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JetBlue's fate rests in living up to promises

/ Source: The Associated Press

Two potentially loaded words may tell the tale about whether JetBlue’s new “Customer Bill of Rights” truly helps to restore its reputation after an operational meltdown.

Littered throughout that proclamation are the words “controllable irregularity.” That’s corporate legalese at its best, giving the New York-based airline wiggle room in deciding whether it owes compensation to travelers caught in service snafus.

If JetBlue really wants this to be a reputation-saving exercise, it will have to be careful about blaming events beyond its control for refusing to make cash payments or offer free tickets to irked customers who will be expecting them.

JetBlue’s competitors must have been smirking as the often-touted airline faltered over the last week. Since it was founded seven years ago, JetBlue Airways Corp. has attained a celebrated status in the battered airline industry by building perception that it was different from others especially in terms of cost and service.

Over the last year, some of its high-gloss image started to fade as its rapid expansion and higher fuel costs swung profits to losses. To combat that decline, it launched a “Return to Profitability” plan that involved raising fares, cutting back on its growth and pushing into smaller, less competitive markets.

Despite those troubles, JetBlue’s solid reputation largely stayed intact — until Valentine’s Day. That’s when a severe ice storm struck the Northeast, freezing planes to the ground and causing passengers to be stuck inside aircraft for as long as 10 hours. Then the airline failed to recover quickly from the storm, leading to more than 1,000 flight cancelations over the busy President’s Day holiday weekend.

“This was a major league breakdown,” said Darryl Jenkins, an independent airline consultant in suburban Washington. “This was a self-inflicted mess ... It showed that they are mortals like everyone else in the business.”

The company estimates that the disruptions, which stranded thousands of passengers in cities across the country far away from the site of the storm, will hit first-quarter earnings by about $30 million, leading to an operating loss.

The immediate financial toll, however, might not be as steep as the long-term damage to its reputation. Passengers might avoid flying the carrier after such a paralyzing mess.

David Neeleman, JetBlue’s founder and CEO, has spent recent days trying to curb potential defections. Unlike many airline CEOs who faced similar crises, he quickly and publicly acknowledged the mistakes the airline made. The airline took out full-page advertisements in several East Coast newspapers on Wednesday to apologize for the travel headaches.

“We are sorry and embarrassed,” the full-page ad began. “But most of all, we are deeply sorry.”

JetBlue’s new “Customer Bill of Rights” is intended to calm passengers’ jitters. Now if JetBlue cancels a flight within 12 hours of its departure because of problems within its control, customers can ask for a full refund, a credit or a voucher. If the airline delays a flight in a situation within its control, passengers would receive vouchers ranging from $25 to the full amount of a round-trip ticket, depending on the length of the delay.

JetBlue also vowed to notify customers of delays prior to scheduled departures as well as not only inform them of diversions or cancellations, but also give the cause.

But embedded in the new bill of rights, the words “controllable irregularity” keep showing up. The way JetBlue describes it, that involves an event that the airline can’t recover from due to its own fault. So a weather-related delay means the company doesn’t have to pay up, but it would if planes were still grounded the day after a storm passed.

The devil of that provision may be in the details, since a “controllable irregularity” might be interpreted differently by different people, noted airline consultant Robert W. Mann, of Port Washington, N.Y.

“Do they walk the talk? Neeleman made his mea culpa very public, and now he has to live up to the promises,” Mann said.

Neeleman said that he didn’t expect payments stemming from this new program will represent “a meaningful expense,” and the new bill of rights could woo new customers. But for that to happen, the company has to be overtly generous.

If it’s not, it could go the way of, which in 2000 promised full refunds or rebates for certain airlines that were booked through its travel Web site. Travelers were entitled to $100 refund from the site, which was owned by the large travel agency Rosenbluth International, if flights were 30 minutes late. That shot up to $200 for hour-late flights.

But months later, the successful program was cut back — largely because it cost too much. eventually went out of business.

For JetBlue, its past reputation no longer matters. Its future has just begun.