JetBlue 2002 Annual Report

At JetBlue, we're not perfect, but we do try to do things differently and work hard to be the best. But don’t take our word for it. See what the media has to say.

JetBlue: Pleasant, Profitable, Nearly Perfect
By: Chris Barnett

May 23, 2002 -- "JetBlue, JetBlue," snapped a rival airline executive recently. "I'm tired of hearing their name all the time."

He better order some earplugs because the "little airline that could," based in New York's gritty Kew Gardens, is on the grow. From two planes and two flights to Florida two years ago, JetBlue Airways has grown to 19 planes and 106 daily flights, including nonstops from Long Beach and Oakland to New York/Kennedy Airport and Washington/Dulles as low as $200 plus taxes. By Christmas, it promises to have 36 new Airbus 320s in service.

At a time when every U.S. airline except Southwest and Frontier is losing money and others are asking Uncle Sam for federal loan guarantees, upstart JetBlue is selling economy seats on coast-to-coast flights at almost 80 percent less than many of the majors' seven-day advance fares on the same routes. And JetBlue is posting a profit.

What's more, with airline bashing practically a varsity sport among business travelers, JetBlue passengers almost rave about their flights. In the last three months, I hadn't heard a discouraging word about its service. Not one.

Impossible? I had to see for myself.

Instead of booking online at JetBlue.com and saving $10 roundtrip, I called central reservations (800-JETBLUE) and, no surprise, got a recording. Yet it wasn't a mechanical robovoice, but a soothing message. "Don't look at it as being on line. Look at it as being held," the message suggested. "Like when you're sitting by a fire and being held."

A minute or so later, Cindy came on the line. She sounded like a soccer mom on a coffee break. She was. Like most JetBlue reservation agents, Cindy works part time out of her Salt Lake City home. In her case, 5 to 10 hours a week. She was sweet, nurturing and efficient. Nine days before takeoff, she found me a $305 roundtrip fare (plus tax) from Oakland to New York and she booked me an aisle seat on the outbound leg.

Cindy, who has four kids, ages 2 to 10, and personally knows JetBlue chief executive David Neeleman, told me to be sure to "pack a lunch because we only give out tasty snacks and that's a long flight." When I asked for an aisle seat on the return flight, she said, "I really apologize. I can't confirm it, but try to get the airport early and I think you'll get one."

Cindy was so shockingly relaxed, pleasant and genuine, I didn't want to hang up.

Oakland Airport on a Sunday morning is a dream. I didn't see a skycap to check my baggage at curbside, but JetBlue's ticket-counter line, an hour before the 7:05 a.m. departure, moved quickly. In seven minutes, a counter agent named Pat greeted me with a big smile. (Turns out she once worked for TWA, had quit, but heard JetBlue was "like a family" and applied for the job.) In three minutes flat, my bag was checked and I was ticketed--with Pat making lots of eye contact the whole time.

With four security checkpoints open at 6:20 a.m., I cleared in seven minutes. Breakfast: a surprisingly tasty egg, ham and cheese in a fresh flour burrito and real rich coffee from Gourmet Burrito for $6:30.

JetBlue loads passengers 30 minutes before takeoff. And since seats are reserved and pre-assigned, it's not a first-come, first-seated operation like Southwest. Even being near the end of the boarding line, I got my aisle seat with no stress. All seats are economy class, upholstered in leather and all were filled. We took off at 7:05 a.m. sharp.

Don't expect a lot of room. With a fully loaded plane, JetBlue feels tight, but not exactly claustrophobic. That's because the aisle-seat armrest cleverly flips up, making it easier to get in and out. And when the passenger in front of you leans back, the seat bottom slips forward so the seat-back recline isn't severe enough to squash you or your laptop computer. I was able to work during the flight and that alone made the 5_-hour trip fast, productive and profitable.

JetBlue's not-so-secret weapon, though, is the best entertainment system of any U.S. carrier: 24 cable-TV channels on a razor-sharp screen embedded in the seatback in front of you. You can check your stocks on CNBC, watch the History, Discover or ESPN channels or view a movie without having to blacken the cabin. It's all free. Next time, though, I'll bring my own earphones with a single prong.

