David Neeleman

2016 BTN Hall of Fame Inductee David Neeleman founded JetBlue and is now the co-owner of TAP Portugal as well as the founder and CEO of Brazil’s Azul airlines. His playbook for success drives frequency in gap markets and at airport locations underserved by other carriers. His product and service philosophy has proven a match for business travelers.

BTN: So what were the dynamics in the industry when you founded Jetblue and what allowed you to succeed in a market that was not very healthy at the time?

Neeleman: You had a lot of airlines that were legacy carriers that had high legacy costs [ant the] service wasn't great. We had this mantra that was "bring humanity back to air travel." I can still remember being at Airbus and looking at this brand new A320. Leather seats, televisions, thinking about people are going to love this and it's going to be much different. But that was just part of it. We had the greatest people ever that we hired and trained. We started treating customers like they actually were paying their way as opposed to being an annoyance which kind of the way I felt flying on the other guys.

BTN: The legacy carriers were having probably some hard times at that point. What made Jetblue work? What was the business model that made it work?

Neeleman: It was a better product than anyone else had. We had better legroom, we had live television. We had better service, more on time flights. It was just one of these things where we wanted to make travel at least a neutral experience, so it wasn't negative. So you got on board and were just able to relax and watch TV or have a little extra legroom. Maybe [people] wouldn't look forward to flying but they wouldn't be dreading it.

BTN: How did you keep the costs down though? As a low cost carrier you're providing better service, better product, but all of those comes with cost. Where were you saving?

Neeleman: When we started in the late ‘90s, airlines were still serving sandwiches and trying to serve food. We figured nobody goes and buys a ticket to buy a sandwich. Those were maybe costing $5, and our live TV cost under a buck, so we thought "Well, we can actually give them something better that they actually want, as opposed to something that is not that great," and we would only do it for a fifth of the cost. We utilized our planes better, we had quicker turnaround times. We basically took all of our pages out of Southwest's book, but then just made it a better product than what Southwest had at the time. Seat assignments, and extra legroom, and leather seats. It felt like a better experience.

BTN: What part did business travel play in JetBlue’s early success?

Neeleman: When we looked at John F. Kennedy Airport, people said "Nobody wants to go to Kennedy." It was kind of a Manhattan-centric view. I took a circle around Kennedy and I said, "Okay, these people live in this circle. There's 5 million people." It was half of Long Island, all of Queens, all of Brooklyn. Those are people kind of equal distant to Kennedy and any other airport. People don't leave [on business trips] from their offices; usually, they'll leave from home. So we had all of these business travelers. And even though it took us a while to get the frequency up and do all the stuff, Kennedy became a preferred airport for a lot of people instead of having to make it over to La Guardia. Even though we took the old terminal six [at Kennedy]… it was really better than anything they had at La Guardia. Then we started seeing people coming from Manhattan. They were saying, "Well, if I just can go 8 miles further, I know it's on the Van Wyck, but if I can just suck it up for 8 more miles then I can fly on JetBlue."

BTN: At what point did the business travel business hit that upward trajectory when you knew you really had something?

Neeleman: I think when we started going to Boston. That really made a huge difference. Boston was an open market for us, it was something that was wide open. The airport is well positioned in Boston. When we started going there we saw a lot more corporate travel from that market. Today JetBlue dominates Boston. 

BTN: Most recently you’ve become the co-owner of TAP Portugal and CEO of Azul in Brazil. How has the JetBlue playbook influenced your strategy for those airlines?

Neeleman: We started [Azul] from scratch, complete scratch. I got down to Brazil and I looked around and I was like, "Wow, this market is so ripe." If you took the 25 largest cities in Brazil, and Brazil is a huge country, it's the size of the continental United states, there's 200 million people who live there. Obviously the income levels aren't the same, but there were only 50 million people traveling by air, where you had 750 million traveling in the US. By all the demographics, by everything, that number should have been like 150 million. So why was it only 50 million?

What we found was that fares were twice as high as they were in the US, and then there was just this lack of nonstop service. Between those 25 largest cities there was only nonstop service 25 percent of the time. We thought if we could get a little bit smaller airplane, and remain in the air with a lower trip cost, we could tie all the cities together, then we could stimulate the market. Before Brazil went through the crisis, it's been pulled back a little bit now, but it was over 100 million people a year. It's about 100 million now. Azul serves over 100 cities. Our closest competitor serves only 50 cities.

It's kind of a business traveler's paradise, our airline, because we serve 70 cities that no other airline serves. We're No. 1 in about 80 percent of all of our markets, and we have lots of frequency. We created a business traveler airline. About 65 percent of our traffic in Brazil is business traffic. It's a huge thing. Even though we have 18 percent of the [revenue per kilometer] in Brazil, we have 30 percent of the business traffic. We outperform our competitors by a wide margin. [Azul is] really tailor made for business, and when you get onboard our aircraft you think you're on JetBlue: live TVs, serving snacks in baskets, friendly people, leather seats; it's all exactly the same.

BTN: And what about TAP Portugal?

Neeleman: TAP's a different challenge. TAP's a 72 years old airline. It was actually owned by the government since 1974. Then we semi-privatized it. … It has a great footprint. Has great people. We're really excited about building a really nice hub in Lisbon. There's already one there that's really focused on Brazil to Europe, and now we're adding a lot of destinations in the United States. We have 12 destinations in Brazil and in Central America. We have the 4 destinations in the US now, but we're actually going to be going to 10 or 12 over the next few years. If you're a business traveler, and you want to go business class, and you're going to a secondary city in Europe like Toulouse, there's no better way to get there than going on TAP. From a less expensive way, with a service way, we're creating all business class lie-flat seats. Hopefully we're either renovating the whole fleet and getting new additional aircraft. It's going to be a whole different experience. Business travelers are going to love flying TAP.

BTN: What cities will you be adding in the United States with lie-flat seats to Europe?

Neeleman: Today, out of Boston and JFK, we have all lie-flat seats. By next June it will be out of Newark and Miami as well. Then we're going to add Toronto service. When the 321LR's are coming, then we're going to add another four or five destinations. Maybe a secondary city like Hartford or Providence. You live in Hartford and you need to go to Toulouse, or you need to go to Milan or whatever, you can drive 20 minutes from your house, get on an airplane, make a quick connection in Lisbon and be where you want to go. You don't have to go to Boston, you don't have to go down to JFK. We have a lot of options and flexibility with this airplane.

BTN: TAP and Azul codeshare with each other and also with JetBlue. How do Azul and TAP work together in other ways? It seems like a natural fit.

Neeleman: We have a great amount of synergy and a codeshare. TAP and Azul buy insurance together, we cooperate on maintenance issues. During the crisis in Brazil, Azul sent 17 planes to TAP, which TAP was able to get a brand new regional fleet. They went from having the oldest regional fleet in Europe to the youngest in less than six months. We already feed customers from Azul to TAP, and then TAP is doing the same for [Azul’s] flight that goes from our headquarters in Viracopos [Brazil] to Lisbon. Lots and lots of cooperation.