On the Runway

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?