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Sent on Mormon-News: 30May01

By Kent Larsen

Jet Blue's Neeleman Makes Fortune

NEW YORK, NEW YORK -- This week's Fortune magazine looks at the phenomenal success of Jet Blue Airways and its LDS CEO David Neeleman, comparing him to Southwest Airline's Herb Kelleher. With his airline so successful, Neeleman is naturally compared to Kelleher: both have successful airlines providing low-cost service in unexpected places. But Neeleman is very different from Kelleher.

Jet Blue's story is nothing less than remarkable. Putting passengers in the air for just 17 months, it is already profitable flying to 14 destinations in Florida, the Northeast and in the West, including Neeleman's hometown, Salt Lake City. The airline files mostly to smaller cities, the so-called secondary markets, but flies from New York's JFK airport, a fact that surprised competitors and analysts alike because it was long assumed that domestic service couldn't be run out of JFK because it was too far away from Manhattan, "Kennedy is only eight miles away from LaGuardia (New York City's closer, more domestic, airport). It's like eight miles is 800 miles to some people," says Neeleman.

Jet BLue also files brand new aircraft, unlike most low-cost startups, and has unique amenities, including leather seats and Direct TV at every seat. But, the airline doesn't serve food, part of the cost-control efforts that, according to Fortune, makes Jet Blue profitable. Jet Blue gets planes back in the air quickly and keeps its airport costs low and it has caught the imagination of its passengers, filling a larger proportion of its seats than any other airline. Many of these passengers are repeat customers; 21% of Jet Blue's passengers fill 50% of its seats. This all gives Jet Blue a lower per passenger mile cost than anyone in the industry, even than Southwest, says the company.

Neeleman should know. He worked at Southwest after Kellerher bought Salt Lake City's Morris Air, the airline that Neeleman co-founded with June Morris. But Neeleman felt Southwest was too regimented (unlike its reputation) and left after just five months. Stuck under a 5-year-long non-compete agreement with Southwest, Neeleman instead turned to software, founding OpenSkies, a company that makes airline reservation systems. When the non-compete agreement expired, Jet Blue was already under development.

Neeleman's record of success, from Morris Air to Southwest to Canada's WestJet, another airline startup, to OpenSkies and now to Jet Blue, has led to respect and admiration in the industry. "He's a genius entrepreneur," says Kevin Murphy, an airline analyst at Morgan Stanley. Dave Barger, JetBlue's President and Chief Operating Officer says, "He has an uncanny knack for knowing when an opportunity's right."

But unlike Kelleher, Neeleman isn't a chain-smoking, hard-drinking extrovert. He doesn't spend time partying, preferring to spend his free time with his children and reading history books. According to Fortune he is a college drop out, an LDS Church member and has nine kids. And he has told people from time to time that he either has attention deficit disorder or that he gets easily distracted.

But somehow that distraction doesn't surface when it counts. He has managed to meet and persuade a variety of people to support his business, including Barger, who turned around Continentals' Newark operations, A-list investors Weston Presidio Capital, J.P. Morgan Partners and Soros Private Equity Partners, who gave him $160 million to get started and even New York Senator Charles Schumer, who helped him secure slots at JFK. "I went in with enormous skepticism about investing in an airline," says Neal Moszkowski, a partner at Soros and a member of JetBlue's board. "But his presence, coupled with the strength of the team, was staggering."

Senator Schumer says that Neeleman's distractions somehow take a back seat to what counts, "He's low- key, and he's totally directed, and he has great faith, being a Mormon," Schumer says. "He's a nut job, but he's a focused nut job," says Jet Blue's government affairs director Robert Land. Fortune's Eryn Brown saw this up front when he gives a talk on airline economics to company employees in Syracuse. " Standing at the front of the room, Magic Marker in hand, he talks with his new colleagues--baggage handlers from Buffalo, check-in agents from Oakland--calmly, naturally, explaining how JetBlue can make money when the big guys don't. He answers personal questions. He doesn't lose his concentration. You can imagine what Moszkowski saw when Neeleman arrived at his office looking for money. The man can be completely, utterly riveting."


A Smokeless Herb
Fortune 28May01 B2
By Eryn Brown
JetBlue founder David Neeleman, a Mormon, doesn't even touch coffee. But for sheer startup magic, he could be Kelleher's match.


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