Fast Company: A lot of startup airlines have failed since deregulation in 1978. Why do you think JetBlue will make it?
David Neeleman: One advantage is we've already been able to get higher fares than our competitors. Customers are saying it's worth a little more to fly us and get the JetBlue experience. If you had told me when we were starting out that this would happen, I would have said, 'You're insane.' When fares are comparable, people tend to go with the incumbent. The loyalty of our customers is astounding. It's proof you can build affinity with a new brand and a higher level of service.
FC: How do you feel when JetBlue is compared to People Express, which abruptly went from popular upstart to bankruptcy back in the 1980s?
Neeleman: When I went to talk to a business class at Yale, Don Burr [the founder of People Express] was in the audience. The professor showed a 20/20 piece on Burr and People Express, and it was chilling to see the rah-rah-rah with those employees, knowing what happened to the company. Then, we watched a 60 Minutes piece on us and the professor asked, 'What are you going to do so you don't end up sitting here one day like Don, with some other young guy talking about his new airline?' I did research on People Express. It didn't have the technology we have. And it had a different business model. We've built JetBlue with quality customer service, low costs, and a really strong balance sheet. I'm a firm believer that if you have those elements, you'll survive rough spots in the road.
FC: How has the competition changed since JetBlue came on the scene?
Neeleman: We've faced competition from the beginning, but now they're no longer just matching fares. They're digging deeper in their bag of tricks and offering lower fares or free tickets or triple miles. But these deals cost them hundreds of millions of dollars. They can't continue that. We just have to wait them out and continue to do a great job.
FC: What's your biggest fear?
Neeleman: I was out at JFK this morning and a customer came up and told me, 'This is the best airline I've ever flown.' I said, 'Thank you,' and I'm thinking, 'Geez, how do we maintain it? How do we make sure he still thinks that about us a year from now, or five years from now?'
FC: What's the answer?
Neeleman: You have to remain focused on your people. That's the key to great service. I want our crew members [JetBlue lingo for employees] to feel that they're important and that we're on a mission together, to put humanity back in air travel. That's where a strong culture comes in. Hopefully, it makes them feel this is the best job they've ever had. If they like coming to work, that gets passed on to the customer. It all starts with hiring, though. We had over 100,000 people apply here last year, and we hired 1,700. We're highly selective. We want crew members who like people, not just certain people.
FC: How do you ensure that the culture doesn't stray off-course as the airline grows rapidly?
Neeleman: We do an annual Speak-Up Survey of all crew members. We ask how they feel, what it's like to work here, what we need to improve. It's an accountability tool, a bit of a hammer for people who come to work and feel like being a jerk. If there's a problem, we find out about it.
FC: What has the survey revealed?
Neeleman: We realized we were promoting people without proper training. We were telling them, 'Okay, you're the boss' but we weren't telling them how to be a boss — a non-dictatorial boss. As front line people, all they had to do was show up on time, sober and with a good attitude, and take care of each other and the customers. Now we're saying, 'You're a leader. We're asking you to inspire greatness in others, because that's what leaders do.'
FC: Were you surprised that employees weren't happy with their supervisors?
Neeleman: When you start out building a new airline, a leadership program is probably the last thing on your list. There are so many other things to do first. Maybe we would have been better to realize we needed it earlier, but we had a mechanism in place to identify the need. And the program is working so far. Even though only 20 percent of the company had been through Principles of Leadership when we did last year's survey, every single category went up.
FC: JetBlue is the third airline you've had a hand in creating. What are you doing differently this time?
Neeleman: At Morris [Morris Air, his first airline], I was too involved in the operational side of the airline, and I lost focus on the customer side and employee side. Every time a plane would break I was involved with trying to get the part. I burned myself out. I was so frazzled worrying about every part of the business that I couldn't be effective.
FC: Is there anything you track on a daily basis to assess how JetBlue is doing?
Neeleman: I get a report sent to my Blackberry at 2 in the morning so as soon as I wake up I can look at how many calls we took yesterday, how many calls were abandoned, what percentage of sales came over our Web site. I want know how yesterday relates to last week and a year ago.
FC: How do you like running a public company compared to one that's privately held?
Neeleman: What I detest about being public is the quarter to quarter focus. The analysts are relentless. When we said our margin will be 13 percent rather than 15 percent, the reaction was, 'Oh my gosh, the wheels are coming off,' even though our margin remained in double digits. I've decided that we have to focus on the long term if we're going to grow the airline the way we want to. We ask ourselves what's great for us a year from now rather than next quarter. That's how you scale without losing what makes you special.
FC: Aside from the employee survey, how do you identify signs that you're becoming the sort of big company you don't want to be?
Neeleman: I am always on the lookout for that stuff. I was out at JFK during Christmas, and I noticed that someone had come up with the idea to put stickers on carry-on bags. Those were the only ones that you could take through security. But because of all the presents and extra bags people had, nobody was doing it, and it was holding everybody up. It may have been well intended, but it drove me a little insane. We weren't thinking of the customer.
FC: Next year JetBlue adds the 100-seat Embraer 190 to its fleet. Why abandon the one-aircraft model that worked so well for you and your inspiration, Southwest?
