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Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 12:39 am

God, do I love this airline. Holly Hegeman, who runs PlaneBusiness.com is also a regular contributor on TheStreet.com where she writes "Wing Tips" a column about airline stocks. In her recent contribution from this past Thursday, Holly explains that David Neeleman visted the Raymon James Growth Airline Conference at the Grand Hyatt Hotel in New York City. Holly, theorized that this meant Neeleman was thinking of taking JetBlue (B6) public soon. Below are some fabulous news for B6 lovers, employees, and future possible stakeholders:

--------
But there was also one oddball in the bunch yesterday -- and that airline was JetBlue.

Yes, that privately held carrier, which we have said positive things about in the past, was there. Or rather, David Neeleman, the wunderkind CEO of JetBlue, was there, making a presentation about the airline.

Airline investors -- read my lips! This is great news!

The fact that Neeleman was there at all indicates to me that JetBlue is probably contemplating going public before the end of the year -- depending on market conditions. Personally, I don't think it would matter what the market does. No matter when the stock were to go public, I think the interest in the issue will be overwhelmingly positive.

So what did Neeleman reveal that we didn't already know? Hard and fast numbers -- which supports our feeling about the airline's business plan, business culture and financial management.

JetBlue, which was capitalized with an initial $130 million, the largest capitalization of any start-up airline, began flying out of New York's John F. Kennedy Airport last February. Its first profitable month was August. (Thats 6 months! Sure beats the dot coms!) Last week, JetBlue hit the 50% milestone in terms of the percentage of passengers booking flights on its Web site. (50%!, you know what that number was for, say TWA? like 5!) Here's why that matters: It costs JetBlue about 25 cents for each booking over the Internet , vs. the industry average of 50 cents. Compare that to the average airline's cost of a reservation handled by a travel agent: $8.50. ($8 a reservation they save? Unbelievable!)

JetBlue's Internet performance pushed it ahead of longtime industry leader, Southwest Airlines, which books about 35% of its flights directly over the Web. Most major airlines are less Web-friendly, posting less than 10% of their flights over the Internet.

Suppose, though, someone is Internet-challenged and has to call JetBlue directly. Guess who they will talk to? A friendly JetBlue reservation agent who is in his or her own home. Yes, that's right. All of the reservations personnel work out of their own homes. (Now thats cost savings baby!) Neeleman said the company has a backlog of 1,200 people who want one of these jobs. (Bet one of you airliners.net freaks want one these jobs!)

Costs. Get the picture here? The airline is obsessed with containing costs. Just as Southwest Airlines is, WestJet (WJA:Toronto) is in Canada and Ryanair is in Ireland. (See a pattern here?)

You may recall that Neeleman was one of the founders and original board members of WestJet, and was VP at Morris Air, which Southwest Airlines purchased in 1994. Herb Kelleher, CEO of Southwest, was so impressed by Neeleman's potential (language is a little too colorful, but Holly is trying to drive the point home) that he forced him to sign a five-year noncompete agreement. The agreement ended in 1999, and hence, we now have JetBlue.

Herb knows how to pick 'em.

On with the hard numbers. Neeleman said JetBlue flew approximately 230 million available seat miles with 10 aircraft in December. This equates to the aircraft being flown approximately 13-14 hours a day.(Awesome efficiency, awesome!) It also means that the airline is producing 23 million available seat miles per aircraft, which is very high. So, productivity is at the top of the industry.

For the year ended Dec. 31, the airline produced an overall on-time performance of 80%, which is more than acceptable. Again, this figure beats the year 2000 record of most of the other U.S. domestic airlines.

Yes, and we would remind you that the bulk of that flying is on the East Coast, and the airline flies out of JFK.

And when the weather does turn ugly, Neeleman said, "We can't control the weather, but we can certainly control the way we react to weather."

From what we can tell, JetBlue puts its money where Neeleman's mouth is.

Last weekend, a JetBlue aircraft slid off the runway in icy slush after arriving at JFK from California. The N.Y. Port Authority helped transport passengers and their baggage off the aircraft, JetBlue gave them food and drink, comment cards (to gauge how passengers felt about their treatment) and, oh yes, JetBlue also gave them a credit to use on a future flight. The amount? The cost of their ticket from California.

