5X Airline Founder David Neeleman on Building Customer Obsessed Airlines – Ep.260

(00:03:32) – David’s principals for building an airline

(00:07:27) – Covid and other impacts on profitability in recent years

(00:08:38) – Changes in service expectations from flyers

(00:12:25) – Setting up an IT infrastructure

(00:15:38) – Scaling an airline to profitability

(00:20:24) – Philosophies around varying customer experiences

(00:29:05) – Building a company around a market or niche

(00:32:46) – Generating new demand via new routes

(00:37:16) – When do you decide to pull out of a city or cut a route?

(00:39:15) – Leadership philosophies

(00:42:03) – Team building practices & communication styles

(00:45:12) – Broader airline challenges

(00:47:42) – Advice to CEOs

(00:48:54) – Key challenges ahead for Breeze

(00:49:37) – Closing thoughts

Alex Bridgeman: I’m excited to have you on the podcast. So, as a kid, I read books about JetBlue and some of the work you did there. So, I followed the different airlines you started and all of them involving blue of some kind. 

David Neeleman: Yeah, seems like it. 

Alex Bridgeman: I assume that’s your favorite color? 

David Neeleman: Well, I actually went to the University of Utah and we’re red. And our big rivals were BYU, and they were blue. So, they just kind of give me a lot of trouble with that. But I think blue is just kind of more of an aviation color. Seems like it’s blue sky. And so, we started with JetBlue and then Azul in Brazil is blue, obviously, in Portuguese. And then we couldn’t name anything blue up here because of JetBlue, so we just painted the plane blue. 

Alex Bridgeman: It made it pretty easy. Blue sets your mind at ease as well. It’s kind of a calming color. 

David Neeleman: Kind of soothing, yeah, it’s good. Matches, like I said, the sky, so it’s great. 

Alex Bridgeman: Yeah, you had the first profitable quarter, Q4. 

David Neeleman: We did. 

Alex Bridgeman: Congratulations. 

David Neeleman: We did. When you start your business, your costs are really high because you’ve got a lot of overhead and you’re spreading it out over just a little bit of flying. And then you also are basically launching new markets. Nobody knows who you are, and so you’ve got promotional fares to get Betty on board, and your load factors are lower. But as you start to mature, then your revenue starts going up, your planes start getting fuller, your costs start coming down because you get economies of scale of adding more and more airplanes over a set overhead. And then when those two lines cross, you make money. It seems kind of easy. It’s easy to explain, harder to do, and most airlines fail. But I’ve been lucky and blessed and had great people with me that we have always been successful. 

Alex Bridgeman: Are there any principles you follow to get to profitability quicker than you might otherwise be able to? 

David Neeleman: Well, the best thing is to surprise and delight your guests. Call them customers or guests or whatever airline I’m at, but it’s all about when people fly in you, you want them to go get off the plane and say it was a great flight and I’m not only going to fly these guys again, I’m going to go tell all my friends to fly them as well. 

Alex Bridgeman: Sign up for the credit card too, all that. 

David Neeleman: Sign up for the credit card, everything. Yeah, it’s all the above. But that’s really the secret is making sure that you- But it actually starts with your team members or your crew members, like we call them at JetBlue, or your [inaudible] as we call them at Azul. You just have to have great people. And people who love their job, who are part of a cause as opposed to just a job. And you try and involve them. Earlier today, I had to have kind of a bi-monthly call with all of our team members. I have weekly calls with our pilots. I have bi-weekly calls with our tech ops guys. So, you just have to kind of get them in the huddle and make them feel a part of something that’s kind of bigger than us, each of us individually. 

Alex Bridgeman: Yeah, the humanity backed air travel has been a consistent theme. 

David Neeleman: Yeah, that’s where we started at JetBlue, but you just want to make people feel- Yesterday, JetBlue turned 25.

Alex Bridgeman: I saw that, yeah. 

David Neeleman: Yeah, and so somebody sent me a picture of me with a profit sharing check, and it was $16 or 17 million after year two at JetBlue. And that was what we were- a big, huge check we were giving back to our crew members. And so, use that as showing people it’s possible that we can build something here. We’ll do about a billion dollars in revenue this year. A little bit slower growth than what we had at JetBlue, but the market’s different. We had COVID to deal with. But letting people know to create something from zero to a billion in four years is really quite an accomplishment for all of our team members. 

Alex Bridgeman: Do you think it was just COVID that led to the slower profitability start or is it something more to it than that? 

David Neeleman: Well, I think there’s a few things. COVID was a principle issue and it was really the resources of the FAA to be able to kind of support us because they were challenged. They were working from home and all those things. But I think that the airlines have gotten better. But the competition we had at JetBlue 25 years ago does not   resemble what we have today. In fact, the airlines today, like Delta and United look a lot more like JetBlue than they did back in those days. They’ve got TVs in every seat, they have Wi-Fi, they have leather seats, they have extra legroom. Those are all things that were hallmark of JetBlue back 25 years ago, and they didn’t have that. Now they do, so they took pages out of JetBlue’s book, they did their own things that were very good. Their credit card is a huge driver of their profitability. So, it’s a much different market than it was 25 years ago. 

