During the Aviation Festival, London, Guy Johnson, News Anchor, Journalist and Aviation Enthusiast, Bloomberg, David Neeleman, Founder JetBlue, Azul and Breeze Airways, and Robin Hayes, CEO, JetBlue Airways, discussed what it takes to grow in new market conditions and build a more sustainable industry.
Neeleman explained the opportunities which inspired him to found Breeze Airways and launch during these challenging times for airlines. “I just saw trends that were developing in the United States, where the smaller and medium-sized cities you had to go through a hub on most all of these cities if you want to go anywhere. But, at the same time, the cities were growing. And especially in the post-COVID era, a lot of people want to go live in cities like these. They don’t really want to live in the big cities anymore. They can telecommute. So a lot of these cities are vibrant and growing, but they just lack air service. That affects the quality of life. Just for people to go to Florida or get to the mid-Atlantic region and different places they want to go, we can see that traffic.”
“..there’s a great market out there if you can do things that can simulate traffic with low fares and convenience for people to travel.”
As Neeleman elaborated, “If you go to a market and say five people are flying this route every day, can we take it to 100 people every day. We’ve seen that. We’ve seen some markets go up 20 times what the X-day was because of traffic stimulation. So we’re looking at 400 routes today. You know, when Ryanair started saying, ‘we’re going to go from 40 million people to 60 million people to 100 million,’ I thought that’s insane. But obviously, Wizz does it now. So, you know, there’s a great market out there if you can do things that can simulate traffic with low fares and convenience for people to travel.”
Hayes agreed. “To me, it made perfect sense because, with all the consolidation that’s happening over the years, so many cities have lost direct service. It’s all being hubbed. So here’s a business model that is almost infinite in size that allows an airline like David’s new airline, Breeze, to take advantage of that. I think it’s terrific, and I think it’s going to be a great success.”
“We’re going to see the actual effect on the planet. As we go ahead the next five years, ten years and 15 years, we can make adjustments.”
Johnson also asked the CEOs about the ambitious sustainability commitment the airline industry had made for 2050, net-zero carbon emissions, and whether it was achievable. “I think so,” Neeleman replied. “I mean, you look at what’s happened in technology over the last 25 years, and you project that ahead for the next 28 years, I think there’s no doubt that we’ll figure out how to solve this problem. And then, as we go along the continuum, there are a lot of other examples of cutting down carbon production. We’re going to see the actual effect on the planet. As we go ahead the next five years, ten years and 15 years, we can make adjustments.”
Hayes noted that airlines must remain financially sustainable while meeting climate sustainability targets. “I think airlines are going to have to—in addition to solving the segment sustainability challenge—they’re going to have to figure out ways of making money doing it. But again, the industry has shown so much creativity over the years in doing that.” Hayes said JetBlue is looking for those opportunities through JetBlue Ventures. “For example, travel products—that’s going to do $100 million EBITDA next year. You know, it was pennies on the dollar just literally two or three years ago. Airlines will have to figure out other ways to drive margins and revenue because I’m not sure consumers will accept higher fares. Why? Because at the end of the day, it’s going to, it’s still going to be a very competitive industry. You’re going to have airlines like David’s Breeze starting up. You’re going to have low-cost carriers growing. You’re going to have JetBlue and airlines like JetBlue, right. All of us will still build a business model around low fares. So, to sit there as an airline and say, ‘I can get higher fares from this in future because there’ll be a willingness to pay,’ I don’t think we can make that assumption. Certainly, the challenge I set out for our team to accomplish this goal. I want to protect margins, and I don’t want to increase fares doing it. Now, some would look at that and say, ‘You can’t do all of that.’ But I think we have to think big and think outside the box to find how we can do all of those things at the same time.”
“For example, in the US, at the moment, is I think there’s a great opportunity for sustainable aviation.”
Hayes also said that these airline sustainability targets would need broader support than the airlines alone. “I think that the industry has to demonstrate a global commitment to this, right? Because governments get the upper hand when they can quite rightly point to a problem. We must take a leadership position now. Where I think governments can help is by providing an incentive. For example, in the US, at the moment, is I think there’s a great opportunity for sustainable aviation. Still, it needs some form of tax incentives that allow producers—allows people—to make investments. There’s lots of money out there. The banks and other financial institutions want to point at sustainable technologies. So the money’s there, but you’ve got to create an incentive structure that allows that pick-up in demand in the early days.”
“This industry has shown a remarkable ability to adapt; whether fuel prices are $50 or $100, airlines have figured out that they can make money.”
Hayes continued, “This industry has shown a remarkable ability to adapt; whether fuel prices are $50 or $100, airlines have figured out that they can make money. We are used to very big swings in energy costs…I mean, look at how much efficiency and how much cost airlines have taken out during COVID… We’ve already gone through a lot before, yet we could do more. I’m not saying it’s going to be easy. We will have to get very creative in driving other revenue streams. You know, at JetBlue, we’re talking about all these people flying on vacation. We’ve got a very little share of wallet beyond their flight. That should be relatively straightforward to convince people to spend more money with us. Now we’re able to drive support. You know, we’ve got a much higher revenue stream for the same capital base. That’s going to help fund some of these sustainability investments.
By Marisa Garcia
CEO
Keynote JetBlue and Breeze Fireside Chat: What will be the longer term effects of the last 2 years and how can we effectively respond to rebuild a more sustainable industry?
>> Watch on-demand on our website
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