Last week, hot airline JetBlue (NASDAQ:JBLU) apologized to customers for providing customer information to a Defense Department contractor. Last night, the company went further, saying it won't participate in the Transportation Security Administration's developmental CAPPS II program (as it had originally intended) unless mandated by law.
CAPPS II is short for Computer Assisted Passenger Pre-Screening System II (CAPPS II). According to the TSA website, the system is intended to use limited customer information at time of booking to help screen for potentially dangerous passengers. It's been a hot issue since it was announced, drawing fire from across the political spectrum. We'll avoid that discussion here, and instead focus on one small point of interest from a business perspective.
Last week, a JetBlue spokesman admitted that the company violated its own privacy policy in giving out the information. The information was released in September 2002, according to the story, and the spokesman chalked the decision up to patriotic fervor in the wake of the terrorist attacks one year previous. "At the time," said Gareth Edmundson-Jones, "it made sense."
JetBlue is considered one of the best-run companies in an industry where investors typically don't have a planeload of choices. (CEO David Neeleman is an admirer of Southwest Airlines (NYSE:LUV), another standout in the sector.) Whitney Tilson has been examining the company, most recently in an article last week where he highlighted a work environment that fosters great customer service. The company, notably, was the only one to maintain its full flight schedule during the recent blackout in New York.
But management clearly lost sight of its mission in giving away customer information so freely. With telemarketing, spam, and other methods of direct marketing increasingly intrusive -- not to mention identity theft -- there's reason to be wary when you hear that your data is being distributed without your knowledge. Perhaps the company wanted to curry favor with authorities, or perhaps management truly did just want to do something to "help the cause."
Whatever the case, it's clear that management slipped up. The cleanup efforts appear to be quick and thorough. And investors had better hope so, as the news continues to attract unwanted attention -- including a complaint with the Federal Trade Commission.
You can reach Dave Marino-Nachison at [email protected] .