Alex Bridgeman: Yeah, on the people side, talking about how important your team is, do you feel like the expectations service-wise that a customer has today versus 25 years ago, how do you feel like that’s evolved? You talk about the TVs in the back of the seats, Breeze doesn’t have those. But that’s also, I assume, because everyone’s bringing their iPads or phones anyway, so you don’t need to provide the extra screen for them and all the weight that goes with that. And it’s down on one flight, and people get frustrated, so might as well not have it at all. But how do you feel like tastes and maybe expectations have evolved? 

David Neeleman: Well, you’ve got headsets you have to worry about getting on the airplane. And I found myself, and I have ADD, ADHD, and it’s well publicized, but I found myself not watching TV when I was on a flight anymore, because if I had High Stream, I could go on X, I could do all the stuff that I would do, and I just don’t watch TV that much. But when I was, back 25 years ago, when we started the airline in 2000, and you get on an airplane and you could watch a game or you could watch something, that was really cool. But people have- it’s changed. And I think TVs are kind of yesterday’s news and I think high streaming video and being able to download your favorite Netflix and have an iPad, people would just rather do that than watch necessarily what’s on TV. I think the numbers all show that. But people, yeah, I think the thing, the biggest thing that’s changed is technology. Technology has made air travel much different than it was back then. Where we’re sitting here, there’s a building on the other side of that parking lot where I started JetBlue. But before I started JetBlue, I started a computer reservation system company called, it’s called Navitaire today, but when I started, it was Open Skies. It’s owned by Amadeus now and it’s worth a billion dollars. But the whole concept of that was that we wanted to get rid of tickets. We were the first ticketless airline in the world. And in order to do that, you had to have a relational database. And all the other mainframes were flat files. And the tickets were the database. So, they couldn’t really track it. And so, by being able to kind of get a relational database and have all that data in there, then you let people- you could just give them a confirmation number over the phone. And then when the internet came, they’d just get a confirmation number printed out or just write it down, show up at the airport, type it in a kiosk, get their own ticket. That changed everything. And we were at the forefront of that. Back in, this is before even JetBlue, this is 30 years ago when I was at Southwest and exported that technology to Southwest. So, JetBlue was started as a company that was, oh, we’re a customer service company that just happens to fly airplanes. People are like, oh, that’s cool. And then now today, nobody… doesn’t care that much about customer service. They just want to be able to do it themselves. They want to be able to go online. They want to be able to have an app that works really simply, they want to be able to make changes, they want to be able to add bags, they want to be able to do all that stuff, and then they don’t want to go stand in line at an airport. 

Alex Bridgeman: We were just talking about that. If I have to interact with someone, it’s a failure of your app to help me.

David Neeleman: Right, and so that wasn’t the case at JetBlue because we wanted smiley people to hand you your boarding pass. Now it’s kind of like, nope, we want to check in, we want to drop my bag off, I want to get on the- I’ll swipe myself on the airplane, and I want to sit on the airplane, and I want to have my high-speed Wi-Fi. And really our flight attendants are the only people that really interact face-to-face with our guests. So, yeah, it’s changed a lot. And that technology has got to be really good because that’s what people expect. 

Alex Bridgeman: Yeah, and a lot of the tech outages have been really well publicized in the last few years. When you’re starting your airline from scratch, you get to kind of choose your lineup of systems that you’re going to use. Is there anything, like starting from scratch, was there anything specific you wanted to make sure you included or a way that you set up your IT infrastructure that could be flexible or more reliable or you could evolve into newer systems more easily? What kind of decisions did you make early on? 

David Neeleman: The first decision was to look at ourselves across the parking lot from Navitaire. They really, if they don’t work, we’re in trouble. That’s our revenue system. It hooks into our operations systems. The other thing I think what we did is, with the operations systems, usually you would start out with kind of a less capable one that was cheaper and then kind of grow into it. But we knew we were going to get big, so we just started with the systems that were just more capable. Because transitioning those systems on the fly is much harder. It’s kind of like trying to change the tire on a car when it’s going down the freeway as opposed to when it’s… 

Alex Bridgeman: Because there’s always a plane flying. You can’t just have a ground stop for a couple hours. 

David Neeleman: You can’t. So, I think we went to… We took a lot of knowledge in the maintenance system, the dispatch system, flight following system, the crew scheduling system. And there are a few things we didn’t do as well as we should have. Now we’re having to switch a couple of those out, but I think having all those years of experience was really helpful in starting with the right systems with a clean, white piece of paper that we could start. The other thing we did that was really unusual, and people are starting to mimic it now, is that we decided it was better if you could text us or you could Facebook message us or you could get a hold of us, and we would respond to you in, say, less than two minutes if it was a critical thing or less than 10 minutes on average, you would rather do that than be on terminal hold on a phone. So, we went to this system where you couldn’t call us, but if you got really frustrated, we’d call you. But we could handle 99.9% of all the issues. And then in 10 minutes or less, that’s really the goal. And then at home, we could have somebody that’s worth talking to six people at a time and resolving and helping them out. And then try and make the app really as functional as possible, so you never had to contact us. So that’s kind of where we’re- the other great thing about Breeze that we didn’t really have at any other airline, because we started with a clean white piece of paper, we required everyone to give us their email or phone number, which is great if you have a disruption or if you- obviously for marketing purposes, but more for operational purposes. If a flight is stuck in Buffalo in a snowstorm and it took three hours to get out late because of an ice storm and you’re coming back from Orlando and you get a message saying, hey, your flight’s going to go at 5 p.m. instead of 2 p.m., you don’t care as long as you don’t get to the airport and look up and see it, but you actually are aware, and you take the kids to another amusement park or to a museum or something, and then you get to the airport. And so being able to kind of have that connection and talk to our guests is really critical, important. And that’s one thing we do really well. 

