![]()
I donât think the American dream is to
start a company and sell it. Sometimes you
end up selling your dream. There are
things that money canât buy.
âDAVID NEELEMAN, FOUNDER AND FORMER CEO
OF JETBLUE AIRWAYS CORP., FOUNDER OF AZUL
LINHAS AĂREAS BRASILEIRAS
Chapter One
DAVID NEELEMAN WHEN ITâS TIME TO MOVE ON
Every time David Neeleman has faced a career upset or disappointment, he has quickly responded by pursuing the next opportunity. His phoenix-like determination to rise from the proverbial ashes has led Neeleman, now fifty, to establish no less than three airlines thus far. His entrepreneurial drive has been fueled by a creative vision to establish organizations that are as good as, or even better than, their competitors, and in the process to help other people.
âFrom the time I sold my first company when I was thirty-three, it has always been about creating new things and helping people reach their potential. Money is a way to keep score at times I suppose, but it doesnât bring happiness. Money is the means, but itâs not the be-all and end-all,â Neeleman said.
Neelemanâs fondest creation was JetBlue Airways Corp., which from its first flight in 2000 quickly captured both news headlines and customer loyalty for its superior service and commitment to do whatever possible not to cancel a flight. An ice storm in February 2007, however, delivered a black eye to JetBlueâs nearly unblemished record, an unfortunate event that Neeleman labeled âthe worst operational week in JetBlueâs seven-year history.â1
Although he may not have been personally at fault for the nightmare of flight cancellations that extended for days, as chairman and CEO, Neeleman took responsibility for the crisis. His public apologies were followed by an even greater commitment to customer service to restore JetBlueâs reputation. For Neeleman, however, another storm was brewing, as discussions ensued around who would be best to oversee the day-to-day operations of the airline, which had been his brainchild and fondest creation. Only three months later, in May 2007, Neeleman was asked to step down as CEO and a year later relinquished his chairmanâs title as well.
Neeleman may have been temporarily without an airline, but he was far from grounded. His latest venture was already taking shape in his mind, an opportunity in Brazil, which is his second home and a market in which he sees untapped potential. This new venture would allow Neeleman once again to build a business embracing the philosophy of servant leadership: putting the needs of others first to inspire them to give of themselves and reach a higher level of achievement.
Devoting himself to this new business in Brazil and focusing on the needs of his employees is how Neeleman copes with his departure from JetBlue, a loss over which he had little control. The man who has been called âa serial entrepreneurâ relies on his philosophy of servant leadership and generates momentum through new ventures to carry him forward into the future, even though the pain of past setbacks remains.
Growing Up in Brazil
A seventh generation Mormon, David Neeleman and his family hail from Utah, but his personal roots are in Brazil. His father, Gary, had been a Mormon missionary to Brazil as a young man, spending two-and-a-half years in the southern part of the country and in Sao Paulo. Even after Gary returned to Utah and got married, Brazil was close to his heart and he longed to go back. He became a foreign correspondent for United Press International (UPI) and soon became the Sao Paulo bureau chief during his seven years there as a correspondent. (Several years later he became UPIâs vice president over Latin America and the Caribbean.) The second oldest of seven children, David Neeleman was born in Brazil and grew up speaking English and Portuguese. When Neeleman was five, his father moved the family back home.
Back in Utah, Neeleman faced a difficult transition to elementary school. Born in October, he was younger than many of his classmates, a situation that became compounded when he was moved ahead a grade because he had already attended kindergarten in Brazil. Later he was diagnosed with attention deficit disorder (ADD), which further explained why school was so challenging for him.
Neeleman benefited from another type of education: working at his grandfatherâs grocery store from about the age of nine until he was nineteen. Watching his grandfather interact with people who came into his store, Neeleman learned quite a bit about customer service. Then came his first real taste of success, which molded him as a leader. At the age of nineteen, Neeleman was sent to Brazil as a missionary, thanks to his dual citizenship and the fact that his father had previously served the church there. During his two-year mission, Neeleman rose through the ranks of district leadership and served as district president for the last seven months of his assignment. âFor the first time in my life, I succeeded at something,â he reflected.
His time in Brazil, spent mostly in the northern part of the country, also exposed Neeleman to a different side of life among people who were largely poor and very humble. The contrast between haves and have-nots created an indelible impression. On one hand were the wealthy who enjoyed a sense of entitlement; on the other were the poor who had next to nothing and yet were often happier and more willing to share what little they had. His experience in Brazil would later affect his leadership in the airline business in many powerful ways.
But as a young man returning to Utah from Brazil, airlines were not on his horizon. Soon, however, he would have his first experience in the travel industry, which would quickly immerse him and, despite an early failure, would never get out of his blood.
Entering the Travel Business
After returning home from his mission to Brazil, Neeleman married his girlfriend, Vicki, and entered the University of Utah. While still a student, he started a travel business in the early 1980s, renting timeshares in Hawaii. âBecause of the recession at the time, companies couldnât sell time shares, so I said, âIâll rent them for you.â Thatâs how I got started,â Neeleman recalled.
When an airline agreed to sell him tickets wholesale, Neeleman was able to offer airfare and accommodation packages to his customers. By the time his company reached twenty employees and $8 million in sales, Neeleman had to drop out of college as a junior to run the operation full-time. Then the airline that had sold him tickets went bankrupt, and Neeleman had to make restitution to his customers. It was a considerable financial loss that nearly wiped him out. âI was done with the travel business,â Neeleman remembered thinking at the time.
Married with two children, Neeleman had no choice but to join his in-lawâs window-covering business and went back to work for his grandfatherâs grocery store to make ends meet. It didnât take long for the next opportunity to come alongâand, once again, it was in the travel business. In 1984, June Morris, founder of corporate travel agency Morris Travel, whom Neeleman described as âa very wise lady,â invited the then twenty-four-year-old Neeleman to join her company and develop a leisure travel business. Neeleman accepted her offer and set up a charter air service which later became Morris Air, the first airline he helped to establish and of which he became a part owner. With Morris Air, Neeleman realized his destiny as an entrepreneur in one of the most difficult, cost-inefficient, and otherwise challenging industries. âThis was my first airlineâmy first hit,â he recalled proudly.
Based in Salt Lake City, Morris Air was among several low-cost airlines that challenged larger carriers on shorter, regional routes. In 1992, while at Morris Air, Neeleman developed a ticketless technology that was a breakthrough innovation in the industry. (Although Southwest Airlines is often credited for having invented ticketless travel, Neeleman says it all started with Morris Air.)
The success of Morris Air attracted the attention of Southwest Airlines, which in December 1993 agreed to buy the smaller airline in a stock swap worth about $129 million. Neeleman, then president of Morris Air, told the New York Times that a buyout by Southwest had not been a stated goal, but âwas definitely something we had in the back of our mind.â2
Being acquired by Southwest was a victory for Morris Air, enabling it not only to become part of a larger airline, but also to join forces with a company that was revolutionizing air travel with affordable fares and an expanding system of routes. âSouthwest was a beacon that was out there,â Neeleman observed in a speech he gave at Stanford University in 2003.3
The Southwest deal gave thirty-three-year-old Neeleman some $25 million from the sale of Morris Air and a new boss and mentor: Southwest CEO Herb Kelleher. âWhen Herb came to town we hit it off,â Neeleman recalled. Both dyed-in-the-wool entrepreneurs with vision and charismatic personalities, Neeleman and Kelleher shared a deep passion for the business and a competitive spirit.
In our interview, Neeleman spoke with admiration for Kelleher, particularly the way he treated employees. âHe could just sit and talk to someone. He didnât care who you were; he just liked people,â he said. Neeleman was also influenced by Kelleherâs ability to focus âmore on the people instead of the profits.â He recalled a comment Kelleher delivered at an analyst conference: âWhen I take care of them, theyâll take care of the customers.â Neeleman would go on to adopt this same attitude in the airlines he later founded.
After Morris Air was purchased, the plan was for it to be merged slowly into Southwest over two or three years, during which time the Morris Air planes were to be repainted and most employees would be hired by Southwest. The pace of that integration, however, was too slow for Neeleman who had grown Morris Air at a rapid pace. Although he loved Southwest and greatly admired Kelleher, Neeleman was told in 1994âa year after the mergerâthat he would have to leave. âI saw them running my company [Morris Air] as they were integrating it. I was trying to get them to be more progressive. Herb said to me, âItâs not working out. Itâs too disruptive for a big organization,â â he recalled.
It was a devastating blow for Neeleman who said he would have returned every penny of the $25 million he made on the deal with Southwest âto take my company back.â That disappointment led to an important revelation regarding his ultimate motivation as an entrepreneur: It wasnât about the money. âI donât think the American dream is to start a company and sell it,â he reflected. âSometimes you end up selling your dream. There are things that money canât buy.â
Even before his departure was official, Neeleman was already weighing possibilities for his next venture. What he settled upon was helping to run a Canadian discount airline, based in Calgary, called WestJet. With a five-year U.S. non-compete agreement after he left Southwest, Neeleman decided Canada was âthe closest place to Utah that was out of the country.â In early 1996, Neeleman became an investor and a board member of WestJet.
