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- [00:11]
A
Join Willie Walker, Walker and Dunlop's chairman and CEO, as we bring you fresh perspectives about leadership, business, the economy and commercial real estate. Willie hosts a diverse network of leaders as they share wisdom that cuts across industry lines. His guests are experts in their fields, from leading economists and CEOs to Harvard and Yale professors and everything in between. Our one goal is simple, providing you with unique insights, unparalleled data and real time market analyses.
- [00:44]
B
Good afternoon, everybody. I started my day in David's time zone and I've flown to the east coast and just landed and ran to a conference room to put this on. Sorry we're a couple minutes late starting this morning, but great to have the hundreds of you and it will be thousands in a moment streaming in to join this conversation with somebody that I have tried to get on the webcast for quite some time. Am absolutely thrilled that David has joined me and have the utmost respect for David and what he has done throughout his career. Most importantly, I think because to those people who watch the Walker webcast and know a little snippet of my background, I actually started an airline in Argentina back in the late 1990s. And so when David and I turn our attention to Brazil and David's a Sewell launch in Brazil, we'll, we'll have some shared experiences in that part of the world. But David, nice to, nice to have you with me and thank you for taking the time.
- [01:46]
C
Thanks, Willie. It's great. Thanks for the invitation.
- [01:49]
B
You're. You're very welcome. It's a, it's a true honor. David. There's so much to talk about and I know that a lot of people listening in today a want insights on aviation and want insights on entrepreneurship, want insights on leadership. All things that you know a tremendous amount about. As I think about your career and having started five airlines and started five airlines in different countries with different business models, I sit there and say, what is it inside of David that drives that entrepreneurial spirit? Where did what, what was that childhood experience that said to you? I either have the chutzpah, the guts, the vision, the entrepreneurial gene that says I'm going to spend my life starting new things up.
- [02:48]
C
It's a good question. I think I probably started as, you know, trying to think outside the box and do things differently and then it just evolved into pure insanity over the years. No, you know, it's like, why do you keep doing this? This is crazy. It's a, it's really the hardest business ever. But you know, from my, I don't know, I I, you know, I figured out in my early 30s that I had attention to deficit disorder. And, you know, everybody wants to have it today or says they have it or whatever, but, you know, I had this kind of unique ability to just look at something and say, I, I think I can do that better, or put myself in the position of the consumer and say, I want to be, you know, I want that different. And it all started with my. I was enamored with Southwest Airlines. I just was. Was obsessed with, you know, Southwest Airlines back in the day was the coolest thing ever. You know, cheap fares, you know, hot pants for stewardesses. I mean, that's how HERP started. That's not what enamored me. But, you know, it just was a transportation system that was efficient, turning planes in 20 minutes, allowing low fares, you know, being. Allowing people to travel. And so my first airline, I patterned it almost exclusively after Southwest Airlines, so much so that they acquired it. So that was kind of my first. My first one, but it was just, you know, thinking. Thinking outside the box. We were the first airline. My first airline was Morris Air. We were the first airline ever to have E ticket Travel, for example. And that just came from add. Lose my tickets, leave my home. Why do I need a ticket? Why can't I just have a confirmation number? So, hey, Dave Evans, who was a guy working on backing up computers, saying, can you build us a reservation system? Well, it needs a relational database. Okay, let's. Who has a relational database? HP 9000. Okay, let's do it. So, you know, I was just trying to look at things, simplify it and solve. Solve problems.
- [04:51]
B
What about working for your grandfather in his grocery store when you were nine years old? That have anything to do with it?
- [04:57]
C
Oh, yeah, I think so. I mean, it's. Had to stand on a milk crate because I was too short to check people out. But, you know, my, My. My grandpa was. Was an entrepreneur and, and he really wanted to please customers all the time. And he, he had this little convenience store back in the. In. In actually the. The 40s that made fresh sandwiches and had donuts. And it looked. It was the precursor of 7 11, which much. What. Much better quality because he thought that's what people want. Come by, grab a sandwich, grab a donut. And so I, I learned kind of at his feet how to. How to have an obsession with. With pleasing customers or what we call guests at Breeze.
- [05:45]
B
And you were born in Brazil. Was Portuguese your first language or was English your first language?
- [05:50]
C
Well, my parents are American, but according to my Parents, I, we left Brazil when I was five, but they said that amongst us, kids would all speak Portuguese to each other. So I guess that was my first language in a sense. But that was pretty quickly replaced when we moved to the United States when I was 5 years old.
- [06:11]
B
How was your Portuguese when you went back down to start up a Sewell?