Alex Bridgeman: And to the point of starting out with that clean sheet of paper, especially when it comes to fundraising and aircraft orders, is there a certain scale you’re looking to be able to get to within a set number of years that puts you on- makes you profitable, or where does that kind of magic number sit? Like we also talked about a couple airlines that tried to start and failed and didn’t hit scale or didn’t hit the right routes or what have you. Is there a size measured in fleet or routes that you’re trying to get to early on? 

David Neeleman: Well, I think start with the premise first of all that I’m not going to start an airline just for the sake of starting an airline, just like, oh, I want to start an airline. No, what’s the opportunity? You have to start with what is your reason for being? What’s your raison d’etre? What’s your- what niche are you filling? And this niche is smaller than it was 25 years ago when I started JetBlue. And the niche that we decided that was really going to work in the United States, the trends that we saw, there was 125 cities that had lost more than 25% of their air service over the last 10 years, even before COVID. And then COVID made the situation worse because pilot salaries at the regionals doubled, and it was uneconomical for people to fly to certain cities. And so, we decided that we would found an airline that would be primarily flying in cities that didn’t have nonstop service between cities. So today we have almost 250 routes. 86% of those routes have no nonstop competition. So, okay, what kind of airplane fits to that? Is there such a thing as an airplane that would fit into that model? Regional jets, no. 50 seats, 70 seats. Those are fake airplanes because they were scope planes. They were forced to be that small. They’re very inefficient. Okay, how about like go to the other end of the continuum? Let’s go to a 321, Airbus A321. 240 seats, that’s Spirit and Frontier territory. And they thought if they just put more and more seats in an airplane and charge less and less and less, they could stimulate enough traffic, and it wouldn’t matter. There’s just not- in these cities that I’m talking about, the reason they lost their service is there wasn’t as much demand. So we kind of went down the continuum and then we found the sweet spot. The sweet spot of 137 seats, 12 first class seats, 45 extra legroom seats, and then some seats that you could sell for basic economy, similar to what’s going on with the big guys, except for the differences where they primarily went in and out of their hubs and connected you, we could fly over those hubs, and because we are just more efficient, we could go nonstop. So, the Airbus A220 was a perfect airplane. And I just said, if I can’t get the plane for this much money, and one of the things that kill you on buying a large quantity of airplanes is the escalation. So, we said, we need to cap the escalation, or we need to have it at a reasonable price. And then the other thing that kills you is your PDP payments, your big cash you have to outlay to buy new airplanes. And so, we negotiated all that stuff, and we got- and we hit the market just perfectly because that was a plane that was looking for a big customer. And Delta had purchased it, we actually purchased ours before JetBlue did, and they started looking at it because we were looking at it. So it was a perfect airplane for what we wanted to start. And so, we didn’t go out and say, I’m going to just go buy a bunch of airplanes and start flying everywhere. We’re going to find what the need is, find an airplane that fits it, work on a business model and see if we can actually make money doing it and kind of mimic a lot of what Allegiant’s doing, but doing it on kind of a smaller, even a smaller city scale, and just doing it better by offering first class, by offering- like for example, they don’t have first class. They just barely are putting in extra legroom seats on their airplanes. They don’t have Wi-Fi on their airplanes, where we can say, oh, you want to pay a $49 fare? Great, you’re just going home to see your girlfriend for the weekend, you want a backpack, put it in the seat, you’re good to go. But if you’re going to Orlando, you’re taking the kids, you want to have free Wi-Fi, you want to have a couple of extra inches of leg room, you want to check your bags, you want to bring on carry-on bags, give us $150. Okay, that sounds great. Well, how about if you’re going on a honeymoon or a babymoon or whatever, why don’t you give us another $150, give us another $100 and we’ll put you in first class. People are like, wow, that’s awesome. So we have something for everybody. And it’s really some of it was luck. Some of it was experience and skill to be able to kind of get where we are today. And it’s really working great. 

Alex Bridgeman: Yeah, because JetBlue was all coach from the get go and only after you left added first class, it’s a fairly recent development for them. But you started with first class. I’m curious how your philosophy on different classes and instead of every customer getting the same experience, there’s now varying experiences. 

