David Neeleman — Founder & CEO of Breeze Airways
On Thursday, September 8th, I had the privilege to interview David Neeleman. Mr. Neeleman is the founder and CEO of Breeze Airways. In addition to founding Breeze, Mr. Neeleman has founded four other airlines including Morris Air, WestJet, JetBlue Airways, and Azul Brazilian Airlines. He has over 40 years of experience in the aviation industry and remains the Chairman of Azul Brazilian Airlines. This interview has been edited for length and clarity.
Joshua Kupietzky: What is your background in the aviation industry?
David Neeleman: It started when I was born because my dad was a foreign correspondent for United Press International. We were from Utah and would travel once a year to visit grandparents. My first introduction to aviation was flying back and forth from Brazil to the United States. When I started JetBlue, the PR [Public Relations] department wanted to find pictures of me as a baby and one of them was from my three year old birthday. I had a cake with a big airplane on it. When I was in college, I started a small company in 1981, after deregulation, which started in 1978. Prior to 1978 everybody had to file for routes and file for fairs; it was all regulated. Then in 1978, the government just kind of threw it all open and said anybody can fly anywhere they want to, and they can charge anything they want to. So, I started an airline tour company, and then when that airline failed, my little tour company failed. After that, Jim Morris, who had a travel agency in Utah, called me and said, “Would you like to come work for me?” and that’s what became Morris Air.
We started chartering airplanes and scheduling them. We ended up getting our own airline [Morris Air], and we sold that to Southwest Airlines. Then, Herb [Kelleher] fired me. I had signed a five year non-compete, so I ended up going to Canada and starting WestJet, and then when that five years was up, I started JetBlue. When I left JetBlue, I started Azul Brazilian Airlines, and now I've got Breeze. I've been heavily involved in aviation since I started my first airline, which was around 1984.
JK: You have started airlines in Canada, Brazil, and the United States. What is the difference between starting an airline in the United States compared to the other markets?
DN: Looking at the United States and Brazil, the FAR’s [Federal Aviation Regulations] are exactly the same, with the exception of some pilot rules in Brazil that are more renstrictive. It is really the same from a regulatory point of view; however, it's much different from who you're selling to. The majority of people in Brazil do not have credit cards, so you have to figure out ways that they can pay. Also, many people do not have transportation to the airport. Now on Azul, we fly about 100,000 people every single day in Brazil. Many of our customers were new fliers, so we had to answer questions about if there was a bathroom on board and other such questions. That was a much different experience. Additionally, it was a much bigger opportunity in Brazil than in the United States. JetBlue today has about 5% of the United States market and Azul has about 40% of the Brazilian revenue market. The opportunity was bigger to create something much bigger in Brazil.
JK: Breeze is your fifth airline; you’ve had tremendous success in your career. What motivates you to keep innovating?
DN: Breeze was interesting because it was founded prior to COVID. I had been gone from the United States market for over 10 years after leaving JetBlue. I was down in Brazil and over in Portugal, and I kept looking at the US market. I thought there were some trends in the United States that were changing the market that made an opportunity possible. I actually think Allegiant has done a great job, but there were a lot of markets that didn't have service. Even now with post COVID, pilot shortages, and the 300 regional airplanes parked, many markets have lost service. We don’t have any nonstop competition in 95% of our markets. I had 55 people hired at the new Breeze when COVID hit, and I felt obligated to those people. Because of this we thought we would just suck it up and get through. We did make it through and launched. Now the world’s our oyster. We have lots of opportunities, especially with the JetBlue Spirit merger. There are going to be many more opportunities for ultra-low-costs. We think we can really stimulate the market.
JK: Your most famous startup airline is JetBlue. How did starting JetBlue inform what you are doing at Breeze? What lessons did you learn from the ups and downs at JetBlue?