- [06:16]
C
It was, it was good, pretty good. I went on a mission, thank goodness. I had completely forgotten Portuguese. And then, you know, we're members of the Church of Jesus Christ, celebrity Saints, and we have this missionary program and you don't get to really choose where you go, you're just assigned to a certain spot. But because I was born in Brazil and had a Brazilian passport, my dad had served in Brazil. So I had the privilege of being called back there and, and I was able to relearn the language and then I've kept it ever since. So where'd you do your mission? I, I started in Rio de Janeiro and then they divided the mission and I spent most of my time up in the Northeast. You know, then that was a hallmark experience for my life because, you know, and the reason I was born there is my dad had served his mission there. It was just a random coincidence. But then he went back to work as a journalist and I was born there. During the time we were living there as, as he was a foreign correspondent. What, what was interesting about that is when I was a young kid, I went as an expatriate. I thought Brazil was the coolest place on earth and everybody was rich because that's who we hang out with. As I went back as a missionary, I was with all the poor people and I was angry, I was ticked. I was like, are you kidding me? And so, you know, I, I just, that was the first time in my life I ever had success in my life where I could lead and I could learn a language and, and I felt like I could accomplish a lot of things. And that was really a hallmark experience. But then I kind of, I kind of filed this little thought back in my mind as a 19 year old boy. I'd love to come back in Brazil and create a company that could lift a lot of people out of poverty and, and, and serve the masses instead of just the 30 million rich people that live in Brazil.
- [08:07]
B
But when you came back from your mission, you went back and finished up at the University of Utah and then.
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C
You went out to Y. I didn't finish up. I dropped out. You dropped out? Who cares? Yeah, I don't want to leave any impression I do have six honorary doctorate degrees, but I do not have a graduation. That's great. You see.
- [08:32]
B
So you, you came back to the States and then you went out to Hawaii and started working in on in timeshares. Talk for a moment about that entry and Al Ler's time shares that you ended up marketing for him and then bundling.
- [08:50]
C
Yeah, I mean, I, I stayed in Salt Lake, but I met Al Lieber actually through someone in my accounting class at the University of Utah. And he was struggling to sell his timeshares. So I didn't offer to sell him. I just offered to, uh, pay him the, the maintenance fee every, every week and then rent him out and then, then kind of keep the difference between what I charged and what I needed to pay him for the maintenance fee. So that's how I launched my first company.
- [09:19]
B
But there was the added piece to bundling in air transportation that made the timeshare seem a little bit more attractive.
- [09:26]
C
Right? Yeah. People in Utah love Hawaii. They just, it's like the coolest. Doesn't everyone love Hawaii? Well, they have a special affection for it. I would say that in Disneyland. So we, we, we got airfare off the west coast and people would have to drive all the way to la, get on this, this cheap flight with Hawaii Express, started with Pacific east and then went to Hawaii Express. And then people could, you know, have, have a package to Hawaii that they could take the whole family and they, these condos could fit like six or people. So you could take your family of four and drive eight hours and fly and, and, and, and afford to go to Hawaii, which a lot of people couldn't do.
- [10:09]
B
And as you were starting that up, why not just stay in the travel agent industry rather than moving into aviation? I, I was listening to a conversation you were having, David, where you talked about that you, you love the Boeing 757. And as someone who's liked airplanes my entire life, I can remember distinctly when the 757 came out and what a great air do have. You always had sort of a lure towards aviation or was it just that you happened to be in the travel industry and saw that the bundling of aviation with it could be something you could sell?
- [10:41]
C
Yeah, it was just, you know, it's, you can't get to Hawaii unless you have a cheap way to get there. You can give them a cheap, cheap condo, but if all the fares are really high, you had to figure out kind of a way to package it together. And you know, my beginnings, you know, at Azul, we have this $500 million a year package business. And I had to push that really hard. And I'm starting to push it here, a breeze. But that was, I keep explaining that was my beginning, that's how I started, was in the vacation package business. So it's kind of always been near and dear to me because it, it just solves a need for people to be able to kind of put it all together.
- [11:22]
B
But you realized at an early age the sort of the cyclicality of the aviation industry and that Hawaii Express went under and you'd pre purchased some tickets on it and that kind of took down that line of business. Why wasn't that the warning signal that aviation and travel might not be the industry to focus on?
- [11:39]
C
That's where the mental illness, that's where the sickness started. That's where we bridge into insanity. I think thinking, hey, I should go get, go do something else. But once it, once aviation gets in your blood, it's pretty hard to get it out.