David Neeleman: 25 years ago, I was egalitarian. Everybody gets the same thing. Everybody gets to be treated awesome. And that was like, okay, it worked really great for a lot of years. But people started segmenting and started saying, look, do you want some extra leg room? I can make some extra money. And it’s all just math. Like our first class seats take up 50% more space than our regular coach seats do. So, I got to charge 50% more. If I can charge 60% more or 70% more, I make money. If I charge less than 50, then it’s better to have all coach seats in there. So, it was just a math equation that drove you to start segmenting. Now I can give two more inches of leg room, and if I can charge, it costs me 20 bucks more for that seat, if I can charge 30 bucks more, then I’m ahead and people like me more. I think it’s been interesting with Southwest Airlines because I worked at Southwest for six months before I left and went up to WestJet and started, helped found WestJet and then I went to do JetBlue. So Southwest, I call them the In-N-Out burger of aviation. They’re like, okay, if it works good, don’t change it, don’t do anything, make that same burger every day. Limited menu. This is what you get. And one of the most kind of interesting things is they, because their costs started going up, they started charging more, and every seat was, they had the getaway fares and they had a little bit of priority boarding. But they kept saying to you, you get free bags on us. You’re like, I don’t want free bags. I want to have my backpack. I want a cheaper fare. Nope, you get free bags. Like, I don’t want to have free bags. So, people just started selecting away from them because they had those options on the other airlines. And then Southwest profits started going down and down and down. And then they also said, look, we do open seating. You get on. I don’t like that open seating anymore. We don’t care. We’ve been doing it for 45 or 50 years. We’ve made a ton of money. We’re In-N-Out Burger. You cannot have a fish sandwich here. You cannot have a deep fried chicken sandwich. You have to eat a hamburger. And when I was there 30 years ago, I kept thinking, there’s these two axioms in business. One of them is, one of them says, if you find something that works, just stick with it. Don’t diversify, don’t de-worsify, just stick with it, be perfect, be the In-N-Out burger. The other one says business is a changing dynamic world, if you stick and do the same thing, you’re going to get slaughtered. And they both are axioms and they both can be true in certain circumstances. But in Southwest’s case, people decided they didn’t like to run on, shove each other for a seat and have that open seating. They didn’t want to have to pay for a bag. They wanted the menu of items. They wanted- some people decided they wanted first class seats. Some people wanted extra legroom seats. And some people couldn’t care less about extra legroom seats. They just want the cheapest fare that you can get. I want a Spirit and Frontier fare. And United and Delta, to their credit, said, okay, you want to do- I’m going to dedicate, I’m going to go to a 321. I’m not going to have 240 seats on it. I’m going to have 185 seats on it, but I’m going to have my first class section, 24 seats. I’m going to have my extra legroom section. And you want a Spirit Fare, it’s in the back, it’s there. We’re not going to give you a seat assignment till you get to the airport. We’re going to charge you for your bags, but we can do this and we can do it for you 10 times a day, where Spirit can do it once a day. And no one’s going to fly you if you can fly us. So, they adapted to that. So, adapting and doing different things and listening to what your customer says is really critically important. 

Alex Bridgeman: It seems like a lot of the advantage, at least you have right now, is structural using the A220. Delta and JetBlue both use the A220, but they use it in very different ways. Delta’s more hub and spoke. What are some ways you can kind of double down on that advantage? I didn’t see any other airlines with big A220 orders that would try to compete on similar routes doing a similar model, but Avilo has done something with the 700 or the 37. 

David Neeleman: Yeah, they have 737s, 700s and 800s. And they get the used market, they go for the used market, they pack the seats in. But they have less flexibility because their trip costs are higher. Their ownership cost is less, but they don’t have the luxury of having first class and segmenting the market nearly as much as we can. It was interesting because we have a lot smaller airplanes than Spirit, but our revenue per airplane was the same as Spirit’s, and they had a heck of a lot more seats. And so, if you have a 20% lower, 25% lower trip cost, and you have the same revenue per airplane, one of you could be making 5% margin while the other loses 15% margin. So, fitting that right seat to the right market, the right plane to the right market is really important. The 220 gives us, there are three major advantages that I love about the 220, and that’s why we picked it. Number one, it had a low operating cost, low fuel burn. Obviously, we got a good price on it. But for premium seating, it’s very efficient. Because we have two and three seats, so every time I put a first class row of first class in, I only lose one seat per row. Everyone else loses two seats per row. So it’s twice as expensive for them to do first class as it is for me. So that’s really important. The other thing is because it’s so fuel efficient, it has great range. I can fly Providence to LAX with that airplane. 

Alex Bridgeman: Yeah, or Boise to Honolulu. 

David Neeleman: Boise to Honolulu. I can do- once I get ETOPS rated, or I can fly down to Cancun, or I can fly to Punta Cana, or I can fly all these other places, and then it’s really good for short field. So, if it’s a special airport, Hilton Head or something like that, or the Keys, Key West, then you can go into those airports where maybe the bigger airplanes can’t. 

Alex Bridgeman: The A220 is a rocket of a plane. It reminds me of a 57 with how much power it has coming out. 

David Neeleman: Yeah, it’s a great airplane. It’s beautiful too. Especially in our paint job, that check on the tail, oh. 

Alex Bridgeman: Yeah, looks great. Big windows too. I think some of the biggest. 

David Neeleman: The biggest windows. 

Alex Bridgeman: Until you get to a 787. 

David Neeleman: We don’t have Mars, because our bathrooms are in the back, but on Delta’s 220s, you actually have a window in the bathroom. You’re like, well, hope no one’s watching me out here. But you have an open window that’s in the bathroom, which is kind of cool. 

Alex Bridgeman: Oh, that’s amazing. You didn’t add it? 

David Neeleman: No, because we put the bathrooms in the back, so we could be more efficient in the cabin. 

Alex Bridgeman: Oh man, that would have been really fun to add. 

David Neeleman: Delta has 10 billion off their credit card so they can do things like that. 

Alex Bridgeman: Yeah. It sounds like the Breeze credit card early on, though, has been successful, so you’re working your way there. 

