing, obsolete technology, and frustrated customers. The airline promised to upgrade its IT infrastructure and install new software to track availability of its staff during emergencies, to train 100 employees from the corporate office as backups during emergencies, and to by introduce a bill of rights that would penalize the airline whenever it fails to offer appropriate service. Regrettably, changes did not end with improving technology and staffing, the airline's Board of Directors fired David Neeleman as CEO and made him non-executive chairman. A move I believe was unfair considering that Mr. Neeleman did a tremendous job addressing the organization's systems failure during the saga.
Information Systems and Business Functions
Although JetBlue's president and chief operating officer, Dave Barger, at one boasted about other people saying “ ‘Airlines are powered by fuel, but this airline is powered by its IT infrastructure' ”, his airline amazingly spent only 1.5 percent of its revenue on improving its information technology infrastructure compared to 5 percent by competitors. The airline relied heavily on low cost technology that was unable to withstand high traffic volumes as witnessed during the storm. The storm saga was as a result of multiple systems and business functions failures. The major failure was with the Transaction processing systems (TPS). This is a system responsible for ticket reservations and tracking the flow of all transactions. JetBlue was unable to manage passenger rebooking or rescheduling their flights because of TPS failure. Since TPS is the major source of information for all systems its failure proved disastrous for the airline as there was no flow of important information regarding all transactions. Besides TPS failure, another failure was in the Customer Relationship Management Systems (CRM). The CRM is the system that helps firms manage their relationship with their customers. The fact that the airline was unable to effectively communicate with their customers during this period shows a break in their CRM system. Another notable failure was in the Executive Support System (ESS). This is a system that senior managers use to address strategic issues and long term planning. The fact that the company outgrew its infrastructure capacity shows that management did not plan for its rapid growth. The lack of foresight proved costly to the organization. Finally, we also note a failure in the Human Resources functional business process. This was due to Human Resources failure to hire or predict enough airlines's staffing needs to keep up with the company's rapid growth.
Finally, its essential to appreciate the measures the airline has put in place to address its short comings. These include upgrading its IT infrastructure, training more supporting staff, and introducing customers' bill of rights. These measures better prepare the airline to handle future events better. Besides, the introduction of customers' bill of rights gives customers assurance that they will be treated fairly and will not be left stranded again. However, JetBlue remains vulnerable if they can not put a system in place to keep up with rapid changes in technology, and staffing needs. Therefore, there is need for the airline to build strong information and Human Resources systems if it wants to avoid a repeat of this crisis.
Laudon, K.C., & Laudon, J.P. (2010). Managing Information Systems: Managing The Digital Firm (11th ed). , N.J: Pearson Education, Inc