- [11:55]
B
Unfortunately, on my, on my flight out here, I was with two colleagues of mine and we were sitting around talking about aviation and I just said once, you, everyone I ever met in the aviation industry when I was launching Alta down in Argentina, once you get it in your blood, you just, you sort of don't get it out. It's just this incredible allure of moving people and the jets and the pilots and the whole whole nine yards. It's just one of those industries that once people get into it, they just can't get it out of their blood.
- [12:20]
C
Yeah. When I was in JetBlue and you know, we were flying high and the PR department called my parents and said, do you have any pictures of David as a, as a young boy? And we're trying to figure out how we got into aviation. And there was this picture of my three year old birthday. I'm standing there with a big airplane on my cake and they said that's it, that's, that's. But I remember just recently that we actually had an airport right by my home when I was growing up in Sandy, Utah, that I'd go up there and watch the parachuters every day and you know, sit under the approach and watch the planes fly over. So I think I've always been enamored with aviation.
- [12:59]
B
Are you a pilot?
- [13:00]
C
I'm not, no. And you, you know, you don't want someone with ADHD to be your pilot. I, I would suppose, I mean my, my form of it where I, my hyper focus is on the business and I always tell our Pilots, we have a deal. I won't tell them how to fly the airplanes if they don't tell me where to fly the airplanes. So, you know, each of us have our different sk in life and do you enjoy flying? I enjoy going to places. You know, I think, you know, JetBlue, we were the first airline to ever have live television on, on the airplanes. And part of that reason is that I was completely bored on an airplane. You know, even reading, we didn't have phones and being able to listen audible and all that kind of stuff, you know, back 25 years ago. So I wanted something to entertain people, to make traveling at least a neutral experience so it wasn't negative. And so that's why I found this company that had live television. And as soon as I saw that I'm like, we're putting out on our airplanes. That's going to be really cool. So yeah, I don't, you know, obviously I like, I like going places, I like seeing new things, but the trying to make the journey as neutral as possible.
- [14:19]
B
I remember distinctly, David, your interview on the Today show back in 2000 when you were launching JetBlue and you were on the plane with the TV screens behind you. And I remember distinctly, I think it was Matt Lauer who actually did the interview with you. And you're sitting there with the TV screens on the back of the seats. How difficult was it to get Airbus to build the television screens into the back of the seats? Because that was totally revolutionary at that time.
- [14:45]
C
Yeah, it took us a few months after we started flying it, it the first airplane didn't come with them, we had to retrofit. But you know, I somehow I think things were probably easier 25 years ago. You know, today we're trying to put, we're trying to go from 12 first class seats to 20 first class seats because we have so much demand. And that process is, seems to be a lot more difficult moving, moving seats a couple of inches here and there than it was to put those TVs in the seat back pockets. So I think there's just been more and more regulations come on. But now we got it done though, and, and from the first time when people walked on that brand new airplane, they saw those leather seats and they saw those live televisions, they were completely blown away. I mean, so much so that, you know, we had a 9 11, we were down, our CFO was down printing the prospectus to go public on 911 and was able to escape that terrible tragedy. And then the following April we went public and we closed it at a price that was 1.7 billion, which is a few hundred million. Then even JetBlue trades that today. And that was 23 years ago. Wow.
- [16:00]
B
And the slogan that you had there was bringing humanity back to air travel, but you seem to have taken it beyond humanity. I mean, as I think about that slogan, David, there's, there's clearly a little bit of Herb Kelleher in there in the sense of like, let's have an experience that has nice people who treat you like another human being. But then there was also the things that you just pointed out as it relates to technology we'd never seen before. The leather seats on a lower cost airline that was up until that point, very much associated with just first class. You would see leather seats in first class, but you saw no leather seats back behind it. What were those? How did you think you could differentiate at that price point, putting those additional amenities into JetBlue back in 2000?
- [16:43]
C
Yeah, yeah, it's a good question. And, and, you know, just starting with Herb Keller, one of the things that. I was briefly at Southwest Airlines for about six months, and I, I effectuated a lot of change there and, and Herb said, yeah, you know, I wanted you to be my successor, but you ticked everybody off. And I, I named off all the things, I started e ticket for them. I got them, convinced them to change their fairing to have peak on Sunday because they didn't have peak travel on Sunday. I put heads up display in the airplanes so they could land in foggy conditions when they weren't using all the equipment, had all that stuff. And he said, well, you should have taken two years to do that. You did in six months. And it ticked everybody off, so you got to go. So I, so I, so I learned.
- [17:28]
B
But just one quick thing where you keep on going on that because it's fantastic. Just. I know it was a luncheon at Ruth Chris talk for. I mean, how was that lunch? I mean, was, was Herb basically. I mean, was he giving you good, honest feedback in a very caring way, or was he like, you know what, David, you pissed everyone off. You gotta go.
