Cleaning up and flying right
JetBlue Airways CEO David Neeleman speaks on airfare concerns, changes for a profitable year and cleaning planes.
(FORTUNE Magazine) -- When JetBlue (Charts) took off in 2000, it quickly became the discount airline of choice. The upstart carrier drew customers with its free live TV, cheap fares, and a CEO who cleaned company planes. But in 2005 the carrier stumbled, posting its first loss since going public. With oil prices sky high, the carrier's model is now being tested. Neeleman, 46, chatted with FORTUNE's Julie Schlosser about fuel, in-flight e-mail, and his plans to get JetBlue back into the black.
With high fares and lower capacity, summer travel looks a bit bumpy. Are you concerned?
I am worried about fuel prices. We were predominantly a long-haul carrier, and the run-up in fuel prices really hurt us. You can't keep charging really cheap fares. I like doing that; it is more fun. But we went from $20 a person in fuel costs to fly across the country to $65 to $70 per person.
We have about 40% of our fuel hedged through the end of the year, but it is mainly catastrophic coverage. It's difficult when fuel is at its all-time high to say, "Okay, now we want to buy fuel for the future." It would have been ideal to hedge at $40 a barrel.
So why didn't you hedge more earlier?
I think the frog just got cooked one degree at a time. I had people saying, "There's no way it is going to go above $50, so don't hedge here."
Are you thinking about alternative fuel?
We are. We can't burn ethanol on airplanes, but you can make jet fuel from coal. We've conceived some legislation, which has to do with just that. You can make this stuff for $35 to $38 a barrel. The downside is that it takes a huge amount of capital to build $4 billion plants. Nobody wants to build it and have the price of oil go below $35. So the legislation basically says you get compensation for your capital if the price goes from $38 down to $18. It's a no-risk thing for the government. With 70 plants, we could generate about 45% of our imported oil equivalent.
You recently won the government's auction for wireless spectrum. How will you use it?
The FCC hasn't officially awarded the license yet. There's commotion about phones, but we have no intention of putting them on planes. We thought what would be useful and respectful of other customers would be if we could figure out how to make a wireless device work, so you can use your BlackBerry at 40,000 feet.
Despite last year's loss, you expect to be profitable next quarter. What are you doing besides cutting some long-haul flights?
That's part of it. We are really focusing on the mix of fares - trying not to offer so many really cheap fares and not so many expensive fares.
Are you still cleaning planes?