My seatmate, Dennis Foley, a rare-wine consultant with Zachy's Wine Auctions in San Francisco, was taking his first JetBlue flight, too. He's a United Airlines loyalist, but hates to overpay.

"I priced a New York flight on United.com and it was $2,400. Ridiculous," Foley told me. "Then a co-worker told me that JetBlue was fabulous and I got this ticket at one-sixth of the United fare. "People get trapped with an airline because of the frequent-flyer program and then you have trouble redeeming [for a free trip]. Ridiculous."

Foley was surprised to find JetBlue's A-320s were factory fresh. "I just assumed they'd be tired old planes and I didn't expect leather," he said.

JetBlue's four flight attendants were all friendly and helpful. The captain welcomed a new team member aboard over the PA--a nice touch--and said she was a Broadway dancer in her last life. Their uniforms are smart and businesslike. The snacks are just okay--bagel chips, cheeses and the usual beverages--but at least there is never a cart blocking the aisle.

Foley and I had lunch together. He had brought a cold lamb chop, cold pizza, some apple slices and his own napkins. I had wonderful leftover grilled chicken, garlicky potatoes and an apple from Q Restaurant in San Francisco. The guy on my right had obviously stopped at a deli for his lunch. It was a picnic aloft. Said Foley: "Even in first class today, the food is so bad, who wants to eat it."

San Francisco investment counselor David Steele was taking his second JetBlue flight to New York. He booked four days before takeoff and paid $500 roundtrip compared to $2,400 quoted by three major airlines. "In general, I give JetBlue good marks for friendly service," he said. "I'd rather save my company the money and I don't eat airline food anyway."

Judging from the number of laptops in use, business travelers don't seem to have discovered JetBlue yet. Maybe they want the frequent-flyer miles. (JetBlue doesn't yet have a frequency program.) Maybe they like American's greater legroom in coach. (JetBlue CEO Neeleman recently told me he's thinking of removing a row of seats to add space.) Or maybe it's because United and American are matching JetBlue's fares on its flights out of Oakland and American is doing the same in Long Beach.

We landed in New York 10 minutes late and the captain apologized for the delay.

On the return flight from New York, I discovered several more thoughtful touches. JetBlue has a dedicated van from Penn Station to Kennedy Airport for $15 one way compared with $35 to $40 for a taxi. Plus, the airline's skycaps can check in you and your luggage, issue your boarding pass and even change a seat.

I got to the airport early in hopes of getting an aisle seat, per Cindy's suggestion. But, surprise! The computers had automatically reassigned me from a middle seat to an aisle. That saved me a trip to the counter and a 15-to-30 minute wait.

The 9:30 p.m. Kennedy to Oakland flight was practically sold out, departed on time and the all-male cabin attendants were congenial and responsive.

But JetBlue dropped the ball when we arrived at Oakland at 12:28 a.m. It took more than a half hour to get the baggage from the plane to the carousel. Worse, there was no airline staffer in the baggage-claim area to explain the delay and answer questions and some passengers were grumbling. I had to go out to the ticket counter and bang on a door to rustle up a representative. But he did apologize for our inconvenience.

More Than Just Cheap Airfare
By John Hatcher
Messenger Post Columnist

Dear JetBlue Airlines:

I’m sure I’m breaking some kind of journalistic credo here, but I have to tell the world that I’ve fallen hopelessly in love with you. I’m not trying to get a free ticket or even an extra bag of your patented blue potato chips. I just can’t control my feelings any longer. Sadly, I also have a confession. I’ve cheated on you. I flew on another airline. But I’m writing in hopes that you’ll forgive me, and to tell you that I’ve learned my lesson. It won’t happen again.

What harm would it be, I thought, when I agreed to fly on a different airline? As I write this, I’m sitting on a plane that’s now more than an hour late in taking off. I arrived at the airport for my pre-sunrise flight to find that it had been canceled. They didn’t explain why.

“We’re going to put you on a different flight on another airline,” they said.

So I was off to a new gate and a new airline. As I boarded the flight, I heard two of the gate employees talking to each other. The plane has a flat tire, maintenance had just told her. It was going to have to be repaired. The woman took my ticket and muttered: “This is ridiculous.”

