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David Neeleman on What’s Wrong with JetBlue and How to Fix It (Across the Aisle, Part 3)

August 26th, 2010

And now, it’s time to talk JetBlue. When I read a recent article where David Neelman talked about JetBlue, I thought he sounded bitter, so I had to ask. It’s clear that he’s still bugged by what happened at JetBlue, and as a shareholder, he wants to see things change. You can catch up with part one and part two, if you missed them.

Cranky: Some would say that the rapid growth of JetBlue is what caused you problems there. Is that an issue here? Or do you not think that was issue there?
David Neeleman, CEO Azul Airlines: I’m not gonna tell you it wasn’t an issue. JetBlue was kind of built for lower fuel costs than what we had. So it took an adjustment period. That was part of it, certainly infrastructure. I was more focused with growing the business from a marketing perspective and I think our operation didn’t keep up maybe as well as it should have.

I had a COO [current President and CEO Dave Barger] that was in charge of that. I think the Valentine’s Day storm showed a weakness in operational recovery areas so that’s an issue. I looked at that experience in Brazil and we have a great team of people down there. We built all of our systems in the beginning, where JetBlue should have been. There was some people who were supposed to be focusing on that, obviously they weren’t. So I’m not leaving anything to chance.

Cranky: It seems, the article I was reading, it seems that there’s still sort of an almost bitterness about what happened there. Maybe it’s just a dissatisfaction. Does it still bother you? Obviously, Azul means blue. Is this still something that bugs you?
David: Yeah, it bugs me. You had a board that was rash and hasty and made a decision that didn’t need to be made at the time. The crewmembers didn’t really deserve that kind of treatment either. They had a certain vision for the company, an expectation. All of a sudden overnight that was changed. Things are different at JetBlue today. They’re not the same as they were.

Maybe some areas they needed a change, but you know, the camaraderie we had, a lot of things we did in the customer service area, I just don’t think it’s the same company and there are a lot of people lamenting that. Every time I fly, people say such things. “Wish you were back.” I wish they would say, “We’re doing great, it’s awesome. Thanks for starting it.” I would much rather have that.

I built JetBlue for one reason. I didn’t need the money. I wanted it to be a great place to work, a great place for people to fly differently than the other guys. Same thing at Azul. It’s your legacy, you know. And you want to make sure. I still think JetBlue is better than anyone else but it’s not the same. When you get bigger, it’s hard to keep it the same. But Southwest Airlines has been around for 40 years and they’ve been able to maintain a lot of happy people working there.

Cranky: You’re still a fairly large shareholder. As a shareholder, what would you want to see JetBlue do differently?
David: I would like to see it focus on customer service. I tell people that at Azul. I only have two goals for the company. I want this to be the best place you ever worked and I want every customer to say, “wow, that was a great flight.” If you can do those two things, you’re gonna grow and be successful. That’s really it. It’s just a focus. I’ve been on some delayed flights on JetBlue lately and didn’t hear anything about the customer bill of rights. In those days, we did things that were special.

JetBlue still wins the JD Power award every year but if you look at the scores, it’s all the TVs and more legroom. If you look at the customer contact scores, Southwest wins all those awards, those categories. And they never did. I think you can make a difference in a commodity business.

Cranky: Back to Azul for a second then I’ll let you go. Can we expect to see Azul outside the Brazilian borders?
David: The market size just isn’t that big. Don’t know if you saw the news on TAM and LAN, still trying to figure out what the heck that is, but the cross border stuff in South American countries is just a tiny fraction. Maybe it’s just a play for TAM to get some management over there, but the market’s just not that big and the market in Brazil is huge. So we’re going to focus on Brazil. Never say never, but we’ve got plenty to do.

Cranky: Not likely to see any widebodies coming in, right?
David: No, not now. We’re small guys now. We like smaller – much bigger opportunity there.

Cranky: I appreciate it. Good luck continuing to grow Azul. Maybe one of these days I’ll be down there and take it for a ride.
David: That’d be great, we’d love to have you.

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David Neeleman on What’s Wrong with JetBlue and How to Fix It (Across the Aisle, Part 3)

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Tags: dave barger david neeleman ceo issue recovery areas shareholder time

JetBlue CEO on the Express Beverage Service, Wifi, and, Wait, Guadalajara? (Across the Aisle, Part 3)

August 6th, 2010

And I’m back for round 3 of my across the aisle interview with JetBlue CEO Dave Barger. The express beverage service is topic number one today, but make sure to stay for the end when talk of LA to Guadalajara surfaces. (See Part 1, Part 2)

Cranky: It’s funny you talked about the beverage service. There was a lot of discussion on the blog about the express beverage service.

Dave Clark, Director of Route Planning: I forwarded your comments to our Director of Product Development [Rachel McCarthy].

