In Focus

Flying High with Jet Blue

I have to get a hold of Chick Susie. She's going to want to know this scoop. Then again, knowing Susie, she probably knew this flash of information long before me. This past week, another airlines took their stock public! So why should Susie care? She likes airline stocks. She's proposed Southwest Airlines for a couple of our Chick Buys and I'm hoping that she gets wind of this article, does some further Chicky research and proposes it for our next purchase. I just might bite.

What if I were to tell you there were an airline that was profitable last year? Remember this is the same year of the 9-11 tragedy. Also, this was the year that many airlines filed for bankruptcy or just plain went out of business. What if I were to tell you that this profitable airlines offered lower fares than their competitors? Yep, Washington, D.C. to San Francisco costs $119 round trip. What if I were to tell you that this low cost airline is based out of an airport in the busiest city in the world, New York's JFK. Get out. It just doesn't seem possible. Somehow, the folks at JetBlue (Nasdaq: JBLU) are doing it.

I know, I know, you probably haven't heard of JetBlue yet, but I'm sure you will soon. As it stands, the airline only serves 18 cities* around the country, and in those cities, it flies in and out of the smaller airports. But they and their CEO have come a long way from where they began.

I first took note of the company's CEO Dave Neeleman when he ran an airline in the city I lived in at the time… Calgary, Alberta. Mr. Neeleman (what the heck, we'll call him Dave since he's only a couple years older than me -- 41 -- and it's easier to type) started West Jet airline whose base was located in Calgary. Previous to coming to Canada, Dave was running a Salt Lake City based airline called Morris Air. He ended up selling Morris Air to Southwest Airlines (NYSE: LUV) in 1993 (are you reading, Susie?) It was his experience at Morris Air that got him addicted to running low fare/high quality airlines. Because of a non-compete clause with Southwest, Dave was forced to launch his next start up airlines outside the U.S. Lucky for me, it was in Canada. I ended up flying West Jet a lot throughout the great white north and took note of the fast/on time service and low fares.

Dave must have been doing something right. Since 1999, when West Jet went public, the stock has returned a hefty 247% profit to it's shareholders. That's better than any old index fund. And get this -- since September 11th, West Jet (WJA on the Toronto Stock Exchange) is up 65%. In addition to two successful start-up airlines, Dave developed an efficient e-ticketing system called Open Air that he implemented at both of his businesses. He ended up selling Open Air to Hewlett Packard in 1999.

With three winning companies under his belt, he was ready to head stateside and test out some new wings. Now our Dave didn't just pick any city to set up shop, he picked the one that doesn't sleep at night, and plunked down. In July of 1999 after hiring a staff and securing financing, he announced to the world that he was back and launching a new airline that would bring "humanity back to travel". And that he has done.

With 23 new and environmentally friendly Airbus 320's, Dave runs the most luxurious fleet in the industry. First, did you hear me say new? Gotta like new. In addition to it being new, all seats are leather and roomy! But now to my favorite part, each seat is equipped with LIVE TV!! Yee haa! Someone who finally understands me! You can fly from New York to San Francisco in a roomy leather seat and watch CNBC, CNN, ESPN, ESPN, Food Network, Discover Kids, Game Show Network and the list goes on (24 channels in all). All this for $119 roundtrip. I'd pay that just for one of Emeril's recipes.

After some thinking (and digging), I figured out how JetBlue does it. They have only one make of aircraft, the Airbus. This saves on technician's training and repair costs. They use non-union employees (a rarity of in the airline industry). They focus on smaller markets that do not offer many direct flights. They don't have a hub, all flights are direct…. and, they only offer e-tickets. JetBlue is on to something here.

They have managed to keep their operating costs to 7 cents per seat, which is almost a third lower than the rest of the industry. Their seats are always filled (due to that low cost), and they are almost always on time (no hub, only direct flights).

Dave took JetBlue public today, and in the first day, the stock soared 66%! It opened the day at 32.00 per share and closed at 45.00. Talk about flying high! Slow down, and get yer head out of the clouds there Dave, it's going to be a tough flight pattern. There has yet to be an airline that has successfully been able to compete with Southwest Airlines. But who knows, maybe Dave is our man. He's done it before, and only time will tell if he can do it again.

Susie? Are you interested??

Chick Karin

* Cities Served: Buffalo, NY- Burlington, VT- Denver, CO-Fort Lauderdale, FL- Fort Myers, FL Long Beach, CA (near Los Angeles)- New Orleans, LA-New York City, NY (JFK)-Oakland, CA (near San Francisco)-Ontario, CA (near Los Angeles)-Orlando, FL-Rochester, NY-Salt Lake City, UT- San Juan, Puerto Rico-Seattle, WA- Syracuse, NY-Tampa, FL-West Palm Beach, FL- Washington, DC (Dulles)