JetBlue Eyes Expansion

By Jens Flottau
Source: Aviation Week & Space Technology
May 20, 2013
Credit: Airbus

As you enter JetBlue's old brick office building in between a New York police station and a run-down train station in a not-so-upscale part of Queens, it is difficult to imagine the inside could offer much more than any modern office. But here is where the experience belies the expectation. The office floors resemble an airport, with “runways” (corridors) and “galleys” (break areas). Signage and design look like they could be in use today by Pan Am if New York's former hometown airline was still around.

The facility is not called the company's headquarters, it is known as the “Long Island City Support Center” in the sense that administration is supposed to support those in the field. And there are no “employees” here; “crewmembers” populate the facility, which is a bit like JetBlue itself. In many ways the carrier looks like any other airline, but in its short history it has been extraordinarily innovative, and its influence on the airline industry is huge.

Carriers worldwide are trying to emulate parts of its business model, therefore JetBlue has helped change the way both legacy and low-fare airlines define themselves in the U.S., Europe and Asia. Look at Vueling, Aer Lingus, Virgin Australia or EasyJet. JetBlue invented the hybrid concept. And apart from trying to be “part of the fabric of New York City,” as Marketing Director Marty St. George puts it, even the headquarters building resembles the hybrid approach—a mix of old and new.

However an issue could arise, even in the very early stages. JetBlue can continue to grow within the boundaries of its existing business model, gently expanding them at times. But in spite of all these small steps, it may well be that JetBlue is tempted to take one giant step and, yet again, carve out another niche. That step could be to enter the long-haul market using widebody aircraft. JetBlue is not there yet and management might decide not to do it in the end. But, “We have talked about it,” St. George says.

It is important to keep these fundamentals in mind when it comes to understanding corporate culture: JetBlue, founded in 1999, is by far the youngest of the big U.S. airlines. Its first flight occurred Feb. 11, 2000 (from John F. Kennedy International Airport to Fort Lauderdale-Hollywood (Fla.) International). It has been among the most innovative and, unlike the first low-cost role model, Southwest, not risk-averse at all. In fact, JetBlue chose to ignore the low-cost-carrier rulebook many times. It introduced live TV onboard and offered an at least 34-in.-seat pitch for every passenger, added smaller aircraft (the Embraer 190) and entered partnerships.

Of course, JetBlue has also been in crisis mode more than once, including the traumatic departure of founder David Neeleman a few months after the infamous operational meltdown of February 2007, when fully booked aircraft were stranded on the tarmac for up to 11 hr. in the midst of a New York-region snowstorm. And there have been periods of what now must be considered excessive growth that the airline paid for dearly in the form of negative free cash flow and low investor confidence. The likely exit of its biggest investor, Lufthansa, in the coming years—coupled with Embraer 190 reliability issues—round out some of the airline's woes.

Given all the above, President/CEO Dave Barger has a surprising message. JetBlue management “isn't about thinking outside the box,” he says. “We happily settle for less glamour.” Since the 2007 shake-up, Neeleman leaving after a series of internal clashes and the airline struggling to regain its reputation, JetBlue has changed gears. Gone are the days of hyper growth. Instead, Barger has recalibrated the modus operandi to profitable growth and return on invested capital. Once highly leveraged, “we have had considerable success in improving our balance sheet.”

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