Podcast Blog #5: Guy Raz and David Neeleman — JetBlue Airways (How I Built This, from NPR)
Guy Raz and David Neeleman — How I Built This from NPR
How one man reinvented airline travel again, and again, and again
Are you an entrepreneur? If so, do you have a guiding philosophy? Something that is at the center of everything you do?
For David Neeleman, his philosophy was that people come first. He set out to create a more humane airline, inspired by his family’s Mormon faith. While it’s well-known today, JetBlue is only one of several businesses that Neeleman built with this philosophy in mind.
So, how do we make businesses more customer-centric? Can a business that focuses on customers before business metrics be successful?
Given the current impact of the pandemic on the industry, I was interested in diving into this topic so I had another listen of Neeleman’s classic episode on NPR’s How I Built This with Guy Raz.
Read my podcast blog below for detailed takeaways of Guy’s interview with David Neeleman who who has now founded five airlines, Morris Air, WestJet, JetBlue Airways, Azul Brazilian Airlines, and Breeze Airways.
How Neeleman’s childhood influenced his business philosophies (3:10)
David’s first exposure to business was through his grandfather, who owned a few grocery stores in Salt Lake City. David started working at the cash register at the store at nine years old. He made sandwiches, served fresh donuts, and whatever else was required. His grandfather had an immense focus on customer service — if there was something a customer wanted that they didn’t have, he’d run out to buy it, and get it for them. He never wanted to lose a customer.
Growing up in a Mormon family, David went on a mission at age 19. He was assigned to Brazil for his mission — something he was excited about because he was actually born there and had a Brazilian passport. He had visited several times with his father, who was a foreign news correspondent, but his experiences were filled with spending time with wealthy well-known contacts his father knew. But as a missionary, you’re not hanging out with the rich people; you’re with those who are downtrodden who will listen to your message. This was an eye-opener for David. Obviously in the US, there is income disparity, but there is mobility with hard work and luck. In Brazil, that mobility is virtually impossible. This made David resentful, and he knew he wanted to come back in the future and do something to help these people. Helping people was at the center of his future goals.
This experience as a missionary also set David up to do well in business as he built experience pitching something you believe in, going door to door and teaching the Mormon faith. As he moved into sales, he was comfortable approaching people and selling them on what he believed in.
His first business venture — big success and big failure (11:46)
David started his own business before he even got out of college. During an accounting class, a classmate told him about their friend who had timeshares in Hawaii but was having trouble selling them. David felt like he had skills to help out, so he called the friend and offered to take responsibility for renting the timeshares out. He posted ads in the resort accommodations section of the local newspaper, started getting phone calls, and booking reservations, taking a cut of each booking. Then he heard about a new airline, Pacific East, and brainstormed that he could make even more money packaging plane tickets and room reservations. Eventually, he was making $6 million a year on travel packages and had a whole staff of salespeople. But then, he switched his airline reservations to a new airline — Hawaii Express. Shortly after David had pre-paid for hundreds of thousands of dollars worth of tickets, the airline unexpectedly closed operations, forcing David to refund his customers out of pocket for the packages they’d purchased.
This ended David’s travel business and forced him back behind the counter of his grandfather’s grocery store — the job he’d had when he was nine years old.
Transition from a travel agency to an airline — Morris Air (18:00)
Knowing his previous success in the travel packages business, David got connected to a local travel agency who wanted him to come work for them and help grow their business. His big idea? Charter flights.
One of the challenges David had faced in his original Hawaiian travel packages was that there were no flights from Salt Lake to Hawaii — customers had to drive to LA. So, David contracted a charter from Hawaii Express to fly direct from Hawaii to Salt Lake. Customers could buy a vacation package for $399 that included the flight and six days, seven nights on the island. This created yet another growth opportunity, as the planes were sitting unused six days a week in Salt Lake in between Honolulu trips. So, David decided to start a route from Salt Lake to LA for $69, inspired by the pricing models of Herb Kelleher, David’s role model who ran Southwest Airlines.
Eventually, this company that David had renamed Morris Air after the owners of the travel agency was purchased by Southwest for $130 million dollars. But more valuable than the planes itself was the ticketing system they had built. Morris was the first company to introduce ticketless travel. Before, customers would receive a physical packet of tickets they needed to fly—meaning if you lost them, you were in trouble. With a ticketless system, the computer system tracked who bought tickets and all you needed was a confirmation code to fly as the computer system could verify you had purchased a ticket.
But when David joined Southwest’s steering committee following the acquisition, he was “driving too many people crazy” according to Kelleher. He had tried to change too much too fast and wasn’t fitting in to the Southwest corporate culture. So he was fired.
Facing a non-compete, David bides his time (35:10)
After being fired by Southwest, David quickly had ideas for an airline he wanted to build, but was bound by a non-compete to not work for any domestic airline for five years. So he needed something to do in the meantime.