In another instance where a flight was held up because of a weather delay, Neeleman said, the pilot walked out of the cabin and offered the use of his cell phone to any passenger who wanted to call friends or family to alert them of the delay. (Absolutely unbelievable!)

Oh, and JetBlue's cost per available seat mile? Neeleman said it's running at about 5 1/2 cents per mile , (Ha!, isn't US Air's like 30 cents?) excluding profit-sharing contributions. Roughly 7 cents a mile, if you include the cost of sharing profits with its employees. This includes the cost of fuel. Got that?

Growth plans call for JetBlue to add 11 brand new Airbus A-320s this year and another 10 in 2002.

We like to describe JetBlue as Southwest Airlines, only updated and improved.

Hey, David, just go ahead and set up the IPO.

My check's already written. (as is mine)
 
wjcandee
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 1:46 am

Just remember one thing. Holly is an immature, impressionable, moron, IMHO.

--Bill
 
DCA-ROCguy
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 1:46 am

All very good news, Russ. I didn't realize that Kelleher of all people made Neeleman sign a five-year no-compete agreement when WN bought Morris Air. That says it all. JetBlue is a standing rebuke to the idea that fares have to be high and customer service bad.

And Rochester has them....I see those beautiful blue and white birds every time I'm home. There is *some* justice this side of the Second Coming.

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
SegmentKing
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 5:04 am

USAir's CSPM is a LOT lower than your beloved TWA. No where near 30cents.

I applaud JetBlue for setting up the industry to lower it's standards even more. Southwest started it, and JetBlue is going to finish it... although at least they have DirectTV...
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
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VirginFlyer
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 7:20 am

Sorry, but how exactly are JetBlue lowering the standards???
It is not for him to pride himself who loveth his own country, but rather for him who loveth the whole world. The earth is but one country, and mankind its citizens. —Bahá'u'lláh
 
CactusA319
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 7:43 am


Not lower standards, just new and creative ways of lowering costs in order to offer low-fares to the passenger and still make a decent profit. Just cuz the other airlines decide to flush their sercvice standards down the toilet in order to compete isn't really their fault. I say more power to jetBlue. I don't see how JB is making other airlines lower their so-called standards. If you want more "service", then I guess you don't mind paying the ridiculous fares most major airlines charge on many of their routes. Or you non-rev and don't have to worry about paying. Anyway the first airline to start this so-called decadence was actually People Express, not SWA.
 
Guest

RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 8:50 am

Bill, I'm curious, explain your reasoning for Holly being an immature nitwit. I'm curious why you think that. I admit some of her writing is a little flowery and short of professional, but I think her points are somwhat on mark.

kindest regards,
russell
 
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RayChuang
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 9:38 am

While B6 did benefit from a some political help  Smile, I think that the airline has been very careful in marketing itself as an alternative to the dominance of UA, DL and US in the US Northeast. It should be noted that B6 probably would have been just as successful if they had chosen the Boeing 737-800 instead of the A320.

The fact they are doing extremely well on their JFK to Florida flights show that B6 has discovered a great demand for flights on this very busy route that offers low fares but higher-quality amenities than WN. Because B6's seat-mile cost is almost WN-like (read: real low), B6 can expand carefully and still make money.

I expect B6 to do the following in the future:

1. Expand on more flights from western USA destinations to JFK. Don't be surprised that B6 starts SJC-JFK, SAN-JFK and SNA-JFK routings.

2. Seriously look at getting the higher-weight version of the A321. B6 will need the planes on their more popular routes such as their flights from JFK to Florida, and because of heavy parts commality, it will definitely not cause undue problems with extra spare parts.
 
SegmentKing
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RE: Sterling Words On JetBlue From Hegeman 1/25

Sun Jan 28, 2001 1:58 pm

I just see the fact that JetBlue is bottom pricing everything that OALs will have to cut back service to match.

Even flight attendants from JetBlue said that a large majority of their travelers have never flown before.... granted they are forming a new market, long are the days of when flying was a priviledge and people dressed up for the event. I remember one flight from SPI to ORD and I was the only one in a full suit (had to be.. I got F on UA :P) out of 25 passengers. Even had people in tank tops, sandals, and skimpy shorts.

Southwest came in and offered nothing but peanuts. At the time, other airlines offered meal service on flights 1 hour or more.. sometimes even less.

