The Exchanges

Q inventory management. So is there a version of that? I mean, there must be a version of that with, with running an airline, right? Like buying fuel futures or cutting costs in a way that, Um, you know, doesn't sort of harm the experience, but can benefit you in the long term because it's the math of running an airline is so complex because the margins are pretty narrow, right?

A Yeah, they are. And small, small as we are, we still burn a hundred and twenty seven million gallons of, of, uh, jet fuel this year. So a dollar increase in the jet fuel price is a hundred and twenty million, uh, two dollars where we are right now, pretty much is two hundred and forty million dollars a year. And United, I think, came out with an estimate that it could be fifteen billion dollars, and they've only ever made six billion in their, in their biggest year. Wow. But for me, I just took it down to the smallest thing to our people today. I said, look, at two dollars, we have to get, for every hour we fly, we have to get 10 more bucks on every ticket. For, if it's a dollar, it's five dollars. And so the long-haul flights obviously get hit worse, and they have to get more. So you move kind of from longer haul to shorter haul. You take all the fringe flights that are not making as much money, and you say, is it better not to fly these? And then you just button down the hatches, make sure you have enough capital. We'll get through it, but we want to make sure we have enough runways we possibly can to make sure that we, we can come out of it stronger.

AI assessment note: “So you move kind of from longer haul to shorter haul.”

Q And as a kid, were you, um, were you entrepreneurial in any way? Did you, like, wash cars or walk dogs or anything like that?

A My grandfather had a few grocery stores, small grocery stores, he called them miniature markets, that were like fast food, and we, he would make the sandwiches in the back, and bring in fresh donuts, and, you know, kind of a precursor to maybe a seven 11, but everything was done fresh. So when I was nine years old, I got a job there, standing on a milk crate, working the cash register, checking out people, you know, counting money, and so that was kind of my introduction to business, and my, my grandfather was a really, Kind of old school. He was born in Salt Lake, but his whole family came from Holland, and so, you know, he, he paid me 50 cents an hour, which kind of made me mad because everyone else made a dollar an hour. He expected more out of me than the other kids, and he was really focused on customer service. If somebody, if there was something in the store that somebody wanted and we didn't have it, he'd run out the back door and run over to Safeway and buy it and bring it back for him. You know, he was, he never wanted to lose a customer. You know, I, I look back on those years and I didn't get to participate as much in high school and do things as sports as maybe as I would have wanted to do, but, you know, I, I think it probably taught me a lot about a lot of things.

AI assessment note: “So when I was nine years old, I got a job there”

Q So JetBlue is like riding high, it's profitable, it's a darling of Wall Street, customers love it, and then comes Valentine's Day, 2007, the biggest ice storm in the Northeast in like decades, and what happens?

A Well, it wasn't just an ice storm. It was the FAA had come out with this regulation that, it was only that year. You know, it was only in 2007 where they said if there's what they called ice pellets in the air, then you can't take off. They reversed it the next year. They didn't have it any time before that, and they haven't had it any time since. So it was just one of these convergence of events where our planes, um, got out to the runway to take off. They called ice pellets. Planes were stuck. Planes were landing. Um, and then this storm moved in. We had people stranded on airplanes. We couldn't get them back to the gate because for like eight hours, right?

AI assessment note: “We had people stranded on airplanes. We couldn't get them back to the gate”

Q She was older than you, I guess, right?

A Oh, yeah. She's about the age of my parents, and so we sat down, and she gave me her big smile, and she said, you know, I, if you come to work for me, I'll make sure you get a piece of the company. You know, you, we can do this together, and, you know, I really like what you did, and so she convinced me. She convinced me to do that, and so I kept the job at the store at night, and I would go there during the day, And, and, and called up all those hotels and said, hey, I'm back. And then I called up Hawaiian Airlines, and I had this contract in my drawer at my, at my old office. It was a charter contract to fly a Hawaiian Airlines chartered from Hawaii to Salt Lake directly, you know, bypassing the drive to LA. And I just didn't have, I was just getting together the bond. You needed a 250,000 dollar bond because it was a public charter. And I was just trying to arrange that when the other airline failed. So I went back to the drawer. I got the contract out. I went to June and I said, if Mitch, your husband can, can help with this bond, we can launch these flights directly from Salt Lake City.

AI assessment note: “Oh, yeah. She's about the age of my parents”

Q People Express, yeah. Like, What did you think the world needed? Like, there were a bunch of airlines. Southwest was thriving. Like, what was it that you thought you could contribute to that, to that industry?