DN: At Morris Air, we invented ticketless travel. We were the first airline in the world to do e-ticket travel, which we exported to Southwest Airlines. So I learned all along the way from Morris Air, WestJet, JetBlue, to Azul. I probably learned most of my lessons at Azul because they pertain to Breeze. At Azul, we have non-stop competition on 80% of our routes. We learned the value of being the only airline in the market when times got tough and fuel went up. It was much easier to raise your costs when you didn't have competition. We raised fares if we had to for high prices because we didn't have competition. I learned from Malcolm Gladwell’s book 10,000 Hour Rule, where people become experts in certain things. It becomes easier once you've done it. Many of the same principles apply across all of those airlines. However, you do learn and progress as you go, which makes it easier.
JK: Due to inflation, many airlines have raised ticket prices and people are still traveling. How long do you believe this pent up demand will last, and has inflation affected Breeze’s ticket prices? Has it changed your trajectory for the next year?
DN: One of the biggest challenges in the industry occurred as soon as people started to return to flying. Then last February, the Russian-Ukrainian war broke out. That was really detrimental to the profitability of the airlines. It basically made it harder to make money. It wasn't just the price of crude, it was actually due more to the refining costs. The price of crude is now coming down to about where it was, but it usually costs about $20 to $15 a barrel to refine a barrel of crude, and that number is now $70 a barrel. So, when oil went up $50 a barrel, it was really $100 a barrel. It went from $85 to $185 partly because of the refining costs. I've always said that if you asked me, “if I prefer a softer economy and lower fuel prices? Or would you prefer a heated up economy and high fuel prices?” I would certainly take the former. What we're entering into now is the economy is softening, job growth is also softening, inflation is slowing down, and oil is starting to come down. The big question is how deep is this slowdown or recession we're going into? But something had to give. The job market was tough because people didn't want to work. They became accustomed to not working. Now they're having to come back to work when the Stimulus Programs are running out and people's savings are drying up. We need to get back to a market where inflation is down, or non-existent, and oil prices come down, even if it means fewer people can travel. What we were doing was not sustainable.
JK: You mentioned that “Breeze is a technology company that just happens to fly airplanes." Can you explain how you are using technology now and how it may evolve in the future? What role does technology play in setting apart Breeze from its competitors?
DN: When I started JetBlue, I said it was a customer service company and just happened to fly airplanes. That was 23 years ago, and technology has changed. People don't really want to stand in line and have someone smile and hand them their boarding pass. They want to do everything on their apps. Do you ever speak to anyone at Amazon, Uber, or Airbnb? You just want to do it all through the app. A lot of airlines are now doing that, and it has become our focus. We want 100% of our interaction through technology. We don't want you to ever have to speak to anyone. If you have an issue changing or canceling flights, adding a bag, doing whatever, you can message us, and we'll get back to you. The goal is that in less than five minutes, your issue can be resolved. By doing that, we're a lot more efficient, and our customers really like it. We get high NPS [Net Promoter Score] scores by doing just that. The key is having an app that's all inclusive. We are pushing the limits on being able to automatically book your hotel, your rental car, your concert tickets and the like. That's the next phase. Behind the scenes operationally, we have a lot of technology as well. The goal is to eliminate many costs by having technology do everything for us.
JK: Why did you choose the Airbus A220 for Breeze’s fleet over other similar aircraft types such as the Embraer E2 or Boeing 737 MAX?
DN: The 737’s technology dates back to the 1950s. This was unfortunately seen in the situation with the MAX's where they still have cables and pulleys. They have a cable that goes all the way back to the rudder. That is late 1950s technology, from the way that the aircrafts communications works to the flight controls, to the circumference of the fuselage. It all originated with the 707. Airbus technology is from the late 1970s early 1980s. The Airbus A320 was launched in 1985. The A220 is 2000s technology, developed in the early 2000s. It was originally developed in Canada with Bombardier. They took all that was learned from the previous 50 years of aviation and incorporated it in the A220. As a result, we get a plane that has a great wing, very comfortable cabin, big windows, and is quite fuel efficient. We can fly further with that airplane than a A320 can fly, and we can do it on short field takeoffs. It’s configured so that we can have a premium cabin with two and two seating. This is done by removing only one seat as opposed to the two that would have to be removed if you did it on an A320 or a 737. The E2 is also a great airplane. It's got the same engine, but it doesn't have the same range, short field capabilities, and can’t do two and two seating. That’s the reason we went with the A220 over the E2. However, we do have 100 E2’s that we're operating at Azul or on order. They are great airplanes as well.
