Dave Barger, CEO of JetBlue for seventeen years
The excitement of flight was wired into Dave Barger’s psyche when he was a boy, listening to his dad tell stories about being a commercial pilot. Barger wanted to be part of that world, too—but his vision was not twenty-twenty, and in those days, it had to be. “It was the best medical challenge,” he says now, “because it forced me into management ranks”—where an entirely different sort of vision was needed.
He started his career at New York Air, became a vice president for Continental and ran the Newark hub, then was asked to be CEO of a low-fare New York startup, JetBlue Airways. A founding member, he ran JetBlue for seven of his seventeen years there, leaving in 2015. Today, that little startup is merging with Spirit to become the fifth-biggest airline in the nation.
It must be a rush, starting an airline from scratch.
I was in the right place at the right time. As I was running the Newark hub for Continental, I knew some people who were investing in what became JetBlue. I am not an entrepreneur; I’m an operations person. But I was asked to join the team as CEO. Being a member of that founding team, asking, “How do you bring humanity back to air travel?”—that was neat.
A guy at Continental at the time, Greg Brenneman, told me, when I had the opportunity to be part of a startup, “You will always have the opportunity to come back and maintain somebody else’s vision. But you won’t always have an opportunity to create.” Even to be part of the name, the color scheme, the uniforms, how you’re going to distribute tickets, and literally the creation of values…. That was 1998. And the number one item I’m so pleased with, when I think back to JetBlue, is that it’s still there. It’s its own brand. It was successful.
What prompted its creation?
The founder, a gentleman by the name of David Neeleman, said, “You don’t truly have low fares in New York City.” There were low fares being offered by Southwest Airlines but not in New York City. New York was pretty much network carriers, and they were protected because you had to have slots to fly in and out of those airports. So, in 1998, here’s an opportunity to create something, and if we can get the government to give us new entrant slots to compete, that should make it easier, because the network carriers are so set in their ways, and they have high fares and a higher cost structure.
What was the state of the airline business when you took over?
A lot of people said that the events of 9/11 accelerated the U.S. airline industry moving into bankruptcy. But there were failed business models all along the way. An external event like that just accelerated the failure. Here in the United States, though, when you start talking about bankruptcy, you know those airplanes are going to somebody else, for the most part. Somebody once said, “We are environmentally friendly in the airline industry, because we just recycle the waste of our business plans!” Don’t worry about declaring Chapter Eleven, just reboot it with the same manufacturers, airports, employees.
I was present for a speech that Wolfgang Mayrhuber, former CEO of Deutsche Lufthansa, was giving to his team in Germany. He said, “Ladies and gentlemen, we don’t sell air transportation. We sell freedom.”
Why did their business model fail?
They relied on high fares and high cost structures, and they were focused on market share as opposed to the financial metric of return on invested capital. And when you see an external event like 9/11, where people are saying, “Do I even want to fly?”—not unlike what we just saw on the backside of COVID—and you don’t have the revenue environment, and you have a high cost structure, and a lot of debt on the balance sheet as well—it’s a recipe for failure. Probably five years later, almost half the seats in the United States were being operated by airlines in bankruptcy. And that’s hard to compete against, because they’re focused on rebooting themselves as opposed to driving profitability.
What role does the airline industry play in the national economy?
Nick Calio, who runs Airlines for America, the trade association, would say it’s 6 percent of GDP. But that 6 percent enables so much more across the U.S.—millions of direct and indirect jobs. It’s significant. It’s not the driver that healthcare is, but it’s a significant contributor. I was present for a speech that Wolfgang Mayrhuber, former CEO of Deutsche Lufthansa, was giving to his team in Germany. He said, “Ladies and gentlemen, we don’t sell air transportation. We sell freedom.”
So JetBlue starts up. How is it being marketed, in comparison to its competitors?
We had the creation of our values first and foremost. Safety, caring, integrity, passion, and fun—I can recite them like it’s 1998. The values are the behaviors, in terms of who we are going to hire so the JetBlue experience is different. And the target was, it has to be new airplanes, nothing used, and it’s going to be point to point; you’re not going to connect. A simplified fare structure. One-way fare structure. Remember how, back in those days, you had to have the Saturday night stay? And 100 percent ticketless and distributed by the internet. I’ll never forget when we received the approval to start selling tickets by the Department of Transportation, early in 2000. We had $111,000 worth of ticket sales in the first day, and that was the first time I was like, “This may work.” There had been an awful lot about the branding of this startup in New York, people saying it didn’t stand a chance to be successful versus all the big network carriers. And then you get in the hardscape of the brand: new airplanes with the leather seats, in-flight TVs, and comfortable cabins. No overbooking. As many snacks as you want; you’re not going to be charged for everything.
