Presentation

Best

Risk Management

Practices

John J. Hampton

March 24, 2014

2

Presentation

Jet Blue Airways

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Jet Blue Airways

New York’s Kennedy Airport.

Valentine’s Day 2007.

Ice storm.

Trapped passengers on planes up to 10 hours.

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Question

Did the company have the Big Picture?

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Question (2)

What are some examples of disruptions?

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Answer

Examples: Ice storm. Police action. Terrorist act. Congestion. Maintenance. FAA regulations. Technology. Fuel shortage. Employee absence.

Strike.

Crazy person.

Power outage.

Communications outage.

Airport closing.

Improper training.

Absence of linguists.

Missing parts.

Accident/Crash.

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Question

Who should be responsible for disruption risk?

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Answer

Highest level. This risk is assigned to the Executive

Vice President for Flight Operations.

Next level. It is further assigned to Kennedy Airport

Operations Center.

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Question

What is the likelihood of a disruption of operations?

•An ice storm hits New York once every three winters.

•33%. The chance of hitting at a busy time.

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Answer

A disruption is likely to happen one time in a 9-year period.

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Question

How severe could it be to have a disruption of operations?

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Answer

Could be: A public relations nightmare if passengers

stranded on planes for long periods of time. Financially costly to reimburse passengers for

losses or time spent. Harmful to long-term and cherished

reputation for the highest quality of customer service.

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Question

What alternatives did Jet Blue have to mitigate the impact of a disruption?

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Answer (1)

Bus Contingency Plan. Unload planes sitting on the tarmac.

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Answer (2)

Additional Personnel. Train nearby headquarters staff.

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Answer (3)

Revised Operating Procedures. For weather or other delays.

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Question

What were the consequences of the failure to prepare?

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Answer (1)

Consequences:$30 million in added costs.Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).

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Answer (2)

Consequences:$30 million in added costs.Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).Jet Blue was the cover story in Business Week on March 5.

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Answer (3)

More consequences. Jet Blue endangered: Top choice in national airline quality

rating (4 years in a row). Condé Nast Traveler reader’s choice

award (5 years in a row). High J.D. Powers ranking for quality.

Question

What happened to Jet Blue in the years after the Valentine’s Day disruption?

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Answer

Jet Blue recovered: Implemented a Customer Bill of Rights. Created a database to track crew locations

and contact information. Cross trained employees and had on call in

the event of a crisis. Created a Web-based rebooking system to

reschedule flights.

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Presentation

U.S. Airways

January 2009

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Question

U.S. Airways flight 1549 landed on the Hudson River in 2009 with no loss of life.

•Landing by pilot Sullivan was called the “Miracle on the Hudson.”

•How did U.S. Airways prepare for a crisis?

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Answer

Preparation: “Dry Runs.” 3 times a year at every airport it

serves. “Care Team.” Gates agents, reservation

clerks, and other employees dispatched on a “moment’s notice.”

800 Number. For families to call for information.

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Question

How did it handle the passengers who were removed from the plane?

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Answer

The airline took action: 150 employees from headquarters (Arizona)

to New York. Employees credit cards to buy medicines,

toiletries, and personal items. Bag of cash. Suitcases with prepaid cell phones and sweat

suits (dry clothes). Escorted passengers to hotels with 24-hour

buffets.

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Question

What else did it do?

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Answer (1)

More action: Arranged train tickets and rental cars for

individuals who did not want to get back on a plane.

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Answer (2)

More action: Arranged train tickets and rental cars for

individuals who did not want to get back on a plane.

Reached out to high-level executives at Hertz and Amtrak so no hassle getting the tickets.

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Answer (3)

More action: Arranged train tickets and rental cars for

individuals who did not want to get back on a plane.

Reached out to high-level executives at Hertz and Amtrak so no hassle getting the tickets.

Retained locksmiths to help passengers who had lost keys for cars and home.

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Question

Anything else?

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Answer (1)

Follow-up action: Sent letters updating passengers after they

arrived home.

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Answer (2)

Follow-up action: Sent letters updating passengers after they

arrived home. Refunded the airplane ticket and gave

each passenger $5,000 to replace lost possessions.

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Answer (3)

Follow-up action: Sent letters updating passengers after they

arrived home. Refunded the airplane ticket and gave each

passenger $5,000 to replace lost possessions.

Paid additional monies to passengers where $5,000 did not cover losses.

The Big Picture of Risk

If it ain’t broke, fix it anyway.

Why good people make bad decisions about risk?•They do not look for it.•They do not prepare organizations for it.•They do not show flexibility to respond to it.

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Conclusion

Is life fair?

•Jet Blue has fully recovered.

•American Airlines acquired US Airways.

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Conclusion (2)

Is life fair?

•Jet Blue has fully recovered.

•American Airline acquired US Airways.

•U.S. Airways management will run the combined airline from the American headquarters in Fort Worth, Texas.

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Best

Risk Management

Practices

The end?

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The end?

Or is it just the beginning?

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