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JetBlue (JBU) |
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On January 1, 2005, just 5 years after its launch, JetBlue was officially classified a major airline by the U.S. Department of Transportation. The airline dates back to 1993, when CEO David Neeleman sold his first airline - Salt-Lake City based Morris Air - to Southwest Airlines. It was as a founder and President of Morris Air that Neeleman proved that innovative, high-quality airline service could be coupled with low fares to create a market of loyal travelers. Following the sale of Morris Air, Neeleman went on to help launch WestJet, a successful Canadian low-fare carrier. He developed the e-ticketing system he had implemented at Morris Air into Open Skies, an airline reservation system he sold to Hewlett Packard in 1999. With three successful aviation ventures under his belt, Neeleman decided the time was right to bring his airline formula to the world's largest aviation market, New York City. In July 1999, having secured a hand-picked management team and $130 million in capital funding from investors such as Weston Presidio Capital, George Soros and Chase Capital, Neeleman announced his plan to launch a new airline that would bring "humanity back to air travel." JetBlue Airways established its primary base of operations at New York City's John F. Kennedy International Airport and launched service from there to Fort Lauderdale, FL. in February 2000. JetBlue has since thrived by offering point-to-point service from four major cities: New York, Los Angeles (Long Beach/Burbank), Boston and Washington D.C. By 2007, the airline operated 502 daily flights serving 50 destinations in 21 states, Puerto Rico, Mexico and the Caribbean. It was the eighth largest passenger carrier in the United States based on revenue passenger miles and the largest operating at JFK. Low fares and leather seats JetBlue has grown rapidly by offering a blend of low fares and upscale amenities. For instance, it assigns seats and sells only e-tickets, 70 percent of which are bought on its Web site. It sells fares on a one-way basis and never requires an overnight stay. It has one of the industry’s youngest fleets, which it has equipped with amenities formerly seen only in first class. On its A320s, all passengers can watch 36 channels of TV on their seat back screens or listen to 100 channels of XM satellite radio. All seats are leather. In 2007, it began removing a row of seats from its A320s to offer extra leg room in two classes. JetBlue’s meteoric growth is all the more impressive considering it occurred in the wake of the Sept. 11 2001 terrorist attacks that sent most U.S. airlines into a tailspin. JetBlue (JBLU-NASDAQ) racked up $214 million in profits from 2002 to 2004, while the industry was losing billions of dollars. Its policy of not requiring pilots to resign their seniority numbers at other airlines enabled it to recruit hundreds of pilots being furloughed by US Airways and other airlines. The ice storm meltdown When fuel prices spiked in 2005, JetBlue lost $20 million, and flaws in its business model began to emerge. As air travel rebounded, its on-time performance slipped from the 80 percent range to 73 percent, the second lowest in the industry. The airline said it was more vulnerable to delays because its flights were concentrated in four of the nation’s most congested airports. In 2006, JetBlue reported losses of $1 million on revenue of $2.4 billion. Then came an ice storm that forced JetBlue to cancel a third of its flights between Valentine’s Day and President’s Day in 2007. At the company’s JFK hub, some passengers were stranded on aircraft for up to eight hours. Analysts attributed the meltdown to inadequate staffing and a lack of infrastructure. The debacle contributed to a renewed public outcry for a national “Passenger Bill of Rights” and tarnished JetBlue’s image among both travelers and investors. However, the damage had been done. Within weeks, JetBlue issued an earnings warning, saying it would lose money in the first quarter. Its on-time performance slipped below 70 percent and JetBlue’s stock began falling as well. By June, 2007, it had sunk 35 percent to $11 from its 52-week high in January. New CEO vows more orderly growth On May 10, JetBlue’s board announced Neeleman was stepping down as CEO to take the position of non-executive chairman. The board named President Dave Barger as his successor. Barger has said that while JetBlue will continue to grow, the need to "calm it down." He has said he will put more emphasis into upgrading infrastructure to pave the way for more orderly growth. Despite its recent missteps, JetBlue still commands one of the industry's strongest brands. In June, the airline again topped J.D. Power’s 47th Annual customer satisfaction survey for the airline industry, besting even full-service airlines. Consumer Reports also named it the top airline in terms of customer satisfaction in June 2007. While Barger may be tapping the brakes, JetBlue remains one of the biggest job generators in the industry. At the end of the first quarter of 2007, the airline was scheduled to add 80 new Airbus A320 aircraft and 78 EMBRAER 190 aircraft to a fleet of 98 Airbus A320 and 23 EMBRAER 190 aircraft by the end of 2014. (For details on pilot hiring at JetBlue, FLTops.com members can visit our “Pilot Hiring – Major Airlines” page.) One big question facing the company is whether it can maintain its union-free status. The company attributes much of its success to the fact that it does not have to contend with “unproductive” union work rules. It has avoided unionization of pilots in part by paying some of the best wages in the industry. A320 captains with six years experience earn more at JetBlue than four other airlines tracked by FLTops.com’s pay rate database.
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FLTops.com members can view recent and past news briefs about JetBlue by visiting FLTops TODAY Archives. |
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