JetBlue''s Friendly Skies
By Whitney Tilson
August 8, 2003
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And what did American Airlines (NYSE: AMR) do in April? At a time when the airline was hemorrhaging cash, CEO Don Carty called for shared sacrifices to avoid bankruptcy. Yet only days after the unions narrowly voted to accept $1.62 billion in annual concessions, they discovered that management had just paid itself large executive retention bonuses and pension protections. This unbelievable burst of insanity cost Carty his job and speaks to the let''s-look-out-for-ourselves-and-to-hell-with-the-employees attitude that pervades the industry.
A good company
On a cross-country flight earlier this year, I had a long talk with a JetBlue flight attendant who used to work for United. She told me that while her base pay is lower, she makes it up by working overtime and participating in the stock purchase plan. She likes working for JetBlue because the company treats her well, she is already quite senior (meaning that she has her pick of routes), and her fellow flight attendants work as hard as she does.
By contrast, at United, she said relations with management were terrible, and she was often frustrated by burnt-out, unmotivated colleagues who -- knowing that their union would protect them -- were rude to passengers or simply sat at the back of the plane during the bulk of the flight. I also interviewed a JetBlue telephone reservations agent when I booked a flight a few weeks ago. She had been with JetBlue for a year and said I enjoy working for them very much. The people are very nice. It''s a good company with good benefits.
Cultural differences
When it comes to building and nurturing a strong corporate culture, there is no magic bullet -- rather, it depends on doing dozens of little things right every day. Here are the keys to JetBlue''s success:
Culture begins with a set of values. Early on in the planning process, 20 members of JetBlue management met for two days and settled on five core values: safety, caring, integrity, fun, and passion. Today, JetBlue''s web site notes, These five values not only differentiate JetBlue''s product; they result in a superior customer and crew member experience.
Leadership at the top is critical, and JetBlue''s CEO David Neeleman is a master motivator. He takes every opportunity to acknowledge and thank his employees, reinforcing his words in the latest annual report: At JetBlue, we operate under the belief that great People drive solid operating Performance which yields continued Prosperity. Our People are the foundation on which our success is built. Another time, he noted, We didn''t build our company on the backs of our people, and we never will. We will always put our people first, before our customers and our shareholders.
The rest of JetBlue management is on the same page. For example, President Dave Barger, who worked for Continental (NYSE: CAL) and New York Air and whose father was a United pilot, notes, In this business you look at the landscape of shrapnel that''s out there between labor and management, and if you can''t learn from that, you''re brain dead.
Neeleman and Barger attend most new employee orientation sessions, fly the airline frequently, help load baggage, take tickets, and so forth. Sure, much of this is public relations, but image matters.
JetBlue hires very carefully. With so many major carriers laying off tens of thousands of employees, JetBlue has the luxury of being extremely selective.
JetBlue is no doubt benefiting from the excitement and esprit de corps associated with a new, rapidly growing company. It will be a tremendous challenge to maintain this strong culture as JetBlue ages. Still, management provides the right incentives: JetBlue contributes 15% of its pre-tax income to a profit-sharing plan, which last year translated into a 15.5% bonus for all employees. In addition, there''s a generous stock purchase plan, with nearly 70% participation overall, plus new pilots get 6,000 stock options.
Bringing it on home
Thinking about corporate culture might sound touchy feely, but I would argue that few factors are more important to a company''s -- and its stock''s -- success. This is especially true in the airline industry, where a long-time pilot assures me, network airlines like United and American have lost sight of the people behind the numbers. In a service industry, motivated employees can help generate a profit, while unmotivated employees can contribute to a loss.
In need of impassioned leadership to overcome an epidemic of low employee morale, too many major airlines focus on self-preservation rather than solid corporate vision. So long as they continue to do so, with each cultural misstep, Southwest, JetBlue, and others will gain market share, one dissatisfied customer at a time.
Whitney Tilson is a longtime guest columnist for The Motley Fool. He did not own shares of the companies mentioned in this article at press time, though positions may change at any time. Under no circumstances does this information represent a recommendation to buy, sell, or hold any security. Mr. Tilson appreciates your feedback at Tilson@Tilsonfunds.com. The Motley Fool is investors writing for investors.
