When I have made plane reservations for my college student sons over the past few years, they never insisted on an airline but they always thanked me profusely when I booked them on JetBlue.
That may be changing. The company made the announcement on Wednesday of a number of changes:
NEW YORK, NY -- (Marketwired) -- 11/19/14 -- JetBlue Airways (NASDAQ: JBLU) today outlined a long-term plan to drive shareholder returns through new and existing initiatives aimed at enhancing the Company's product advantage and service-oriented culture while delivering improved financial results. The revenue initiatives are expected to collectively generate more than $400 million in annual operating income on a run rate basis beginning in 2017…
Robin Hayes, JetBlue's President, said, "We believe the plan laid out today benefits our three key stakeholders. It delivers improved, sustainable profitability for our investors, the best travel experience for our customers and ensures a strong, healthy company for our Crewmembers. As we focus on executing this plan, JetBlue's core mission to Inspire Humanity and its differentiated model of serving underserved customers remain unchanged."...
The press release went on to outline changes that included reducing leg room in new planes, ending free bags for some fare categories, charging for wi-fi, and creating more premium class offerings. That’s inspiring to Wall St. but not to “Humanity.” Hayes would have been better to have left out that last sentence. The only thing worse than not having a purpose is pretending to have one.
What will my sons and many other consumers think of these changes? That JetBlue is putting short-term shareholder interests over long-term stakeholder interests. And remember that it is stakeholders--customers, employees and partners--who determine what kind of value the company creates over time. The press release says that they are looking to the long term but they're assuming that stakeholders are passive servants to the shareholders' interests. Don't bet on it.
The profit calculation is incomplete without a calculation of what a change like this will mean to the JetBlue’s intangible capital including reputation and brand. It should. Because intangibles are longer lasting assets than any airplane or luggage cart—unless you fail to take care of them. The accountants project $400 million in profit. What they need is an ICountant to help them figure out the loss in future revenues caused by its decline in brand equity. The only way to counteract Wall St’s short-term myopia is with solid data and communication about long-term value.
Who’s looking out for JetBlue’s intangible capital? Not the team that made this decision.