sort of thing you can pull off when

sort of thing you can pull off when you're small, and that becomes far tougher
the bigger you get. Can JetBlue maintain those qualities as it morphs from nimble start-up into the bureaucracy that's required to manage a vastly more complex
operation?
It's a question that applies to many truly innovative companies these days. Call them postmodern corporations, perhaps. If they pull off this transition, they become big, but remain in important ways the antithesis of bigness-think Starbucks, Dell, and Amazon. Like JetBlue, they depend on flexibility, speed, and a sense of intimacy with employees and customers alike. Put another-way, the challenge JetBlue now faces is this: Is small scalable?"
Neeleman began flying into turbulence in 2005. At the same time as Fast Company was pondering hiS ability to save his company from the fate of People Express, a similar concept which failed in the 1980s, rivals Delta and United were launching Song and Ted, low-cost/high-frills offerings meant to directly compete with JetBlue. Labor and maintenance expenses began to creep up as JetBlue's people and planes got older and the company experienced problems with the introduction of a brand-neW aircraft type, the Embraer 190. As is often the case when an airline brings a new type ฐ of aircraft into its fleet,.JetBlue experienced unexpected glitches. Not only did the new Embraer 190s arrive behind schedule, installing the in-flight entertainment system so integral to the JetBlue passenger experience took longer than expected. Also, pilots and mechanics used to doing things a certain way on the existing fleet experienced significant learning curves in operating the new aircraft. On-time performance eroded and flights were canceled." In addition, Florida and the Gulf Coast, important markets for JetBlue, were ravaged by Hurricanes Rita, Wilma, and Katrina in the summer of 2005. The demand forair travel to the affected regions fell, petroleum refineries were closed, and JetBlue's fuel costs soared 52 percent. At the end of 2005, the company reported its first-ever operating loss, $20 million.ฐ
Neeleman and Barger discussed these challenges in the company's 2005 Annual Report and offered a plan for recovery. They planned to grow revenues by raising average fares, using capacity more efficiently and adding service to small and mediumsized cities where a relative lack of competition would allow JetBlue to command a price premium. They also reiterated the airline's commitment to reliable service, which meant "operating flights even with a delay rather than canceling the flight for the schedule's convenience." To manage costs, they promised to improve workforce productivity through better training, smarter business processes, and more extensive use of automation, and they said they would control the risk of rising fuel prices through financial hedging strategies. The executive team also refused bonuses, and Neeleman delayed the delivery of 36 new aircraft. t6
By the end of 2006, Neeleman and Barger's plan to grow their way out of trouble seemed to-be working. Revenues rose 39 percent in 2006, to $2.36 billion. The firm enjoyed three successive profitable quarters, ending the year just $1 million in the red. In January 2007, ฐDavid Neeleman told investors, "I'm tremendously proud of the efforts our creWmembers have made in advancing our plan to institutionalize low-cost carrier spending habits and improve revenue overall." Dave Barger said that the airline's performance in 2006 "positions us well for 2007, a year in which we plan to grow capacity 11 to 14 percent, while continuing to enhance the JetBlue Experience." Investors appeared to share management's confidence. Towards the end of 2006, analysts began to upgrade their recommendations, and by mid-January, the stock price had soared to a new 52-week high. No one knew the turbulence that lay just ahead.