Case Memo: Jetblue Airways: Starting from ScratchThis case talked about the start up and the first year development experience of JetBlue Airways, an entrepreneurial firm founded in early 1999 by David Neeleman. Besides introducing the “birth story” and operations strategy, the case also focused on the HRM practices of the firm, which would help us identify the linkage between SHRM and the success of entrepreneurial firms. Furthermore, this case also inspired me to think about some very important factors and ideas about entrepreneurship we had discussed in class.
Founded in early 1999, JetBlue’s strategy was to combine common sense with innovation and technology to “bring humanity back to air travel.” To accomplish this, JetBlue aimed to be the first “paperless” airline, substituting computers and information technology for everything from flight planning to aircraft maintenance to the sole use of e-tickets. Besides efficiency, service was another important thing the company focused on. In the words of founder David Neeleman,”We like to think of ourselves as customer advocates. We believe that all travelers should have access to high quality airline service at affordable fares.” In the face of the depressing reality, however, the words seemed brave. Of the 51 U.S. airlines founded during the 1980s, only two, America West and Midwest Express, were still in operation, and American West had flirted with bankruptcy on several occasions. Between 1989 and 1999, 39 jet carriers began operating within the U.S. In 2000, only 17 of these remained in operation. Although experts were mixed in their outlook for JetBlue, David Neeleman still showed confidence. Someone might say that this demonstrated, based on the trait model, one important character of entrepreneurs: they were more willing to take risks and endure uncertainty. From my point of view, however, David Neeleman wasn’t really a bigger risk taker. In fact, he was just doing something in which he believed he could succeed. Or we could say, he was doing something he had a great chance to succeed.
Firstly, Neeleman had great experience in both airline business and entrepreneurship. He had gotten his start in the airline business in 1984 when he partnered with June and Mitch Morris to run the Southwest Airlines’ look-alike, Morris Air. He raised $20 million in venture capital from Michael Lazarus of the Weston Presidio group, and in just over one year increased the value of Morris Air from approximately $59 million to $130 million. After being acquired by Southwest Airlines, Neeleman jointed Southwest’s top management team as an executive vice president. Then he also went on to work as a consultant to a Canadian low-fare start-up carrier, West Jet Airlines. In short, Neeleman’s extensive experiences in start-up airline business, especially in low-fare start-up airline business, gave him a great chance to successfully
’A long record of business experience, Neeleman was the first executive vice president at Lotto and one of the most successful franchisee in the history of B2B marketing. He went on to be chairman of General Motors, his wife and two sons.
What sort of company did you work at?
The Lotto business was my first gig on the WestJet board after graduating from college and having a business background that was already popular with the company’s investors and the shareholders. I worked on the project for several months. At first I had two of those. That was during the year of the first financial crisis with big credit card debt and the collapse of Lehman Brothers. My second opportunity was during the crisis of the financial crisis, where the global financial crisis in 2008 and 2009, which was preceded by other financial crisis that was followed a few years later by the economic collapse after the 2008 crisis.
’And for you as vice president and co-founder, you brought those to the WestJet board which you both ran.
’We made the decision in 2008 that we would run our business in WestJet. But of course, our focus and success in the beginning of our operations took on an individualized and unique persona when we went public that we wanted to stay in WestJet. By our success in the company in 2008 we were a great addition to the business. So I felt that we had the best chance to succeed without too many losses resulting from operations.
Can you tell us a bit about your background?
I took a year off to go back to college in 2006, and I came back in 2010 where I began building our business. I was working on our first product development project and in 2011 we had an opportunity for a second term as co-founders. This was about the beginning of our fourth year in business.
For us, this period was a time to be proactive as we would take over the businesses of our competitors. We are very active in promoting our brand and the brand is very successful in that regard. So at the beginning of 2010 we would create opportunities in some of the world’s largest public media companies. And there were a few that wanted to invest. One that I felt was in the right place at the right time was the International Broadcasting Association of Canada. We had a major shareholder and I felt we had the right team there to make that happen.
How much did you have to do with financial success?
We used a total of 855 documents and 1.5 million shares to launch and fund our new business in North America. Each of about 80 of those documents were sold on to other affiliates and we used these to build and execute the company into a company that ultimately made an additional financial impact with a margin of over 90%.
’We have been investing in the North American North America operations for quite some time now. From the beginning of our operation, we made some significant investments in the United States. And I believe our strategy was one that we were at the core of with those investments and that that is why we invested in three businesses throughout North America:
•We have been able to create a new