Airlines

JetBlue Founder's 'New Big Thing' for Aviation


JetBlue founder David Neeleman

Photograph by Jonathan Alcorn/Bloomberg

JetBlue founder David Neeleman

David Neeleman, the serial entrepreneur with four successful airlines under his belt, is looking to tackle one of aviation’s most acute problems: the price of jet fuel.

“My big thing—a $1 billion X-Prize—is to figure out how to make natural gas into jet fuel,” Neeleman, JetBlue’s founder, said Sept. 17 at an airline forecast conference in Dallas. “That’d be awesome. That’s my next big thing.”

The notion of converting a gas into a liquid jet fuel is not as technically far-fetched as it may initially sound. In Qatar, Shell (RDSA:NA) has built an $18 billion GTL (gas-to-liquid) plant that produces jet fuel from gas at a cost of $80 per barrel. A Qatar Airways flight in 2009 became the first to be powered by fuel derived from gas.

While that price is too high for worldwide feasibility, Neeleman said that cutting it to $40 would be a “game changer” that would make natural gas a better alternative-fuel source than current research into fuel sources such as jatropha, algae, and other biofuels. Bio-jet fuels are a pet project of Virgin Atlantic Airways founder Richard Branson, whose Carbon War Room in December launched a website devoted to cutting in half the use of traditional jet fuel. While promising, such research has not yielded commercial projects of a scale needed for global airlines.

Neeleman is hoping to rally other carriers to contribute $1 billion to a fund that would reward innovators who successfully convert natural gas to jet fuel. He said that could have saved Delta Air Lines (DAL) one-third of its $12 billion fuel bill in 2011.

Such incentives have a long history, including the first trans-Atlantic crossing, when Charles Lindbergh won $25,000 from a New York hotelier for making his Spirit of St. Louis flight in 1927. More recently, a $10 million prize was awarded in 2004 for the Paul Allen-Burt Rutan effort SpaceShipOne, the first manned craft to achieve successful private space flight.

Since crude oil spiked to near $150 per barrel in July 2008, airline executives have bemoaned the extreme volatility that has marked commodity prices. In the past week, a barrel of West Texas Intermediate has passed $100 only to drop more than 4 percent at one point on Monday. Such volatility—even more than sustained high prices—impedes executives’ abilities to plan and control their costs.

Neeleman, 52, helped to start Morris Air out of a charter operation in the early 1990s; Southwest (LUV) bought that company in 1993. After helping to found Canada’s WestJet Airlines in 1996, he founded JetBlue (JBLU) three years later, based at New York’s JFK Airport, and built it into a successful independent carrier. He was replaced as chief executive officer in 2007 after a disastrous Valentine’s Day snowstorm snarled the airline’s operations for several days. The next year Neeleman, who was born in Brazil and speaks Portuguese, founded a Brazilian carrier, Azul, which operates out of Campinas, northwest of Sao Paulo.

In his remarks before the Boyd Group’s annual International Aviation Forecast Summit, Neeleman said his days of starting new airlines are probably over. “If you start a thing that 40 percent of your cost is fuel … there’s just a smaller piece of what you can control now. When I started JetBlue it was so easy. It was like taking candy from a baby. Fuel changed the whole dynamics.”

Bachman is an associate editor for Businessweek.com.

Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • RDSA:NA
    (Royal Dutch Shell PLC)
    • $30.55 EUR
    • 0.34
    • 1.1%
  • DAL
    (Delta Air Lines Inc)
    • $38.94 USD
    • -0.58
    • -1.49%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus