JetBlue TrueBlue - BusinessWeek: Is JetBlue the next People Express?

From the March 12, 2007 issue...

I don't have a link right now but its in the print version.

The major points relate to not having a system to keep everything together during times of major delays, cost cutting, not investing in new systems, tapped out markets, and increased expenditures due to not having new aircraft and potentially having its pilots join a union.

Bottom line, B6 won't be going away anytime soon but it won't have as easy a time as its had in the past.

Here is the link...

http://www.businessweek.com/magazine/content/07_11/b4025055.htm

Oops, didn't see this before I posted the other thread.

I think they make a lot of great points, particularly about upcoming maintenance costs and the growing health of B6's competitors.

Oops, didn't see this before I posted the other thread.

I think they make a lot of great points, particularly about upcoming maintenance costs and the growing health of B6's competitors.

Excellent article. Jet Blue, sadly, is making some of the very same missteps that People Express, as well as a host of other "airlines of history", made, ie. overexpansion; over-estimation of brand loyalty; and a woefully inadequate infrastructure.

Jet Blue management should certainly take heed of the warning signs.

Interesting point, and I just told a friend of mine this should be his senior thesis for his Route Analysis and Profit course, because, the more and more I find old PeoplExpress timetables, the more and more the JFK hub seems to resemble the route structure that EWR had 20 years ago. Things are just real real close, minus the LGB hub now and the DEN hub back then when the Frontier merger was announced, but, only a few cities are really missing between the two.

Interesting point, and I just told a friend of mine this should be his senior thesis for his Route Analysis and Profit course, because, the more and more I find old PeoplExpress timetables, the more and more the JFK hub seems to resemble the route structure that EWR had 20 years ago. Things are just real real close, minus the LGB hub now and the DEN hub back then when the Frontier merger was announced, but, only a few cities are really missing between the two.

That would be an excellent thesis, and could prove to be quite prophetic.

Totally different service models, though. And remember that PE didn't have the Internet, and JetBlue books an awful lot of tickets that way.

Existing air carriers were also much stronger than they are today, and they could afford long fare wars. Aggregate air travel demand was much lower, so it was tougher to serve certain city pairs. Hubs were less congested, so point-to-point had less advantage. PE's fleet was much, much different (and not in a good way).

Here is the link...

http://www.businessweek.com/magazine/content/07_11/b4025055.htm

Another poorly written Business Week story. Headwinds - yes, People Express - give me a break.

And also PE's downfall really occurred with the Frontier merger. If not for that one horribly bad decision PE might still be flying.

Not really. The Frontier merger was just the cherry on the sundae. PE actually fell apart for three reasons:

** Sophomore-level operational ability. The airline grew more complex, adding stations, frequencies and fleet types, but its underlying systems did not. JetBlue has the identical problem, but until the V-Day Massacre did not seem to believe it.

** Too much blind faith in Donald Burr, a visionary but no realist and a man who once acquired a bunch more 747s simply because "people like flying on 747s." JetBlue has this problem in spades. Neeleman obviously knows how to start an airline, but there's no evidence he knows how to run a stable one. Whenever I hear about people "drinking the blue Kool-Aid," I remember all those poor PeopleExpress employees insisting to me that they were absolutely destined to surpass UA and AA by 1990... even as the walls were falling down around them.

** No yield management strategy. PE did not have the computer systems in place to do demand pricing and charge a bunch more for the last available ticket. AA did. So AA could match PE fares, or go cheaper, with a "seats are limited" tag, while PE had no choice but to price every seat on every flight identically. The story of how Bob Crandall at AA ran PE out of business with sophisticated yield management is a business school classic. I don't think JetBlue has this problem, but if challenged on too many bread-and-butter routes, the majors could still undercut JetBlue dramatically anytime -- like NW is doing to F9 in MEM right now.

There are numerous spooky parallels between PE and JetBlue, and denying them is really whistling past the graveyard. The most telling for me is the absolutist, top-volume belief that JetBlue will (A) last forever and (B) take over the world. Not happening.

