When David Neeleman stepped down as CEO of JetBlue Airways a year ago, he swore he'd never start another airline. "Shows you how compelling...
NEW YORK — When David Neeleman stepped down as CEO of JetBlue Airways a year ago, he swore he’d never start another airline.
“Shows you how compelling … this Brazil idea really is,” the JetBlue founder said of his latest venture, an airline — of course — that will appeal to Brazilians on service and price.
The 48-year-old father of nine who has been involved in starting up three carriers north of the equator says he won’t be launching another one on this side of the globe any time soon.
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“If someone came to me and said, ‘Here’s $400 million to start an airline in the U.S.,’ I’d say, ‘No way,’ ” Neeleman said over lunch in New York last week.
Oil at more than $120 a barrel, a slowing economy and fierce domestic competition are squeezing airlines. Most U.S. carriers reported sharp losses in the first quarter. Two — Delta Air Lines and Northwest Airlines — are combining to try to cut costs, and several others are said to be seriously exploring joining forces.
But Brazil is different, said Neeleman. Two carriers, TAM Linhas Aereas SA and Gol Linhas Aereas Inteligentes SA, control more than 90 percent of the market, and prices are about 50 percent higher than they are here, he said. There is no passenger rail service to speak of; people who can’t afford to fly travel long distances by bus.
But penetrating Brazil’s airline market may be harder than it sounds.
“Neeleman is up against very strong brands,” said Bob Mann, an independent airline consultant based in Port Washington, N.Y.
“The Brazilian domestic market is not one that’s easy,” said Mike Boyd, president of The Boyd Group, an Evergreen, Colo., consultancy. “The place has been a graveyard for airlines. … That much said, if anybody can make a go if it, Neeleman would be the one.”
Neeleman’s new carrier, Azul, sounds a little JetBlue-ish. It will use 118-seat E-195 jets made by Brazil’s Empresa Brasileira de Aeronautica SA. JetBlue uses a similar Embraer plane. The planes will be outfitted with leather seats and free satellite TV — amenities familiar to JetBlue customers but virtually unheard of in Brazil.
Neeleman plans to start service next year with three planes, then add a plane a month until he has 76 in service. He has raised $150 million — about a third of that from Brazilians, the rest from the U.S. — and has invested $10 million of his own money.
Neeleman was born in Brazil while his father was in the country as a Mormon missionary. He holds joint Brazilian and U.S. citizenship, which gets him around a Brazilian law blocking foreign citizens from owning more than 20 percent of an airline.
Azul will fly domestically at first but may add international routes later. The airline will be privately held, with the intention of someday going public. Neeleman will hold voting control.
“I won’t have the same issue [I had] at JetBlue,” Neeleman said. “I’m not going to lose, you know, I’m not going to be surprised like I was last time.”
And surprised he was, when JetBlue’s board asked him to step down as chief executive and handed operational control of JetBlue over to President Dave Barger just months after an infamous Valentine’s Day 2007 ice storm caused thousands of flight cancellations throughout the Northeast.
Neeleman apologized at length for JetBlue’s missteps and took immediate steps to fix the airline’s operational issues.
But Neeleman’s efforts to fix JetBlue didn’t prevent the board from deciding he was the problem.
Neeleman has remained chairman of JetBlue but recently said he won’t stand for re-election. He’s selling JetBlue shares as part of a regular diversification plan.
But it’s clear Neeleman’s in no hurry to return to the U.S. airline industry. Asked about a potential merger between UAL Corp.’s United Airlines and US Airways Group, Neeleman said: “I’m glad I’m in Brazil.”