firstthird
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saw this on the Yahoo ticker and thought it was interesting. this is the first of 3 parts, or read the link.
http://yahoo.businessweek.com/magazine/content/04_07/b3870109.htm
Is JetBlue's Flight Plan Flawed?
Miscalculations, cutthroat competition. CEO David Neeleman faces tough challenges to keep the airline on the ascent
David G. Neeleman is nothing if not confident. And it shows even on this bitterly cold day at Boston's Logan International Airport, even though he has been up since 3:30 a.m., even though he has $100,000 riding on the day's events -- and even though the head of the airport authority mispronounces his name not once, but twice. (It's Neel-uh-man.) None of that diminishes his enthusiasm. What matters to this 44-year-old entrepreneur, who competitors concede has one of the most creative minds in the business, is that JetBlue Airways Corp. (JBLU ) is starting service in its 22nd city with its biggest launch ever: 11 flights to 5 destinations within a month.
As the airline's visionary founder, Neeleman is happiest preaching the gospel of JetBlue. After all, this wildly profitable, fast-growing New York-based startup may have forever changed what's expected of a low-fare airline. In a slickly choreographed show, complete with a Boston fife-and-drum corps, Massachusetts Governor Mitt Romney, and a private production company to provide TV and radio feeds to nearly 30 stations around the country, Neeleman shows off what every passenger can expect from JetBlue: a friendly cabin crew, roomy overhead bins, live satellite TV at every leather seat, and soon, 100 channels of satellite radio and pay-per-view movies. It's all part of what Neeleman calls "bringing humanity back to air travel." Which is how he built a bona fide brand at a time when most consumers have about as much regard for their air carriers as they do for their phone companies.
Neeleman still has a lot more he wants to prove, though. He intends to spend some $7 billion to more than quintuple JetBlue's fleet by 2011, to 290 planes, which would make it bigger than US Airways Group Inc. (UAIR ) is now. Starting next year, he'll wield a new 100-seat jet to attack smaller markets that previously seemed safe from the discount onslaught. In short, Neeleman has dramatically upped the stakes in the airline wars. The reaction has been fierce, driving down JetBlue's operating margin and its stock price. There may be worse to come. After slashing costs and building up cash, wounded carriers such as American Airlines Inc. (AMR ) and Continental Airlines Inc. (CAL ) are now in better shape than they've been in years to defend themselves from JetBlue and other fast-growing low-cost interlopers. In late January, Delta Air Lines Inc. (DAL ) announced it would add eight new destinations from New York's John F. Kennedy International Airport, JetBlue's home base. And Delta and United Airlines Inc. have started their own discount airlines, Song and Ted, respectively.
At the same time, many of the discounters are increasingly likely to find themselves competing against one another as they try to expand their presence nationally. Even Southwest Airlines Inc., (LUV ) Neeleman's onetime employer and notoriously no-frills rival, is considering offering satellite-TV service and buying smaller planes, just like JetBlue. "JetBlue has effectively painted a fairly large target on its back," warns one competitor. Or as Jamie Baker of J.P. Morgan Chase & Co. (JPM ) puts it: "The industry is gunning for JetBlue."
How Neeleman handles these fresh pressures will determine which of two scenarios plays out: On the one hand, the counterattack from rivals could blunt JetBlue's ambitions or Neeleman and his team could fumble their growth plan. That would leave JetBlue a niche player under constant assault. "They have chosen a fast-growth approach," says Michael S. Allen, chief operating officer of Back Aviation Solutions. "It's going to require some good execution."
The happier outcome would have JetBlue and other low-cost carriers, which now account for 22% of the U.S. market, push the legacy carriers aside and go on to dominate air travel. James D. Parker, of Raymond James & Associates Inc., believes that's the more likely conclusion. The discounters could nearly double their market share in the next five years, he says, leaving the big names to focus on international and long-haul travel. "The major airlines' initial reaction is to increase capacity, reduce fares, and defend themselves. But it can't last, because they don't have the low costs to match those low fares."
X-MAN. In the center of the storm, seemingly unperturbed, sits Neeleman. He is a successful entrepreneur with an unshakable belief in his own abilities. "I think there are a lot of people who would love to be in my shoes," he says. That lack of humility, though, concerns even his backers. "The only thing I'm worried about [at JetBlue] is overconfidence," says Darryl Jenkins, visiting professor at Embry-Riddle Aeronautical University. "I'm glad they've had these hits." Neeleman is also a practiced, some say calculating, salesman who once told his wife, Vicki, that he has "X" -- the ability to see how things work, a skill that would let him "make money from doughnut holes." And he is a devout Mormon and father of nine who regularly invites acquaintances to his New Canaan (Conn.) home for big Sunday dinners to discuss faith and the Scriptures. JetBlue executives who have worked for the charismatic Richard Branson of Virgin Atlantic Airways joke that Neeleman is just like their old boss, except without the "blondes and champagne."
http://yahoo.businessweek.com/magazine/content/04_07/b3870109.htm
Is JetBlue's Flight Plan Flawed?
