Skygod
Blue Member
- Joined
- May 12, 2003
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From http://www.fastcompany.com/magazine/82/jetblue.html
And Now the Hard Part
Can JetBlue make the leap from popular (and profitable) niche airline to major player -- without losing its soul? Only if it can grow big but stay small at heart.
He's flying, but not the way you imagine the CEO of an airline flying.
Instead of sitting aboard a new blue-and-white jet in leather-upholstered comfort, David Neeleman is piloting a dirt-caked Chevy Tahoe, doing a Dale Earnhardt Jr. through the dark streets of Queens. It's five before 9, his night flight to Salt Lake City departs at 9:25, and Neeleman, the CEO of JetBlue Airways, is 15 minutes from the airport. You do the math.
"I hope we make it," he says with a laugh, gunning the Tahoe into an open lane. "If there's an accident up ahead, we might not."
He could have left the office earlier, but that's not like him. Or he could have left the driving to someone else, but he's not that kind of CEO. He may run an airline with more than 6,000 employees and 57 twin-engine jets, and he may be, as a new book about him claims, "arguably the most innovative figure in modern-day aviation." But he prefers to drive himself, just as he does every morning on the nearly hour-long commute from Connecticut. If the vehicle suggests anything, it's practicality; he and his wife, Vicki, have nine children. Kids' clothes litter the backseat. An empty water bottle rattles amid discarded newspaper pages in the foot well.
As Neeleman races toward John F. Kennedy Airport, darting and weaving through evening traffic, it's clear that he's doing what comes naturally and what he happens to do so well: flying by the seat of his pants.
It's worked pretty nicely so far. At a tough time for the U.S. economy, JetBlue has quite literally soared. While much of the airline industry was crippled by September 11, and while United Airlines and US Airways fell into bankruptcy, JetBlue has been a dramatic example of what can happen when the right entrepreneur with the right idea -- low fares and popular frills such as satellite TV and leather seats -- comes along at the right moment. Founded in 1999 and flying since 2000, JetBlue has put together 12 consecutive profitable quarters. It enjoys among the industry's best operating margins, the highest percentage of seats filled, and one of the top rates for on-time arrivals.
And Neeleman has an even grander flight plan for JetBlue: He aims to vault his startup airline into the ranks of the majors, with 290 planes and 25,000 employees within seven years. Although it hit almost $1 billion in revenue last year, JetBlue is still tiny compared with American Airlines, with $17.4 billion, or United, with $13.7 billion, or Delta, with $13.3 billion. And for all its meteoric growth, JetBlue still operates just 220 flights to 23 destinations a day. Compare that with industry leader American's 4,200 daily flights to 250 cities in 40 countries. Now JetBlue is about to embark on a steep climb: In the next 12 months, it expects to hire between 1,700 and 1,800 employees. It's introducing a new plane every three weeks -- and next year will be adding one every 10 days, including a second type of aircraft.
Clearly, Neeleman will have to fly by more than the seat of his pants. The airline industry is littered with great startup airlines that never made it to the big time, all founded by ambitious and imaginative people. Neeleman is already running a company bigger than anything he's ever run before, and its organizational and competitive issues are increasingly daunting. This is, of course, the test all entrepreneurs face if they're lucky enough: Can the genius that helped them create a successful company from nothing be redirected to the very different challenges of running a vast enterprise?
But there's a special twist in JetBlue's case. Much that's distinctive about this airline -- from the enthusiasm of its employees to its relentless customer focus to its hip, slightly countercultural image -- is precisely the sort of thing you can pull off when you're small, and that becomes far tougher the bigger you get. Can JetBlue maintain those qualities as it morphs from nimble startup into the bureaucracy that's required to manage a vastly more complex operation?
It's a question that applies to many truly innovative companies these days. Call them postmodern corporations, perhaps. If they pull off this transition, they become big, but remain in important ways the antithesis of bigness -- think Starbucks, Dell, and Amazon. Like JetBlue, they depend on flexibility, speed, and a sense of intimacy with employees and customers alike. Put another way, the challenge JetBlue now faces is this: Is small scalable?
