Jet Blue ODDS ARE YOU WON'T START TWO AIRLINES, REVOLUTIONIZE YOUR INDUSTRY...OR TALK GEORGE SOROS INTO INVESTING IN YOUR COMPANY ANYTIME SOON. STILL, JETBLUE AIRWAYS FOUNDER DAVID NEELEMAN CAN TEACH YOU PLENTY ABOUT HOW TO TREAT YOUR CUSTOMERS AND EMPLOYEES.
By Jennifer Keeney; David Neeleman

(FORTUNE Small Business) – You can find business advice in the oddest places, but few people look to the airline industry--save Southwest and perhaps Continental--for tips on making customers happy. Add JetBlue Airways and its founder, David Neeleman, to the shortlist. From his fleet of spanking-new planes, to unlimited snacks onboard, to satellite TV at every seat, Neeleman is making his mark with JetBlue, which the company says became profitable only six months after its February 2000 launch. He also has a thing or two to say about motivating employees. Taking a page from the Southwest Airlines playbook, Neeleman often helps out at JetBlue's JFK Airport hub in New York City, even vacuuming planes and hauling luggage, and expects the airline's other executives to show the same spirit.

Who is David Neeleman? Raised in Utah, Neeleman dropped out of college and started a Salt Lake City travel agency in 1981. Three years later the 24-year-old teamed up with travel agent June Morris to help run an air-charter business that grew into Morris Air, the Salt Lake City-based discount airline. Neeleman patterned Morris Air after customer-driven, employee-friendly Southwest. He also was an innovator, launching the first ticketless system in 1993. That same year, as it turns out, Morris Air was purchased by Southwest for $129 million in stock. After a few months on Southwest's executive planning committee, Neeleman left to help launch the Canadian airline WestJet; then he headed Open Skies, a company that created touch-screen electronic reservations and check-in systems.

After these successes Neeleman decided to run his own airline. So he got a group of investors, including Chase Capital and George Soros, to kick in $160 million, and they launched JetBlue. An IPO, the company says, is on its way. "They're doing considerably better than most other startups," says ING Barings analyst Ray Neidl. "They've got a lot of funding, a good management team, and they seem to have a good market plan--and those are the three things you need to succeed." This year JetBlue will add to the list of 12 cities it serves, which currently include New York, Orlando, and Buffalo. We recently sat down with Neeleman at JetBlue's offices, near the airline's JFK Airport hub, to find out what makes him and his airline tick. Edited excerpts:

How do you fly expensive, new, Airbus planes, provide amenities like wide leather seats and TVs, and still stay cost-efficient?

What kills you cost-wise are those recurring charges. We knew that if we were to buy brand-new airplanes, then we would save in maintenance. Most of the parts on that plane have five-year warranties on them, so we have this tremendous honeymoon during which all the money we would spend in maintenance during that period would more than pay the difference between a new airplane and an old airplane. As for seats, leather seats cost twice as much as regular cloth ones, but they last twice as long. It's more comfortable for our passengers, and it doesn't cost us any more money.

And as for those amenities?

As far as the live TV goes, we wanted something that would really set us apart. If we gave people a rubber piece of chicken or a lousy turkey sandwich, then we'd be just like any other airline. So instead we put snacks in a big basket and we say, Take as much as you want. So nobody's going to starve on our flights. But those are 12- and 14-cent items as opposed to $4 pieces of rubber chicken. And the live TV was a fraction of that $4 cost. So the combination of all that makes for a much better flying experience at a lower cost.

What kinds of food do you serve on your flights?

Blue food. We've got blue potato chips and some bagel chips, and we're trying to work a deal to get some blue M&Ms on there. For drinks, we serve everyone with full cans, but with trays as opposed to clogging the aisles with those carts. People really like that. The carts aren't in the way, and people can get up and go to the bathroom if they want to.

What else are you doing to set JetBlue apart?

We have three bathrooms on the airplanes, so I'm kind of toying with taking one of the back bathrooms and turning it into a female-only bathroom. You know, there are very few places in our society where women are asked to go to the bathroom the same place men are.

You developed the ticketless concept at Morris Air. Are there other things you're doing at JetBlue that you think could be adopted by the big guys?

We're going to go big into checking people in at the curb using handheld devices. Our initial concept was checking in people while standing in front of the counter, using a touch-screen, so that we could teach them how to check themselves in. We have kiosks for that now, but they don't really check bags because [the kiosks] can't give out bag tags. We're going to work hard this year to get them bag-tag capable, so people can go and check in at the kiosk, check their own bags and leave them with our personnel. So we could have maybe one person handling five kiosks.

So, how do you spend your time when flying JetBlue?

Mostly I'm talking to the customers or crew. I'll start in back with the flight attendants, then go up front and announce to passengers that I'm on board and that I'll be passing through the cabin to help serve snacks. So I go through and speak to every passenger, find out what their concerns and comments are, and collect a lot of business cards. On longer flights I'll land up front with the pilots because they tend to lead kind of an isolated existence. Most of the time I'm at the airport--I've spent a lot of time in the planes throwing bags--but I try to take at least two flights a week.