A Well, I thought that, ah, a couple things. Southwest had a rule book that they didn't really violate at the time. One of them that they never flew into, kind of, congested airports. They, they didn't want, because on time percentage and, you know, turning airplanes in 10 minutes was just so important to them. That they didn't want to go to New York, for example. Boston. They weren't in Boston. They want, they were in Providence, and so they, they, they kind of skirted around airports. They never went into SFO. They were in Oakland, and so they didn't really, you know, go into these, these East Coast congested airports, and, you know, Don Burr, who was the founder of People Express, came to see me one time, and I remember he was looking at starting an airline, and he wanted to do it in JFK, And he was saying, you know, during the middle of the day, you could run a bowling ball down the middle of, of the runways at JFK. They're only busy at night. There's nothing in the day, and there's a lot of people there. So I just kind of filed that away, and, and, you know, his, his airline didn't materialize. So when it came time for me to, to found, you know, JetBlue, I wanted to find a place that I could start in a, in a, in an area where I knew there was a lot of people. I studied The New York travel market, and so I thought, well, this is a perfect place to put an airline.

AI assessment note: “I studied The New York travel market, and so I thought, well, this is a perfect place”

Q principle as a leader? Like, now that you've made mistakes and you've, you know, driven people crazy and kind of had time to reflect on the kind of person you are and the kind of leader you are, what do you, what do you aspire, like, how do you aspire to lead? Like, what do you want people to say about you when they're like, oh yeah, David, he is.

A He made my life better. You know, I, you know, we have this thing at Azul where I tell everyone, I want this to be the best job you've ever had. I want you to look forward to coming to work every day. And so I walk around the company saying, is this the best job you ever had? Is this the best job you ever had? If not, why not? Because I think if you do that, you know, if you matter, if your company matters, um, then you're going to be more successful. You know, if you were plucked from the face of the earth, would anybody care? You know, who would show up at your memorial service? And how many lives have you touched? Because I think the more people you touch, and the more good that you do, and the more people you serve, and the more lives that you change, the happier you are too. So all those things all work together.

AI assessment note: “He made my life better.”

Q at a difficult time after nine 11. Um, and one of the things that you did a lot, you'd fly in the planes all the time, you'd make an announcement that you were the, the head of the company, and then you would sit on the planes and serve snacks and help clean the planes. Um, was that a shtick or was that real? I mean, what was that about?

A No, I just really wanted to stay in touch with our customers. I really wanted to hear from them. You know, not only would I get up and introduce myself, but I would also say I'm going to come by and serve snacks, but I also want to hear from your experience with our company. I want to know what we did good, what we did bad, you know, what we can improve on, you know, any ideas you have for us. And then I had, you know, other people in our company doing the same. I just think it's just incredible to stay in touch with your, with your people. And then, you know, those working the flight, See that you care.

AI assessment note: “No, I just really wanted to stay in touch with our customers.”

Q We can stop this podcast now, and like, end of story. You start another airline. You start a brand new airline in 2008 called Azul in Brazil, by the way, which means blue. Was that, was that deliberate? Did you call it Azul deliberately?

A Yeah, I did. It was, I think, you know, I, I obviously was, have great affection for JetBlue, and Azul was the closest thing, and Azul's, you know, blue in Portuguese and in Spanish, so. I had made some trips down there, and, and, you know, I had this thing tucked away in the back of my head about going back to Brazil and making a difference, and that I had when I was a nineteen-year-old boy, and one of the things that was amazing to me is how few people were traveling, ah, in Brazil. And I determined that there were two major reasons. Number one, the service just wasn't good as far as non-stops between cities. The 25 largest cities in Brazil only had non-stops about 20% of the time, but then there were like 50 cities that had no service that needed service. No one flew to these cities. They were making people drive four hours.

AI assessment note: “Yeah, I did. It was, I think, you know, I, I obviously was, have great affection for JetBlue”

Q Is that, is that how you saw the company?

A I plagiarized that with not even knowing. I don't know when he started, when I started, but that was my thought. I just, I just wanted to do everything, and maybe it was because I came up with this whole notion of servant, servant leadership. You know, maybe I learned that on my mission of serving others, and just saw how Southwest had built their culture, and You know, I just developed this thing that, you know, we're going to go out, and we're going to take care of our people, and the people are going to take care of our customers, and it was funny, because when I was talking to the investors in New York, they said, hey, dude, you're in New York, you're not going to find friendly people in New York, and I said, well, I got a lot of, a lot to choose from, so there's, there's fifteen million people here, I'm sure I'll find some nice people, and we sure did.

AI assessment note: “I plagiarized that with not even knowing... that was my thought.”

Q You thought you could do a discount airline that would fly to places that discount airlines were not flying to?

A Yeah, where Southwest Airlines wasn't, and you know, you gotta remember at the time, too, all the carriers, these legacy carriers had accumulated so much stuff, I mean, pension programs, and you know, the, the customer service at that time wasn't very good, and we wanted to bring humanity back to air travel, you know, and this is something that I've kind of learned over the years. Number one is you don't just go start an airline for the sake of starting it. You have to have A reason for being, but also just because you're in a place where no one else flies or can fly doesn't mean that, you know, you can treat people poorly. So let's treat people awesome. Let's find a place that nobody else flies. Let's fly between routes. And so layering all this, I say, I always say to my team, guys, too much overkill is never enough. Let's just keep layering it on, make it better and better and better.