Neeleman: Even though Southwest has only one plane, the 737, some of their planes were created 30 years apart. The parts and technology are different. It's not actually like having one plane. So they've successfully managed a more complex fleet than people realize. I think we can, too.
I didn't want to be a prisoner of our business model. There are two contradictory axioms in business. One says that when you figure out what makes you successful, take the cookie-cutter approach: Don't change a thing and be the best at that. The other says that you have to continue evolving in order to take advantage of new opportunities.
Initially, we went with a bigger plane than we wanted, but the Airbus 320 gave us 156 seats at a low cost, which was our strategy. It's a more fuel-efficient plane. But it excluded a lot of markets we wanted to fly to with a smaller plane. The 190 gets us there. We think we've created a real category killer. We factored in the inefficiency of maintaining a second aircraft and training pilots for it. It's not like having 10 different planes. We're evolving. I think that's the mark of a good company.
FC: How do you enhance service while keeping costs low?
Neeleman: It's a balancing act. When we started out, we asked, should we have $5 meals? But we realized it wouldn't be a memorable experience, which is what we were going for. Instead, we decided to put TVs on our planes for a buck per passenger. So we spent 20 percent as much and added a feature with a perceived value that's probably ten times greater.
I wasn't excited about doing a frequent flyer program at first, because I thought free flights would hurt our costs. But we didn't want to be the only airline without one. It was the most requested thing whenever I talked to customers. We had to do it in such a way that we used automation and our Web site to keep costs down. And we wanted to drive people's behavior, not give points that people kept for 20 years. Ours are good for a year. If you know you've got one more flight to earn a free ticket, you're more focused on flying us. We've got over a million members in this thing now.
FC: Has anyone complained about the points expiring?
Neeleman: I have heard push back on that. So we're working with a few credit card companies that will allow you to convert your spending into points, so you can top off your account that way.
FC: Some costs are going to increase: The new planes will eventually need more maintenance, and employees will make more the longer they work here. How do you maintain your operating margins, or can you?
Neeleman: We've been having these conversations from the beginning. We're always looking for new technology that makes us more efficient or a better way of managing the business. If you look at last year compared to this year, fuel costs will be more this year, but that's true for everybody. And maintenance costs will be double what they were, because our engines have scheduled maintenance. The biggest chunk is for overhauls. We have 25 engines we'll send in this year and it'll be 30 next year. We haven't sent more than seven in previous years. But we've planned for this. We know we won't have a big jump the following years. Those costs will be predictable, and they'll be spread out over more planes. As we get bigger, we'll take advantage of economies of scale. We'll save on parts. We'll save on marketing.
FC: What doesn't scale?
Neeleman: We used to have a big anniversary party every year. We fit everybody in our New York office in the biggest banquet room at a hotel, and we had a satellite truck to tie in employees at different locations. This year we realized it wouldn't work. We've gotten to big. We said, 'Let's go with smaller parties' in our Blue Cities, and Dave Barger and I will do a summer tour to visit them.
Also, responding to every email is not scalable. I get over 100 emails a day, maybe 30 from customers. I'm trying to reconcile their need to hear from me and their need for a quick answer. I selectively respond to these. More and more, though, someone on our Customer Commitment team provides the answer. I can't respond to every crew member's question, either. This is why you have to have damned good leaders in place. We want supervisors to be able to solve these problems.
Neeleman: We didn't see an effect, but it was painful to go through. I felt it was important to come out and take responsibility. We had to come out and tell our customers, 'We made a mistake. This is what happened. And here's why it won't happen again.' I wrote a letter on our Web site and called a number of concerned customers. This happened when we were still small, but it's an example of what can happen when you're big. It was one decision by one person, and I didn't have any knowledge of what happened until later. But you don't want to make every decision. If you're growing as fast as we are, you can't. You have to give people that responsibility and counsel them on how you make decisions.
FC: Where do you get your best ideas?
Neeleman: In the shower. I come up with something, and I'll come to work and bounce it off a few people. I'll take it into the executive meeting, and they'll say, 'Yeah, it's a good idea,' or "That's the stupidest idea you've ever had.' You have to surround yourself with strong, smart people who will push back. My team knows I can come up with some doozies.
FC: Such as?
Neeleman: I can't seem to get over the finish line on this one: a female-only bathroom on planes. I've been talking about it for years. I just think it recognizes that nowhere else in society are women required to share the same bathroom as men. But it's not a big deal to the women I ask.
FC: Where do you get your passion for service?
Neeleman: I worked in my grandfather's store from the time I was 9 until I was 19. If he didn't have something, he'd run out and buy it so no one was disappointed.
FC: I know you help clean the planes whenever you fly. Is it true you have cleaned gum out of the carpet?
Neeleman: Here's what happened. I was vacuuming one of the planes that had just been reconditioned. The carpet comes out. It's part of a complete make over. The plane was two years old, but it looked brand new. When I came across this big clump of gum, I wasn't happy about it. The carpet was maybe two weeks old. I got down on my hands and knees and picked at it with a plastic fork.
FC: Who won, you or the gum?
Neeleman: I got most of it up with the fork. But I had to use a piece of ice on the last bit. After I froze it, it chipped right off.