David Neeleman: Yeah, it’s doing good. Yeah, we’re really happy with it. You’d say, when they first- it’s really interesting because we have a very interesting demographic. If you’re living in Westchester County and you have a second home in Vero Beach, we’re the only person that flies it. And I know people who used to fly a private jet back and forth and now they just fly on Breeze. It’s an interesting dynamic. It’s an interesting demographic. So, when you fly between cities that nobody else flies to or cities only nonstop flight, you get just a really great demographic. So, the uptake, because I was like, why would someone want a tenth credit card in their wallet? Marriott’s got theirs, and Delta’s got the SkyMiles card, 1% of the GDP. Well, because you’re the only one that can get there nonstop, and so they flock to the card, and so we’ve exceeded every expectation on the card. 

Alex Bridgeman: Yeah. One kind of big question I’ve been curious to hear your thoughts around is, every market you’ve gone to was essentially expanding that market. And Azul, of course, was getting folks off of buses and onto planes and JetBlue was bringing some nicer service back and that egalitarian treatment with more entertainment and all that, and Breeze having more point to point. And so, I’d love your thoughts on how do you look at a potential market or niche that you might be able to build a company around? What are some of the questions you ask yourself to try to understand? Like what was Breeze like, your research process for understanding how could Breeze fit as a company? 

David Neeleman: Well, this is kind of a leftover, a holdover from the deregulation days, from the regulated days. But the DOT still keeps a database of every single person in the country, where they flew and what they paid. And it’s like nine months behind, so it gives you kind of a little head start. And so, we can take a look at that and say, hmm, between these two cities, there used to be non-stop service. There was an average of 130 people a day that flew that and they paid 128 bucks. Today, that number’s fallen in half. There’s no non-stop service. So, if we were to put non-stop service back in again, do you think we could get that number back up again? I think we could exceed it if we gave better service. So, there’s a lot of science, data science, and there’s a lot of gut feeling. And there’s certain cities just have community of interest. And we fly between Provo and Orange County twice a day. And we could probably do it five times a day if we could have the slots in Orange County. Because there’s community of interest between those two places that people just want to go to Disney and they want to come visit relatives and they’re all at BYU at school and they want to go home for the weekend and see their girlfriend, whatever. So, there are cities that have community of interest, and there’s places where you just want to have a desirable place to go. You look at a place like Huntsville, Alabama. Who in Huntsville doesn’t want to go to Vegas? Well, you’ve got to connect over some hub, Denver or Dallas, or we’ll take you on Thursday or Friday and we’ll bring you back on Monday. You can just go out for a weekend, and oh, on the other side of that, if you want to go really cheap, we’ll send you non-stop, you can stay Sunday through Thursday or whatever. And you want to go to Tampa? Do you want to go to Orlando? So though we just develop markets out of those places. And I would tell you, we probably generate, we have to generate 80% of what we fly. I doubt we- if we stole 10 or 15%, I’d be shocked. We don’t steal that much; we generate it. Because if it’s less expensive and it’s more convenient, people just do it more often. When I started years ago, when I saw Ryanair over in Europe starting up, and they were finding these crazy secondary cities out of Stansted airport or- I’m like why would anyone want to fly to that? I don’t even know the name of it. This secondary city from Toulouse, France, and they got it for free. People say just fly down here, we’ll give you the free airport service. And I thought there’s no community of interest there. Well, all these Brits started going down there and saying, wow, look at these French country cottages. They’re so cheap. Like for 50,000 quid, I can get me a French country cottage. So, they bought up all the cottages, and the next thing you know, they wanted to go back a couple of times a month, back and forth. They created a market. And that’s how you do it. If you have service, and we serve, I think, Vero Beach from eight different cities and we probably serve more next year. And you can get there. It’s a great place. It’s not crowded. You can get a second home for a decent price. And now you can fly back and forth on Breeze anytime you want to go. Then it’s going to force you to buy. And that’s same story, generating a market. 

Alex Bridgeman: What are some tactics you use to generate that new demand, that new market? 

David Neeleman: First of all, find places people want to go and they want to go more often. Because there’s the second home, there’s the just get out of the cold and get to the sun. There’s also a lot of migration that’s happening in the country. People have been moving to the Sunbelt. 11 of the 13 new routes that we announced last week touched the Carolinas. Why did they touch the Carolinas? Well, there just happens to be a lot of people from the Northeast that have moved to Raleigh, to Charleston, to Richmond, to all these places that we fly. Richmond is not in the Carolinas, but Greensboro, not Greensboro, but Greenville, Spartanburg, South Carolina, that’s another place that we fly. So, I think you want to go where they want to go for either- we call that VFR, visiting friends and relatives. And the cool thing about Mid-Atlantic is not only do you want to go visit friends and relatives that live there, that move there, but it’s a cool place to go too. It has a lot of fun things to do. So you just combine all of that as you make these market selections. 

Alex Bridgeman: And so, once you’ve selected a market and there’s now, you’ve announced a new route or maybe before the announcement, there’s more research or testing of some kind that you can do, once the route is announced, how do you generate demand effectively? What’s been effective for you? 