His business partner for Morris Air, Dave Evans, recommended they build and sell their ticketless reservation system to other airlines. Eventually, they sold this ticketing system to Hewlett Packard.
While the ticketing system kept David busy, he called Kelleher to tell him he was going to break the non-compete, believing it wasn’t really enforceable, or wasn’t worth the cost in legal fees to enforce. But he was wrong — Kelleher knew David would be one of his biggest competitors with whatever he came up with, so he promised to fight tooth and nail to keep the non-compete in place.
Why does the world need another airline? Bringing humanity back to air travel (38:50)
When thinking about what gaps existed in the airline industry that David could fill, he thought of what Southwest avoided. The low cost airline never flew into congested airports to maintain their on-time departure status and quick 10-minute turnover that made them successful. This meant they avoided New York, Boston, San Francisco, and other major cities. But flyers there were still looking for budget airlines, so he decided to try and meet that need. All the legacy carriers had accumulated lots of “stuff” — most notably bad customer service. David held the philosophy that just because you are somewhere no one else flies doesn’t mean you can treat people poorly. Too much overkill is never enough.
David would refer to Jetblue as a customer service company that happens to fly planes. Inspired by the servant leadership of Mormonism, he based his business on the idea that they were going to take care of their people, and then their people were going to take care of their customers.
To make sure this customer-service mentality was maintained, David frequently flew on Jetblue planes and told customers he was there that wanted to hear from them. He took on the role of serving snacks, really meeting and understanding the needs of the customers he was working to sell to.
This mentality was also shown in the way the company treated their employees and the fact that employees were not unionized. David felt that if their people needed someone else (a union) to tell them how to treat employees, he wasn’t doing a good enough job of taking care of employees.
Each of these examples boil down to three keys to David’s success:
Have people who work for you that are ambassadors for your brand
Have flawless execution on every level — David would follow dashboards for every part of the business, from tracking on-time departures to the time it took bags to get from the plane to baggage claim
Always make it right with the customer — If you make a mistake, make them more loyal having had an issue with your company than having not had an issue in the first place.
Holding himself accountable preaches customer philosophy — and gets him fired (51:17)
In 2007, there was a major storm in the Northeast. The FAA had just introduced a new regulation that year that said if there were ice pellets in the air, you can’t take off (a regulation that was removed the next year because of its flaws). As a result, planes were on the runway to take off and planes were stuck as ice pellets began. People were stranded on flights, some for 10 hours as planes couldn’t take off but had nowhere to go with new planes having taken over their gates. David was in the command center for four days dealing with the fallout, as JetBlue struggled more in recovering from the weather incident than other airlines. He did 27 live interviews in one day — from the Today Show in the morning to the Letterman show at night—apologizing for the incident and describing how he would make it right for the future.
David felt that JetBlue was held more accountable by the media because its brand had taught people to expect more. With greater expectations comes greater let down when those expectations aren’t met. With this incident, the shareholders decided they no longer wanted David at the helm of the company, fearing founder’s syndrome had made him incapable of leading the way properly.
So what next? David decided to finally fulfill his lifetime dream to return to Brazil and make a difference.
Bringing comprehensive air travel to Brazil with Azul (56:01)
After leaving JetBlue, David spearheaded a new venture named Azul (an homage to the “Blue” in JetBlue). One of the things that amazed him was how few people were traveling in Brazil, identifying two root causes. First, service wasn’t good as far as nonstops between cities. Of 25 major cities, flights were only nonstop 20% of the time. Many cities had no flights at all, even though Brazil is a major aircraft manufacturer. Second, fares were really high — about double what they were in the US. So, David bought Brazilian airplanes and flew routes no one else flew to. Now, prior to the global pandemic, it became the #1 airline in terms of daily departures and cities served in Brazil with 800 flights a day, serving 80,000 people a day.
No matter the specific company, maintaining consistent values (61:20)
When deciding what to do next in his life, David has always come back to what he wants other people to say about him — “He made my life better”. At Azul, he consistently told employees “I want this to be the best job you’ve ever had. If it’s not, why isn’t it?”
While each business served a different audience or addressed a different need, customer service and putting people first was at the heart of each one.
End (70:10)
How I Built This with Guy Raz : JetBlue Airways — David Neeleman
0:00 | Intro
3:10 | How Neeleman’s childhood influenced his business philosophies
11:46 | His first business venture — big success and big failure
18:00 | Transition from a travel agency to an airline — Morris Air
35:10 | Facing a non-compete, David bides his time
38:50 | Why does the world need another airline? Bringing humanity back to air travel
51:17 | Holding himself accountable preaches customer philosophy — and gets him fired
56:01 | Bringing comprehensive air travel to Brazil with Azul
61:20 | No matter the specific company, maintaining consistent values
70:10 | End
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