JetBlue founder David Neeleman: Turning Blue into green
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JetBlue Airways founder David Neeleman never excelled at school or sports, and he remembers painfully the self doubts that plagued him as a teenager, when he lacked the patience to read an entire book or write adequately. "It really didn't feel like I was going anywhere," he said.
It took a late-teens journey through the slums of Brazil to turn Mr. Neeleman's life around and set the impatient, easily distracted college dropout on a course to create Forest Hills, N.Y-based JetBlue, the best-financed startup airline of the deregulated era and the newest discount entrant to Pittsburgh International Airport, with flights to Boston and New York starting June 30.
Mr. Neeleman's evolution from bored, uninspired student to restless airline entrepreneur is a story of several failures, how he recovered from them and his ability to turn potential weaknesses into strengths.
Many of JetBlue's best-known features -- its knack for customer service, for salesmanship, for equal treatment of all passengers, for a pledge to "bring humanity back to air travel" -- can be traced to Mr. Neeleman's South American pilgrimage and the lessons he learned about himself along the way.
Six years after JetBlue's launch, Mr. Neeleman is now a messianic figure in the hypercompetitive, cutthroat airline industry, the latest in a lineage of colorful, oddball leaders that includes chain-smoking, whiskey-swilling Southwest Airlines founder Herb Kelleher and millionaire playboy Richard Branson, founder of Virgin Atlantic.
The key difference, perhaps, is Mr. Neeleman's strict religious principles -- he is a seventh-generation Mormon and father of nine known for his Sunday night dinner conversations with friends about faith and family. And he spends much of the time attempting to recruit converts in his Wall Street-laden suburban Connecticut neighborhood, where he is a ward mission leader.
"Think of Richard Branson who doesn't carouse and doesn't drink and you have Dave Neeleman," said well-known airline consultant Darryl Jenkins, a fellow Mormon who knows Mr. Neeleman. "Take the booze and the women away, they are identical." Airbus Chief Operating Officer John Leahy, calling from the airplane manufacturer's offices in Paris, described Mr. Neeleman as "Herb [Kelleher] without the Wild Turkey and the cigarettes."
His restless energy
Like both Mr. Branson and Mr. Kelleher, Mr. Neeleman is popular with employees and passengers. He rides his planes at least once a week, announces himself over the intercom, walks up and down the aisles with snacks and takes suggestions from passengers (often jotting them down on a napkin).
He joins in the cleaning of the aircraft. He pals around with the baggage handlers.
Diagnosed with attention deficit disorder, which explains his teenage aversion to reading and writing, Mr. Neeleman refuses to take medication, afraid it will dull his creativity. Instead, he lets his hyperactive side out where everyone can see it. He has been known to walk out of the room in the middle of meetings, pluck food from the plate of nearby diners and, once, leave chicken burning on the backyard barbecue grill so he could satisfy the urge to buy a new watch.
During a brief stint with Southwest Airlines in 1994, Mr. Neeleman's disregard for corporate protocol offended many at the Dallas-based discount giant. In meetings, according to Barbara Peterson's book "Blue Streak," he would scribble in his notebook, over and over, "DSAW," short for "Don't Say A Word."
But many others in the industry remain charmed by his restless energy -- Mr. Neeleman claims his disorder allows him to focus almost exclusively on a single goal, the success of JetBlue. Mike Chen, head of North American sales and marketing for GE Commercial Aviation Services, still recalls a meeting where the JetBlue CEO climbed atop a conference table at the GE unit's headquarters to show his excitement about the new airline.
"Very amusing, " said Mr. Chen, a neighbor of Mr. Neeleman's in suburban Connecticut.
Mr. Neeleman's boyish impatience and sincerity can be awkward sometimes, concedes Ms. Peterson, the author who spent years chronicling JetBlue's rise. But he is also "the kind of person who can really mesmerize a crowd when he is really on."
Behind Mr. Neeleman's cult of personality is an airline that so far has defied the track record of countless airline startup failures since Congress deregulated the industry in 1978. Profitable for its first four years -- it lost $20 million last year due to the rising cost of jet fuel -- it is now the country's 10th-largest carrier, in terms of traffic, and by the end of 2010, plans to climb to 30,000 workers, from 10,000 currently, and to 275 planes, from 99. The company consistently ranks among the industry's best in customer satisfaction, with live TVs at every seat, fashionably-dressed flight attendants, pizza during long layovers at the airport and a policy never to over book -- that is, sell more tickets than seats.
Still, while JetBlue has been an unprecedented success for a startup, "I think [Neeleman's] keenly aware of how easy it is to stumble in this business," Ms. Peterson said. Even today, living in an 8,000-square-foot home in suburban Connecticut and atop an airline with more than $1 billion in revenue, he knows that his competitors -- especially the major airlines hurt by JetBlue incursions in the East -- are waiting for him to slip up.
Some analysts already are warning that JetBlue's hot streak may be over. Its on-time performance is down, its costs are up and it is taking on a new type of plane, the 100-seat Embraer 190, which will complicate everything from maintenance to training and move the company away from the simple model that got it started.