David Neeleman: Well, we call it three bites of the apple. You have the first where you announce the city and you get all the press in that area to be excited about the new route, a new city like Albany and Rochester we just added. We also added Memphis. My good friend’s the founder of FedEx, Fred Smith. So, he’s been after me on Memphis for a while. And you go down and do the press. That’s your first bite of the apple. And then you put everything out for sale and that’s the second bite of the apple, and then the day you start flying, you make a big deal and get all the press there. So, it’s really getting the word out, and that’s all kind of free. It’s earned publicity. You don’t have to pay for it. And then obviously, there’s a lot of ways to target people online, where you have Google ad searches and different ways that you can market. And of course, there’s Google Flights that anybody can put in there and they say, well, wait a second, what’s this Breeze thing? I can get there like three hours quicker and I can do it for half the price? Because I always say, Breeze, when we started, I said, we want to get you there twice as fast for half the price. Like, who doesn’t want to do that? So, things like Google Flights, we’re on Expedia, we’re on Priceline. So those are ways to get the word out if people are already searching anyways. But really, it’s when they experience it. Once they experience it, about half the people that fly in us are flying us for the first time. And the other half are repeat business because we’ll grow about 40% this year. So, you want to really track those people that are flying you and you want to incentivize them to keep going and then you want to really take care of the first time flyers so they come back and fly you again. 

Alex Bridgeman: Have you noticed that when you add new routes, it increases the percentage of repeat flyers because now they can use Breeze to fly to more places? 

David Neeleman: Yeah, I mean, I think Albany, Charleston’s a really good example. It was something that we already fly to Charleston. We added Albany as a new city, but everyone in Charleston already knew about Breeze, and all the people that were from that area called all their friends and said, hey, Breeze is coming to Albany, come see us, book your flight, go to flybreeze.com and book it. So certainly, we fly- we announced 69 cities We added 29 last year. We’ve added like five so far this year, and we’ll probably do less than half of what we did last year. But we are still growing at the same rate. So why are you not adding 29 a year? It’s because we’re connecting the dots. People are- of those 27 cities that we now serve out of Raleigh, those are all cities mostly that we’re serving. We did add new cities in Albany, out of Raleigh and out of Rochester, but all the other cities were cities we already served. So, it’s connecting those dots and getting the synergies of people flying in between those cities we already serve. 

Alex Bridgeman: At what point do you decide to pull out of a city or cut a route? 

David Neeleman: Yeah, that’s a good question. We’ve only pulled out of five cities in our four-year history. And that’s a pretty good hit rate because 69, 5, maybe 6%. And I think those cities would work now if we went back in them. And we’ll probably be back. But I think you have to see growth and you have to see cities where you just keep adding more and more destinations. And if you can’t find that many places to go, then you tend to kind of want to just use those precious assets and go somewhere where you can do better with them. So, it’s not just cities you plug, but you also have routes. And a lot of our routes are seasonal. So, January, February, nobody wants to go to LA and nobody in LA wants to go to Providence. It’s kind of like, sorry. Come April, I’m going to go to Providence. I want to go up and eat lobsters and hang out in Boston. Yeah, I’ll do that all day long, but I don’t really want to do that in January. So in January, the people in Providence are like, I don’t want to go to LAX, but can you send me down to Orlando? Can you send me down to Vero Beach? Can I go to Sarasota? So, we do do some seasonal shifts and there are some people that get upset about that. I’m like, well, then you’re like one of the few people that wanted to do it, but there’s just not enough to do it. So, we do come in and out of markets and back in again on season. But I think we’re much better than almost any other airline of just kind of leaving routes. I think we give it more time and we do better in those routes. I think probably 15% of our total routes that we’ve maybe gone out of in some airlines our size 40, 50%. So, we usually stick with it. 

Alex Bridgeman: On the team side, you’ve been a part of companies that grew really quickly, and getting to a billion in revenue in four years, that’s a lot of growth starting from zero. What have you learned about leading fast-growing companies? And maybe as a thought experiment, like if I followed you around for a week while you were at each airline, what would I notice today about how you run a company versus at JetBlue, Azul, or WestJet, or Morris? 

David Neeleman: Yeah, I think the thing that’s really changed for, obviously, the workers have changed. The people that work for you are maybe a little more sensitive, a little bit more, I won’t use the word snowflake. But you have to make sure that you really communicate well, and you treat them well and you are really positive with them. Correcting where you need to, but it’s more, yeah, you have to make sure that you’re taking care of them. And one of the great mediums we have is, especially for a company like us, where we’re based in Salt Lake City, but most of our operations are out East, we use Teams a lot. I have a weekly call with our pilots. We have a weekly call with our flight attendants. We have a twice a week call with our tech ops guys. We had a call today with our team members who do that every other week. If you add up all those numbers of all those people that are on those calls or listen to those calls, we hit over half of our workforce every single week, where we’re getting them in the huddle, tell them how we’re doing, talking a little bit about the industry, keep giving them kind of a pep talk on what we can do better, what we’re doing great on, and what we can do better on. So, I think that medium is, I spend more time on Teams talking to people than I do- When I was at JetBlue, it was great because my headquarters was four miles from the airport. I’d go over there a couple of times a week, I’d get in the belly of the airplane, I’d throw bags, I’d play hoops out with the guys on the ramp. I could sit at a gate and pull tickets or go on board and clean airplanes. I could do all that and that was fun. But today we’re just so dispersed. It doesn’t make any sense for me to fly across the country, hang out. And because a lot of those people that are working on the ramp are not, don’t even work for Breeze. They’re contractors. We’re trying to get more above the wing, we call it, at the gates, but a lot of those people aren’t working for us. We have a lot of management that kind of looks over them. But it’s a different game altogether, and so you have to use technology, and you have to communicate with the people via Teams, and communication, internal communication, it’s a much different ballgame than just going out and playing hoops with people like we used to do when I started JetBlue. 

