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
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
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.