Upstart airline profitable after just 1 1/2 years
By Rachel Beck
Associated Press
NEW YORK — It's rare for an airline to make money while offering cheap tickets and good customer service and, on top of that, be deemed the hippest carrier around.
Associated Press
But it's the combination that's making JetBlue the buzz of the industry after just a year and a half in business. Whether it's the free satellite TV at every seat or the smiling faces greeting passengers at the gate, JetBlue is packing its planes with new and repeat customers.
David Neeleman, founder of JetBlue Airways, helps clean one of his 16 Airbus A320 jets: "We are all about exceeding expectations."
Its rise has come so fast that some industry onlookers wonder whether it can last. Most, however, bet that JetBlue's success will continue as long as it keeps doing what it's doing now.
People like Betsy Casados of Colton, Calif., are fueling its rapid growth. She became a JetBlue convert during a recent trip from Ontario, Calif., to New York City.
"It was delightful," said Casados, who used to fly low-cost leader Southwest Airlines between the coasts. "I don't remember the last time I called a flight delightful."
JetBlue fares run as low as $49 each way, which stand to become ever more attractive during the economic slowdown.
"These hard economic times are nirvana for JetBlue," said Holly Hegeman, chief executive of planebusiness.com, a Web site that gives financial analysis of airlines. "Nothing makes people happier than flying on an airline that makes them feel like they are getting a great deal for their money."
JetBlue is the brainstorm of David Neeleman, who knows what it takes to build a successful startup carrier because he'd done it before. His first effort was Morris Air, which he sold for $130 million to Southwest in 1993, and then he helped found Canada's WestJet.
In early 1999, he raised $130 million from investors, including Western Presidio and J.P. Morgan Chase, that had helped finance his other startups. He also persuaded billionaire George Soros to come on board.
Neeleman, 41, wanted its home base to be New York, a huge market that lacks a prominent low-cost carrier. Instead of La Guardia Airport, with its constant delays, he set his sights on John F. Kennedy International. While farther from midtown Manhattan, JFK is much less crowded.
In deciding where to fly, he looked for opportunities at secondary airports close to large cities. Instead of Miami, he went for Fort Lauderdale. Oakland, Calif., was picked over San Francisco. It's a system developed and perfected by Southwest founder Herb Kelleher, whom Neeleman considers a friend.
NAME: JetBlue Airways HEADQUARTERS: Queens, N.Y. CEO and FOUNDER: David Neeleman EMPLOYEES: 1,800 FIRST FLIGHT: Feb. 11, 2000 OPERATIONS: 80 flights a day to 16 cities nationwide AIRCRAFT FLEET: 16 A320s from Airbus Industrie QUOTE: "I never wanted to inherit another airline or someone else's problems," says Neeleman, who founded two previous carriers.
Neeleman purchased only new aircraft — 16 A320s from Airbus Industrie, each with 162 seats. His philosophy is that new planes give an airline "instant credibility" with travelers.
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JetBlue Airways in a nutshell
JetBlue says that, on average, it is filling about 80 percent of its seats, compared with about 68 percent for the industry. It operates 80 flights a day to 16 cities nationwide, with Long Beach, Calif., to be added later this month and Washington in October.
The airline employs 1,800 people, among them an executive team that includes top players from Continental and Southwest.
JetBlue expects to bring in $300 million in revenues this year. It was first profitable last August and has made money consistently since November.
With its limited fleet, planes must make repeated trips. To ensure that everything is kept on time, Neeleman insists on a speedy turnaround of 35 minutes. His ideal stopover includes about eight minutes to get passengers off the plane, five minutes to clean, then 20 minutes to board the next group.
While relishing the low prices, travelers are also drawn to the airline's "cool" factor. There's satellite TV at every seat. There's no prepared food, but an unlimited supply of soda and snacks.
The buzz got New York resident Mark Apter and two friends to try out JetBlue on a recent getaway to New Orleans.
"Lots of people we know have been talking about JetBlue, so we wanted to try it," said Apter, 26, who spent $150 on a round-trip ticket.
By avoiding the hubs of the larger carriers, JetBlue has been left alone by the major airlines. But industry analysts say that the major carriers could wage an all-out fare war if JetBlue infringes on their territories.
Another factor to watch is rising costs. So far, JetBlue has worked to keep expenses under control. About 40 percent of its passengers book online, which costs only a fraction of a phone reservation. It also allows all of its reservation agents to work at home, so office expenses are lower.
But with each city it moves into, JetBlue must spend heavily on advertising and marketing to woo new passengers. It also is adding to its fleet of planes and has an order with Airbus to buy up to 131 aircraft at a value of $6.5 billion.
For now, Neeleman is looking ahead confidently, yet still taking the business one day at a time.
"We are all about exceeding expectations," he said, "and we seem to be doing that very well."