Alex Bridgeman: Yeah, we had Ann Rhoades on the podcast, and she talked about a weekly Sunday email you would write to the company and reference a story of how some employee went above and beyond for a customer. And talking about the weekly calls as well, like what are some other recurring communications that you try to do with the team? If I, as a communicator, and everyone talks about you can’t over–communicate. That’s something that really seems possible as a CEO. But what does your style and cadence look like? 

David Neeleman: We have certain rules that you don’t violate. Number one, if you announce a new city or a new route, you tell your people before you tell the media. So they hear it first from you. So, they trust that the information is coming directly from you. And then it’s just over communicating. I always have this motto that too much overkill is never enough. So it’s not good enough to be the only airline flying in the market. You want to have the newest plane. You want to have the best, the cleanest plane. You want to have the happiest people on board. You want to have Wi-Fi. You want to just layer on. You want to have first class. So same thing with your people. You just want to be able to over-communicate. Because people just don’t read emails anymore. Yeah, I’d love to blast out an email to the group and think that everyone read it. Doesn’t happen. So that’s why today we had a couple hundred team members on the phone, and I’ll track that recording that we have, and it will be listened to 600 times. Then our pilots, we have 160 pilots on, and I’ll track that and it’ll be listened to 400 times. So, I can get a gist of what percentage of people we’re touching on a weekly basis, as opposed to just firing something to their inbox, which they may not read anyways. 

Alex Bridgeman: Yeah, that’s fair. Thinking about communications and some of your comments around Southwest, did you see the Better Southwest podcast that Elliott tried for a week or so? Interviewing the different potential board members and then it just disappeared. I think once they got the guys they wanted elected to the board, it got deleted, taken off. I couldn’t find it on iTunes or Spotify anymore... 

David Neeleman: That was part of the deal, right? Southwest gave them five board seats. And they said, as part of this deal, you need to delete all your stuff. Because we don’t want you criticizing us if you’re going to be on our board. You’re on our side now. 

Alex Bridgeman: I figured that was the case. I was like, oh, something happened here. Because it was really well done, too. They clearly put a lot of effort into producing all that. 

David Neeleman: Elliott has plenty of money to do that, so. 

Alex Bridgeman: Do you think they’re heading in the right direction now with red eye, more cross-country, assigned seats? 

David Neeleman: Certainly an improvement. It’s really hard to move that ship quickly. And so, there’s still some things, they’re still saying free bags and don’t have a basic economy section. And so, I think that they’ll get there, but kind of one step at a time. They’ve been around a long time. And so, yeah, I know some members of the board, Rakesh, who’s the chairman, who invested 250 million of his own money in the, well, it was 100 million of his own money in the company. He’s a really smart guy, so he’ll get them there. 

Alex Bridgeman: Why do you think other- it seems like a couple of airlines are struggling or at least having to reinvent themselves, Spirit and Frontier, the kind of merger discussions there being a prime example. Do you think there’s a broader challenge that airlines are facing and trying to deal with that you’re observing? 

David Neeleman: Yeah, absolutely. There’s the haves and the have-nots. You’ve got United who’s making record profits, Delta making record profits. American’s lagging, their market cap’s a third of what United’s is, but they’ve got more debt. And so, they’re lagging, but they’re still doing okay. Alaska’s got tons of wins in their cell. They bought Hawaiian for a really good price. And when they bought Hawaiian, Southwest said, hmm, maybe we shouldn’t be losing so much money flying to the islands. And that pullback has really helped Hawaiian rebound. So that’s good for them. And then you’ve got Spirit and Frontier that are- they’re under all kinds of pressure. And I believe that they will merge. I just got a message that Frontier just called off the merger talks. They were talking, AKA called it off again. But I think it’s just because Spirit’s drawing a line and they’re drawing a line, and there’s a lot of egos there. But I think they’ll eventually get together, even though they called off the merger talks. JetBlue has got to kind of get back to its roots and doing what they do great. They do have a great product and they have some great real estate in New York and in Boston. I think the big question is, will Spirit and Frontier merge? What happens to JetBlue? Can JetBlue stay independent? I hope so, as the founder. But a lot of people are looking at it saying, hmm, there’s some good stuff there. Be it from the big guys or from the other guys, maybe Southwest, Alaska, whatever, that may look at JetBlue as the target of some time in the future, especially if JetBlue’s stock price stays low. So, you got to figure out how to right the ship and get the stock price up so it becomes a tougher pill for people to swallow. 

Alex Bridgeman: Do you think it would make sense for someone like Alaska to buy JetBlue to have East Coast presence and now JetBlue has West Coast? 

David Neeleman: I think on paper it does, but easier said than done. They had a hard time just buying Virgin America and integrating all that. They spent a lot of money for it and that was in their backyard. Getting rid of that Airbus fleet, now you got a whole other Airbus fleet. So I don’t know. I think Alaska’s kind of just enjoying what they’ve got going now. I don’t think they want to deal with that. That’s a big undertaking. 