It was one of those junior-sized airplanes you can’t stand up straight on. Everyone had crawled into their seats and was getting ready to leave when the flight attendant announced, “Ladies and gentlemen, we’ve just learned this plane has a flat tire, which means everyone is going to have to get off so it can be changed.”

So, I climbed back down the steps and walked back into the airport wondering why we’d gotten on board in the first place. Back in the airport, we were told to move to a new gate, where we went and sat and waited without being told when we’d be leaving or how late we’d be.

Now, no airline is perfect.

Even you, JetBlue, have problems with airplanes. Just a few weeks ago, I was on one of your flights when it was announced a computer wasn’t working. But here’s the difference.....We were told we’d have to get off the airplane until the problem was repaired. It might mean that the flight would have to be canceled, but they just didn’t know yet. They told us all of this, leaving out no details.

Once we were all back in the gate area, a television was rolled out so we could watch the morning news and a table was set up with cold drinks and snacks.

A little while later, we were told the problem had been repaired. We got back on board the airplane, where the pilot said something I haven’t heard once today from this other airline: “Sorry.”

The pilot said he knew how busy we were and how important our time was.

And that would have been enough for me, except that when we were about to land, the pilot also announced that we had all been issued vouchers we could use to save $50 on our next flight.

In a recent article analyzing the steady decline of profits for the nation’s major airlines, The New York Times suggested the industry’s giants were being forced to resort to fewer services for passengers, longer waits between flights, and other methods designed to cut the costs of operations. All of these moves, industry experts say, are aimed at competing with JetBlue and Southwest Airlines, the two most profitable airlines in the nation.

It shows just how out of touch the dinosaurs of the airline industry are that they look at the successes of these two airlines and think that their secret to success has been cheap tickets.

Securely Lost
By: Bryan Miller
The New York Times
10/27/2002

AS a patriotic American in these difficult times, I try to be understanding at airport security stations when I am patted down, stroked, poked, prodded and frisked by a stern-looking fellow in a cranberry blazer holding a magnetic wand. This is the new reality we must put up with.

But what I do find disturbing is how this new system vastly enhances the odds that I will leave behind a personal article before getting onto the plane.

In the past months I have lost, temporarily misplaced or been obliged to dump a trench coat, a cellphone, who knows how many books, my laptop (twice) and three or four Swiss Army knives.

And it appears that I am not the only distracted traveler in this security blitz. In the first months after Sept. 11, airports were overwhelmed by lost loot. For example, in January, security agents in Denver Airport recovered 81 laptops and 105 cellphones; in Seattle-Tacoma Airport, 150 laptops were left behind in July and August. It is surmised that travelers, who at first were unaccustomed to such scrutiny, became temporarily distracted. This is more serious for those like me, who routinely arrive at the X-ray machines minutes before the plane door closes.

There is hope. In recent months airports have reported that the pace of lost articles has slowed considerably. “Now, people are paying more attention at the checkpoints,” said Monique Bond, a spokeswoman for Chicago's airports, “and the screeners are more cognizant that people leave things behind.”

Despite having taken more than a dozen flights under the new restrictions, I still get rattled when I am chosen for one of the random security searches -- I have been “randomly” selected in my last six flights -- in which you are asked to remove your coat, watch, belt buckle, writing devices and potentially ballistic footware. My shoes have been removed so often that I should save time by traveling barefoot.

One of the handiest little devices on a trip is the Swiss Army knife. You can slice fruit, uncork wine, cut articles out of magazines, remove old luggage tags, file your nails and perform other types of essential tasks. Almost invariably, I forget to put it in my checked luggage, so there goes another $25 -- and try removing a magazine article with a plastic knife. There may be some way to get back these articles, but it's hardly worth the effort once you are back home.

I've always wondered where these knives and files and other metal accessories go, so on a recent trip I asked a security officer.

“Throw 'em away,” he grumbled.

“They throw away thousands of perfectly good pocket knives?”

“I said we throw 'em away,” he repeated sternly, walking away with the purposeful air of someone who would happily impound a Boy Scout's whistle.

Rumor has it that people carrying laptops have a greater chance of being pulled out of line; and one-way tickets always trigger suspicions, they say, as do travelers whose itineraries change several times in a short period. This is precisely my profile.

