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By Kathleen
Cassedy
CEO and President David Neeleman
of the new low-fare airline, JetBlue Airways, presented his insightful
keynote speech on the afternoon of Thursday, May 24, with very little
sleep. That is because just the day before he had flown the inaugural
flight from the airline’s second airport, Long Beach, California,
at 3 a.m. PST with a live broadcast by him to 20 stations.
Since JetBlue launched its
first flight on February 11, 2000 from New York City’s John F.
Kennedy Airport to Fort Lauderdale Airport, the airline company has
expanded operations to 15 U.S. cities, providing 76 daily flights on
a fleet of 14 new Airbus 320s.
Neeleman is not new at launching
low-fare start-ups. He was the founder and president of Morris Air (1984-1995),
based in Salt Lake City, which was the first airline to offer electronic
ticketing. He sold Morris to Southwest Airlines in 1993, and initially
worked for Southwest. His contract with Southwest forbade him to work
for competing airlines for five years after he left the company. During
the interim, he provided consultation to a new, low-fare Canadian airline,
West Jet, and helped develop Open Skies, a touch-screen electronic reservations
and check-in system, which was recently sold to Hewlett-Packard. He
also conceptualized the new airline he wanted to start. a highly capitalized,
low-fare airline that focused on customer service.
“The airline business
is a real addictive thing. It gets in your blood,” he explains.
“I’ve always had this yearning to be in the airline business
and give back to the business.”
Neeleman is very proud of
JetBlue, which became profitable six months after it began operating.
The company’s management philosophy is based on what he calls the
old values: Take care of your employees first; they will take care of
your customers; and your customers will take care of your shareholders.
Based on his previous track
record, Neeleman was able to attract an initial $130 million in capital
funding from investors which included Weston Presidio Capital, George
Soros, and Chase Capital. At that time, Neeleman had no management team,
no planes, and no airport slots for take-off and landing.
Neeleman notes that startup
airlines are usually the carriers of last resort. They often use old
Boeing 727s, which are cheaper to buy, but more expensive to maintain
and operate. His vision was to create the most highly capitalized startup
in U.S. aviation history, which used new planes, provided exceptional
customer service, and the best coach-class experience. In JetBlue planes,
all seats are leather, which costs more, but then they last twice as
long as cloth, says Neeleman. The back of each seat also has a television,
offering free 24 channels by satellite.
When prospective staff and
crew are interviewed, they must buy into the company values of safety,
caring, integrity, fun and passion. Rather than pay his management team
less money because the airline was new, Neeleman paid them more than
what they would receive at comparable jobs with other companies. He
also felt it was important to provide profit-sharing and offer stock
options when the company goes public. “It’s critically important
to get everybody involved with the company,” he says.
On the subject of service,
“This is an industry (airline) in which we have—more than
any other business I can think of—very little control (because
of weather and mechanical problems).” says Neeleman. “But
an airline company can control how it handles delays.” After a
review of one a JetBlue plane delay, which caused a passenger to miss
his son’s wedding, Neeleman decided to initiate weekly three-hour
training for management in how to handle delays. He also had customer
service call every passenger on that plane to ask him or her how JetBlue
could have improved the situation. The man who missed his son’s
wedding received three round-trip tickets.
Every month, a certain amount
of JetBlue’s budget is allotted for passenger inconvenience; Neeleman
insists that it all be spent. “We have a policy that if a passenger
is delayed over a certain amount of time, we give them back in credit
another flight. We want them to go and experience a flight that wasn’t
delayed,” he explains.
“I try to take at least
a flight a week. I spend time with the employees, and talk to every
single passenger on the flight,” he says. “I listen to them
about what literally motivated them to call us in the first place [for
reservations]. What is it they don’t like about us, or like about
us. These are all such important things in the business.”
The company, initially called
New Air, paid an agency $150,000 to come up with a name. Neeleman did
not like any of its suggestions. Another firm proposed the name Blue,
which Neeleman liked. The marketing team decided to go with the name,
JetBlue, which played on the expression, “jet black.”
“I said, ‘Look, the name will not make us. We will make the
value of the name,’” Neeleman recalls.
JetBlue is more interested in conducting market research and employee
surveys than rolling out elaborate advertising campaigns. “I tell
the ad agency your job is to make the phone ring, let us take care of
the brand.” The minute the phone rings or someone contacts reservations
online, JetBlue has the possibility of having a customer for life, he
says. “Let people know we have great fares. They’ll call us.
They’ll come fly with us, and they’ll tell their friends.
“We can have the coolest,
most expensive ads on the planet, but if we don’t deliver on the
promise, then it doesn’t matter,” Neeleman says. Rather than
spend $80,000 to hang a promotional banner in a sports arena, as a marketer
suggested, the company spent $80,000 to create little gifts for New
York taxi drivers who bring passengers daily to the airport. “Drivers
can start a virus, spreading the word throughout the city about the
great new airline, JetBlue,” he says.
Neeleman believes that JetBlue
has the highest online transactions in the industry: about 40 percent
of all ticket sales. The company is planning an Internet marketing campaign,
which will offer a free ticket for every five round-trip tickets purchased.
Neeleman wanted to make one
of the most important jobs in the company reservations more rewarding,
so JetBlue designed a program to allow reservationists to work from
home. These employees are more productive, and it saves the company
‘brick and mortar’ costs, he says.
A recent employee survey received more than an 80 percent response with
92 percent positive feedback about the company. “Now we’re
focusing on those areas that prevented the rating from being 100 percent”,
he says.
“When people ask, ‘What
are you going to do during a recession?’ I say ‘This airline
is built for recession,” Neeleman remarks. JetBlue has the strongest
balance sheet in the industry and the lowest costs. From December 2000
through April 2001, every month was more profitable than the one before.
And passengers like the airline. In the 2001 Zagat Airline Survey, readers
ranked JetBlue the No. 2 domestic economy airline behind Midwest Express.
“We finished No. 2 in the comfort and service categories, and ranked
5 for food, and we don’t serve meals,” says Neeleman, noting
that JetBlue only serves snacks.
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