Wild Blue Yonder

JetBlue Surges Despite Recent Setback

JetBlue founder David Neeleman.

By James J. Parziale

Does this sound like a picture-perfect getaway?

You lounge around in a made-to-fit leather chair while watching a plethora of satellite television channels, sip on a beverage or cocktail of your choice and enjoy not-readily-available views from your perch above the ruckus in the streets.

This might whet your palate and sound like a swanky weekend getaway, but this is just the flight to your destination. This is the experience you get when flying on JetBlue Airlines, the Queens-based discount carrier founded by airline service guru David Neeleman. His vision was to provide a revolutionary flying experience whose cornerstone was efficiency and stellar customer service.

“Equality has always been important to me and I wanted to create an airline with low fares so everyone could travel, but at the same time make people feel welcome when they were flying,” Neeleman said.

JetBlue’s model for a new terminal under construction at JFK Airport.

JFK To FLL

Neeleman’s baby started modestly, launching Feb. 11, 2000, with a flight from John F. Kennedy International Airport to Ft. Lauderdale, Fla. It was the first step JetBlue took to becoming a fixture in the airline service community, which has now burgeoned into a fleet that services 51 destinations in the United States and Caribbean with more than 125 planes. What started as his personal vision has now been shared with more than 45 million customers that have ridden the friendly JetBlue skies, and that number is expected to continue to swell this year.

Still, every business venture, inevitably, has a storm that is must weather. JetBlue’s crossroads came on Valentine’s Day this year when a winter snowstorm smothered the Northeastern seaboard. The storm grounded almost 1,200 of JetBlue’s flights, and in some cases planes and passengers were trapped on the tarmac for 10 hours or more. It was not JetBlue’s finest moment, and the passenger-friendly airline that had an unblemished resume took its first haymaker.

JetBlue, however, proved it was just a bit of turbulence.

Cabins feature leather seats.

Valentine’s Day Massacre

It was probably the worst Valentine’s Day David Neeleman could remember, and Cupid had nothing to do with it. Old Man Winter ransacked the east coast with snow and ice this past February, grounding most airlines across the board. JetBlue waited longer than most to cancel flights and by doing so had planes waiting for weather to break. That morphed into stranded planes, trapped and disgruntled passengers, and very bad business.

Neeleman reflected candidly on the meltdown, which cost JetBlue $41 million and cracked its previously impervious mettle. It was an awakening that opened his eyes to how to better serve his customers, and helped bring JetBlue into a better age. Neeleman now looks at his company’s history in two segments: before and after Valentine’s Day 2007.

 

One in a fleet of more than 125.

“Before, we believed we were doing a pretty good job,” he said. “We had earned all those awards for best airline and best customer service. I wouldn’t necessarily say that we were lulled into complacency, but as we’ve grown, we haven’t always done an excellent job in scaling all areas of our operation. We’ve added planes and new cities, but some of the supporting stuff on the back end…wasn’t beefed up like it should have been.”

While the crisis was going on, Neeleman had an outpouring of staff that wanted to help but didn’t know how. Now, through technology upgrades, new hiring and a more well-rounded training, his staff is better equipped to handle more situations.

“Airlines are fine operating on a slim staff when the weather’s okay, but when weather hits we have to be able to ramp up in our support areas, like in reservations and in our airports,” he said.

Neeleman did not avoid the bad press, either. He assumed responsibility for the problems and tried to maintain good will with the patrons, handing out $24 million in vouchers to affected customers. For a man who has dedicated his life to customer service in the airline industry, it was a massive disappointment.

“I was sick about it. That’s why I was out there talking to the press and to our customers, letting them know that we weren’t going to point fingers for our reaction to the storm,” Neeleman said. “We were responsible…. I think it was more of a wake-up call to review how we operate than a setback. We had two other major storms after Valentine’s Day, both of which we came through with flying colors.”

Neeleman personally and publicly apologized and stressed that the changes that have since been made are in the customers’ best interest. The most poignant change is probably the Customer Bill of Rights, which guarantees every customer certain levels of compensation for disruptions. Neeleman said that because his is the only airlines with anything like it, a competitive advantage exists.

“They seem to understand that we’re a better airline now because of this event and we’re more capable and prepared to handle anything like it in the future,” he said.

Neeleman also said that there have been preventative measures taken to ensure that even if inclement weather occurs again, problems won’t. In addition to “beefing” up the management team and software, JetBlue plans to unveil a way for customers to change their flights without a change fee.

In all, Neeleman said the experience, though detrimental in the short-term, will make for a better horizon.

“Today, I’d say I’m more relieved and highly focused on our operation,” he said.

