JetBlue Introduces Customer Bill of Rights

By Rich Silverman

After a disastrous Valentine’s Day icestorm forced JetBlue to cancel more than 1000 flights and leave passengers stranded on the tarmac at New York’s JFK airport for as long as 11 hours, the airline has introduced a Customer Bill of Rights that would compensate passengers for delays or cancellations.

"We failed our customers and our crew members," David Neeleman, founder and CEO of the discount airline said Tuesday. "This was a pretty somber week for us," he added, "during which huge lessons were learned.".

Among those lessons were financial losses to the tune of an estimated $30 million and a close to 5% drop in the company’s stock price. According to Dow Jones Marketwatch.com, shares in JetBlue, which is traded on the NASDAQ exchange, fell almost 5%

The company has created a series of payments and other compensations that it will pay to customers in the event of delays, whether they were created by the company or were due to circumstances beyond its control. For flights cancelled by JetBlue within 12 hours of departure due to reasons under the airline’s control, JetBlue will give customers a full refund, a credit or a voucher. If the airline delays a flight for reasons under its control, it will pay customers from $25 to the value of their tickets. The amount of compensation will depend on the length of the delay.

Neeleman also said that passengers will be compensated if a plane is unable to taxi to its gate with 30 minutes of arrival or if a departure is delayed more than 3 hours. Passengers would be eligible for vouchers worth anywhere from $100 to the value of their roundtrip tickets. If a plane is unable to take off for more than 5 hours, Jetblue will allow passengers to deplane.

The company has said it will make these compensations retroactive to February 14th. As a result, they expect to pay out close to $10 million in refunds and $16 million in vouchers for future travel. JetBlue also expects to make additional investments in infrastructure that could total $4 million.

The company is also taking additional steps to prevent this type of problem in the future. Neeleman noted that flights JetBlue cancelled due to weather earlier during the days leading up to February 14th prevented them from getting employees where they needed them to be. "We should have acted quicker and we should have had a better contingency plan," he said.

As a result, New York was short of employees trained on the company’s computer systems. JetBlue will train and credential an additional 940 employees to help out in the future, and will make an effort to improve communications with customers at airports and their website.

The airline says it is now back to 100% operations. But the repercussions from last week’s events will continue to be felt for some time. William Greene, an analyst for Morgan Stanley wrote recently in a research note that "The company's recovery plans and systems had not been adapted to adjust for the substantial growth of the past few years," With the company working hard to recover, he added "As such, we believe the stock will be dead money for the next few months."

CEO Neeleman is more optimistic than Morgan Stanley’s Greene. "This was a big wake-up call for JetBlue," he said. If there's a silver lining, it is the fact that our airline is going to be stronger and even better prepared to serve our customers."