Can smaller businesses ever hope to apply to their company what you do at an airline?

You don't have to do something grand to be a great company. The ability to focus on customer service is something that applies to every single business you're in. For example, I was taking my clothes to the dry cleaner and because of my late schedule, it was hard to get there. They close at six. How am I ever going to get home to pick up these clothes? I'd have to wait 'til Saturdays, and if I had the kids' football games or soccer games, I couldn't get them then. Plus, they wouldn't take anything but cash or a check. I often had to buy new clothes. Then I got a letter from another dry cleaner. It said, "We know you're busy, we know you have other things to worry about, and we're here to serve you." And it could have been written by an MBA out of Harvard. They said, "We'll keep your credit card on file so that you never have to worry about paying. We'll even come by and pick up your clothes, and we'll deliver them, too." This guy has developed this thriving business by being a great service provider.

How do you make sure your employees provide that level of service to your customers?

It's really focused on whether or not you like people. So we have prospective employees tell us about a specific time in their past work experience when they did something out of the ordinary for their job description and helped someone. One of our best flight attendants is a 60-year-old retired fireman. His answer was, "I was in a burning building, and some of my guys were inside, and the building was coming down, and I had to go in and get them out of there." We said, "You're hired!" But you'd be surprised at some pilots who say they can't think of a single thing.

You have said your employees are very productive. How do you pull that off?

Because we were able to buy new airplanes and invest heavily in technology from day one, we were able to develop a model in which we required fewer employees per airplane to accomplish these tasks. With fewer employees per airplane, you can compensate people really well. We also set up a pay structure that would really work for people. Then we took the leap and said we want the benefits to start soon after they walk in the door. A lot of companies make the mistake of treating new employees as second-class citizens for a while. But it creates animosity at the beginning. Some airlines, when they're training their employees, make them buy their own hotel room. So their employees come to work mad as hornets, you know? We pay for their hotel, give them their own room, and pay them for their training. Not the same as if they were flying, but a very good salary for the training. So the people come to work grateful as opposed to mad.

In what way does your profit-sharing plan increase your employees' productivity?

Employees think, Hey, how can I increase my profit sharing by shaving this amount of fuel or by doing this more quickly, or how can I make this customer happier so he comes back? One day in December there were a lot of cancellations in the New York City area, and we operated our flights deep into the night, but we got them all done. I got e-mail from employees who picked up passengers off canceled flights from all these other carriers from LaGuardia, and they wrote "profit sharing" in big, bold letters.

What qualities do you look for in employees?

Employees who are used to pitching in and helping, who aren't regimented to the point where they say, That's not my job; that's your job. If I'm the CEO and I'm willing to go out on a holiday and throw bags and work out on the ramp, then there's no employee who shouldn't pitch in anywhere the work needs to be done. We have a culture: When the plane lands, every employee on the plane, be it the CEO or someone from sales, pitches in and helps get the airplane ready. The pilots even come back and do it.

What are some other things you do to motivate your employees?

Well, we pay double time on holidays for all hourly wage employees. Our part-time employees don't get the benefits that the full-time employees get, but they actually get a higher rate per hour because we take that extra money that we save and we give it to them as salary. In Salt Lake City [where all of their reservationists are based], we have all home reservationists. We did it at Morris, and those employees had superior performances being at home as opposed to being right here where we could stare at them. But nobody does it. I find it almost comical that there's this big-brother kind of control thing with the employee. As for our in-flight people--our flight attendants and our pilots--the standard work month for the industry is about 70 hours. We give them time-and-a-half for everything they do over 70 hours. So we give them an incentive to work more hours.

What kinds of things do you do to make really busy travel days such as holidays less stressful for people?

On the day before Thanksgiving, we pretty much close down the office here and ask employees to sign up for a shift. So there's a lot of extra help out there. I think that really takes the pressure off our frontline employees, and it's really critical to do that. You know, from time to time we have people singing in the terminal, we have a play area for the children, so the kids can play there. So we try and take the stress off it that way.

How did things go for JetBlue during the big snowstorm the Saturday before New Year's?

We were scheduled to have 50 flights, and we operated 24 of them. But we were also able to combine a lot of flights and get people where they wanted to go. The airport had to close for much of the day, but we had three planes ready to fly when the airport reopened at 6 P.M., and we flew until 5 A.M. Down in Fort Lauderdale, we had a waiting room full of 350 people who all cheered when were able to get them flights. If you cancel a flight, you have to go out of your way to make sure you help people. And that day, all of our people made it to the airport to accommodate flights. No one called in sick.

Finally, do you have a favorite scene or character from any of the Airplane movies?

Airplane is one of my favorites. I love the scene where the air traffic controller says, "I picked a bad day to stop sniffing glue." And because I'm a Mormon and everyone thinks Mormons don't drink Coke, I always say, "I picked a bad day to stop drinking Diet Coke."

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