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JetBlue flies into second decade after ups and downs in first

Published December 24, 2010 5:58 pm

Airlines • The carrier marches on after 10 years of ups, downs.
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The high points during JetBlue Airways' first 10 years are almost too many for Dave Barger to recall, the low points almost impossible to forget.

The new terminal the low-cost carrier opened at New York's JFK airport in 2008 was huge, said Jet Blue's CEO, who was in Salt Lake City last week to celebrate the carrier's 10th anniversary with 2,141 reservation and airport employees in Utah.

Getting a sixth consecutive customer satisfaction award from J.D. Power and Associates last summer was big, too, Barger said.

Pulling off the switch to a new online reservation system in January was important — even though passengers couldn't book tickets, check in or change itineraries for 24 hours, he said.

But what amazes the 52-year-old executive most is that JetBlue survived and prospered in the years after its February 2000 launch, especially given the bookend of the Great Recession. The next 10 years were marked by everything from the Sept. 11 terrorist attacks to deep turmoil in the airline industry, as other carriers filed for bankruptcy, merged or went out of business.

"As we look at the history book, we can't find another pure start-up, post-deregulation in 1978, that has successfully flown into a second decade without some kind of financial restructuring, or merger-and-acquisition activity, or they just never make it 10 years. They don't even get out of the box," Barger said.

To be sure, JetBlue's journey hasn't been easy. Although it became a darling of the airline industry, and its founder, former Utah wunderkind David Neeleman, became a celebrity, JetBlue has had to navigate through some very tough times.

"It is a great company, in terms of customer service. It's a superior product, but it's one lousy investment," said airline analyst Vaughn Cordle.

"It just happens to be a more profitable airline than other airlines, but the profit levels are below the required rate of return on that investment," Cordle said, adding that JetBlue's stock has lost more than 50 percent of its value in the past five years.

Barger said the worst moment was the airline's clumsy response to a snowstorm that slammed the Northeast during a busy weekend in February 2007. While other carriers heeded warnings about the weather, JetBlue delayed canceling flights. As a result, passengers were stranded on airplanes for hours, and operating mix-ups shut down the carrier for days.

"There is no doubt for a period of time there was absolutely a short-term degradation to the brand. We were above the fold in everybody's papers for a full week," Barger said.

The meltdown, which became fodder for cartoonists and late-night TV comedians, led to Neeleman's departure as CEO three months later. Barger, the airline's chief operating officer, replaced him.

Barger's first response to the Valentine's Day crisis was that JetBlue would fix the problems fast. Although storms are common in New York in February, he said, the carrier's response exposed severe shortcomings in JetBlue's leadership, computer systems and decision-making protocols.

"My initial reaction was, 'We'll get it corrected.' ButDay 1 became Day 2, became 3, became, 4, 5 and 6. Let's face it, it was a month before we were back on track." Barger said.

Another embarrassing incident erupted in August, when exasperated flight attendant Steven Slater told off his passengers, grabbed two beers and exited the plane in New York via its evacuation slide.

"Boy, when we make news, we make news," Barger said.

But unlike the snowstorm, Slater's meltdown didn't seriously damage JetBlue's image, Barger said.

"It was interesting because it was newsworthy for a couple of days, with JetBlue attached to it. But after about two days it truly became a one-off individual voicing his decision in kind of a pictorial manner. We didn't see a degradation in loyalty at all," he said.

Perhaps paradoxically, the U.S. recession and glacial recovery have been good to JetBlue. The airline was profitable in each of the four quarters in 2009. Its $88 million profit in the first nine months of 2010 was 87 percent higher than in the corresponding period last year. That's helped the stock recover to levels not seen in a while, trading around $6.60, with a 52-week range of $4.64 to $7.60.

A big reason was because the economic downturn forced travelers to shop for the best deals. New customers appeared to like JetBlue's cheaper ticket prices (its average one-way fare is $142) and free amenities.

JetBlue also slowed its growth plans. At one time, it planned to add 35 airplanes in 2010 and 35 planes in 2011. Those number were scaled back to 10 this year and nine next. The acquisitions will be financed largely with cash on hand.

The aircraft are being deployed mostly on new routes, to the Caribbean and Latin America from Boston and other eastern airports.

Salt Lake City doesn't figure much in JetBlue's expansion objectives. The airline last month added a third daily flight, to Long Beach, Calif., but Barger said no new routes are planned.

"I could certainly see a time when [a flight to Boston] could transpire. I could see an Orlando, where we flow traffic not just to the attractions in central Florida, but also into our franchise down into Latin America," Barger said.

"I don't see it in the near term. But we're taking nine aircraft next year. I think we are taking 12 in 2012. So there are opportunities, and we'll put the airplanes wherever we can drive that return on invested capital and free cash flow," he said.

pbeebe@sltrib.com —

JetBlue in Utah

Founded • February 2000 by former Utahn David Neeleman

Service • Launched Salt Lake City-New York service November 2000

Operates • One daily flight to New York's JFK airport; three daily flights to Long Beach, Calif.

Employs • 2,141 people in Salt Lake City (2,117 reservations employees working from home or at the reservations training and support center in Cottonwood Heights; 24 operations employees at Salt Lake City International Airport)






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