Miscalculations, cutthroat competition. CEO David Neeleman faces tough challenges to keep the airline on the ascent
David G. Neeleman is nothing if not confident. And it shows even on this bitterly cold day at Boston's Logan International Airport, even though he has been up since 3:30 a.m., even though he has $100,000 riding on the day's events -- and even though the head of the airport authority mispronounces his name not once, but twice. (It's Neel-uh-man.) None of that diminishes his enthusiasm. What matters to this 44-year-old entrepreneur, who competitors concede has one of the most creative minds in the business, is that JetBlue Airways Corp. (JBLU ) is starting service in its 22nd city with its biggest launch ever: 11 flights to 5 destinations within a month.
As the airline's visionary founder, Neeleman is happiest preaching the gospel of JetBlue. After all, this wildly profitable, fast-growing New York-based startup may have forever changed what's expected of a low-fare airline. In a slickly choreographed show, complete with a Boston fife-and-drum corps, Massachusetts Governor Mitt Romney, and a private production company to provide TV and radio feeds to nearly 30 stations around the country, Neeleman shows off what every passenger can expect from JetBlue: a friendly cabin crew, roomy overhead bins, live satellite TV at every leather seat, and soon, 100 channels of satellite radio and pay-per-view movies. It's all part of what Neeleman calls "bringing humanity back to air travel." Which is how he built a bona fide brand at a time when most consumers have about as much regard for their air carriers as they do for their phone companies.
Neeleman still has a lot more he wants to prove, though. He intends to spend some $7 billion to more than quintuple JetBlue's fleet by 2011, to 290 planes, which would make it bigger than US Airways Group Inc. (UAIR ) is now. Starting next year, he'll wield a new 100-seat jet to attack smaller markets that previously seemed safe from the discount onslaught. In short, Neeleman has dramatically upped the stakes in the airline wars. The reaction has been fierce, driving down JetBlue's operating margin and its stock price. There may be worse to come. After slashing costs and building up cash, wounded carriers such as American Airlines Inc. (AMR ) and Continental Airlines Inc. (CAL ) are now in better shape than they've been in years to defend themselves from JetBlue and other fast-growing low-cost interlopers. In late January, Delta Air Lines Inc. (DAL ) announced it would add eight new destinations from New York's John F. Kennedy International Airport, JetBlue's home base. And Delta and United Airlines Inc. have started their own discount airlines, Song and Ted, respectively.
At the same time, many of the discounters are increasingly likely to find themselves competing against one another as they try to expand their presence nationally. Even Southwest Airlines Inc., (LUV ) Neeleman's onetime employer and notoriously no-frills rival, is considering offering satellite-TV service and buying smaller planes, just like JetBlue. "JetBlue has effectively painted a fairly large target on its back," warns one competitor. Or as Jamie Baker of J.P. Morgan Chase & Co. (JPM ) puts it: "The industry is gunning for JetBlue."
How Neeleman handles these fresh pressures will determine which of two scenarios plays out: On the one hand, the counterattack from rivals could blunt JetBlue's ambitions or Neeleman and his team could fumble their growth plan. That would leave JetBlue a niche player under constant assault. "They have chosen a fast-growth approach," says Michael S. Allen, chief operating officer of Back Aviation Solutions. "It's going to require some good execution."
The happier outcome would have JetBlue and other low-cost carriers, which now account for 22% of the U.S. market, push the legacy carriers aside and go on to dominate air travel. James D. Parker, of Raymond James & Associates Inc., believes that's the more likely conclusion. The discounters could nearly double their market share in the next five years, he says, leaving the big names to focus on international and long-haul travel. "The major airlines' initial reaction is to increase capacity, reduce fares, and defend themselves. But it can't last, because they don't have the low costs to match those low fares."
X-MAN. In the center of the storm, seemingly unperturbed, sits Neeleman. He is a successful entrepreneur with an unshakable belief in his own abilities. "I think there are a lot of people who would love to be in my shoes," he says. That lack of humility, though, concerns even his backers. "The only thing I'm worried about [at JetBlue] is overconfidence," says Darryl Jenkins, visiting professor at Embry-Riddle Aeronautical University. "I'm glad they've had these hits." Neeleman is also a practiced, some say calculating, salesman who once told his wife, Vicki, that he has "X" -- the ability to see how things work, a skill that would let him "make money from doughnut holes." And he is a devout Mormon and father of nine who regularly invites acquaintances to his New Canaan (Conn.) home for big Sunday dinners to discuss faith and the Scriptures. JetBlue executives who have worked for the charismatic Richard Branson of Virgin Atlantic Airways joke that Neeleman is just like their old boss, except without the "blondes and champagne."