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A cost-cutting CEO angers customers

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in Best-Practices Leadership,Leaders & Managers

When JetBlue Airways started flying in 2000, it shook the commercial aviation business. Its leaders sought to disrupt the traditional airline industry.

JetBlue planes provided all passengers with more legroom and a comfortably padded seat. They could check suitcases without an extra fee and enjoy free Wi-Fi and satellite television in flight. Almost instantly, JetBlue proved a success. Its founder and CEO, David Neeleman, basked in glory.

When Robin Hayes took over JetBlue in early 2015, he imposed a series of controversial changes. He announced plans to initiate baggage fees and add 15 more seats to JetBlue’s fleet of Airbus A320 aircraft.

What’s worse, he decided to do away with padded seats in favor of the “slim-line” seats favored by most major airlines. Travelers of those airlines widely detest the bare-bones seats.

In laying out his strategy, Hayes followed the playbook set by Wall Street analysts. They were criticizing JetBlue for being “overly brand-conscious and consumer-focused,” thus leading to “lagging fundamentals.” Hayes cut costs by eliminating what differentiated JetBlue from its competitors. This delighted the analysts, who in turn projected surging earnings for JetBlue.

Yet consumers rebelled. They lambasted JetBlue on social media—and the airline’s Facebook page—for watering down what made it successful in the first place.

Hayes mounted a feeble defense. He admitted that he expected “a lot of noise” from customers who would resent the changes. But he added that JetBlue would still offer “a better experience than you will have on any other airline.”

Arguing that JetBlue would still exceed the extremely low bar of its competitors didn’t sit well with the public. It shows that even if visionary entrepreneurs launch disruptive companies that win customers, a more conventional CEO can undo much of that success.

— Adapted from Mad Genius, Randy Gage, Perigee.

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