Now look at it... you can fly Florida - midwest on a 3 hour flight and not even get a meal now....
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
toxtethogrady
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Yes, But Can They Hedge Fuel?

Sun Jan 28, 2001 2:12 pm

The near-deaths of Legend and National Airlines, and the losses at many of the majors last quarter are a testament to $30-a-barrel oil.

JetBlue has actually been a very cautious roll-out, though I am surprised that they would be flying transcon straight off the bat. Still, maybe they can find their way to IAD and IAH...
 
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flashmeister
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RE: Sterling Words On JetBlue From Hegeman 1/25

Mon Jan 29, 2001 12:36 am

Air travel has become commonplace, SegmentKing - as it should be. If it didn't, we wouldn't have such a plethora of airlines, routes, etc., to talk about.

When you look at it, the point of an airline is a rapid, safe way to get you from point A to point B. Airlines are not caterers, country clubs, or private jets.

When you go to a concert that lasts 3 hours, do they provide a meal? No. That's not their business. Music is.

Airlines recognize that people flying during certain times get hungry, so airlines may go out of their way - but it is not core and central to what their business is.

As for the low-cost airlines (Southwest, jetBlue), you're getting precisely what you pay for. Nothing more, and usually nothing less.

Look at it this way - when you pick up your phone to dial a number, you no longer talk to a nice, soothing operator who places your call for you. You do it yourself. That could be called a service reduction, but it's a good thing: the telephone system today is reliable, scalable, and handles billions more calls per day than the old system could. It's innovation.

Innovation has happened with airlines too, and as a result, we can fly whenever we want whenever we want, pretty much. No, suits aren't required, and one doesn't feel like royalty anymore, but it's the progression of an invention. I mean, really - what difference does it make if I wear a 3-piece suit, shorts, or a goddamned clown suit on my 2 hour flight to Chicago? The plane works the same no matter what, and that's what you purchased - transport from point A to point B, and nothing more.
 
Guest

RE: Sterling Words On JetBlue From Hegeman 1/25

Mon Jan 29, 2001 2:11 am

Ditto to Flashmeister, well said, however, I very much await seeing someone in a "goddamned clown suit" on my next flight.

Yeah, Nate, your elitist ideas regarding flight are obsolete. Air transport is indeed no longer a fancy adventure or priviledge, its simply transport for the masses. Of course, some have attempted to change this model, Midwest Express, Legend, etc....,but their way of business is still far from proven.

Airlines recognize of course, that most pax travel to get from place to place and not to be served pre-cooked filet mignon, otherwise the F section would be slightly larger than Y, unlike it is today.
 
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johnboy
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RE: Sterling Words On JetBlue From Hegeman 1/25

Mon Jan 29, 2001 2:44 am

I pity those poor first-time passengers. Now they'll expect all other airlines to have on-time arrivals, cheerful flight attendants, clean aircraft, leather seats, and innovative IFE. What a let down.  Wink/being sarcastic
 
DCA-ROCguy
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RE: Sterling Words On JetBlue From Hegeman 1/25

Tue Jan 30, 2001 3:50 am

Amen to Flashmeister and Russ. Deregulation in 1978 made it very clear: air transportation is to be available to all, not just the rich. Airlines can run their DCA-LGA shuttles and first and business classes, and rake in all the high-margin money the want. But they also are to make reasonable-fare and low-fare seats available too. Big Air doesn't want to do that, so JetBlue and other low-fare carriers are coming to the rescue. And putting the big guys to shame with their customer service.

Flashmeister, if you want to fly in a clown suit some time, you don't need to fly alone.  Smile I'll join you in my King Arthur costume, compete with Burger King crown, and stuffed rabbit pinned to the shoulder with fake blood all down the front of the tunic. Jet Blue would probably love it.

"Watch out! That rabbit's dynamite! One...two...FIVE!"

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
AF-A319
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RE: Sterling Words On JetBlue From Hegeman 1/25

Tue Jan 30, 2001 4:00 am

I wish we had a so great airline in Europe

jetBlue rules!!!!

Lj CDG
 
TWFirst
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RE: Sterling Words On JetBlue From Hegeman 1/25

Tue Jan 30, 2001 4:00 am

Nate, did the rubber bands from that SPI-ORD aircraft snag your suit??


Come on, you can come up with a better example than that to support your argument! Big grin
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