- [17:47]
C
No, he was, you know, he was, he was. You know, honestly, it was dinner, early dinner, and you know, I, I actually cried, you know, and he grabbed my hand and said, it's going to be all right. But it, but he was being sweet and kind and we remained friends until he died and I went to his funeral and, and he, he was a great man. But on the, on that was his, his tender side, his Business side is like, this is the last guy I ever want to see in this business. He, he had convinced me to sign a five year non compete, right. And then when the Justice Department asked me to come back and visit him with their general counsel, which was Jim Parker, who succeeded him for a short period of time and has since passed on. And this is why I can tell the story because they're both not, no longer with us. I don't, I don't want to embarrass him, but I'm back at the Justice Department. And they said, now what are you going to do now that you're leaving, You've left Southwest? And I said, well, I can't really do anything for five years in the US and they, they're back, they went up on their backs and they said five years. And they looked over at the general counsel, Jim Parker, and he kind of waved them off and said, oh, we know it's not enforceable. So I, I left there like, wow, okay. So I called Herb and said, look, I'm not going to fly where you fly because I'd be an idiot to do that. But you know, you've, Jim's admitted this is not enforceable. And he said, Herb basically said, I'll sue you and, and take every cent away from you and I'll probably lose, but you're the last person I want to see in this business. So I went to Canada and helped start WestJet Airlines during that five year period of time and launched what is today Naviter, a billion dollar value company that does reservation system.
- [19:37]
B
So, you know, in typical, in typical David fashion, it's like, I can't do that, so I'll just go somewhere else and create value.
- [19:43]
C
Yeah. But he was tender and sweet to me, but when it came time, he showed his fangs and said, you're the last person I ever want to see in the airline business. So I'm going to keep you out as, as long as I possibly can.
- [19:55]
B
Let me, let me jump back to where I, where I cut you off at that luncheon though, where you were going to Herb and what I was asking you about JetBlue and about sort of the vision to bringing humanity back to air travel. Yet at the same time you had some very significant, if you will, service amenity breakthroughs that differentiated the airline and how you thought that the business model could afford those.
- [20:17]
C
Yeah. So I was on a flight from Dallas to Salt Lake and I sat down in a seat that had, it was soaked with urine that somebody had. It was a clot seat that someone had sat in right before me. And I, you know, stood up, I was in my suit, it was all wet. And I said to the flight attendant, look, I, somebody, you know, had an accident here in this seat and they say the plane's totally full. You either sit in it for the whole flight or you can get off the airplane. So they gave me a blanket to sit on and then the person had sat in front of me, had moved in front the same person and had, did it, got in the bathroom again and then it came through and got on my socks. So at that point in time I determined I was going with leather seats that I was never going to have, have my, any of my customers have this happen to them. So I did the math and, and leather seats cost twice as much, but they lasted three times longer. So I said they're cheaper so why not put leather seats on all the airplanes? PETA didn't like that. Obviously I got, I got a lot of PETA stuff. But then eventually we went to the, to the Pleather and then the TV set. People were thinking that somebody wanted a $5 soggy sandwich on the flight and that cost about five bucks and I could do live television for a buck. So I was able to give people something different, something unusual, something that really resonated with them for less cost. Same thing with new airplanes. You know, our new airplanes, because they had maintenance holidays, they were more reliable. I got a really good price from Airbus for them. It was, that's one of the lessons I learned at Southwest with the help of John Owen, who was my first chief financial officer, who, who I brought from Southwest. He showed me the math. Buy a new airplane for a really good price. It's actually cheaper than flying a 20 year old airplane.
- [22:21]
B
And you've been big on Airbus and Embraer in, in all of your. Well, obviously at Southwest you were running Boeings, but at your airlines you've been a big fan of both Airbus and Embraer. Why not Boeing?