But all that doesn’t matter unless the airline has the human side, the behavioral side, bringing that talent in to make the difference. You might be flying low-fare in a brand new airplane, point-to-point, but you can still tell when somebody doesn’t care that you’re on the airplane. So it was the soft items that became the hard items, if that makes sense.
The glamour of those early flights, when people dressed up and it was all rather elegant—will that ever return? Was it only possible when flight was novel, or was it a function of expense?
Yeah, it’s fun to look back at. I don’t see it returning. To me, flying’s still glamorous in its own way, but not in how we present ourselves. It was interesting on the backside of COVID, people talking about how expensive air travel is—and of course oil’s up, and there’s so much pent-up demand, so fares are higher. I’m glad to see the fares higher, because it’s to me such a bargain. I think there was such an entitlement mentality: I want a low fare, and I’m going to fly across the country, and I’m going to do a long weekend in Cancun or whatever. People who complain about the fares getting higher, it’s like, “Do you want to drive from New York to Orlando? It’s gonna take four days of your vacation. And what about the hotel costs and the gas and the wear on your vehicle? But there’s a fine line, because of the competitive landscape. Who’s next in offering that lower fare?
Are you following the JetBlue merger with Spirit?
I can’t say I’m that close to it, but I’m definitely following it. I always look at organic growth. If I was in the boardroom, I’d be asking questions. Of course, you have to get through the financial questions, but it’s everything we did in the early days, in terms of the values, bringing the right people on board. How do you do that when you’re trying to merge cultures? You can paint an airplane. You can reconfigure an airplane. You can put the same pricing mechanism in place. But how do you merge cultures?
I was at Continental Airlines, which became part of United Airlines. I look at an airplane today, and it’s a Continental paint scheme, and it’s got United on the airplane, and it’s United and Continental employees and some from other airlines that came in over the years, but I swear I could still get on that airplane and tell you who used to be Continental, who used to be United. There’s just something in the DNA of each airline. Southwest has made some acquisitions, but they’ve done a great job—I don’t know who used to be at AirTran or Muse Air or Morris. I think that’s the hard part. The pro formas, the financing, that’s the easier part. So we’ll see what transpires.
No overbooking. As many snacks as you want; you’re not going to be charged for everything. But all that doesn’t matter unless the airline has the human side, the behavioral side, bringing that talent in to make the difference.
Are mergers healthy or bad for competition?
Seven years ago, when I was retiring, you still had American, United, Delta, and Southwest as 85 percent of the industry. So the argument can go both ways. You already have concentration, so airlines get together to try to challenge the Big Four. There are always going to be new airlines on this landscape. The industry just attracts too much attention for there not to be startups. I think that is what helps. If you do have this concentration, the new entrants are always going to be providing the competitive spirit in terms of fares, which is good. However, once you start to get into these big cities—I’m of the opinion that airlines compete more on the ground than in the air. If I have gates and I can block you, it’s always going to be hard for you to come on in and actually lower your fares on top of me.
What makes starting an airline company so attractive? There’s a lot of drawback to it, and financially not a heck of a lot of reward.
What happens over time is, the concentration of the airlines starts to create the environment for the paper airlines, the pro formas, to be put together. To say, “Hey, there’s an opportunity here.” And boy, it’s an attractive business. It’s like sports cars, like sports teams. It attracts people who, whether they are well-heeled or they have the right concentration of a network, there’s just something about the industry that continues to attract new airlines. And by the way, most of them fail. Most of them are only paper airlines, [proposals seeking investors]. If they fail, it’s like, well, okay. They made their money elsewhere, could be technology, could be hospitality. There are two of those paper airlines flying today, Avelo and Breeze. They’re probably both flying about ten airplanes each. But for every paper airline that makes it, a large number of ideas never hatch.
