AIN Guest Perspective: JetBlue CEO Dave Barger
The effort to bring “humanity” back to air travel has guided JetBlue CEO Dave Barger's management philosophy ever since he landed his original job as the airline's president and COO in August 1998. While circumstances beyond its control certainly tested that doctrine at times, JetBlue never veered from its core values-thanks in large part to Barger, who, in May 2007, assumed the chief executive's role from its founder, David Neeleman. Since then Barger has led the airline's return to profitability, presided over its transition from Navitaire to the Sabre reservations system, guided negotiations that ultimately kept its headquarters in Queens, N.Y., sealed a landmark code-share deal with Lufthansa and brokered an interline agreement and slot swap with American Airlines that will allow JetBlue to launch service from Washington Reagan National Airport in November. From his offices in New York, Barger spoke with AIN this month about those developments and some of the trends he sees emerging within the industry at large.
How do you view the industry's performance the first quarter of this year?
I think generally across the industry it's nice to see some strength back into bookings. For us it's a peak time of year anyway because in our route system now to Florida and the Caribbean we tend to carry the VFR (visiting friends and relatives) traffic and discretionary traffic more so than the business flier. But as we're becoming more relevant to the business flier…I think all things considered, we're seeing a rising tide, which is positive.
How has JetBlue become more relevant to the business traveler?
First of all the new reservations system allows us to penetrate the GDS (global distribution system) community into the corporate travel manager. Things like our frequent-flier program, TrueBlue, are much more user friendly in this iteration with last seat availability on the airplane. Adding frequency between city pairs-in places like Boston-[is a] significant source of business customers, let alone the new terminal here at Kennedy [Airport], which I think business fliers feel pretty good about the fact that it works, as opposed to some of the older infrastructure in and around the region.
Did the emergence of Virgin America help push you deeper into Latin America?
Not necessarily, because really when we started to deploy assets, 55 percent of our assets were on the [transcontinental network.] And that's just too much, and so we decided to redeploy into Latin America. And when oil started to run, all of a sudden transcon-which happens to be very competitive in Virgin America's market-it was just a better allocation of resources to fly shorter haul into Latin America, with a greater revenue upside and maturation of the market. So one can kind of think that it was Virgin America, but it was really kind of a combination of what was right for JetBlue and balancing our route network.
How important was the switch to the Sabre reservations system?
I think it's real important for this chapter of our airline. First of all, just as we were growing the company-we took nine airplanes last year, we're taking four more this year and we'll have quite a bit of growth planned from 2011 out-we needed to change out our customer service system just because of our own growth platform, number one. Now a secondary reason, but it's a main reason, was the ability to have airline partnerships, to optimize things that we're doing with American [Airlines], what we're doing with Lufthansa, Aer Lingus, Cape Air and other carriers. I think what's so different about Kennedy, our home, [is] we're the largest carrier, and we're the largest domestic airline in all of New York if you put Newark and La Guardia and JFK together. But there are over 80 airlines that fly in and out of JFK. The ability to electronically talk to these other carriers through the Sabre system…that was the secondary reason for the change. And the third reason is really to optimize the booking flow-ancillary revenue streams; that could be hotels, car rentals, insurance.
Do your goals include a full code-share agreement with American Airlines?
Don't know. We truly haven't had those discussions. I think what we would like to see is an open architecture so that we can partner with Lufthansa and the carriers that…let's face it, Lufthansa's within [the Star Alliance], you see American in OneWorld; it's this open architecture where we can connect traffic. All that said, I think that we're really pleased with what we announced with American so far…and I know that our team is very much open to what can be next, as has been the case with Lufthansa as well. Of course, then you get into the alliances, and it's a rather interesting landscape because we don't participate.
Will JetBlue ever become part of a global alliance?
I'm real open to it. But again, at the same time you have to be careful of that too, because if you tend to declare an alliance…you opt in, but then you're kind of opting out of other partnerships. We've been independent really, and there are not many carriers like that. Alaska is. Southwest is, JetBlue, AirTran. We'd have to see what makes sense. But at the end of the day if it's good for our shareholders, our customers and our crewmembers, you bet we would make that decision.
What major surprises have you encountered in your two years as CEO?
One thing we learn is that there are always surprises. I don't mean that in a flippant way, but who would have expected oil to go to $147 and $180 including the crack spread, where all of a sudden we're on the back side of the economy going into a deep recession? These were such huge curveballs on to the industry with oil-our number one cost-going to that level. But in a way the reverse spike was even more difficult because what do you do? When do you try to bail out, if you will, in terms of oil hedging?
How important is maintaining a non-union workforce?
I think it is important. At the end of the day, though, educate crewmembers and they'll make their own decisions. I just think that a direct relationship where we can collaborate as opposed to negotiate is in the crewmembers' best interest. There are airlines that are successful with a unionized workforce such as Southwest. I just think that we can optimize our environment by talking with one another and solving issues with one another without a third party.
Is your no-furlough policy the most important part of your effort to maintain a non-union workforce?
I wouldn't say the most important; let's face it, you have to be competitive from a comp and benefits perspective. But you also have to be able to walk the talk. So things like job security and making decisions to support that are very important as well.
Would you be interested in a re-engined Airbus or Boeing narrowbody for your operation?
Absolutely. There's interest. Anytime one of the OEMs is coming out with potentially something that looks like double-digit fuel efficiency improvements, it's of interest. Now all that said, it gets very complex. What's the timing? Is there going to be a new-generation narrowbody airplane from both Boeing and Airbus? What happens to your current fleet's residual value? Our number-one cost is fuel, even with oil at these levels, and so the ability to place winglets on the A320 and to reduce our fuel burn…we're working through that modification right now. What you don't want to do is buy, I'll call it 'new-old,' [where] all of a sudden it's becoming old because something else is out there.