- [22:37]
C
Well, I, you know, it was funny because I gave, I gave Boeing the opportunity. It's a kind of a famous story where um, you know, we knew what, having hired John Owen from Southwest, I kind of knew what Southwest was paying for seven 37s. I didn't expect that. You know, obviously they, they, they had ordered hundreds of them. We were just ordering a hundred. And so I, we put a little piece of paper in front of them and said, look, you give it to us for this price, we'll shake right now. And they said, no, that's too low. We said, we're gonna go talk to Airbus. And they said, well, go ahead. Knowing that we would never select Airbus, they had, they had very effectively kept Airbus out of all the low fare carriers. No one, no one other than nobody was flying the A320. You know, the plane had been launched for 13 or 14 years, but nobody was flying it. So I flew back to Airbus and man, they, they started showing me the, the, the 320, the flyer by wire technology, the wider cabin and I was just enamored with safety. And they talked about the flight protection envelope that you could create and not let a pilot do something that would create unstable flight. If you had fly by wire but with cables and pulleys, you, you couldn't, you couldn't stop that. And then they, they took me in the simulator and showed me a really unfortunate thing with Egypt Air. We had a, had a captain that pitched the plane down and they said, look, if that would never have happened on our airplane. So I just, I'll. And then you, we could put 162seats on that airplane versus 147. So we had all those extra seats with lower fuel burn at the time. So I just became convinced in a day it was a better option. But, and then Boeing came back and offered us a lower price than was on my little piece of paper. But I was kind of already convinced that, that at that time the 3:20 was a better product. And then I said okay, well give me the 800. We were the 700. And I said give me the 800 for the same, same price. And they refused. And then I shook with bo, with Airbus and they came back and said, okay, you can have the 800. And I said it's too late, I've already agreed to go with Airbus. So you know, it's, it's those seminal moments that, and then, and then as soon as JetBlue had all the success, then EasyJet and AirAsia and you know, eventually Frontier and Spirit, everybody went with the, with the 320 because we proved that you could operate it in a kind of a low cost environment.
- [25:20]
B
And did the, did the sort of interest in embraer come from AUL or had that come in when you were with JetBlue, when you had JetBlue in their start. Do you have any Mrs. @ JetBlue or was that all on the Sewell?
- [25:35]
C
No, we, we launched the 190. They just flew the last one 90 flight JetBlue did just the other day a couple weeks ago. You know, I, I just felt like we needed a lower trip cost airplane to be able to go into other cities that, so we could differentiate ourselves and you know, kind of became enamored with what Embraer was doing, went down for the rollout and you know, decided to go with the 190 because it was just a different class of airplane. It wasn't like a regional jet, but it had a, had a hundred seats on it and so we could fly to a lot of markets and it was a really instrumental airplane for when, when we moved into Boston because Boston was as big as New York and we could do a lot of markets with a 190 that we couldn't do with the 3 20.
- [26:29]
B
And David, during, I mean JetBlue obviously took off literally and figuratively and you're on that kind of rocket ship and, and you'd seen plenty of success previously at both WestJet as well as at Morris Air. So this wasn't like, wow, there's a whole new feeling of having everything going my way. But it was at a, I would, I would put forth. It was at a different pace, if you will. You were, you were growing so fast and getting millions and millions of passengers into JetBlue. Was there, was there a moment in that growth period where you were like, well, this is going too fast, where things are just happening, where we're expanding too fast or we're kind of out over our skis trying to keep up with demand, where you sort of say we've got to tether this back in or were you and your team always capable of meeting that demand as JetBlue did, that sort of up to the right trajectory?
- [27:19]
C
You know, it's, it seemed, it seemed right when we were there. But one of the things that I, you know, in, in hindsight I realized as I've gone and done bigger airlines and more complex airlines, that we didn't have a foundation. And that was kind of the fault of, of our COO really. You know, he had, didn't have experience doing it. And then the board, when they removed me, they put him in charge to be the CEO. And you know, it's man, you know, today a breeze as we're going to, we're at 230 flights a day, going to a thousand. You know, I, I'm always pressing our people, hey, will this take us to a thousand? Will this take us to 2000? You know, will this take us to 1500? You know, when you evaluate all the people in every position on the bus, can this person take us to a thousand. So, you know, I'm, I'm certainly a lot better at that today with, Given the experience level. But, you know, what happened on what we call the Valentine's Day Massacre, where we had an ice storm that came through New York and people were on planes for six, seven hours, and, you know, I was, you know, kind of instrumental in putting Humpty Dumpty back together again, but I realized that we were really deficient in communication with our crews and, and we didn't have the kind of technology we have today. But, you know, life's a learning experience and, And, and, you know, JetBlue had some really good years. It, it took a long time for the stock to get back, maybe seven or eight years after I left to get back to where it was when I left. But, you know, they kind of got it figured out for a while and times were good and, and fuel was low, and, you know, they were able to pay for a lot of airplanes in cash. So, you know, it's. And now they're kind of in a little more difficult situation. So, you know, and the challenge for that today for them is they're kind of overlapped on 85% of their markets, and everybody has leather seats and brand. And TVs and screens and. And brand new airplanes, and they have first class, and JetBlue doesn't have first class. So, you know, you have to evolve and you have to change and things become. Some things that were just easy at some point in time become, you know, very difficult when people figure out what the model is and they can duplicate it.
