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Into the wild blue yonder
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October 6, 2000: 6:51 p.m. ET
David Neeleman's upstart airline, JetBlue, marries low fares with a sense of humor
By Staff Writer Hope Hamashige
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NEW YORK (CNNfn) - For many travelers, this truly has been the season of our discontent. Angry would-be fliers fumed all summer long and into the fall as cancelled flights, delayed flights and missed connections ate hours, and sometimes days, out of their long-awaited vacations.
The headaches of air travel -- the lost baggage, the too-small-for-some seats, the questionable meals -- seem to be getting worse with each passing year, in spite of industry promises that they will do a better job.
 Would anybody put up with all this if they had a viable alternative? Certainly not, thought David Neeleman, and there is no reason, other than relying on entrenched and outdated business practices, that air travel couldn't be very civilized, affordable and just a little bit fun. What he came up with, after five years of planning, is the upstart JetBlue Airways, which held its inaugural flight from New York's John F. Kennedy airport in February.
JetBlue is not like other airlines. It attempts to marry the low prices of low-cost pioneer Southwest Airlines with the glitz and frills that make Virgin Airways so much fun to fly. JetBlue is also trying to distinguish itself from the large carriers by treating customers with a lot more respect and being a whole lot more cool.
'It's really been a lot of fun'
In a tone that has come to characterize Neeleman's understated nature, he said the formula for building a better airline is simple. Put planes on the routes people want to travel, charge them the right price and do it with a smile. If all that comes together, you will have a success on your hands.
"We just took a fresh look at the airline industry. What we are able to create is the airline that has the lowest cost and, I believe, the best service," Neeleman said. "People love to fly JetBlue."
Neeleman, 40, is hardly the firebrand one might expect of an airline entrepreneur who is taking on huge, corporate behemoths like Continental (CAL: Research, Estimates) and American Airlines (AMR: Research, Estimates).
Neeleman, in talking about creating an airline from scratch and making it succeed, casually describes the process as "a lot of fun" and "really not all that difficult if you think about it." Even the five full years of planning for the first flight, he said, were "great." Initially, Neeleman had attempted to partner with Richard Branson to launch Virgin America. That plan ended after the two couldn't agree on the terms, and Neeleman decided to do it on his own.
His quiet manner and lack of personal grandstanding, said Neeleman's younger brother, Stephen, belie a deep intensity and drive.
"He's not someone who will talk himself up, but that doesn't mean he doesn't expect a lot," said Stephen, who used to work with David as a station manager at Morris Air. Stephen, now a surgical resident at the University of Arizona, said David had charts of scheduled flights on the wall of his office while at Morris Air, and would regularly check that flights were getting off the ground at their appointed time.
"The most important thing to him was the passengers and he remains very attentive to people's needs. It's very important to him that they have a good experience," Stephen said.
Few fledgling airlines survive in the long haul against the large carriers. Remember People's Express, Air One or Tower Air? They are but a few of many that have tried and failed.
 Many people, however, believe Neeleman and JetBlue have a better-than-average chance of survival. He was able to secure venture financing to the tune of $130 million from top-shelf investors, including financier George Soros and Chase Capital. Just six months into its life, JetBlue turned a profit and is outperforming the major carriers in critical categories like arriving at its destination on time. It's also losing fewer bags than the big airlines and is clocking far fewer complaints from passengers.
These are the things that really make or break people in the airline industry, said Goldman Sachs airline analyst Glenn Engel. "It really is the basics, not the frills, that matter. Mainly, people just want to leave on time and arrive on time. If they can't do that, it can cost a lot of money to fix the problems and they get in trouble."
Neeleman no newcomer
JetBlue may be a brand new name and concept, but Neeleman is no newcomer to airlines. He learned the business from June Morris, a respected figure in the travel business who owned a prominent Utah travel agency and charter airline, Morris Air. Neeleman was appointed president of Morris Air when he was 24 years old.
Morris Air started out as a charter carrier, shuttling Utahans to warmer climes of California and Hawaii in the winter. The jets returned to Utah full of beach dwellers on their way to ski the slopes on Utah's legendary powder.
