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CEO Interview - A Return On Investment for JetBlue's CEO

David Barger, CEO, JetBlue David Barger, CEO, JetBlue, says the company’s investment in people, not technology, is what allows an airline to stand out from the crowd

Despite a new, efficient terminal at JFK in New York the airport still experiences delays because of congested airspace. What can or should be done to mitigate those delays?

Development and deployment of NextGen technology will be critical to improving the operational performance of JetBlue, along with the other carriers that have significant operations in the north-east of the United States.

A modern Air Traffic Control (ATC) system is a national asset, as critical to the United States’ economic success as the highway system. Investment in bringing us from a radio-based, 20th century ATC system to a satellite-based, 21st-century system will be safer, far more environmentally friendly, and better for airlines and our customers. JetBlue continues to work with the Federal Aviation Administration (FAA) and Department of Transport (DOT) on their efforts to focus the newest technology in the New York area.

We are also partnering with carriers and the Port Authority of New York and New Jersey on new processes and procedures, as exemplified this year by the successful Bay Runway (13R/31L) rehabilitation project. The runway is being widened and strengthened, and additional taxiways added. It will drive efficiency at the airport.

Are slot auctions a viable proposition?

Slot auctions make no sense at all. It isn’t a big issue under the Obama administration and there is a question mark over who owns the slots. I would say to look at who has stimulated jobs, brought customers to food and beverage outlets, and driven retail sales.

How would you describe your business model? Although initially perceived as a low-cost carrier, you have deviated significantly from the usual LCC model.

We think of ourselves as a company that happens to fly aircraft. And we’re focused on recovering our cost of capital, which is unheard of in this industry.

JetBlue is a value carrier. We may not be the lowest fare out there, but we offer our customers a premium coach class product that includes many of the elements for which other airlines now charge. When you buy a ticket on JetBlue, you know you’re going to get the most legroom in coach class, 36 channels of DirecTV, 100 channels of XM radio, a free checked bag, and all the snacks and drinks you can eat.

It’s a contrarian model. I’m not saying we will never unbundle the product but it is about delivering value to the customer. People pay a premium to fly with us—in economy class.

More than a quarter of JetBlue’s capacity is international travel. Do you see your growth coming from domestic or international services in future?

Our stated goal is to be America’s favorite airline. But that doesn’t limit us to North America. So we see significant growth coming from domestic and international services. Growth will be concentrated in New York and Boston, but also the Caribbean, Florida and southern California.

For the moment we’re staying with our current fleet type and geography. The point is that you have to earn the right to fly. Fixing the order book and then deciding where to fly is not the way to do it.

You are adding to your interline agreements at a rapid pace (El Al, South African Airways, American Airlines). Will this continue?

Absolutely. Our agreements all differ slightly from one another and, more importantly, from the historic codeshare model. All we want is to be given credit for bringing travelers into the system. It’s not about how far they’ve come or how far they’re going. As the largest domestic airline at JFK, and the largest carrier at Boston, we are excited about the continued growth opportunities provided by linking with successful carriers.

What are your thoughts on joining an alliance? Lufthansa (Star) is a minority stakeholder and yet you are growing ties with American (oneworld).

While we rule nothing out, our focus is on our own organic growth as well as growth with individually selected partner carriers. To use a technical term, it’s about having an open architecture. We’re not joining an alliance at this point because we don’t want to be restricted in any way. We want the opportunity to participate in the market as we see fit.

Is being an innovator in technology a risky strategy?

Innovation is an area where JetBlue has had, and will continue to have, substantial success. LiveTV, XM radio, and, in future, in-flight wireless connectivity help enhance the customer experience and add value. We have just signed a broadband connectivity memorandum of understanding in partnership with ViaSat and that is a very exciting prospect.

But our strategy is centered on people, not only technology. Any airline can duplicate TV and Wi-Fi. However, if we continue to hire, care for, and inspire the best people who deliver the JetBlue experience then no one can match that.

How do you maintain strong labor relations and ensure employees remain positive?

Labor is one reason why the industry has been broken. But everyone here realizes that our crew members are the key to our brand and our success.

We believe we are the most pro-labor airline out there—and that we can care for our crew members better than a third party. It’s not only about benefit plans and salaries but rather having a structure that can withstand the pressures of this industry. That will allow the airline—and jobs—not only to survive but to prosper.

This is only possible through education, as it pertains to balance. Crew members must know where and why they are working. A large part of this success starts with our values. As a value-driven organization, everyone, from executives to seasonal airport workers, goes through the same orientation training and internalizes the same five values. That’s not to say that we are perfect—we’re always seeking feedback and trying to improve how we support our crew members. But we’ve created a work environment where our crew members know they are supported and valued. 

Will biofuels become a commercially available reality in the near future?

We’ve been very active in this regard, and we are also strong proponents of the FAA’s efforts, including the US Air Force’s work, and that of various airframe and engine manufacturers. We are confident the future holds great promise and we will continue to support this area.

But there’s more to environmental mitigation work. The industry isn’t getting the press it deserves and people are unaware of the genuine motivation in the industry to stem emissions. A flight now is far more fuel efficient thanks to better engines that use hundreds of gallons less per hour, single engine taxiing, and technology that allows us to take account of conditions in real time rather than hours-old reports.

Social media is another important new development. Do you view it as a distribution channel or a means of improving customer service?

You’ve got to know your audience. For our customers, social media is both. Thousands of our customers are comfortable in the social media arena, and it is proving to be a very successful distribution channel.
It is also vital to service recovery. The days of customer services taking days or weeks to get back to you are long gone. Even an email service can take too long. Service recovery must be immediate and social media gives us that ability.

Social media at JetBlue serves as a gateway to effectively process and direct our customers to the best resources. JetBlue’s dedication to customer service spans our brand—and every crew member shares that identity. Our recognition for customer service is only possible because of the support and attention of all of our teams.

We believe the best use of Twitter, for example, is first as a listening post where we can learn from our customers, and understand how we’re doing as an organization and where there are opportunities to improve. 

What regulatory changes would make for a sustainable future?

There are three main areas we have to tackle: ATC, taxes, and security. I’ve talked about NextGen. It is critical to fund priorities like these, which means the taxes and fees levied on the airline industry must be reinvested in the industry. Too often they are spent elsewhere.

Governments must also understand what taxation does. It puts up the price of a ticket and that translates into a dampening of demand. That in turn results in poorer economic performance. Security has to be rationalized as well. That also has an effect on the industry’s ability to perform.

We must stop governments looking on aviation as a utility. We have to be able to recover our cost of capital.

 

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