- [29:50]
B
You mentioned fuel costs, and I know that all the, all the airlines used to hedge out their fuel costs, and I don't think any do today. Why is, why is hedging out fuel cost now not an industry standard?
- [30:04]
C
Well, because I think what happened during, during COVID now, Southwest was always the kind of king of fuel hedging, because we're in Texas, we know oil, we know fuel. And so, and I, and I had this, this theory at, at, at aul, too. I said, look, guys, if fuel goes below $40 a barrel, nobody can survive for a long term on $40 a barrel. So let's just go ahead and hedge below $40 if we can see that on the forward curve. And then Covid comes along and it goes to zero. And Azul gets a $250 million bill from, you know, the, the folks that were doing the hedging, and Southwest gets a billion dollar bill. So, you know, it's It's a little bit like gambling in a sense. And, you know, maybe, you know, you have the Black swan event that can really wipe you out if you do it. And, you know, it's kind of, I guess everyone's kind of settled on, we're all going to, at least we'll all be doing the same thing. So nobody will be advantaged or disadvantaged. We're all kind of on the same page. Yeah.
- [31:12]
B
When, when, after having done JetBlue and then named a soul Azul, I was hoping that your next airline. There was a, my favorite restaurant in Buenos Aires was a restaurant called Azul Profundo. And I, you'd come back to the States and call it Deep Blue. But you, you started up Breeze, which, by the way, full disclosure to listeners, I'm an investor in Breeze. So I, I, I, I do have a, a line here to both. I, I, I don't have to wish for David's success because everything that David touches turns to gold. But with that said, I, I was attracted to Breeze purely because of you, David, and because of your track record. But it has been really fun to watch Breeze through its development life cycle as it's added these new routes. And you found this, if you will, you know, again, a very distinct niche market. Talk for a moment because we, we talked about what was unique about JetBlue. What, what's unique about Breeze? You're, you're going to these cities where generally speaking, they do not have direct connectivity to other city pairs. And as a result of it, I mean, I flew from, I flew with somebody on Monday from Idaho Falls, Idaho down to Denver, where he was connecting through to go east coast. And I was fortunately getting off in Denver. But you know what? Our connection was delayed by, we were delayed by an hour and a half getting out of Idaho Falls due to weather in Denver. And he was going to miss his connection through. And you're sitting there going, I'm going to take you from Idaho Falls directly to wherever your spot's going to be. How have you defined A, the cities you're flying to and B, the demand for that service? Because you've seen demand follow your supply in a way that, given I'm in the apartment business, all of our customers would love to know your secret sauce on figuring out where that demand is. Because everyone who owns an apartment building wants to know where everyone's moving to. So they, they look at, for instance, one way U Haul rentals, right? They want to figure out where people are moving and where we're getting good Demand, you all have to go basically create that demand, right?
- [33:15]
C
So I mean, just to take a step back about, you know, why I even did Breeze in the first place. And this was before COVID So Covid hit, we had 55 employees and didn't get any of that government money like all the airlines did, very little of it. You know, I, I looked at the United States and I'm like, do I really want to do this again? You know, Azul was really successful. Prior to Covid, Azul was worth, had a market cap of $6 billion. We were the most profitable airline in the world and were voted the best airline in, in the world by TripAdvisor. And then you know, it's been a rough go a little bit at Breeze of Azul because of, because of COVID because we didn't get that government money and now they're restructuring and things are going to be just fine. But what at Azul I learned the value of being the sole carrier on a market and how much better we did flying soul Carrier. And then I looked at what Allegiant was doing and there were soul carriers. And then I looked at 125 cities that have lost more than 25% of their airfare over the, over the last 10 years. And then I looked at, especially during COVID the migration patterns as people were kind of moving from kind of the Midwest and the Northeast and going to Florida and then bouncing up to the Carolinas and, and that whole whole thing. And I, and then I looked at the quality of product that you know, Salient had compared to, you know, what I had envisioned. And then I looked at this aircraft that was the Airbus A220 and I said whoa, you know, all this kind of stuff fits together really interestingly because I can do a trip, I can. You know, we don't focus on, on seat mile cost nearly as much as we focused on trip costs. What does it cost to fly A to B? And then I saw the scope causes for the, the big airlines had that were kind of holding airlines airplanes down to 74 seats. And then I saw this Airbus A 220, you could fly to 145 seats or if you wanted to put 12 first class seats on, you could go to 137. If you wanted to go to 20 first class seats because of the efficiency of the cabin, you could go to 135 and have 20 first class seats and then still have 