Blue Skies

By Sally B. Donnelly/J.F.K. Airport

The first thing you notice when getting on board is the new-car smell. "No wonder," says the flight attendant, hearing your remark. She points to a metal plaque on the doorway rim that says the Airbus A320 was delivered only a month ago. Then there are the blue potato chips from naturally blue potatoes. The free cable TV on your personal video screen. The leather seats. Flight attendants with a sense of fun about their jobs and a can-do pilot who informs over the p.a. system that yes, there's a major storm coming into the New York City area but that we'll get there on time anyway. And we do.

So the traveler wonders, Is this for real? Or maybe the right question is, How long can they keep up this nonsense?

Just as the country's hatred of airlines was exploding last year, JetBlue came into being with a new attitude, new planes and a new concept of service. What perfect takeoff timing for a carrier that is trying to bring pleasure and even style back to flying. JetBlue is low-price and all-coach, like Southwest Airlines, yet hip and sassy, like Virgin Atlantic. In the air, JetBlue offers the plush seats and satellite TV; on the ground, it offers hyperefficiency and--are you ready?--candor about delays. You could call it the antiairline.

The rapidly expanding company is flying 80% full, vs. an industry average of 68.4%, and it recently booked its seventh straight month of profits, even as major carriers have struggled to stay in the black. From its base in New York City, JetBlue currently flies to 14 destinations, including Oakland, Calif.; Denver; Orlando, Fla.; Seattle; and Salt Lake City, Utah. Last month the company became the most ambitious start-up in U.S. aviation history when it ordered 48 new Airbus 320 jetliners--valued at $2.5 billion--to go with the 68 planes on the way and 15 in service. That's just part of JetBlue's full-throttle flight plan. In August the carrier will open a second home base, in Long Beach, Calif.

Which is to say that JetBlue is flying into dangerous territory. Of the hundreds of start-ups since the industry was deregulated in 1978, only America West has grown into a major company--and it has flown in and out of Chapter 11 bankruptcy. New carriers tend to fall victim to pernicious competition as well as their own incompetence. Last month, for example, the Justice Department decided to appeal a judge's dismissal of a predatory pricing case against American Airlines for running smaller carriers out of Dallas.

Credit CEO David Neeleman, 41, for piloting JetBlue past the early disasters that typically befall fledgling carriers. For starters, Neeleman raised $160 million from investors--almost triple what other new airline entrants have managed to obtain. The hefty sum is insurance against any unforeseen cash crunch; last year start-up National Airlines veered into bankruptcy because of surging jet-fuel prices.

Then there's the safety issue, a big one for consumers who are leery of "new" airlines that fly 25-year-old planes. JetBlue flies only factory-fresh, state-of-the-art A320s. Neeleman has fitted each with 162 seats--vs. the A320's 180-seat maximum.

Flyers are raving about the so-called JetBlue experience. It begins with pricing, which is competitive and doesn't torture consumers with requirements like Saturday-night stays. There are 12 one-way fares from New York City to Orlando, for instance, ranging from $70 to $199. On Delta, by comparison, there are 41 fares between the two cities ranging from $70 to $584. Result: after just one year of operation, JetBlue debuted as No. 2 on the Zagat 2001 customer-satisfaction survey (bested only by Midwest Express). That satisfaction has JetBlue en route to tripling revenue to $300 million and passenger rolls to 3 million this year.

The early accolades wouldn't bother the big airlines if only students and grandmothers were flying JetBlue. But the carrier is pulling in business travelers, the industry's most valuable passengers and the source of up to 50% of its profits. "We were starved for an airline like this," says Christopher Hayes, the chief investment officer at Rulison & Co., a financial firm based in Rochester, N.Y. Hayes, who has lately forgone his frequent-flyer perks on JetBlue rival US Airways, has already flown the newcomer 12 times: "It's hard to compare flying JetBlue to other airlines."

JetBlue's marketing is another radical departure. The carrier aims its product at the frugal yet style-conscious consumer. "We want that 'aspirational' audience," says Gareth Edmondson-Jones, the airline's spokesman and one of many employees who came from Virgin Atlantic. "We see our customers as the same ones who can afford more but shop at Target because their stuff is hip but inexpensive." That kind of thinking drove decisions like JetBlue's choice of leather seats instead of the less expensive cloth. "It's a nicer look, a better feel," says Neeleman, in full salesman mode. "Of course, it's also easier to clean when people puke on it."

Neeleman has raided rivals for employee-focused top executives, including COO Dave Barger, a key part of the team that turned around Continental Airlines. Neeleman lured chief financial officer John Owen from Southwest, "because there is no one else in the world who is better at buying airplanes and running a successful financial operation." For his people person, Neeleman chose the only executive who ever fired him. That was Ann Rhoades, who helped develop the airline industry's happiest employee group at Southwest. But in 1994 she pink-slipped Neeleman after Southwest bought Morris Air, another low-price airline he had started.