Cranky: There were a lot of comments about it. For me, it was a minor thing, but I thought that was an interesting one, because people started getting passionate about it. I was just curious if that’s something that might be revisited.

Dave Clark: Rachel and I discussed this. Is it too limited? I mean, some people on the comment board said “Southwest does a full service from Oakland to Reno, 38 minutes block time. Why does JetBlue have an express service?” Rachel and her team were really enthusiastic to get that input. I think it’s something they’re going to be looking at in more detail. I think they’re worried about consistency where we’re not halfway through the cabin and then because of turbulence, the back half of the cabin gets nothing. One of the concerns is that everyone gets something. The comments, especially in your article, now they’re going to look at it. It created a good debate in our offices.

Cranky: I realize it’s not what’s keeping you up every night Dave, but still, it’s interesting.

Dave: Well, the aspect of exceeding expectations is so important, my heritage at New York Air with 146 seats on an MD80 flying from LaGuardia to Boston and DCA with a full service. So it’s not that it can’t be done, it’s can you be consistent? And what the people really want, because people are brining more and more onboard the airplane whether it’s inflight entertainment or food and beverage. But I do think that if someone’s flying from JFK to Syracuse or San Juan to Santo Domingo or Burbank to Las Vegas, the opportunity to say “hey, I’d just like to have a Presidente beer,” I’d like to be able to satisfy that.

Cranky: You talked about IFE there, wireless is something you’re happy to be a follower right now and coming out with something good and exciting soon?

Dave: We want to have a wireless application soon. By design, we were a follower. When you look at today’s offering, for the most part ground-based and the pricing is really something that’s being powered by the supplier and the branding as well. That’s something we do a little bit differently. So I think it’s been prudent for us to first of all validate, which we did through BetaBlue, the ability to use a ground-based network, because it also told us what we couldn’t do. Think about the Caribbean.

I think the ability to be a follower and to partner with some new partners in what their capabilities could be which obviously would be satellite-based, is pretty exciting. And at the same time, if we find that we have to go a traditional path for a couple years until technology is further enhanced, we’ll do that to. I think people think of JetBlue as a leader in inflight entertainment, Brett, which gives us pause too. We have 140 choices today with the TVs, with the premium entertainment, with satellite radio. We’ve had a little bit of a people understanding, but clearly people are looking for wifi especialy on the long haul. Satisfied to be a follower right now because we’d like to leapfrog what’s out there today.

Cranky: It does help when you have LiveTV already on the plane. I’m curious about LiveTV. When I flew down from Sacramento a couple weeks ago, the plane was dark, TVs weren’t working. The captain made it sound like, I don’t know if it’s an increasingly common occurrence or if it’s something that he’s just seen a lot. Have there been reliability issues? Is that something you’re focused on?

Dave: Very much so [as a focus]. Statistically, the system is very reliable. We track a metric called dark aircraft, a metric called number of seats inop by aircraft. We track even the channels if we’re having challenges with individual channels as well. The beauty of the system is that it downloads everything into our LiveTV group so we can track the wellness of the fleet. That being said, a year ago last summer, we were absolutely not pleased with what we were seeing, but we’ve seen huge improvements in the last year. It’s interesting too. What was it? I think a lot of it has to do with new equipment we were putting into the aircraft. I don’t think we’d see JD Power 6 years in a row if we had consistent problems because it’s such a hallmark of the JetBlue brand. We’re really pleased with what we’re seeing today.

Cranky: Sorry I’m kind of digging into the weeds on some of these things, but sometimes I think it’s fun to dig in to get that high level perspective on these things. . . . I think we’re out of time. I could do this all day, of course, but you have other things to do.

Dave: I appreciate the time to talk. As I shared in Phoenix, to come out here to Long Beach and see mounds of dirt and the construction . . . I’m really excited. The airport and the economic impact, and how we can continue to invest, whether it’s commuter slots or whatever it might be, doing it respectfully. Maybe Dave [Clark] can give you some more on that. So are we gonna go to Guadalajara? It’s on tape, come on.

Brett: Guadalajara?!

Dave Clark: There’s an open authority at LAX right now.

Brett: Are you looking at that?

Dave Clark: We’re looking at continuing to accelerate our growth to Latin America, including Mexico, so part of it is knowing where we can fly. It leads to the question of an FIS [customs/immigration facility] in Long Beach. We could fly to Cabo whereas at LAX we can’t.

Brett: Very interesting. Thanks guys.

