David Neeleman

Business Jet Traveler » April 2011
“The CEO and President [at JetBlue]...should have known better. it’s ironic t
Friday, April 1, 2011 - 5:00am

Like Richard Branson, who arrived late and left early when I interviewed him three years ago, JetBlue founder David Neeleman seems to be a man in a hurry. He showed up 20 minutes after the appointed time for our talk, exchanged brief hellos and ducked into his office to check e-mail. Then, about 15 minutes into what was to be an hour-long interview, I asked about the extent of his involvement with JetSuite, a private jet company he co-owns. "I actually have a phone conference with the board in 16 minutes," he said. Then he laughed-something he does easily and often-while I glanced anxiously at my long list of remaining questions.

I wrapped up quickly and photographer Bill Bernstein began shooting pictures of Neeleman in his ­office. Three minutes later, he smiled faintly and asked, "Are we almost done? Are we winding down?"

I'd read that Neeleman is obsessed with watches and buys them four at a time so he'll always have one in case several break or get lost. That seemed to fit his personality. But he told me he used his watch mainly just as a calculator and-before he got a BlackBerry-as a data bank. And I noticed that the clock on his desk wasn't working and that the one on his wall hadn't been reset after Daylight Savings Time, which had ended weeks earlier. Neeleman, it seems, doesn't ­really need a clock. He runs on Neeleman time.

And a lot happens on Neeleman time. He cofounded Morris Air, a low-fare charter airline, when he was still in his mid-20s and has since played key roles at several other airlines and related companies, most notably JetBlue, which he started. He served as its CEO until May 2007, when the board of directors replaced him. The following March, he announced plans to launch Azul Brazilian Airlines, a domestic carrier that he says is already profitable. And last year, he led a group that bought JetSuite, which operates in the western U.S.

These days, the 51-year-old father of nine divides his working time between his native Brazil, where he spends about 10 days a month, and a small office above a bank near his New Canaan, Conn. home. Like Neeleman, who wears jeans to work, the office is not dressed to impress. Computer-printer cartridges and an unhung picture occupy space in the reception area, and the sparse furnishings are the sort you might find at Staples or Office Depot. But that's no surprise. This is clearly a man who'd rather be dreaming up deals than dwelling on décor.

What led you to purchase JetSuite?

Alex Wilcox, the CEO, was at JetBlue and we've always stayed in touch. And my dear friends run Embraer [which supplies JetSuite's Phenom 100s], so that was an element. And I've owned a [jet] share and what [Alex] said to me kind of resonated: Most trips are within a thousand miles and carry four people or less. So why do it with a bigger airplane that has higher costs and more seats if you're not going to fill them?

When I heard the Phenom burns a hundred gallons an hour, [requires] less maintenance, less this and that, and the planes are very inexpensive from a capital ­perspective, it made a lot of sense to me. So with a group that was an investor in Azul, we bought the controlling interest in the company. We're offering a really good product at a really reasonable price. It's kind of like an Azul and JetBlue of the corporate jet market.

When you bought JetSuite, you said, "The private jet market has been broken for some time, loaded with unnecessary expense, poor asset utilization and low return on capital, despite the exorbitant costs to its users. I believe JetSuite will be able to deploy its uniform fleet efficiently, following some of the basic rules of low-cost carriers, to deliver the availability and low price points that are going to open the industry to large numbers of new corporations, resorts and individuals." What did you have in mind when you talked about "following some of the basic rules of low-cost carriers"?

Just having low operating costs. There's not much you can do if you've paid $10 million for an airplane that's flying two hours a day. I'd rather pay a lot less than that for an airplane that flies two hours a day. You're never going to get utilization where you would at, say, a JetBlue but as long as you've got planes sitting on the ground, you might as well do it with lower capital costs. We took the sweet spot of the market and said, "How can we do the sweet spot more efficiently?" And it starts with having a plane that burns 100 gallons an hour rather than, say, 250.

At JetBlue, a lot of your ticket sales were online, the pilots had laptops and so on. Do business jet operators need to implement more technology to increase efficiency?

The biggest bane of the business jet market is unsold legs. So the ability to sell those legs by having them posted on the Internet [is important] and I think there's a lot more of that going on today. But again, if you're going to have a lot of empty legs, you might as well do it with a 100-gallon-an-hour airplane.

The airlines have been cutting back on frills and first class, which is driving more people to business aviation. Do they need to find ways to treat their high-end customers better?

Well, JetBlue doesn't have first class. We treated everyone the same. Maybe it's funny I'm in the JetSuite market because it's so weird to me that on a plane with 150 seats, you give 12 people a great ride and you stick it to 138-squish them all back there because of 12 people. There's something about that that just feels wrong.

But doesn't JetSuite give a different class of service to a handful of people who can afford it? They're just not on the same airplane with economy-class passengers.

Yeah. No, I mean JetSuite's a great product. We flew a Phenom around Brazil a couple of weeks ago. We did something we could never have done if we hadn't had a plane. There's a bunch of big cities in Brazil that are four or five hours from airports. So we used a JetSuite Phenom and visited six cities in two days, met with mayors, met with all these people. That would have taken us a week, two weeks [traveling on an airliner].

At Azul, you call all your employees "crewmembers." What point are you trying to make?

I want every person who works in our company to say it's the best job they've ever had. You can't treat someone like an employee and have them say it's the best job they've ever had. You have to treat them like they're part of a team that's creating something bigger than each of us individually. I thought "crewmember" was a good term. We're all crewmembers.

How do you take that approach beyond mere words?

How you select them, how you train them, how you treat them, what kind of benefits and pay you give them, what the management style is. They've got to feel like they want to come to work everyday. When you have news of the company, you tell them first. You don't tell the public first. You always try to make them feel that they're part of the huddle. And you have to have great managers and make sure they aren't using management by intimidation.