As Neeleman rushes into the terminal on this February night, it sure looks as if the answer could be yes. JetBlue is still the sort of outfit where the ticket agents at JFK call out, "Hey, David!" It's 9:15, but there's no need to panic. There's a slight delay. On his way from ticketing through security to the gate, Neeleman takes his time, chatting almost nonstop with employees. It could come across as patronizing, all fake smiles, glib lines, noblesse oblige. The difference here is that the boss knows many of these employees by name. He asks about their job, their kids, a spouse undergoing chemo.
At that moment, JetBlue still feels truly intimate. But then, as Neeleman heads down the jetway, the pilot of the plane teases, "So you really do exist." Turns out, it has taken him two-and-a-half years to finally meet the CEO. It's the hint of danger, the serpent in the garden. JetBlue isn't even that big, and already there's a pilot who has worked here since 2001 and can joke that Neeleman is just a myth.
For all his hands-on entrepreneurial brio, it's clear that Neeleman has been thinking big since the very beginning. For one thing, the bench of executives he's assembled to run the airline every day has depth that would be the envy of any other young company. And Neeleman and his team have carefully laid the groundwork for growth. Some things that startups usually wrestle with, like sophisticated technology, are already in place, years ahead of schedule. Pilots, for example, store their flight manual on laptops, so it can be updated instantly. It's the industry's first paperless cockpit. And Neeleman has other resources that will come in handy -- like money in the bank, about $600 million in cash and cash equivalents.
He'll need it, because this is one vicious business. A new airline hasn't managed to join the ranks of the real majors in a long time. Since deregulation in 1978, in fact, only a handful of startups (such as AirTran and America West) have survived out of the more than 100 launched. For good reason. Planes are **CENSORED****CENSORED****CENSORED****CENSORED** expensive, and it takes a lot of people to run them.
And Neeleman's startup has gotten big enough to draw serious competitive fire: In just the last year, two major airlines have started their own versions of JetBlue, Delta's Song, and United's Ted. In December, JetBlue pulled out of Atlanta, its first retreat, after Delta and AirTran flooded the market with new cheap flights. And in January, JetBlue announced that its usually stellar profit margin had dipped three percentage points to 13.3% in the fourth quarter of 2003, largely due to price-cutting by the majors.
Then there are the inevitable growing pains -- pains that, in this business, can be lethal. For now, JetBlue enjoys the lowest costs in the industry, just over six cents per passenger seat mile. But any startup with new planes would have lower costs. The jets don't need major maintenance yet. They will. And none of the staff have worked at the airline more than a few years, so the pay scale is fairly low. It will rise. The point is, large airlines fork over more money to run their business, and the reason why isn't just unimaginative management. That's another price of being big.
Before JetBlue has to worry about the problems of bigness, of course, it has to last long enough and grow fast enough to face them. And Neeleman, 44, has one hole in his resume: He has never run a large company, or even worked at one for very long.
His forte has been launching businesses. While at the University of Utah, he started a travel business and dropped out to run it. Later, he teamed up with the owner of a local travel agency to launch Morris Air, a regional airline, which was eventually purchased by Southwest Airlines, a company he had long admired. Neeleman went along to take his dream job, executive vice president, but lasted less than six months before he was fired. "David didn't understand the nuance of the organization," says Ann Rhoades, a Southwest vice president at the time. "He needed to walk, not run." He went on to help create the company that developed Open Skies, the software for e-tickets, and started and departed from his second airline, WestJet, a thriving low-cost carrier in Canada, by the time he started JetBlue.
But if he's not a big-company guy, Neeleman knows how to attract and adapt mature talent to an immature company. Dave Barger, president and COO, ran Continental's Newark, New Jersey, hub. John Owen, CFO, was treasurer at Southwest. And the head of HR was none other than Rhoades, who had helped show Neeleman the door at Southwest. He has learned a lot since then, she says -- including how to practice the sort of restraint that can come hard to strong-willed company founders. "He realized that if you hire A-players, you don't have to sit on them and tell them what to do," she says.
Neeleman and Barger are an impressive duo and a bit of an odd couple, the excitable entrepreneur and the detail-oriented, highly organized, even-tempered son of a United pilot. "They're yin and yang," says Dave Bushy, who recently joined JetBlue as vice president of flight operations and who once held the same title at Delta.