40 extra legum seats. So you know, I, in some ways we were lucky in Some ways we were good because you know, I, I had learned that premium was, was important flying at Azul because we had a business class section on international flights. And so because you were only getting rid of one seat per row because we had a two and three seating configuration, we could do it very efficiently. And what, what we realized is we could get twice the fare and, and it only took up 50% more room. And so that if you can fill them up, that math works all day long. And then it was just the, the ability to fly non stop to a bunch of routes that had lost their non stop service. You know, in our, our first hundred routes that we picked that are, we've been in over two years those routes initially 64 of those hundred routes hadn't had non stop service for over three years. Because the big airlines started by, you know, we're bypassing them. We're, we're actually making, forcing people to go through hubs. Places like Huntsville, Alabama that was growing and people were immigrating, but you had to go to all the hubs because there was no structural mechanism. The, the, the airplanes were too big. They had to send you to a hub and there was no way to go from Huntsville to Orlando or Huntsville to Las Vegas or Huntsville to Tampa. So with our trip cost airplane, we knew that we could go into markets that didn't have the nonstop service. And today we've got over 300 routes and those hundred that we are that had no non stop Service. Today there's 87 still that we have with only one in and we're flying those non stop. But we do do good in those and we do have competition on about 15% of our routes. But we do very well because in 24 of our 78 cities we have more nons, we have more destinations, non stop destinations than any other airline that's in that city. So we become relevant by saying, okay, we fly to places that either want to go or your family all move to, you want to go visit them or they want to come visit you and we can get you there for twice as fast. You know that, that, that whole stress of a connection is, is real. If you don't have to deal with that stress of your friend connecting in Denver and worrying about missing his flight and spend the night in Denver or waiting four hours for the next flight, if there even is one, it gets people to travel more often and we can get you there twice as fast for half the price. That's what we, we talk, that's, that's.
- [38:11]
B
Such a Great slogan.
- [38:11]
C
And people, people love that. And then they say, well, okay, you fly to Vero Beach. Wow. I used to have to fight Orlando and drive two hours or West Palm beach and fly for two hours. I think I'm going to go look for a place to buy at Vero beach because Florida real estate values are down. If I can buy a place and you can get me there for twice as fast, that could. Or maybe three times as fast. If it's Vero Beach, I'm gonna go buy a place and I'm gonna fly you 12 times a year instead of just going down there one or two times a year. So if, if a market has what we call 15pm yeah, and there's a. This goes back to your central question you just asked the. The dot. And this is a leftover from the, the deregulated days, the regulated days. Everybody had to report their traffic, everything they flew, and what the average fare was. So we have this perfect database of information. And if there's 15 people on average flying between two cities, we can make it work because we, we lower, we get a better fare. And, but the convenience is the bigger factor. And we can usually four or five times, or maybe eight times that market. And that's why I don't think we're a threat to the other airlines because we generate eight, eight to ten times more traffic than we steal from anyone, because we generated it because it's just so much more convenient. And then when you look at, across the country, you say, well, how many markets fit that? And, you know, this article that came out recently, it was 367 airplanes worth of flying just on these 15 PDU markets. There's a couple thousand of them all over the country, and we're only in 300 markets. So there's, there's a lot of room for growth as well.
- [40:00]
B
When I think, when I hear you talk about that, David, it's, It's fascinating. B. I know you like, for instance, Canton, Akron, Ohio, as a. As. As one of your, you know, largest growing airports that you're serving. And I think your most traveled city pair is Provo, Utah to Santa Ana, California, because I think you've got two daily nonstops on that route, and I think that's your most frequent route. And it's just fascinating to me because again, going back to the industry I'm in as it relates to apartments, there are, you know, a lot of apartment owners who would love to understand those drivers of demand. And quite honestly, you know, someone hears that you're growing Your presence in can Akron and that says, hey, people are there, they're getting access to other places. Maybe there's some job growth that comes after it. Maybe someone wants to move their headquarters there that they didn't think they can. Akron was the place they'd headquarters their company out of. And the next thing you know, you have a really nice multifamily market, a really nice retail market, et cetera, et cetera on the commercial real estate side. And I find it to be interesting about whether you all are sort of that, you know, canary in the coal mine as it relates to opportunity for growth.