On the infrequent occasions when I am not frisked, my troubles usually begin when I am asked to spread out my clothing and possessions -- keys, wallet, change, pens, notebooks -- on a long table. Often this table also holds detritus from fellow travelers' pockets and bags, and when everyone is in a rush, things can get pretty wild. About a year and a half ago, even before the security crackdown, I walked off with another man's navy blazer and wore it for nearly a month before noticing a canceled opera ticket in one pocket. I hate opera.

My latest fiasco occurred several months ago while leaving from Kennedy Airport for Long Beach, Calif., on JetBlue Airways, the economy airline that mercifully doesn't serve meals -- if you don't count those cloying salt-and-sugar-glazed peanuts that give you a Saharan thirst.

After an hour in the air I felt a twinge of guilt for relaxing on the plane with a Bloody Mary and watching motocross on TV when, in my Los Angeles office, my colleagues were already at work. So I decided to turn on my laptop and be productive as well.

Wrestling the carrying case from under the seat, I placed it on the little fold-down table and opened it. Inside were manila files, a tape recorder, a biography of Theodore Roosevelt and a few pens. No laptop. At moments like these it is best to take a deep breath, compose oneself and calmly retrace one's steps over the past few hours. I dashed back to the flight attendants' station and whimpered. “What color is it?” one of the flight attendants asked.

“Sort of gray,” I replied.

Of course, almost all laptops are sort of gray. “Does it have your name on it?”

“No, it doesn't,” I confessed.

Remarkably, she offered to call the captain to ask if he could contact the JetBlue terminal at Kennedy. I was flabbergasted. Why would a busy pilot come to the aid of a hapless economy class traveler?

For the next half hour I was in a near-fugue state, envisioning the rest of my pathetic computerless life.

The attendant interrupted: “Mr. Miller, the captain said they're looking.” She handed me the phone. “You talk to him.”

“Captain, I'm a food writer. My entire life is in that computer.”

“Why don't you meet me up front when we land,” he replied reassuringly.

Too agitated to return to my seat, I paced the aisle. Every other passenger, it seemed, was working away on a computer. Depressed, I went back to the galley area.

“Don't worry, this happens every single day -- cellphones, computers, Palm Pilots, you wouldn't believe the stuff they leave,” another flight attendant said.

We landed at Long Beach and, sure enough, the captain was waiting for me. “We have someone who takes care of it from here,” he said calmly.

A chipper young woman escorted me into the terminal, where she placed several calls to the JetBlue security office at Kennedy.

“Yes, a gray laptop. So you have it?” she asked.

I was shaking like a wet dog, praying it was mine.

“Mr. Miller, they're putting it on the next flight out.” Happily, it was mine.

These experiences have made me -- and all frequent travelers, I suppose -- nostalgic for the innocent days when check-in consisted of an occasional opened bag, followed by a polite apology for the intrusion. And a security officer would no sooner remove your shoes than he would ask to move in with your family while you were away.

And best of all, if I wanted to work at 30,000 feet, all I needed was a legal pad -- although I frequently lost my pen.

Newsday
Fasten Your Seat Belt
By Monty Phan
Staff Writer
April 7, 2003

Donald Feltham is aware of the irony: He makes regular cross-country trips to New York to work on a planned theater musical about the Wright brothers and the birth of flight, yet he travels in a modern jet equipped with satellite television.

But what's more telling about Feltham's California-to-New York excursions, which he has taken every other month since October 2001, is that he always travels in the same kind of jet: those of JetBlue, the Forest Hills-based low-cost carrier whose success depends on customers like Feltham.

"I don't think I would go back to the other airlines," said Feltham, 42, an administrator at a Los Angeles law firm who also has an Internet talk show about Broadway.

Despite a loss of business because of the war in Iraq, a shaky economy and a battered airline industry, JetBlue somehow continues to thrive. While other carriers are laying off workers, JetBlue is hiring. Others are curbing flights; JetBlue is adding. Others are posting losses; JetBlue is making gains. In fact, JetBlue's success seems to be spawning imitation; next week Delta launches a low-cost competitor.

