Time for some facts, not hearsay.
Mr. Neeleman, along with his very talented and capable managment team, put together a very tight business plan. Fueled by a tremendous amount of start-up capital, Mr. Neeleman was able to negotiate the very best A320 deal in existence. No U.S. airline gets new A320's cheaper than jetBlue.
Although there might be a glutton of old airliners sitting around right now, that doesn't mean there is a shortage of financial institutions and leasing companies wanting to buy new airplanes and establish reliable lease agreements. Which is exactly what Mr. Neeleman does. He sells the aircraft for a small profit, then turns around and leases it back at terms favorable to both jetBlue and the new aircraft owner.
When combined with the "spendable" IPO proceeds, jetBlue is on track to financing 56 more aircraft in the next 4 years. They will have 84 aircraft by the end of 2007 based on their current agreement with Airbus and their strategic plan. They will have 32 aircraft by the end of this year.
Part of the Airbus deal does involve maintenance and aircrew training. Airbus is "paying for" most of the required maintenance during the first three years on each aircraft. Airbus also provides the initial aircrew training. In its SEC report, jetBlue states very clearly that it expects maintenance and labor costs to rise steeply in the coming years.
Of course, when the aircraft start to age, jetBlue can choose selectively which leases to renew, while continuing to add new aircraft with the same initial good deals from Airbus.
Mr. Neeleman and company never deny they are following in SWA's footsteps. Their advantage is knowing which footsteps to avoid, and their revenues/profits are doing their talking.
Will jetBlue target SWA? IMO, initially they are too busy scooping up the business passengers who want some degree of class, but can't fly Delta, AA, or UAL business class anymore due to travel budget cuts. Combined with the large east coast market and Florida, they will continue to prosper without going head-to-head with us. They will grow their point-to-point system quickly, however, and eventually will compete with us to some extent.
Look for their second crew base in either Long Beach or Oakland during the first half of next year.
As most of you know, the domestic airline industry has been changing dramatically the last few years, and 9/11 only accelerated the inevitable. By the end of this decade, we will see a completely different domestic landscape and, fortunately, be one of those at the top.
The question is whether ALL of us will ever see wages and benefits commensurate with our corporate success.
My understanding is that they have always been paying for their aircraft. The sweetheart deal that they have involves the warranties on their aircraft and their maint department. It is a way to allow the Euros to backdoor a subsidy to the airline and allows a startup to have a better cash flow initially. What Airbus does is allow airlines to charge them retail reimbursement for parts and services for warranty work while incurring a wholesale cost. This makes the maint department an initial profit center instead of a direct cost department. The incentive for the manufacturer is that the program encourages continuous additions of new aircraft, as older ones roll off warranty. There are capital advantages for the manufacturer that are back loaded, including high financing charges and higher parts costs when the aircraft do come off warranty. The carriers who participate in such deals hope that the early help will give them the leg up to deal with the downsides that eventually come. Boeing so far hasn't wanted to play that game, but may have to to compete. Mesa Airlines did a similar deal with Raytheon with the 1900D's that was good for them while the pyramid was building but killed them at the end.
Interesting hourlong CNN deal on JetBlue today. I think that they are definitely doing a lot of good things and will be around for some time, although I remember when both Western Pacific and Valujet were just as popular with the media.
Neeleman is a smart guy. I remember a talk he gave in SLC in-between Morris and JetBlue when he talked to business people about how the way to save 10 grand a year in salary was to give them 2 grand a year in "free" day care.
I think that JB is going to be a bigger problem to the big guys than they will to us. I also think that JB definitely needed to break out of its JFK one trick pony, but I think that they will lose a war of attrition on the West Coast out of Long Beach.