Tony Janus started what we believe was the first commercial airline in the United States, an airboat between St. Petersburg and Tampa, in 1914. In the next hundred years, the U.S. airline industry, if you aggregate it, did not make money. It lost money. But it’s just a sexy business, like horse racing or sportscars. People say, “Hey, let me take a shot,” even though the industry in the U.S. didn’t make a dime its first one hundred years. The Civil Aeronautics Board governed it until President Carter deregulated it in 1978, which allowed competition to take place—but it was still not making a dime. And it’s such an essential business. Now, it’s not just passengers, it’s cargo.
You became the head of the company in 2007, and you stayed until 2015. What challenges did you face?
Again, I had this operating background. I never joined JetBlue thinking I would run the company. There was succession planning, and I was asked to head the company. David [Neeleman] then became the chair. I think the number one issue I had to learn was, David had always been external-facing, and I had been internal. I was comfortable with the FAA, the DOT, the airports, the port authorities, going down to Washington and spending time with members of Congress. But a publicly traded company, when you start to get involved as the external face of the company? That wasn’t part of my DNA. I ran the company for seven years and enjoyed it, but I have to admit, I enjoyed being at orientation more than doing an earnings call. You learn, and people help you learn. The board was terrific. Joel Peterson ended up as our chair. We’d have discussions every two weeks on a Saturday. And it’s interesting, because we weren’t talking about the competitive landscape or oil as much as we were talking about the team, its health and effectiveness.
I look at an airplane today, and it’s a Continental paint scheme, and it’s got United on the airplane, and it’s United and Continental employees and some from other airlines that came in over the years, but I swear I could still get on that airplane and tell you who used to be Continental, who used to be United, who used to be Northwest. There’s just something in the DNA of each airline.
Did Wall Street ever get in your way? A 2014 Bloomberg headline read “JetBlue CEO Fires Back at Wall Street Analysts,” and a Fortune headline read, “JetBlue Will Need to Fight for Its Soul Against Wall Street.”
Well, JetBlue needed to go public to finance the growth of the company. You have to embrace Wall Street, and I certainly had to learn. You just have to be very purposeful, relentless, open to feedback and criticism as well. We’re building a brand we believe is differentiated in a commodity business. And when you’re saying that it’s not a commodity, we’re not a network carrier—we’re not an ultra-low-cost carrier, either. Some said we were a tweener, between the two. Okay, it’s a commodity business, but people will pay up for something if there’s true value there. But boy, it’s not for the faint of heart. There are certainly some pointed discussions, earnings calls, or analyst reports, saying what the company’s doing and why you’re leading it. What are you trying to build for the long run in this differentiated market? I have tremendous respect for the analysts community, but you get inside of unit revenue and unit cost, and, well, there’s a lot more to it than that. Gordon Bethune, who was leading Continental when I was, said, “Listen, you can take so much cheese off a pizza that…forget it.”
Will we soon be able to walk into an airport, have our faces scanned, and relax? And are there dangers in that?
You always have privacy issues that you’re working through. And if the technology is down, what’s the backup? But I am very optimistic with regard to what’s happening with biometrics from a security perspective, and how we continue to refine what we are looking for and who’s of interest. Whether it’s Homeland Security, TSA, or globally, it’s amazing to see some of the stuff that’s in place. And I think it’ll be respectful. I don’t know that it’s going to be user-friendly. But it’s not going to keep somebody away from the airport.
How do you see the eVTOLs [fitting [Electric Vertical Take-Off and Landing Aircraft or air taxis, powered by batteries, similar to helicopters] into the industry for short commutes?
Yeah, the vertical takeoff and landing machinery. I don’t think it’s a fad, but I don’t think it’s ubiquitous. There are eight billion people in the world, and most have never had the opportunity to fly on an airplane. So when I think of grabbing an Uber—what used to be Uber Elevate—to fly from this facility in Dallas to another facility in Dallas, it goes right back to the airline industry and where JetBlue cut such a nice landscape. It can’t be for the 1 percent—the way less than 1 percent, when you think of how expensive it’s going to be to charter an eVTOL. There are parts of the world where eVTOLs can play a role because we’re losing so much productivity in congestion, and not only that but what we’re doing to the planet as a result of that congestion. But it can’t be for the less than 1 percent. The ability for people to participate in what aviation provides, to me, is the key, and that goes right back to JetBlue. It can’t be a high fare. And I don’t know how they’re gonna get that cost down to put three people on this machine to go from St. Louis to Springfield. I just can’t see it. I think we’re going to be using our electric vehicles for those kinds of distances. I can see the use of eVTOLs here in the States in places like L.A. They talk about it in the Dallas-Fort Worth metroplex. But there are places outside the U.S. where the applicability is much greater. When you start talking about the use of that machine to deliver goods and medications, there is no doubt you can justify that. In the States, the technology is there, but you have to get it through the regulatory body as well, and I don’t want that over my house, or over kids’ schools. And the whole world is understaffed right now. How are you going to staff eVTOLs with pilots if the airlines are understaffed?