Mr. Neeleman has heard the warnings -- and dismisses them. He insists that JetBlue will not be another People Express, a hot startup in the 1980s that generated a lot of buzz but lasted only six years. Still, he knows that, "If you are in the airline business and you don't have a fear of failure," said Mr. Neeleman, 46, "you are in La-La land."
A seventh-generation Mormon born in Sao Paulo, Brazil, to a father stationed there as a UPI correspondent, Mr. Neeleman was 19 when he found his way back to the country of his birth on a missionary assignment for the Mormon Church.
It was a trip that would change his life.
Finding the discipline he lacked in school, Mr. Neeleman learned to speak fluent Portuguese, visited poor villages without running water or electricity and converted more than 200 people to the Mormon faith in two years -- well above normal recruiting levels for a person his age. The church made him assistant to the head of Mormon missions for that country, helping direct the activities of 100 volunteers.
"That was really the first time in my life I had excelled at anything," Mr. Neeleman said in a telephone interview from his Forest Hills, N.Y., office.
When he came home, he said he knew: "I can succeed at something."
Others saw that salesmanship in him earlier. At 9, he stood on a crate to work the register at his grandfather's Salt Lake City grocery store, demonstrating an ease with both numbers and people.
One customer service lesson learned at the grocery store would come in handy later -- customers were happy to pay when they received exactly what they wanted. Later, at the University of Utah, Mr. Neeleman started a travel agency that packaged cheap trips to Hawaii, a venture that pulled in as much as $1,000 a day. He dropped out his junior year to run it full time. He had $150,000 in the bank.
But that all disappeared in 1983 when the airline supplying his seats went under, forcing him to file for bankruptcy. It was Mr. Neeleman's first business failure, and he took it hard, later saying he was "devastated." Married with two children, he returned to his grandfather's Salt Lake City grocery store, once again working the register and stocking the shelves.
But Mr. Neeleman bounced back from failure in a big way. His uncle hooked him up with June Morris, the owner of the largest travel agency in Utah, and Mr. Neeleman built Morris Air into a 22-plane regional carrier that Southwest Airlines purchased for $129 million in 1993.
Mr. Neeleman, at 34, cleared at least $20 million in the deal, and landed a job with his idol, Mr. Kelleher. Mr. Neeleman had modeled many of Morris Air's policies after the Dallas carrier, including plastic boarding passes, no meals and quick turnarounds at the gate.
That job at Southwest lasted only five months, however. Mr. Kelleher fired the mercurial Mr. Neeleman after employees complained about his outbursts.
He had about $25 million at the time, but he found himself moping around Salt Lake City, unsure of what to do next and hampered by a five-year noncompete clause he signed with Mr. Kelleher, which made it impossible for him to get back into the airline business right away. He told author Barbara Peterson that he cried after receiving the news.
Into the Blue
Mr. Neeleman kept himself busy after Southwest -- advising a Canadian discount carrier West Jet and running a reservation company that he eventually sold to Hewlett-Packard -- but all along he knew he had to take off again with an airline of his own once the noncompete clause expired.
His new concept was simple: a discount airline with frills.
JetBlue would keep its costs low with quick gate turnarounds, one plane type -- the Airbus A320, with 156 seats -- and low labor expenses. It kept unions away by offering stock options to employees in lieu of pensions and arranging for reservation telephone agents in Utah to work from home.
But unlike Southwest, JetBlue would fly long-haul red-eye routes; showcase fashionably dressed flight attendants; offer assigned, leather seats; and provide live television at each seat -- at no additional charge.
First, though, he knew he needed to raise a lot of money. The man who once told a journalist that "people who invest in aviation are the biggest suckers in the world," put in $5 million of his own money and persuaded others, including international financier George Soros, to contribute a total of $128 million -- the most ever raised by a startup in the deregulated era. With help from U.S. Sen. Charles Schumer, D-N.Y., he also won hard-to-get landing and takeoff slots at JFK, its operational headquarters.
Passengers took to the oddball, underdog ethos of JetBlue, which launched in early 2000. The airline was profitable by its third full quarter and went public in 2002, taking advantage of the many problems experienced by higher-cost competitors, such as US Airways.
There have been a few missteps along the way, too.
JetBlue retreated from Atlanta under pressure from Delta Air Lines, a longtime nemesis of Mr. Neeleman. JetBlue also guessed wrong on the price of fuel and failed to lock in lower contracts when it had the chance -- a mistake that contributed to its losses last year.
And it is spending billions now on new facilities and the new Embraer 190s, which will fly out of Pittsburgh, leading some experts to wonder whether JetBlue is getting too large and too complex.
"JetBlue's business model has lost a tremendous amount of its luster," said local airline analyst Bill Lauer. "I am not predicting its demise, but it is not the second coming of Southwest Airlines at this point."
Pittsburgh will be JetBlue's 39th city -- part of an expansion beyond the Northeast and Florida -- and the gamble is that local customers are fed up with high prices on the Boston and New York routes offered by US Airways. "We should have done it sooner," Mr. Neeleman said.
US Airways will no doubt match JetBlue's prices. Confident that US Airways will not drive JetBlue out of Pittsburgh as Delta did in Atlanta, Mr. Neeleman, blunt as ever, said that his airline "is much more liked than US Airways."
"We hold onto our customers because they love flying us. People really like us."
First Published April 9, 2006 12:00 am