In January, JetBlue, which went public about a year ago, said its 2002 revenue was $635.2 million, nearly double that of the year before. For the quarter that ended Dec. 31, its profits rose 37 percent, to $15.2 million, from the same period a year earlier, and its sales nearly doubled to $187.3 million. Its stock price has been relatively stable, closing in the mid- to high-$20s since early December.

Last month JetBlue did, however, warn of a lower-than-forecast first-quarter operating margin because of rising jet-fuel prices and near-record snowfalls in the Northeast. Chief executive David Neeleman said the war in Iraq also would have a negative impact on business, but not nearly as much as the Sept. 11 attacks did. Nevertheless, Neeleman said he remains positive.

"If you have confidence in your pilots, confidence in your customers and balance sheet, you don't revise every time something happens," he said.

The company and analysts say JetBlue's success is no secret: By focusing on customer service, it has built brand loyalty in an industry not known for such feats.

Neeleman admits customer service is the company's top priority, and its success retaining customers allows the airline to count on them as one constant in a climate overrun by variables. The company said about 600,000 people have signed up for its TrueBlue program, which started in June and rewards passengers who repeatedly fly the airline. About 1,500 to 2,000 people register for TrueBlue per day, and program members account for about 20 percent of online sales. Last quarter, 15.6 percent of JetBlue's revenue came from TrueBlue members.

Customer service "is the big, huge concern we have all the time, and we focus on it continuously," Neeleman said. "You can never think, 'We made it,' because when you do, you go down the tubes."

In an industry that has seen December's Chapter 11 bankruptcy filing by United Airlines and last week's last-minute agreements that allowed American Airlines to avoid a similar fate, Neeleman said JetBlue, which took flight in February 2000, will continue its growth strategy as scheduled. He said its 41-plane fleet will expand to 52 by the end of the year, and JetBlue will add service to Atlanta in May and to San Diego in June, its 21st and 22nd cities served, respectively.

Yet, it now also must contend with Song, a Delta Air Lines subsidiary that replaces Delta Express. Song will focus on low-cost travel between the Northeast and Florida -- JetBlue serves five Northeastern cities and five in Florida -- and, beginning in October, will offer satellite TV from the Dish Network, a rival to DIRECTV, available on JetBlue flights.

Song is set to add digitally streamed music, pay- per-view movies and interactive games by early next year. JetBlue, which in September paid $81 million to buy Melbourne, Fla.-based LiveTV, the company that developed the airline's seat-back technology (showing 24 channels), said it is exploring which entertainment options to add, including possibly offering satellite radio from a LiveTV partner.

In addition to the challenge posed by Song, American Airlines this week begins nonstop daily flights from Kennedy Airport, JetBlue's base of operations, to Orange County, near three JetBlue stops in southern California (Long Beach, Ontario and, in June, San Diego).

The two airlines tangled earlier this year when JetBlue, which has established Long Beach as its West Coast base of operations, temporarily gave up four "slots" at the airport to American after about a year of legal squabbles. Each slot, which allows for one takeoff and landing at the airport, is controlled by the Long Beach city council; by May, JetBlue will be using all of its 23 remaining slots, the largest allocation at the airport.

However, under a proposed settlement -- designed to avoid a protracted legal battle and which JetBlue expects the Federal Aviation Administration to approve soon -- the airline will take back the four temporary-use slots from American and then give up five slots: three to American and two to Alaska Airlines, leaving JetBlue with a total of 22. Alaska would have until Oct. 15 to use the slots or cede one each to JetBlue and American.

In February, United Airlines, as part of its strategy to emerge from Chapter 11 bankruptcy protection, said it plans to start a separate, low-cost carrier, a decision opposed by industry unions.

Then there's Southwest Airlines, the leader of low-cost carriers that has posted full-year profits for the past 30 years and served as a model when Neeleman created JetBlue. JetBlue has so far avoided butting heads directly with Southwest, particularly in the New York area, where Southwest's only operation is from Long Island MacArthur Airport in Islip.

Kennedy is either the origin or destination for 146 of JetBlue's 180 daily flights. In 2002, JetBlue had about 5 million passengers out of Kennedy, second to American and nearly the combined total that the next three carriers -- Delta, United and British Airways -- had at the airport.

