JetBlue Airways, the best-financed of any start-up since US airline deregulation, plans an early 2000 launch from New York's underused Kennedy International Airport. The airline is the brainchild of David Neeleman, who sold his previous start-up, Salt Lake City-based Morris Air, to Southwest Airlines six years ago. Since then, he has been chief executive of Open Skies, creater of a touch-screen electronic reservations system recently sold to Hewlett-Packard, and he served as consultant to Canadian low-fare start-up WestJet Airlines.
Having signed a five-year "no compete" clause as part of the Morris sale to Southwest, Neeleman had time to think about and plan this new airline, which he promises will be different. "We're going to bring humanity back to air travel," Neeleman says.
"This is a dream I've had for the last five years." Neeleman exudes optimism that JetBlue - the name picked in part because blue is his favourite colour - will succeed where many low-fare start-ups have failed. "We have the capital, we have the management team, we have the formula."
The new airline, which was being called "New Air" until the name JetBlue was picked, will start with nearly $130 million in capital, including $120 million from leading US venture capital firms, such as Soros Private Equity Partners, which put in $40 million, Chase Capital Partners and Weston Presidio. According to John Owen, JetBlue chief financial officer, Weston Presidio, an investor in Neeleman's Morris Air, was the lead firm and also brought in three other investors: MassMutual Life, BankBoston Capital and NationsBank Montgomery Securities (now part of Bank of America). Neeleman has put in $5 million, part of the $20 million he made from the Morris sale.
For his management team, Neeleman has recruited what one official calls the "finance and culture" element from Morris and Southwest with executive vice-presidents Thomas Kelly (general counsel) and Ann Rhoades (human resources) and chief financial officer Owen. Operations turnaround staff have come from Continental Airlines, led by president and chief operating officer Dave Barger, while a marketing/product development contingent has arrived from Virgin Atlantic Airways, headed by Amy Curtis McIntyre, vice-president marketing and sales. "We are not about failure," Neeleman says.
Unlike most start-ups, the carrier also has committed to new Airbus A320s to avoid the potential unreliability of older jets that gave some start-ups the reputation of "low fares with a hitch", Neeleman says. JetBlue will take delivery of the first of 25 A320s on firm order next June but will begin service in January or February with new A320s leased from International Lease Finance and Singapore Aircraft Leasing Enterprise. The carrier expects to have 10 A320s in its fleet by the end of next year. Its fleet could eventually total 82 A320s.
The A320s will have 162 leather seats in a single class but will offer more leg room than competitors' economy-class seats and more hip room, courtesy of the wider fuselage of the A320 compared with single-aisle Boeing aircraft. Each seat will be equipped with a television monitor on which passengers can access 24 channels from DirectTV, including news and live sports, delivered in conjunction with LiveTV, a joint venture of Harris and Sextant Inflight Systems.
Other innovations include the banning of queues, Neeleman says, with passengers checking themselves in and getting seat assignments via computerised touch screens on kiosks in the airport terminal.
The airline expects average fares to be 65% lower than those existing in the markets to be chosen. Not surprisingly, airports already are clamouring to be served by the carrier, which is considering 44 cities, most in the eastern corner of the USA, but ranging as far west as Salt Lake City and Denver. Neeleman has promised that the first two cities served will include one in low-fare starved upstate New York - either Buffalo, Rochester or Syracuse - and one in Florida.
Although Kennedy Airport presents its own challenges - it is not convenient for many New Yorkers and JetBlue will require an exemption from the Department of Transportation to operating flights in the important early evening hours - the airline's officials are convinced the new airline will be a consumer and corporate success.
The all-important average costs will be kept low by the efficient use of aircraft, gates and employees, Owen says, a Southwest trademark. "Others try to bring down average costs by dense seating," he adds.
Source: Airline Business