And Now the Hard Part
Can JetBlue make the leap from popular (and profitable) niche airline to major player -- without losing its soul? Only if it can grow big but stay small at heart.
He's flying, but not the way you imagine the CEO of an airline flying.
Instead of sitting aboard a new blue-and-white jet in leather-upholstered comfort, David Neeleman is piloting a dirt-caked Chevy Tahoe, doing a Dale Earnhardt Jr. through the dark streets of Queens. It's five before 9, his night flight to Salt Lake City departs at 9:25, and Neeleman, the CEO of JetBlue Airways, is 15 minutes from the airport. You do the math.
"I hope we make it," he says with a laugh, gunning the Tahoe into an open lane. "If there's an accident up ahead, we might not."
He could have left the office earlier, but that's not like him. Or he could have left the driving to someone else, but he's not that kind of CEO. He may run an airline with more than 6,000 employees and 57 twin-engine jets, and he may be, as a new book about him claims, "arguably the most innovative figure in modern-day aviation." But he prefers to drive himself, just as he does every morning on the nearly hour-long commute from Connecticut. If the vehicle suggests anything, it's practicality; he and his wife, Vicki, have nine children. Kids' clothes litter the backseat. An empty water bottle rattles amid discarded newspaper pages in the foot well.
As Neeleman races toward John F. Kennedy Airport, darting and weaving through evening traffic, it's clear that he's doing what comes naturally and what he happens to do so well: flying by the seat of his pants.
It's worked pretty nicely so far. At a tough time for the U.S. economy, JetBlue has quite literally soared. While much of the airline industry was crippled by September 11, and while United Airlines and US Airways fell into bankruptcy, JetBlue has been a dramatic example of what can happen when the right entrepreneur with the right idea -- low fares and popular frills such as satellite TV and leather seats -- comes along at the right moment. Founded in 1999 and flying since 2000, JetBlue has put together 12 consecutive profitable quarters. It enjoys among the industry's best operating margins, the highest percentage of seats filled, and one of the top rates for on-time arrivals.
And Neeleman has an even grander flight plan for JetBlue: He aims to vault his startup airline into the ranks of the majors, with 290 planes and 25,000 employees within seven years. Although it hit almost $1 billion in revenue last year, JetBlue is still tiny compared with American Airlines, with $17.4 billion, or United, with $13.7 billion, or Delta, with $13.3 billion. And for all its meteoric growth, JetBlue still operates just 220 flights to 23 destinations a day. Compare that with industry leader American's 4,200 daily flights to 250 cities in 40 countries. Now JetBlue is about to embark on a steep climb: In the next 12 months, it expects to hire between 1,700 and 1,800 employees. It's introducing a new plane every three weeks -- and next year will be adding one every 10 days, including a second type of aircraft.
Clearly, Neeleman will have to fly by more than the seat of his pants. The airline industry is littered with great startup airlines that never made it to the big time, all founded by ambitious and imaginative people. Neeleman is already running a company bigger than anything he's ever run before, and its organizational and competitive issues are increasingly daunting. This is, of course, the test all entrepreneurs face if they're lucky enough: Can the genius that helped them create a successful company from nothing be redirected to the very different challenges of running a vast enterprise?
But there's a special twist in JetBlue's case. Much that's distinctive about this airline -- from the enthusiasm of its employees to its relentless customer focus to its hip, slightly countercultural image -- is precisely the sort of thing you can pull off when you're small, and that becomes far tougher the bigger you get. Can JetBlue maintain those qualities as it morphs from nimble startup into the bureaucracy that's required to manage a vastly more complex operation?
It's a question that applies to many truly innovative companies these days. Call them postmodern corporations, perhaps. If they pull off this transition, they become big, but remain in important ways the antithesis of bigness -- think Starbucks, Dell, and Amazon. Like JetBlue, they depend on flexibility, speed, and a sense of intimacy with employees and customers alike. Put another way, the challenge JetBlue now faces is this: Is small scalable?