Headrests are equipped with DirecTV.

A History In Flight

Before he became Chairman and CEO of JetBlue Airways, David Neeleman launched two successful aviation businesses. In 1984 he co-founded a low-fare carrier called Morris Air with June Morris, the owner of Salt Lake City-based travel agency Morris Travel. As President of Morris Air, Neeleman implemented the industry’s first electronic ticketing system and pioneered a home reservation system that is now the foundation of JetBlue’s unique call center; all calls to JetBlue’s reservation number are handled by reservationists working out of their homes.

Following the sale of Morris Air and a short period with Southwest Airlines, Neeleman took the electronic ticketing system that he had initiated at Morris Air and developed it into Open Skies, the world’s simplest airline reservation system. He sold Open Skies to Hewlett Packard in 1999. Also during this period, Neeleman acted as a consultant to WestJet Airlines, the successful Canadian low-fare start-up airline.

In 1999, after the conclusion of his five-year non-compete agreement with Southwest Airlines, he decided the time was right to bring his successful airline formula – innovative, high – quality service plus low fares equals a strong and loyal market – to one in New York. He assembled a hand-picked management team of airline industry veterans and secured $130 million in capital funding from investors such as Weston Presidio Capital, George Soros and Chase Capital, now JP Morgan.

“It takes a lot of work to start an airline, from securing funding to filing FAA and DOT applications,” Neeleman said. “We had our work cut out for us to convince people that we’d be viable in the industry for the long haul, especially as a low-cost airline based at JFK that would offer customer amenities, which is what I wanted to do.”

JetBlue was founded with a wealthy backing of investors and is the self-proclaimed best-capitalized airline start-up in history. Playing a key role in that strategy are the newer planes. JetBlue’s fleet of new Airbus A320s and E190s are more reliable, so they spend less time on the ground. The planes are more efficient, so JetBlue spends less on fuel than other carriers and the youngest fleet in the sky belongs to JetBlue.

“JetBlue was the first U.S. airline to launch with more than $100 million in capital,” Neeleman said. “Another big struggle was convincing people that JFK would work for a low-cost airline. Most people were skeptical that customers wouldn’t travel to JFK for low fares, but now we’re the largest carrier at JFK.”

Neeleman joked that one of the hardest aspects in the early goings was picking a name. They dabbled with the name Egg, Gotham, Taxi, Home, among others.

“We barely made the deadline for painting our first planes with the name JetBlue as they came down the assembly line,” he said.

Lessons Learned

From its first take-off, JetBlue has always done things differently. The unorthodox practices have given them a distinctive character, which customers enjoy.

JetBlue has been ranked No. 1 in quality and overall performance of U.S. airlines for three consecutive years in the annual Airline Quality Ratings by the University of Nebraska at Omaha Aviation Institute and W. Frank Barton School of Business at Wichita State University. JetBlue was also rated “Best Domestic Airline” at Conde Nast Traveler’s 2006 Readers’ Choice Awards, the fifth consecutive year receiving the award.

These accolades are due in part to JetBlue’s atypical services. Their planes are equipped with a LiveTV system offering 36 channels of free DIRECTV or FOX InFlight. JetBlue also has a system it touts as its key to success.

Mayor Bloomberg attending JetBlue’s ribbon-cutting ceremony.

“One day one of our early crewmembers came to me with information about a company that could put TV screens in airline seatbacks,” Neeleman said. “Once I saw that, I knew we had to have it.”

Also, JetBlue doesn’t provide in-flight meals, which cuts the cost for the company and the customers. Simple online booking at JetBlue.com is another feather in JetBlue’s hat that customers enjoy.

A top-shelf marketing crew is the impetus behind JetBlue’s catchy in-flight slogans. Lines like “Without you, we’d just be flying a bunch of TVs around,” or, “Don’t tell anyone, but you’re our favorite customer,” replay on the headset TVs. They are catchy, and even Neeleman has difficulty picking out his favorite.

“I honestly don’t think I can pick a favorite,” he said, “but I really like our new ads around the most legroom in coach: ‘Dear legs, kick, jump, do splits – the extra legroom is just for you.’”

Neeleman, after weathering the February storm, can now take a minute and enjoy his successes. He set out to “bring humanity back to air travel” and though he is always trying to improve JetBlue, he can revel in that success.

“I saw the opportunity to offer airline customers inexpensive fares with friendly service and set out to do just that,” he said. “The best way to do that is to create a place where people like to come to work. Other airlines think that you can be successful by adding TVs and leather seats to planes when in fact it’s a lot more than that. A company’s culture is so important and there’s just no way to create that overnight.”