By the time Morris Air became a carrier with scheduled flights, it was a major contender in the West. It undercut the big carriers, and forced them to slash their prices on the routes Morris flew. By 1993, Morris Air was acquired by Southwest Airlines (LUV: Research, Estimates) and David Neeleman signed an agreement that he would not compete with Southwest for at least five years. It took that long just to plot out his new venture.
At JetBlue, Neeleman has surrounded himself with experienced airline executives from Southwest Airlines, Virgin Airways and Continental Airlines. Having a strong management team, a group in whom Neeleman says he has complete faith, frees him up to "dabble and dream and continually build a better mousetrap."
A very different experience
From the very beginning of a journey on JetBlue, travelers should notice a difference. Make a reservation on JetBlue and the traditional rules of airline travel are out the window. There is no mandatory Saturday night stay to get the lowest fare. All fares are one-way. And nobody ever receives a ticket from JetBlue.
Tickets, explains Neeleman, are one of those antiquated concepts that  make airlines inefficient. For years, carriers have hired a lot of people who do nothing but produce tickets. Eliminate tickets and you eliminate an entire layer of inefficiency.
Step on to the plane and you settle into a leather seat that is roomier than most, and reclines more comfortably than most, because the seats shift forward when the backs tip. The seats are all outfitted with satellite television, so you can watch ESPN, the History Channel, or CNN while on board.
Flight attendants don sleek, dark blue Prada knockoff separates and don't serve hot meals on trolleys that trap customers in the aisles. Instead, they carry baskets of snacks, often "blue edibles" like blue potato chips and blueberry muffins, and never place restrictions on how many each flyer can grab.
By the way, the casually hip look is not just for the in-flight employees. JetBlue ground crews stand out in silver bomber jackets and cargo pants.
One other thing you will notice is that you are paying less money for the flight. On some routes, JetBlue undercuts the competition by up to 65 percent.
Some of the innovations at JetBlue that Neeleman is most proud of are the things passengers won't see. For instance, when you speak to a reservations agent on the telephone, that person is working from home. All JetBlue agents, many of them stay-at-home moms, make your reservations via laptop rather than from a centralized reservations office.
JetBlue is also leading the way on Internet bookings. Nearly 30 percent of all JetBlue passengers make their reservations over the Internet, a figure that Neeleman proudly promotes. The majors, he points out, aren't in double-digits yet in their online bookings.
Many challenges still ahead
Though the first six months have been good ones for the infant airline, it is too soon to call it a success, Engel said. JetBlue will have to manage its growth well over the next several years if it is going to be a long-term player. At present, JetBlue has 10 brand new Airbus jets, and it plans to expand its fleet by one plane every month for the next eight years.
 In addition to continually delivering the highest quality service, JetBlue will have to pick its new routes well, Engel said. From its hub in New York City, JetBlue started out by flying to smaller Florida cities like Fort Lauderdale. It later expanded to several Northeast cities, including Buffalo, N.Y., and Burlington, Vt. It now flies as far as the California cities of Oakland and Ontario. JetBlue will add service to eight to 10 as-yet undisclosed new cities by April 2001.
The first, most immediate test of the new airline will be to see how well it gets past the recent dramatic upturns in the price of oil. Neeleman admitted he could have hedged better against soaring oil prices, but remains optimistic that it will have little effect on the company's bottom line.
At a time when the major airlines are tacking on gasoline fees to their tickets, Neeleman said he doesn't believe JetBlue will have to do the same. His fleet, he said, is much more fuel-efficient than most carriers because the planes are brand new. Also, every time consumers hear about gasoline fees on airline tickets, they may decide to shop around for a better price and end up on JetBlue.
"Right now only 15 percent of costs are fuel-related. If costs double that has an effect, but it will be less on us than our competitors," Neeleman said. "It's not alarming right now."
Neeleman is equally upbeat about plans to take the company public some time in the near future. He doesn't know exactly when, but it will happen, he said in that assured, yet casual way.
David Neeleman doesn't seem to have anything bad to say at all. Not about oil companies, venture capitalists, the Securities and Exchange Commission, or any of the other usual targets of business owners.
When given the opportunity, he won't even say anything really that bad about flying the competition, which he did last week to get to a meeting in Salt Lake City, a city not yet served by JetBlue.
When asked about his trip and flying on one of the big competitors, all he had to say was: "It was great." 
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JetBlue
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