May 11, 2007 / 12:24 AM / 12 years ago

Neeleman's vision no longer enough for JetBlue

WASHINGTON (Reuters) - Ousted JetBlue Airways Corp. (JBLU.O) chief executive David Neeleman promised in the late 1990s to “bring humanity back to air travel” and used that vision to help drive the biggest airlines to their knees.

David Neeleman speaks at the Reuters Aerospace and Defense Summit in Washington December 7, 2006. JetBlue Airways Corp. on Thursday pushed out founder Neeleman as chief executive three months after a service meltdown. REUTERS/Hyungwon Kang

But JetBlue could not sustain its early success with lower fares and leather seats, and Neeleman joined other airline chiefs who have stepped aside with their underperforming carriers facing softening prospects and sharper competition.

JetBlue said Neeleman’s departure as CEO was natural in the evolution of a company. Neeleman, 47, acknowledged his entrepreneurial approach was not suitable for managing a growing business. He remains nonexecutive chairman and the largest shareholder.

“The airline’s beyond him now,” said Mike Boyd, an industry consultant. “The baby grew up and ran off to college.”

Neeleman’s timing was good when JetBlue first flew in 2000. He had accumulated expertise with start-ups in the 1980s and 90s.

“He’s charismatic and visionary,” said Aaron Gellman, business professor at Northwestern University’s Kellogg School of Management. “The guy’s full of ideas.”

Neeleman introduced electronic ticketing and led a reservation systems company in between airline ventures. JetBlue adopted his ticketing concept and favored other new tools like television in the cabin and laptops in the cockpit.

At the time of JetBlue’s emergence, bloated older airlines wrestled with costs, unprofitable routes, unhappy workers, and customers dissatisfied with delays and worsening service. Fares, especially for business travelers, were high.

“It was pure rapacious greed on the part of the old network airlines. They would charge whatever they wanted and you were to like it,” said aviation consultant Robert Mann.

Neeleman’s entrant was lean. JetBlue’s new Airbus planes, point-to-point flights and customer focus set new standards. Neeleman was youthful and optimistic and his new company and single-class service presented a sharp contrast.

Service flourished and customer ratings were high. JetBlue made money and gains on Wall Street early on. JetBlue succeeded even after the September 11, 2001, hijack attacks accelerated the industry’s worst ever financial downturn.

“The way to differentiate yourself was to create a new airline category. When you then executed on that you were so refreshing and customers were so refreshed. They couldn’t get enough of it,” Mann said.

Neeleman’s full-ahead business approach out of New York’s John F. Kennedy airport gained industry admirers. But the public liked him, too. He met customers and got to know his front-line employees, sometimes cleaning cabins.

A one-time Mormon missionary, Neeleman donates his salary to an employee crisis fund. “He’s a very decent guy,” Gellman said. “This has got to be hard for David.”

But Neeleman’s aggressive growth plans affected reliability, experts said. Fuel prices soared and stumbling legacy airlines restructured, becoming more competitive.

Richard Gritta, a business professor and airline expert at the University of Portland in Oregon, said low fare rivals proliferated.

“JetBlue is left fighting against clones,” Gritta said.

JetBlue lost money for the first time in the fourth quarter of 2005 and has struggled since.

Neeleman’s legacy will no doubt be clouded by the airline’s service meltdown in February when an ice storm in New York brought JetBlue to a virtual standstill for several days. He said JetBlue mishandled the crisis, which delivered a body blow to its customer service reputation on which Neeleman staked the business.

Neeleman said at the time he was “uniquely qualified” to lead the company and felt no pressure to resign.

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