Does the political party in power make a difference for the airline industry? Are there certain kinds of policies or regulatory impulses?
No. In my experience, whether it was Democrat or Republican, it didn’t matter. I think of those people in the FAA, it’s now a five-year position, so you’re not subject to the every-four-years of a political appointee. Of course, the Department of Transportation is. But I never saw politics enter into it. That’s not to say you won’t find other points of view; there are 535 experts in aviation! But from a regulatory perspective, you never saw it. Our certificate resided in Garden City, New York. I’ll never forget when Nick Sabatini handed over our operating certificate. He said, “This is the minimum level of regulatory compliance you have to achieve. So now it’s up to you to go above and beyond.”
What happens when the culture wars hit the air?
Air rage is not a new term, and there have been examples of air rage. I don’t think when I was in office we ever had anything to the extent of what purportedly happened during the pandemic, with the politicization of the mask. But in hospitality, we tend to bring people together. It could be at concerts; it could be on airplanes; it could be in restaurants, hotels, whatever. I don’t know what it is in terms of an airplane, but my sense is that it’s much more dramatic, so it gets reported above the fold, as opposed to what happens at a restaurant or a concert. And when something does happen, the airplane diverts, and they’re met by crash, fire, rescue, local authorities, and it tends to catch a sound bite or more.
There’s something psychological about people all being enclosed together in midair, and feeling vulnerable, and not agreeing.
For sure. And part of that goes right back into who are you hiring, who are you training, and how good is their teamwork, in the air and with people on the ground. It’s one thing to hire and staff, but what’s the training? You might be dealing with somebody who has a behavior disorder. There might be a medical condition involved. We had a flight attendant who came out of the Fire Department of New York, and by word of mouth, the FDNY became our number one pipeline in New York for a time. After you put in twenty years at the fire department, you became a flight attendant. Think about the training they have received, the tremendous experience they’re putting to use at 35,000 feet: “I don’t think we need to make this one air rage. Let’s somehow settle this one down.”
[PULLQUOTE] Tony Janus started what we believe was the first commercial airline in the United States, an airboat between St. Petersburg and Tampa, in 1914. In the next hundred years, the U.S. airline industry, if you aggregate it, did not make money. It lost money. But it’s just a sexy business, like horse racing or sportscars.[ENDPULLQUOTE]
Would you ever go back and run an airline again?
Sure, I would do that, but I think some people just absolutely love it, and I think you have your run for a period of time and put the next generation in. I’m sixty-four. I think I can contribute in a different way, whether that’s on boards, helping build teams, or what I’m doing with infrastructure capital now, with Oaktree and Connor Capital, with railroads and shipping assets and trucking companies. The KPIs [key performance indicators] are the same. And I’m having a ball!
What do you see as the future of the American airline industry? Ten years from now—are you optimistic or pessimistic?
Optimistic. Willie Walsh runs IATA, the International Air Transport Association; he’s over in Geneva right now. And I mentioned Nick Calio. My sense is that from their boards—and the airlines they represent—the message has to go to the employee community that this is where you want to work. This is why you want to be a pilot. This is why you want to be a mechanic. I think that word has to be refined to say, “Hey, listen, I like working at home on glass too, but only to an extent. Get out and see the world.” That’s the number one offering in this business, and I would just hammer it, in terms of attracting talent. We continue to connect the world with these incredible machines. The environmental footprint is going to continue to get better and better, and that will attract people who want to be responsible, who don’t want to be part of something that’s emitting all kinds of carbon all over the planet and contributing to global warming. So I think we’re finding this message while we’re also selling freedom, mobility, experiences. I’m incredibly optimistic, but I’d like to see the message refined a bit. How would I operationalize that? I’d say, if you join an airline, instead of “space available passes,” here are your twenty tickets, and in year one, you can go wherever you want to go, give them to whoever you want to give them to. Not “space available,” but where you can book your trip; you can count on it. I’d take advantage of what the industry has to offer.