Another poorly written Business Week story. Headwinds - yes, People Express - give me a break.

I think you're saying is what the article is saying.

The story starts with the headline by asking a question and not making a statement. By the end of the article, it comes to the conclusion that B6 is not another People Express. They use the word turbulence similar to how you're using headwinds.

On the surface, B6 is showing the signs of People Express. However, when you look a bit deeper one can see that's not the case. Its not an easy road ahead for B6, but its not a death spiral either.

When I heard the news this past week that Spirit Airlines was going to impose a fee to check baggage and for soft drinks on-board, that strategy reminded me of the PeoplExpress business model.

I do not see many similarities between PeoplExpress and jetBlue, fortunately.

When I heard the news this past week that Spirit Airlines was going to impose a fee to check baggage and for soft drinks on-board, that strategy reminded me of the PeoplExpress business model. That part of the PE model, people didn't mind. People thought it was fair and even kind of fun, especially when the off-peak BTV-EWR fare was $19 (no kidding). Charging for checked bags didn't hurt PE; the stuff I listed above did. And if you don't see B6/PE parallels, read the thick but excellent book "Hard Landing" by Thomas Petzinger. It's eerie how history is repeating itself.

That part of the PE model, people didn't mind. People thought it was fair and even kind of fun, especially when the off-peak BTV-EWR fare was $19 (no kidding). Charging for checked bags didn't hurt PE; the stuff I listed above did. And if you don't see B6/PE parallels, read the thick but excellent book "Hard Landing" by Thomas Petzinger. It's eerie how history is repeating itself.


I worked for PeoplExpress in college. Have I got stories!

Rest assured, there's no pictiure of Frank Lorenzo over our mantle.

I worked for PeoplExpress in college. Have I got stories! Love to hear them sometime... I was a TV reporter in BTV when PE came to town and blew away not only US, but Greyhound with low fares and high frequencies. Suddenly we could all take our dates to NYC for Sunday brunch, and as I covered transportation for my TV station, I grew friendly with a lot of the PE ground staff. The tragedy was that when the operation was well on its way to unraveling, everybody could see it but them.

Not really. The Frontier merger was just the cherry on the sundae. PE actually fell apart for three reasons:

** Sophomore-level operational ability. The airline grew more complex, adding stations, frequencies and fleet types, but its underlying systems did not. JetBlue has the identical problem, but until the V-Day Massacre did not seem to believe it.

** Too much blind faith in Donald Burr, a visionary but no realist and a man who once acquired a bunch more 747s simply because "people like flying on 747s." JetBlue has this problem in spades. Neeleman obviously knows how to start an airline, but there's no evidence he knows how to run a stable one. Whenever I hear about people "drinking the blue Kool-Aid," I remember all those poor PeopleExpress employees insisting to me that they were absolutely destined to surpass UA and AA by 1990... even as the walls were falling down around them.

** No yield management strategy. PE did not have the computer systems in place to do demand pricing and charge a bunch more for the last available ticket. AA did. So AA could match PE fares, or go cheaper, with a "seats are limited" tag, while PE had no choice but to price every seat on every flight identically. The story of how Bob Crandall at AA ran PE out of business with sophisticated yield management is a business school classic. I don't think JetBlue has this problem, but if challenged on too many bread-and-butter routes, the majors could still undercut JetBlue dramatically anytime -- like NW is doing to F9 in MEM right now.

There are numerous spooky parallels between PE and JetBlue, and denying them is really whistling past the graveyard. The most telling for me is the absolutist, top-volume belief that JetBlue will (A) last forever and (B) take over the world. Not happening.


Excellent assessment. The erstwhile PE cheerleaders (and there were plenty of them, but they didn't yet have the Internet to trumpet their allegiance) and the B6 cheerleaders remind me of those on the Titanic who kept braying that the ship was unsinkable even as it was taking on water at the head.

Fix the problems and maybe history will not repeat itself.