During this time, Neeleman also developed Open Skies, a reservation system that catered in particular to small and medium airlines, allowing them to issue electronic tickets. In 1998, he sold Open Skies to Hewlett-Packard, which, in turn, sold it in 2000 to a unit of consulting firm Accenture. Open Skies reflected Neelemanâs belief that technology can create efficiency in airline travel. However, technology alone would not be the solution to better air service. As Neeleman believes, âThere is a human aspect of our business. We are in the service business. We call it . . . high tech, high touch. You need to be able to do both.â4
After WestJet and Open Skies, Neeleman had a strong desire to establish an airline that would be like no other. In 1999, as his five-year non-compete with Southwest was coming to an end, Neeleman looked around the U.S. market for what he could do next. His target: the Northeast, where airfares were particularly high. Going to New York on several occasions to speak with potential investors, Neeleman surveyed John F. Kennedy Airport, which he saw as wide open in terms of terminals and runway capacity. âSo I decided to do it again,â he said simply.
Starting his new airline, his second, Neeleman decided to learn from the mistakes of others, particularly when it came to poor customer service and the hassle of flying. He sought the advice of his longtime legal advisor Tom Kelly and financier Michael Lazarus of Weston Presidio as he explored the ways a new airline could use customer service as a competitive advantage. A case study by Harvard Business School summarized the brainstorming around Neelemanâs new venture: âWhat if building a people-centric corporate culture could not only increase pride and creativity, but also avoid a unionized workforce that every major airline had, including Southwest? What if you could build a discount airline that had an entirely new fleet of planes? What if you could create an almost entirely paperless airline, with ticketless flying as the only option?â5
Neeleman answered all those questions with JetBlue. To fund it, he raised $130 million mostly from the original investors in Morris Air, with one notable newcomer: billionaire investor George Soros and his Quantum Fund, who at one point would own about a third of the company. Other investors included Chase Capital and Weston Presidio, which backed what Neeleman called a âSouthwest-Plusâ business plan. With investors onboard, Neeleman made JetBlue the best-funded startup in airline history.6
In July 1999, JetBlue was unveiled as âNew Yorkâs new low-fare, hometown airline,â promising affordable airfares that would be, on average, 65 percent less than current fares on some routes. Called the first âmega start-upâ airline, JetBlueâs initial plans were for a fleet of up to 82 new Airbus A-320 aircraft. JetBlue promised wider seats, more legroom, and more overhead storage space than other airlines in its class. Another plus was twenty-four channels of live in-flight television for a first-class experience in every row of the aircraft. âI was looking for something we could offer for entertainment. I still remember finding this company that could put live television in the seat back. When I saw it, I knew that was it. We were the first ones to offer it,â Neeleman recalled, sounding very much like an entrepreneur who enjoys breaking ground and doing things, both large and small, before others do.
There were many firsts for JetBlue, which embodied Neelemanâs vision of offering something differentâor as he called it âa new shade of blueââin air travel. These differentiators were more than just window dressing and amenities; they reflected a commitment to establishing a culture that was vastly different and that would translate into satisfaction and success.
âThe vision for JetBlue came from everything I learned at Morris Air and WestJet, all of my experiences rolled into one, with a goal of becoming better than all of them. A lot of things I took from Southwest, such as how they treated people and how efficient they were,â Neeleman said. His goal was not just to mimic but to significantly improve upon what he had experienced first-hand at other airlines. âMy goal was to be a new and improved version of Southwest.â
Although JetBlue would be a major accomplishment for Neeleman, there would later be deep disappointment in store for him as well. Before that happened, however, it would be one incredible ride.
At the Controls of JetBlue
Reflecting on his entrepreneurial drive, Neeleman explained it as the desire to figure out how to do something âbetter, more efficiently and at lower cost.â At JetBlue, he first attracted an all-star team of industry veterans, including Dave Barger from Continental Airlines, who became chief operating officer; Tom Kelly as general counsel; John Owen from Southwest as chief financial officer; and Ann Rhoades, the senior human resources person at Southwest who had helped fire him, as head of human resources. Others came from Virgin Atlantic and the U.S. Department of Transportation. The team embraced Neelemanâs core values of putting employees (whom Neeleman called âcrewmembersâ) first as they worked to deliver the lowest-cost and highest-quality service.
JetBlueâs first flights took off in 2000. By August of that year, w...
