Air Transport World

It's a blue world after all: JetBlue rewrites the rules of the game and has the Majors on the run to keep up.

Nothing about the office building at 118-29 Queens Blvd., Forest Hills, N.Y., hints at the revolution taking place within. The architecture is unremarkable, to put it kindly, and the address is enough to send shivers down the spines of hip Manhattanites, whose forays into Queens generally are confined to the annual US Open tennis tournament in nearby Flushing Meadows.

Looks can be deceiving, however, because this is the new headquarters of JetBlue Airways. When you are one of only three or four airlines in the Western Hemisphere that is profitable and growing, you don't need fancy digs or a midtown address to impress.

Three years on, JetBlue continues to amaze. Having turned the corner on profitability in its first full year of operation, it has posted nine consecutive profitable quarters while doubling in size and then doubling again. It currently is operating nearly 200 daily frequencies across a route network encompassing 21 destinations. Although it has begun to "connect the dots" among its city-pairs, around 70% of its flights begin or end at its JFK hub, which sits in the middle of a local catchment area of 5 million. It ended 2002 with after-tax income of $48.9 million on sales of $635.2 million and followed this up with a net profit of $17.4 million for the 2003 first quarter--which generally is acknowledged to have been the most challenging since the fourth quarter of 2001.

Over the same period it has rewritten the rules for startups, banishing the prefix "no-frills" from the phrase "low-fare airline" by offering leather seats and 24 channels of live satellite television onboard its spotless A320s. Asleep-at-the-wheel Major airlines have been forced to play catchup since day one, when airline founder and CEO David Neeleman gamed the political system to get precious slots at capacity-constrained JFK. Two years ago he caught everyone napping again, sneaking into Long Beach Municipal Airport on the outskirts of Los Angeles and snagging 27 of only 41 airline-use daily slots there--although this is likely to be whittled down to 23 under a subsequent agreement. Long Beach provides an attractive alternative to LAX as a western terminus for JetBlue's transcon services from JFK and Washington Dulles International Airport. In addition, it flies to Oakland, Las Vegas and Salt Lake City from Long Beach and added Atlanta and Ft. Lauderdale in May.

In April, the airline set the stage for its next growth surge by announcing orders for 65 new A320s with options on a further 50, bringing the firm backlog to 111. The fleet, currently at 42, will number 53 by year end. The route network, heavily weighted in favor of New York-Florida and transcon markers, will grow by one more city in 2003 when San Diego-JFK comes online June 26, and Neeleman has hinted at another.

Perhaps nothing better illustrates the upsta rt's ability to rewrite the rules of competition than the fact that Delta Air Lines has been driven to reinvent the inflight TV product JetBlue pioneered in order to give its new low-fare unit a fighting chance. Song launched in April but will not begin offering its own satellite-based TV until autumn, and fleetwide rollout will not occur until 2004. JetBlue, which purchased LiveTV in September 2002 for $80 million, is guarding its patents jealously. …

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