Neeleman obsesses over keeping employees happy, and with good reason. Airline watchers say JetBlue's ability to stay union-free is critical to its survival as a low-cost carrier. The industry's labor-relations record is famously toxic. "But if there is anyone who realizes the importance of treating their employees right, it's the management team at JetBlue," says airline analyst Holly Hegeman, the editor of planebusiness.com

Neeleman, who wants to take JetBlue public within two years, is just as obsessed with keeping costs down. Like Southwest, JetBlue flies only one type of aircraft, which keeps a lid on training and maintenance expenses. With flight attendants and even executives like Barger chipping in to help clean the jets even before they have landed, turnaround times average just 35 minutes, as fast as industry leader Southwest.

Despite the focus on cost, JetBlue has expenses that most other airlines have rejected. It has configured its planes with emergency equipment such as life rafts and beacons for flying over water, thus allowing its flights to swing out over the ocean to avoid congestion on crowded East Coast routes. It has worked closely with controllers to "tunnel" to its upstate New York destinations. That means flying at 10,000 ft., rather than the usual altitudes above 18,000 ft., which enables JetBlue to avoid traffic jams in the air lanes. "It costs us about $400 more per flight," says Chris Collins, vice president of operations. "But getting to your destination early is priceless."

The best thing JetBlue may have going for it is Neeleman. One of seven siblings, who has nine children of his own, Neeleman has been dreaming about airplanes since he saw a red one on his second birthday cake. A serial travel entrepreneur, he started his first business as an accounting undergraduate at the University of Utah. He has launched four airlines, including Morris Air and Canada's WestJet Airlines, each one more successful than the last. Neeleman, who retains such geeky attributes as wearing a calculator-watch combination, even developed the computer system that became the basis for e-ticketing.

According to his father Gary, a journalist turned publishing executive, David got his entrepreneurial drive from his grandfather, who opened what Neeleman pere claims was the country's first convenience store, on South Street in Salt Lake City. David certainly learned frugality: of the $3,000 his parents sent him during his year on a Mormon mission in Brazil, he saved $1,300. He has retained that trait. He gets around New York City by subway.

Herb Kelleher, founder of Southwest Airlines, considered Neeleman such a threat that after buying him out, he forced his young rival to sign a five-year noncompete agreement in 1994. "David's a genius," Kelleher says of Neeleman. "There's no question about it." The hiatus gave Neeleman a lot of time to plan every last detail of his dream airline.

In the opinion of those who work with Neeleman, that may translate into a new detail every few minutes. JetBlue's CFO Owen says dealing with Neeleman is "like trying to put a bridle on a wild mustang." Even Neeleman admits that lots of his ideas won't work (including serving pizza on planes, allowing only those passengers who book online to get seat assignments and having men's and women's lavatories). "That's why I make sure there are people around me who push back," says Neeleman. Owen does his part: "I tell him it's O.K. to think outside the box, but we have to be able to see the box."

It took a Westerner like Neeleman to see the beauty of the New York air-travel market, which was certainly lost on New Yorkers. From 1986 to 1997, high prices in the largest domestic market had stifled growth. Neeleman and his management team figured that thousands, if not millions, of New York-area passengers could be enticed back with low fares and excellent service. Says Owen: "Essentially, New Yorkers were prisoners. They had only low-quality, high-fare airlines to choose from. Their expectations were at bottom."

Bypassing delay-plagued La Guardia Airport, Neeleman based the airline at John F. Kennedy, an international gateway that is crowded only a few hours per day. But it's also eight miles farther from Manhattan and more expensive to get to, a potential hurdle for low-fare domestic customers. Nonetheless, JetBlue lobbied the Clinton Administration for a remarkable 75 slots (takeoff and landing rights) at J.F.K., enough to allow robust airline growth through 2005. J.F.K. has proved a smart move: when congestion choked La Guardia to a standstill last year, JetBlue launched a marketing campaign that called J.F.K. "New York's most on-time airport."

For all its rapid expansion, JetBlue has yet to take on any of the "fortress hubs" dominated by the majors: Atlanta (Delta), Chicago (United and American), Dallas (American) and Detroit (Northwest). And it does not intend to. Neeleman knows that if he invades the hubs, the big carriers will probably try to price-cut him to death or add flights to overwhelm the still small airline.

But as it expands, JetBlue will have to prove that it can indeed cross flight paths with major carriers that have already helped ground newcomers from People Express to Pro Air. If JetBlue's philosophy of improving service, simplifying pricing and treating customers as if they mattered can make it there, the upstart New Yorker should make it anywhere.

Read Sally Donnelly's weekly column on the airline industry at time.com