JK: Regional Airlines have had to cut many flights and destinations because of staff shortages. Has that opened up more opportunities for Breeze since you are targeting secondary markets where regional airlines might have had to abandon or cut back service?
DN: We have a lot more opportunities. I'm not sure the regional routes are ever going to come back at the level that they were before. The big airlines, in their infinite wisdom, and I use that term pretty loosely, incentivized the retirement of 7,000 pilots, enough to fly about 500 airplanes. Those retired pilots can't come back to work at those airlines, so we’ve hired many of them. That's why there are 350 or 400 regional planes that are parked today. All the big airlines did was cannibalize their own feeder operations. My guess is that you will not see more 50 seat airplanes. Those airplanes served their purpose, and now they're gone. There's a great deal of service that won't return. I think United and others have come out and said that the regional market will never be the same. Their cost structure is much higher than ours, obviously because they were always just an inefficient fabrication of the scope clause from a pilot union. They basically said, you can pay these pilots less, but you're restricted to the size of the airplane, which was 74 seats. That was the basic standard. We can fly with that same kind of cost structure, which basically has124 seats. We fly nearly twice as many people for the same cost structure. I don't worry about competing with them. We have two separate markets and what they will be doing will be a lot smaller.
JK: Currently, Breeze Airways is private, but long-term, do you see Breeze making a debut on the public market?
DN: It is a capital intensive business, and in order to grow, you need capital. There are very few airlines that can remain private over a long period of time, so that is in the plan.
JK: What do you anticipate happening to the airline industry in the next decade? What would you like to see happen?
DN: There is the whole issue of climate change and carbon, and there's been a lot of effort going into hydrogen or electric airplanes. Obviously, if we just cut down on meat consumption that might help too, but I think that's an issue. People are going to try to push the envelope on the carbon side. They will continue to use technology to lower costs and stimulate traffic. That's really the key. I'm on the board of Lilium that has an electric type of helicopter, but that has challenges as well because the cost of batteries are going way up. Is it cheaper than a helicopter? I'd hope so, but I'm not sure it's going to be that much cheaper. It will be interesting to watch.
JK: What do you consider your greatest achievement in the airline industry?
DN: Azul by far. Azul has done more for Brazil than any other company in the last 15 years. It was my dream to create a lot of jobs in Brazil and let people fly. We will fly about 50 million people this year, and we will employ, directly or indirectly, about 50,000 people. We have changed a lot of lives down there.
JK: I saw in previous interviews that you have struggled with ADD. How has that helped with your success in the aviation industry? Do you believe it has helped you be such a visionary in the aviation industry?
DN: ADD is when you procrastinate, have trouble getting started, are distractible, etc. However, it also has one positive attribute, and that's that you can hyper focus on things that you're really interested in. So, I hyper focused on the airline industry 40 years ago, and I found an industry that was not innovative. My ADD focus inspired JetBlue to put live TV on airplanes and do a bunch of things no one had ever done before. Everyone does that now, but JetBlue was the pioneer. It was the creativity from just hyper focusing that allowed those changes to happen.
JK: We started this interview talking about your background in the aviation industry. What advice do you have for young people trying to start a career in the aviation industry?
DN: It depends on what sector. There are many talents, everything from baggage handling to being a pilot. If you have the temperament to be a pilot, you should do that, and do it fast because the jobs are great and they are really high paying. If you want to be a technician and if you're an engineer there's a huge need there too. There is also a need if you want to do route planning, which people love to do. You may want to be on the business side, the marketing, the internet side - all that. Just work really hard, and learn all about it. Try to hook on with an airline, and then just do your best to make a difference.
