JetBlue Airways chairman David Neeleman, in his first public appearance since the airline's board shifted CEO responsibilities to president Dave Barger, delivered the keynote address at Corporate Travel World on May 22. He discussed his new responsibilities at JetBlue, the carrier's appetite for more corporate business, new international airline partnership opportunities and his initiatives in Washington, including a coal-to-fuel bill. Neeleman spoke with BTN senior editor Jay Boehmer following his address.BTN: You told the audience that JetBlue is nearing refundable fares. How far away are you?
David Neeleman: There's really just some technology we're working through. If it gives us more business and if there are policies against it and we can get more for the fare, then why not? Sometimes people fit things into square little boxes, and if we can help them do that, we'll do it.
BTN: You said it's a little more flexible than other airlines.
Neeleman: We were already more flexible in our nonrefundable fares than the other guys, because you can switch names. But this is really the next step, the next generation.
BTN: Is there any rollout date?
Neeleman: We're going to be testing it very soon, in the next week or two. It's really just a technology issue we're working through. We should have had it out before.
BTN: It sounded like you're eyeing new partnerships with international carriers.
Neeleman: We have the largest airline at Kennedy International Airport, and with Open Skies there are a lot of opportunities. Things will change, so we want to be there to connect people to Kennedy better than anybody else does. If any E.C. carrier can fly to anywhere in the United States to anywhere in the country, I would assume that business is going to be coming into New York. We have the network to get in there.
BTN: Does that mean a more formal alliance, like of Oneworld, SkyTeam or Star Alliance?
Neeleman: I don't know about the alliances. We're more interested in what can be done on an individual airline basis. What we found from these airlines is that if their alliance partners can't provide them the service, they're free to go cut a deal with anybody to get the feed they need. Just because they're part of an alliance doesn't mean that they won't be able to cut a deal with us.
BTN: When your duties shifted to chairman, some speculated it could be to find a merger partner, perhaps Delta or Frontier. Are we just hearing the rumor mill turning?
Neeleman: Yeah. I guess you are. There's certainly nothing to announce.
BTN: What's your take on Southwest signing a deal with Galileo
(BTN, May 21)?Neeleman: It was silly for them not to be in it. It used to be, years ago, that GDS booking fees were ridiculously high, and every time anyone canceled or booked, fees just kept on piling up and piling up. Now, the new model is if someone books through the GDS, we'll pay them and if they don't book that way, we won't. If you can bring fresh revenue for us and that outweighs the new booking fee we're paying, it makes all the sense in the world. I would guess that Southwest will figure that out pretty quickly. Not only will they be in Galileo, but they'll probably go to all of them and change their participation in Sabre as well. Given our experience, I can't imagine them doing anything differently than that. We looked at the customers who were booking and it was new business, by and large. They were higher average fares and they were coming on the days of the weeks when we had seats: Tuesdays and Wednesdays. Travel buyers are so fixated on that single channel, because of the reporting, that they can't see beyond it.
BTN: After relisting in the GDSs last year, you forecast a degree of incremental revenue. Have your forecasts come to fruition?
Neeleman: Yeah. Absolutely. We're very pleased with it.
BTN: You mentioned in your speech this morning a virtual first class concept. Can you tell me what you expect to come of that?
Neeleman: It's probably putting the cart before the horse. But, why not, when you can charge a nominal fee to have no one sitting next to you? If you can generate more revenue for the flight, then why not? You've got to work the technology, though, and make sure you can set aside some seats so people can book that way. The nominal fee would not be covered by a lot of travel policies, so you would have to bury that in the fare.
BTN: It sounds like JetBlue is placing more focus on corporate business.
Neeleman: Absolutely. It's more revenue. We're in the business to drive more revenue. However, business is more tied to the economy and leisure is more consistent. The first thing that goes away when the economy goes down is business travel. The economy is pretty strong now and people are still traveling. If the economy starts to tank a little bit and businesses start to tighten the belt, and they have to get that 10 percent off, they'd get it a lot easier with us than the other guys. We'd be well positioned for that.
BTN: JetBlue said you would explore more long-term strategic opportunities. What is your new day-to-day role like?
Neeleman: Now it's just heading to Washington and taking meetings. It's really the long-term, strategic stuff and making sure we can stay creative. I've got some ideas on what we can do. If you're busy chopping trees all day long, you forget to take a look at the forest. We have to let the operations run themselves. Dave's role is to run the day-to-day and the year plan, and I'm out there a little further.
BTN: You said you'll be spending a little more time in Washington. What initiatives will you focus on?
Neeleman: We're working on FAA reauthorization. We have to get a similar bill out of the House that we got out of the Senate. I'll also be working on a coal-to-liquids bill.
BTN: What has to be done to make coal-to-liquid fuel a reality?
Neeleman: There's a huge capital commitment. In order to build a plant, you need a several-billion-dollar commitment. Today, based on the price of oil, it makes all the sense in the world to build one of these plants. But someone like a GE, which is a very risk-averse company, is not going to commit $3 billion to build a plant, knowing that if the price of oil goes below $30 a barrel, they could potentially have a write-off.
What our legislation does is allow them for the undepreciated amount for that plant. If fuel goes below, say $40 a barrel, they get reimbursed for that plant for taking that risk. That's number one. The second thing is the sequestration. There are proven technologies for oil recovery where you can pump it back into the atmosphere. There are even new things where you can pump it into big greenhouses where plants are growing. Then, there's even the ability to recrystallize the CO2 into a solid form and bury it into the ground, so you that know it won't go back into the atmosphere.
BTN: Does headway need to be made with Washington?
Neeleman: The first key is getting the financial thing done. Once you get that, then the capital markets will take care of the technology. We can do it, given the right impetus and incentives. The bill we have is for six plants. It's been introduced in the House, and now we need to get this to the Senate. I think it is something the president would sign. He understands the dependence on foreign oil.
BTN: Would one of your planes be able to fly on coal-to-fuel right now?
Neeleman: Yes. Absolutely. There's a company in South Africa that makes it—but they don't sequester the CO2—and South African Airways flies on the fuel. The military has been testing the fuel that comes from that as well.
BTN: How fuel-independent could that make the United States?
Neeleman: We have hundreds of years of coal. We have about 30 percent of all the world's coal—we are the Saudi Arabia of coal.
BTN: How long would it take to make coal-to-fuel a reality?
Neeleman: It's a longer-term thing, but once we get the bill passed it will be a few years to get the plants up and going.
BTN: You're regarded as an entrepreneur in the travel industry. Are you looking at new businesses outside of JetBlue?
Neeleman: I'm still very focused on JetBlue. I'm the largest noninstitutional shareholder, so I still have a lot at stake.