Besides calling employees "crewmembers," you make a distinction between "customers" and "passengers."

I want every customer to get off a plane and say, "Wow, that was a different experience. I want to fly with these guys again." Passengers don't act that way. Customers do. And I have to have people who love their jobs to have a customer that gets off a plane saying, "Wow." So those things go hand in hand.

Your approach sounds reminiscent of Richard Branson's.

Well, Richard doesn't have a hands-on management style. But yes, I think people who work for Virgin feel it's a special place to work.

Right before you were ousted from JetBlue, you had a PR disaster when New York had an ice storm and passengers were left sitting for hours in airplanes on the ground.

It's funny because Delta had as many planes as we did stranded on the runway for 10 hours. But people expect a lot more from JetBlue than from Delta. So we took the brunt of [the criticism].

What did you learn from the experience?

You have to have crewmembers that are ambassadors for your customers and you have to be flawless in your execution. And when you're not, you have to treat your customers in such a way that they may be more loyal with you having had a problem than if you had never had a problem. So everybody that was affected by that [ice storm] not only got a full refund but their next trip was on us. We gave away $40 million to apologize for the failings of our operation. Then we came out with a customer bill of rights. And [our customer-satisfaction ratings] bounced right back. So when things happen, you acknowledge you made a mistake and make it right with the customer.

You lost your job over this.

I'm not in charge of getting people off airplanes but ultimately I am responsible. But the COO and president at the time...those guys should have known better. It's ironic that some of them got promoted and I'm the one that got ousted. But that's OK because sometimes boards don't know everything. They're looking through a peephole.

I've heard that people tell you they wish you were back at JetBlue.

Yeah, oh, just constantly. Oh, my gosh. I get that every day.

Well, you know what happened at Apple, where Steve Jobs got ousted and then made a triumphant return. Could that happen with you at JetBlue?

I don't know. It's hard to go back and Azul's a great company. So I'm not even thinking about going back. Obviously the board would have to leave for me to do that, because while they may acknowledge privately that they made a mistake, publicly it's pretty tough to admit when egos are involved. I think the management team there is learning, but people are still yearning for the good old days.

So if a new board were to come in and ask you to return, would you do it?

I couldn't run both companies but I wouldn't mind having a bigger involvement in JetBlue than I have today, which is nothing other than just a shareholder. You know, being the founder and being someone who dreamt that whole thing up, it would be nice to be a bit more involved. We had a 10-year anniversary and I didn't get anything. People sent me stuff from the company but not officially. There was nothing, which is kind of ridiculous but that's OK.

"Azul" is Portuguese for blue. Why another "blue" name?

There's probably a little bit of a poke in the eye there-kind of like, "The blue lives on."

The airlines are a tough business. Why start another after JetBlue?

Well, I've done this three times. It's what I know. I've always made money at it, always been successful. I figured out a formula that works and Brazil really needed it. And I had this idealistic view of trying to make a difference. I've got 3,000 people in Brazil that work for us and love their jobs and we flew four million people this year and a lot of those people had never flown before.

You say you've got a formula for achieving success with an airline. What is it?

It's that combination of being the lowest-cost producer and having the best product, so people get onboard and go, "Wow, I paid this and I got this! I'm gonna tell 10 of my friends." So it's efficiency combined with some perks like leather seats, extra legroom and live television. It's being so efficient you can actually be a cost leader at the same time.

But profit margins on airlines are so slim that they're starting to charge for everything from bags to snacks. How do you become so efficient that you can combine perks with low prices?

You use technology to have fewer people per airplane. You turn your airplanes more quickly-keep them in the air. You buy new airplanes so you can fly them more hours in the day and they're more fuel-efficient. And you hire the best people and train them well so you need fewer of them.

You worked as a missionary in Brazil. How did that experience affect you?

When I was living there as an expatriate child and visited as a teenager, I ran with the influential people and the rich. Then I went back to Brazil and lived with the poor. And that contrast really annoyed me. It made me want to do something to make a difference for the lower classes and that's what we're doing-creating air travel for the bus fare.

What's your goal in life? What are you trying to accomplish?

To create a better life for as many people as I can. To change lives. I have ADD [attention deficit disorder, which was diagnosed when Neeleman was in his 30s]. I'm just a dreamer and a schemer.

I always try to do things a bit better.

I understand you have a $200,000 salary at Azul and no stock options.

I own 15 percent of the company. Why do I need stock options? I never took a stock option at JetBlue. It's better to leave those shares for people that don't have as much as I have.

I read that at JetBlue, you also didn't have your own parking spot and you donated your entire salary to a crewmember crisis fund, saying, "It seemed hoggish of me to have all this stuff when others didn't because every time I would get something someone else would have less." Yet then I read about your $14 million mansion in Connecticut.

It's my wife's mansion. I never would have built that, ever. I think she's repentant. It was a project for her and it kind of got out of hand. But we all felt funny moving in. That's why we want to sell it.

I'd wondered how you reconciled the mansion with your philosophy.

I don't.

CEO Files Résumé

NAME: David Neeleman BIRTHDATE: Oct. 16, 1959 (in São Paulo) POSITION: Founder and CEO, Azul Brazilian Airlines. Board member and co-owner, JetSuite. PREVIOUS POSITIONS: Co-founder, executive vice president (1984-88) and president (1988-93), Morris Air. Executive Planning Committee member, Southwest Airlines, 1994. CEO, Open Skies (an airline reservation system company), 1995-98. Co-founder and board member, WestJet (Canada), 1996-99. Founder (2000), CEO (2000-07) and chairman (2000-08), JetBlue. EDUCATION: Attended University of Utah for three years.

PERSONAL: Lives in New Canaan, Conn. Married with nine children.

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