As Neeleman rushes into the terminal on this February night, it sure looks as if the answer could be yes. JetBlue is still the sort of outfit where the ticket agents at JFK call out, "Hey, David!" It's 9:15, but there's no need to panic. There's a slight delay. On his way from ticketing through security to the gate, Neeleman takes his time, chatting almost nonstop with employees. It could come across as patronizing, all fake smiles, glib lines, noblesse oblige. The difference here is that the boss knows many of these employees by name. He asks about their job, their kids, a spouse undergoing chemo.
At that moment, JetBlue still feels truly intimate. But then, as Neeleman heads down the jetway, the pilot of the plane teases, "So you really do exist." Turns out, it has taken him two-and-a-half years to finally meet the CEO. It's the hint of danger, the serpent in the garden. JetBlue isn't even that big, and already there's a pilot who has worked here since 2001 and can joke that Neeleman is just a myth.
For all his hands-on entrepreneurial brio, it's clear that Neeleman has been thinking big since the very beginning. For one thing, the bench of executives he's assembled to run the airline every day has depth that would be the envy of any other young company. And Neeleman and his team have carefully laid the groundwork for growth. Some things that startups usually wrestle with, like sophisticated technology, are already in place, years ahead of schedule. Pilots, for example, store their flight manual on laptops, so it can be updated instantly. It's the industry's first paperless cockpit. And Neeleman has other resources that will come in handy -- like money in the bank, about $600 million in cash and cash equivalents.
He'll need it, because this is one vicious business. A new airline hasn't managed to join the ranks of the real majors in a long time. Since deregulation in 1978, in fact, only a handful of startups (such as AirTran and America West) have survived out of the more than 100 launched. For good reason. Planes are **CENSORED****CENSORED****CENSORED****CENSORED** expensive, and it takes a lot of people to run them.
And Neeleman's startup has gotten big enough to draw serious competitive fire: In just the last year, two major airlines have started their own versions of JetBlue, Delta's Song, and United's Ted. In December, JetBlue pulled out of Atlanta, its first retreat, after Delta and AirTran flooded the market with new cheap flights. And in January, JetBlue announced that its usually stellar profit margin had dipped three percentage points to 13.3% in the fourth quarter of 2003, largely due to price-cutting by the majors.
Then there are the inevitable growing pains -- pains that, in this business, can be lethal. For now, JetBlue enjoys the lowest costs in the industry, just over six cents per passenger seat mile. But any startup with new planes would have lower costs. The jets don't need major maintenance yet. They will. And none of the staff have worked at the airline more than a few years, so the pay scale is fairly low. It will rise. The point is, large airlines fork over more money to run their business, and the reason why isn't just unimaginative management. That's another price of being big.
Before JetBlue has to worry about the problems of bigness, of course, it has to last long enough and grow fast enough to face them. And Neeleman, 44, has one hole in his resume: He has never run a large company, or even worked at one for very long.
His forte has been launching businesses. While at the University of Utah, he started a travel business and dropped out to run it. Later, he teamed up with the owner of a local travel agency to launch Morris Air, a regional airline, which was eventually purchased by Southwest Airlines, a company he had long admired. Neeleman went along to take his dream job, executive vice president, but lasted less than six months before he was fired. "David didn't understand the nuance of the organization," says Ann Rhoades, a Southwest vice president at the time. "He needed to walk, not run." He went on to help create the company that developed Open Skies, the software for e-tickets, and started and departed from his second airline, WestJet, a thriving low-cost carrier in Canada, by the time he started JetBlue.
But if he's not a big-company guy, Neeleman knows how to attract and adapt mature talent to an immature company. Dave Barger, president and COO, ran Continental's Newark, New Jersey, hub. John Owen, CFO, was treasurer at Southwest. And the head of HR was none other than Rhoades, who had helped show Neeleman the door at Southwest. He has learned a lot since then, she says -- including how to practice the sort of restraint that can come hard to strong-willed company founders. "He realized that if you hire A-players, you don't have to sit on them and tell them what to do," she says.
Neeleman and Barger are an impressive duo and a bit of an odd couple, the excitable entrepreneur and the detail-oriented, highly organized, even-tempered son of a United pilot. "They're yin and yang," says Dave Bushy, who recently joined JetBlue as vice president of flight operations and who once held the same title at Delta.