AI assessment note: “Yeah, where Southwest Airlines wasn't”

Q So, okay, you guys, I guess you guys wanted to build a reservation system that you could essentially then sell to the airlines, but why wouldn't, why wouldn't airlines just, just do it themselves?

A Well, they didn't, airlines had these big mainframe computer systems they were using at the time, and everything was done on a flat file. So there was no relational databases. The actual, the database was actually the ticket. So if you lost your ticket, and, you know, it became a negotiable document, And they didn't have any other way of tracking anything. And then they would look at things in the rearview mirror that happened three or four months ago. They had no forward-looking ability at the time. And so by us building the system, we allowed people to have real-time information on all the reservations that were coming in. You know, we could tell them, you know, what the average fare was, what the, what the load factor was on each flight, all the stuff that they never had before. And so it was a huge, it was a revolutionary, ah, change for the airline business at the time. And so, you know, did that during this period of the non-compete, and about halfway through the non-compete, I called, or a couple, maybe a year and a half into it, I called Herb, and I said, hey, Herb, you know, I've consulted, you know, legal counsel. This thing is not really enforceable. I mean, I didn't get any consideration. He said, David, you're the last person I want to see in the airline business. So, I will fight you tooth and nail. I do not want to see you in the airline business. And I said, all…

AI assessment note: “airlines had these big mainframe computer systems... everything was done on a flat file”

Q Yeah, so what is it that you guys, I mean, how were you able to be profitable so fast and for so long compared to the other airlines?

A Well, I think it was just, we were a differentiator. I mean, people saw us, and, you know, we had the word of mouth, and people love flying us, but it's just building a better mousetrap, and building a better company, and, and, ah, you know, I, I became enamored with this whole thing when I was running the company, and I, I read this article called The Constant Customer. They said, look, some companies just grow quicker, they're more successful, you know, and they've, they did a lot of research into what, What it was about these companies that differentiated them from, from other companies. And there was actually United Airlines and Southwest in the article, and it talked about the differences between the two and how they ran their businesses. And the three things they named was, you know, number one is having people who work for you that are ambassadors for your brand, that adore your company, that feel valued and, and feel loved in the company. Um, number one. Number two was, Flawless execution. On every single level, you need to be completely flawless. And so, I, we have dashboards every day where I can tell you everything that's going on at my companies, you know, from on-time percentage, when the last bag made it to the carousel on the most delayed flight, you know, everything about that experience, so you need to be flawless, and then the third thing is you need to make i…

AI assessment note: “And the three things they named was, you know, number one is having people”

Q Which is amazing, because it reminds me of the Southwest model with seven-thirty-sevens. All right, tell me about Breeze. What makes it different from JetBlue and Azulin, or, or similar, or different from other airlines operating right now?

A Well, I always learn. I learn from everything that I've ever done before, and You know, it's, uh, I learned from my Southwest experience that if you bought brand new airplanes, it was actually cheaper than if you got old airplanes. And I did that at JetBlue. And then I learned also at Southwest that you need to treat your people awesome. So I, I did that at JetBlue. And then, um, you know, as you said, I was some somewhat forced out of JetBlue. They wanted me just to be the chairman. I said, no way. So I went back to the country of my birth and founded Azul, and I learned a time from- Well, he was actually a journalist, but he had served his mission there. Fell in love with the country and came back to work, as so many do, uh, when they, when they served their missions. So it was amazing. Brazil was kind of like the US airline business when it was in the 19 sixties. So I really learned the value of being the exclusive person in a market, uh, being a monopoly market. Even till today, Azul, about 85% of their markets, they have no nonstop competition. So Um, learn, learn that big lesson, and then I look back to the U.S., and I just saw some interesting trends that airplanes were getting bigger and bigger, and then the big guys were, were, uh, dominant hubs and really forcing people to fly through hubs. 125 cities had lost 25% of their air service over the last 10 years.

AI assessment note: “I really learned the value of being the exclusive person in a market”

Q And you still fly JetBlue all the time?

A For free. I love it. And so does my family, so, um, uh, we all, we all, we all love JetBlue, so, um, but, you know, the company, um, we had some Some academics on our board that started thinking, oh, this is the entrepreneur's dilemma. It's time to kind of turn this over to professional management. Let's do this and kick David up to be the chairman, and, you know, I don't, I think there's nothing like an entrepreneur, you know, there might be isolated cases where the entrepreneur dilemma, you know, is the case, but in most cases, there's just nothing that can substitute for the passion, and so, um, I'd love to do a business case. I teach courses at Stanford, actually, with my high school diploma, I don't even have a college degree. And, um, so.

AI assessment note: “For free. I love it. And so does my family”