While JetBlue's success in building brand loyalty is "very odd" among airlines, it's not impossible, said Michael Boyd, an airline industry consultant and chief executive of The Boyd Group in Evergreen, Colo. The now-defunct People Express did it, and Southwest continues to, Boyd said.

"If Song can do the same thing, we've got a battle on our hands," he said.

But Neeleman dismisses the challenge. He said that although Song is a new name, it's merely a replacement for Delta Express, a carrier that already was in the market and one that JetBlue had success against, Neeleman added.

There was this, however, from Song's camp: "I think every Coca-Cola needs its Pepsi," said Stacy Geagan, a Song spokeswoman. "Certainly, there's plenty of room for healthy competition in the airline industry."

Still, that doesn't mean JetBlue is unresponsive to the moves of competitors. JetBlue said it would begin flights in May between Long Beach and Atlanta, Delta's hub, three weeks after Delta announced it would launch Song. JetBlue said that the two events were unrelated (and that Delta was monopolizing that route), but in February it christened one of its planes "Song Sung Blue," a poke at the competition.

Neeleman acknowledges JetBlue announced the San Diego routes partly because of the news four weeks earlier that American would fly to Orange County, but also because research showed that 5 percent of the passengers who flew from Long Beach were from San Diego.

JetBlue also has taken advantage of other airlines' troubles to expand. Last Nov. 4 it said it would begin service from Kennedy to Las Vegas beginning in January; two days later, Las Vegas-based National Airlines folded, and the next day JetBlue said it would begin its Sin City service the following week instead of two months later.

Neeleman said his company's choice not to invest in "$40 million high-rises" allows it to move quickly when it needs to. "It gives us a lot of flexibility," he said.

JetBlue's success also stems from its ability to keep costs low. Boyd, the airline consultant, said the carrier does it by limiting cabin service -- like Southwest, JetBlue has no meals during flight, although it does offer blue chips and other snacks -- and by serving larger markets, "in airports that collect a lot of people, not Bangor or Ithaca." Also, JetBlue's reservation staffers work from home, and in 2002 nearly two-thirds of its flights were booked through its Web site.

When Feltham takes his trips to New York every other month, he said he enjoys flying out of the smaller airport in Long Beach because it's more convenient and less of a hassle than Los Angeles International. He didn't even mind flying the red-eye out of Ontario, Calif.

"At that time of night, it's the only flight leaving the airport," Feltham said. "There's no trouble with security. You don't have to get there two hours before your flight."

JetBlue avoids high maintenance costs by keeping a relatively new fleet of 162-seat Airbus A320 planes, and its work force is non-union. JetBlue recognizes that its costs could increase as its fleet ages and if its employees choose to unionize. Yet, Boyd pointed out the success of Southwest, which is 32 years old and has a work force that's 85 percent unionized.

Dan Kasper, an airline economist for the consulting firm LECG LLC in Cambridge Mass., said JetBlue's low costs give it a "huge leg up" over its standard-fare competition, especially in a down economy. Low-cost carriers' thrifty nature also allows them to do better during economic downturns, he said, because the public is more concerned about the cost of travel.

"I don't think any major carrier is now in a position where it can, is, or should be ignoring the impact of JetBlue and other low-cost carriers," Kasper said.

Southwest, of course, is the best example, he said.

While Neeleman, who worked for Southwest for about six months after selling his company, Morris Air, to the airline in 1993, said JetBlue's goal is to sustain its growth, there's a Catch-22 involved. The airline has about 4,600 employees, about a seventh of Southwest's work force, although JetBlue said it will add a thousand workers by year's end. Because of its relatively small size, JetBlue can be selective about whom it hires. That selectivity, and the family-type atmosphere JetBlue breeds, has helped it achieve a high level of customer service, which strengthens its brand loyalty.

"As you get bigger, it becomes harder to maintain the esprit de corps," Kasper said. "That's harder to sustain. Southwest has done it, but it's one of the few."

Even Neeleman admitted that growth comes with a price, which is why he's so focused on maintaining loyalty. Boyd said JetBlue would be a "total failure" without the customer service it has fostered, a trait that remains its most effective selling point.

"Any idiot can get an airplane, fill it with people and charge low fares," Boyd said. "Getting people to come back again -- that's the magic, and that's where JetBlue's strength is."