Alex Bridgeman: Yeah, certainly. What other advice do you offer CEOs who want to build ambitious companies and grow quickly? What are some key points? 

David Neeleman: Just hire great people and treat them great and make sure that they feel part of a cause. They feel part of something other than just their job. If you interact with companies, you can tell if people love working for the company. And those companies just grow faster, if you have a high NPS score. We focus a lot on NPS score here. And when we’re on time, our NPS score is through the roof. And when we’re not- 

Alex Bridgeman: This is external and internal NPS? 

David Neeleman: Yeah, external, obviously. I think our people internally are a little more critical than even our guests are. We do much better externally than we do internally, which is a challenge that we’re addressing every day. But yeah, people who have higher NPS scores do better and they have higher market caps, and so we really focus on that. But back in the day when I started JetBlue, nobody did that. Qualtrics didn’t exist, SurveyMonkey didn’t exist, but everybody does that now. So that’s not unusual, it’s just unusual to have a really high score, and that’s what we are really focused on. 

Alex Bridgeman: What other- you mentioned ETOFs being something you’re trying to get to at some point. What other key challenges lie ahead for you that you’re focused on? 

David Neeleman: Well, imminently, hopefully we’ll have FLAG, and we can fly international. We could fly international today, charter, public charter, but our marketing guys are holding out saying, oh, let’s just do it scheduled service. Another season goes by. So, it’s obviously not something that’s wholly dependent on us. It’s an FAA process. And so, we’re- but we can do it. We fly internationally all the time, but there’s scheduled service international and there’s public charter. And if we don’t get the scheduled service, we’ll be flying the public charter side, which is the same thing for our guests. 

Alex Bridgeman: Wonderful. What have I not asked you that I should have asked you? 

David Neeleman: I think you covered it pretty well. We’re just trying to build a company by starting by treating your people great and wanting your guests- put yourself in their shoes so that you fix stuff that you would be annoyed with so that they come back and fly you again. It’s pretty simple, but there’s a lot of complexities, obviously, to this crazy business. 

Alex Bridgeman: Yeah, I think a lot of CEOs would run better companies if they tried their own product and went through that same experience, especially with apps or any sort of services or even something like dog boarding. Like, you use your own dog boarder and fill out all the forms. There’s probably something there that sucks that as a customer you would see, but as CEO it’d be easy to miss. 

David Neeleman: Yeah, I mean, go pick up a rental car and unless you’re a gold or something, all you have to go through that every time. You think you can go on and verify yourself and do all that online and just go pick up your car. There’s just so many things that would be easier. Kind of a funny story, when I was kind of putting together JetBlue and I really wanted to- was thinking about what people really wanted, I was flying on another airline, I won’t say the name, but I was flying another airline, and it was a full flight, every seat was taken. And I went to sit in my seat, I had a suit on. I felt wetness I was sitting on. And it ended up being urine from the person who had flown before me. So, I stood up to the flight attendant. I said there’s urine all over the seat. Now I’m all wet. And she said, well, it’s the last seat on the airplane. Do you want to get off or do you want to stay on? And I said, back when they had blankets, I said give me a few blankets. So, I sat on the blankets. And then I was on my way back home, and all of a sudden, I felt wetness on my socks. And the person who was sitting in those seats had moved up one seat, and now he was urinating onto my socks. It’s just an old guy, and what do you do? So, I took my socks off and put them in the barf bag. And then I said, if I ever start another airline, I’m going to have leather seats. This will never happen to one of our guests. 

Alex Bridgeman: Were they cloth? 

David Neeleman: Yeah, they were cloth. Back in those days, everyone had cloth, except it was first class. So I went and said, how much does it cost to put a cloth seat on? And they’re like, it costs like three times more, but they last 10 times longer. I go, we’re going with leather seats. That’s just a small example of something that was crazy. It’s like, why didn’t we put wheels on suitcases before like 30 years ago? Because nobody ever thought of it. Now everybody has those seats that wouldn’t cause that unsanitary conditions on these cloth seats that everybody used to wear. 

Alex Bridgeman: Oh, that’s horrific. Do you check your seat every time before you sit down now? 

David Neeleman: Not really, because I can see if it’s a leather seat or it’s a pleather seat in a lot of cases. 

Alex Bridgeman: I would never forget that. 

David Neeleman: When I had- PETA kind of came after us because we had leather seats, and they sent me a shirt that said PETA, and then someone else sent me a shirt that said PETA, and it come down, people eating tasty animals. So, we switched to pleather as soon as we could because those were just as good as leather, but originally they were all leather seats. 

Alex Bridgeman: Yeah, there’s a lot more synthetic leather options today that you could choose. Some of them are a little bit more long-lasting, too. 

David Neeleman: Yeah, and they’re lighter. 

Alex Bridgeman: Yeah, lighter, too. Well, David, thank you for sharing your time with the podcast. It’s been super fun. 

David Neeleman: Appreciate you coming all the way out here. 

Alex Bridgeman: Yeah, well, absolutely. Happy to have you.

David Neeleman: I need to get you out to Raleigh and see our operation out there. It’s doing great. It’s growing and we’ve got more destinations out of Raleigh than any other airline, so I’m really proud of what we’re doing out there. 

Alex Bridgeman: Yeah, still lots of opportunity. There’s a Portland option there that you can fly one day. 

David Neeleman: Yeah, that may work.