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JetBlue CEO on the Express Beverage Service, Wifi, and, Wait, Guadalajara? (Across the Aisle, Part 3)

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JetBlue CEO Comes to Long Beach and We Talk SoCal (Across the Aisle, Part 1)

August 2nd, 2010

JetBlue CEO Dave Barger will be visiting every single airport in the system this year to celebrate the airline’s 10 year anniversary. Last week, he came through Southern California, and of course, spent a fair bit of time in Long Beach. While he was here, I had a chance to sit across the aisle from him for about half an hour. We had a wide-ranging conversation about everything from local issues (today) to American and other partnerships. Yes, I made sure to touch on snack boxes and the express beverage service as well since those have been hot topics here recently. Of course, we hit on wifi and even some nuggets about expansion in Mexico. This is part 1 of 3. Enjoy.

Cranky: Alright. We’re here in Long Beach, anything you want to say?

JetBlue CEO Dave Barger: Go Angels! How’s that? No, I think it’s really exciting to be at the airport and see construction taking place. I think to see the investment with the parking structure taking place in earnest . . . looks like we’ll be in the ground with the terminal redevelopment by the end of the year, probably two years with the phasing with that design . . . it’s exciting. Where we’re at today, we’re finally seeing the investment, plus the tarmac investment that’s been taking place, it’s exhilarating. We’ve needed it and now we can see the finish line.

Cranky: Yeah, I’m curious to see – you’re already using all your slots, when you have more terminal space are there going to be any thoughts about trying to get the Embraers in the commuter slots?

Dave: Specific to the commuter slots, we think that would add increased utility . . . looking at how best to optimize limited resources at an airport like Long Beach. What it means to the community, what it means to the vibrancy of the city and the surrounding airport. We respect the statute, the historical meaning of it . . . but the fact is that airplanes are totally different in terms of technology than when the statute was put into place. I think what’s most important is that the investment is taking place. It’s great to see concrete being poured at Long Beach.

Cranky: One thing about Southern California, we’ve heard a lot from you on the East Coast lately. Boston is growing, [Washington National (DCA)] is starting up. It’s been pretty quiet out here. Are there any plans in the future to have a west coast focus at all?

Dave: Actually, I believe there’s been pretty significant investment and focus that’s taken place in the last year. Let’s look at the video tape. Now we’re in LAX – we opened it with four flights and now we’re at six. Burbank is at four, Long Beach is at 30, so we have 40 today. A year ago we weren’t in LAX, so there’s been pretty significant investment. . . . Fact is we have 5 focus cities of which LA, the Basin, is one of those including Lauderdale, Orlando, New York, as well as Boston. Transcons appear to be doing quite well. The shorter haul flying out of Long Beach appears to be doing well. Is that the economy? Is that the competitive landscape? Is it oil? Is it the discretionary dollar? I think it’s all of the above, so we’re excited about what’s happening in the Basin.

Cranky: It’s good growth at LAX for sure, but I think from a Southern California perspective you haven’t added any new destinations FROM Southern California. Maybe frequency increases. So I think that’s more what I was talking about – increase in breadth as opposed to depth.

Dave: I think that increase in breadth includes adding frequency in a market. We’re at 30 in Long Beach, a historic high. And everything we’re doing here is 150 seats. So it’s a better use of a precious resource than a 50 seat jet. Multiple frequencies into Seattle, into Portland, into Oakland, into San Francisco, over to Las Vegas, plus the transcons, plus Austin, and Chicago. While opening more cities is something we’d like to do, we’re focused on just making the pattern of service relevant to the business traveler as well as the discretionary traveler. So I think it’s another way to look at what we’ve been doing. Our network is quite a bit different than what it looked like just a couple years ago.

Cranky: Absolutely. The long hauls have been trimmed down in favor of the short hauls in Long Beach, and then a lot of those have gone over to LAX.
Dave: Interesting because another opportunity would be a change in the commuter slots. I mean, if you only have 30 today, but you want a pattern of service that will appeal to the business traveler to Portland. . . . It’s still a finite number, so something has to give in there somewhere, and that’s why some frequencies have been relocated out of Long Beach. We respect the statute but I don’t think that drives best utility for the community.

Cranky: I’ll go back to LAX for a second. One thing LAX has that Long Beach doesn’t is international feed. You guys have been focused on the alliances, but they’ve all been East Coast so far. Can we look forward to seeing some of those opportunities where you might be feeding Asian carriers in LA?

Dave: I think it would be exciting. I mean, as I look at our second decade or part of our second decade, this open architecture, the opportunity to partner with really anybody. The Sabre investment has really allowed us to enable the relationship with El Al most recently, American, South African. Of course, we’ve been in place with Lufthansa but now to optimize it, Aer Lingus, Cape Air. I think it’s safe to say you’ll see more and more announcement regarding partnerships, and potentailly that could certainly be off the West Coast. A place like LAX or SFO, by definition that’s where it would have to take place.

Stay tuned for Part 2 and 3 later this week (unless something hugely awesome happens that postpones the rest of this).