Presentation Best Risk Management Practices John J. Hampton March 24, 2014

2 Presentation Jet Blue Airways

3 New Yorks Kennedy Airport. Valentines Day Ice storm. Trapped passengers on planes up to 10 hours.

4 Question Did the company have the Big Picture?

5 Question (2) What are some examples of disruptions?

6 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.

7 Question Who should be responsible for disruption risk?

8 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.

9 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.

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

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

12 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.

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

14 Answer (1) Bus Contingency Plan. Unload planes sitting on the tarmac.

15 Answer (2) Additional Personnel. Train nearby headquarters staff.

16 Answer (3) Revised Operating Procedures. For weather or other delays.

17 Question What were the consequences of the failure to prepare?

18 Answer (1) Consequences: $30 million in added costs. Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).

19 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.

20 Answer (3) More consequences. Jet Blue endangered: Top choice in national airline quality rating (4 years in a row). Condé Nast Traveler readers 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 Valentines Day disruption? 21

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. 22

23 Presentation U.S. Airways January 2009

24 Question U.S. Airways flight 1549 landed on the Hudson River in 2009 with no loss of life. Landing by pilot Sullivan was called theMiracle on the Hudson. How did U.S. Airways prepare for a crisis?

25 Answer Preparation: Dry Runs. 3 times a year at every airport it serves. Care Team. Gates agents, reservation clerks, and other employees dispatched on amoments notice. 800 Number. For families to call for information.

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

27 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.

28 Question What else did it do?

29 Answer (1) More action: Arranged train tickets and rental cars for individuals who did not want to get back on a plane.

30 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.

31 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.

32 Question Anything else?

33 Answer (1) Follow-up action: Sent letters updating passengers after they arrived home.

34 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.

35 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 aint 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. 36

Conclusion Is life fair? Jet Blue has fully recovered. American Airlines acquired US Airways. 37

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. 38

Best Risk Management Practices The end? 39

The end? Or is it just the beginning? 40