- [41:07]
C
I think so. And it's also migration, you know, and you know, I looked at, there's a Wall Street Journal article where the top two in migration states in the union. Well, 2 and 3, I can't remember the first one, but 2 and 3 were north and South Carolina. And so there's a lot of people moving to the Carolinas and there's a lot of people Catn. Akron's a great place. I've got two daughters and son in laws and grandchildren that live in Dayton, Ohio. One's in the Air Force and one's in medical school. So it's a great place. But you know, people migrate and they go to different places. And when you do, when you move from, from Ohio and you move to Raleigh, Durham, for whatever reason for work or because of climate or whatever, then you gotta go back for weddings and funerals and family get togethers and their family comes and visits you. And so this, these migration patterns are real and they, and they really. And there's a lot of places like Rochester and Syracuse and Albany and that, that also have that kind of migration pattern. And it doesn't really work for others to not fly through a hub. You have to fly through a hub because of the higher trip costs. And so, you know, I, I think there's a lot of ways you can create markets. And you know, I think back, you know, Ryanair, I was just looking at their market cap this morning. They're 32 billion dollars. They make two and a half billion dollars in profit a year. And they started by flying to places nobody even thought of or heard of. I remember they were flying from London down to some secondary airport in Toulouse, France. And I know Toulouse because that's what our three twenties were made. Why didn't you fly into that airport? Well, we got this other airport for free and they all saw these British guys start flying down there and they said, wow, I can buy a French country country cottage. For only 50,000 quid. I'm gonna buy that. Next thing you know, all the, all these people bought up these French country cottages and they could go down there and drink their wine and, and have great food and get out of the dullness. You know, the, the Tupperware list that is, that is London without sunshine. And all of a sudden Ryanair is making a ton of money on that route because they've got thousands of people that own French country cottages. So, you know, there's a, it's, it's really interesting to pick routes and, and, you know, it's, and, and launch new cities and, and we've, we've just got a lot of happy, happy guests. I mean, I, I've never seen NPS scores higher than what we have here at Breeze. I mean, it's, it's unbelievable. We, we're, we're bumping on 80 every week and, and part of the reason is that I've convinced our folks that we can do this and, and that, you know, there's a maturity curve because when you start flying in market, nobody knows you, they've never flown you before, you have no repeat business. And then as you start building that business markets become profitable after about six months on average. But I, I've convinced people if we can be on time and try never to cancel a flight, then our maturity curve is steeper, it comes on a lot quicker.
- [44:26]
B
So you had a, you had a 85% on time performance in September and you didn't cancel a flight the entire month? I think that's right.
- [44:34]
C
The entire quarter, yeah, entire quarter, yeah. We haven't canceled since the, the, the end of the first quarter. We canceled one flight and we've flown, I think it's probably approaching 50,000 flights now. We may send you late, we may have to overnight you, whatever, but we got it to there and now. And now, yeah, we have moved up. We were the number one on time airline in September and, and we're, we're still there in October. Number one on time with a few days to go. So that's our goal. We want to be number one on time and we want to cancel almost zero flights if we can help it. And we do everything possible to make sure we don't cancel a flight. So. And the hurricanes have cooperated this year, which is, is the biggest factor for us. And obviously if we have a heavy snowstorm, but other than that, we get them done. And not flying into congested airports helps. Yeah.
- [45:28]
B
Your comment about Ryanair, it brings me back many, many Years when I was working for TPG and for David Bonderman and we were going Continental was trying to buy Idolinas Argentinas and I was working on that deal and at that time, David made an investment in Ryanair and I had no idea what Ryanair was and boy, would I have liked to have invested in ryanair. Back in 1998 when David and other TPG members like Bill Frankie of, of of America west were all working together and putting money into Ryanair.
- [46:00]
C
Well, David Bon, he was a good friend and, and he, and he invested in Aul and, and I was talking to him about Breeze. You know, he obviously before he passed away, but yeah, I miss him. He was, he was, he was a good man. Really good.
- [46:13]
B
He was a very good man. Talk for a moment, David, as we're closing this out as it relates to the pricing model that you have for Breeze is somewhat distinct in the sense you've got nicer and nicest, which I love. It's easy, it's transparent. You kind of come on and you just kind of say, okay, pick what you want and you're very clear of. You want to be able to cancel your ticket. You go a little bit nicer and I love that. I think one of the biggest sort of criticisms that lower cost airlines in the United States are getting now is you sort of feel like you're nickeled and dime for every little, every little thing that you're doing. And, and it feels like Breeze has figured out how to give some transparency there. You kind of pick the service offering you want, it's nice, nicer or nicest and you kind of go with it. Talk about how you've been able to be that transparent when it feels like a lot of your competitor firms are trying to kind of dingy on a fee here and a fee there.
- [47:08]
C
Yeah. And, and it's really the genius of, of Luke Johnson, who's our, our chief revenue officer. You know, we really wanted, you know, upsell is, is, is something that, and, but, but give, make. Make people feel like they have value for what they're paying for. You know, I remember my son was flying one of the ULCCs and he has a big family, eight kids. And they went to the gate and every little kid had a backpack and they charge him a hundred dollars for every little kid, you know, for a carry on. You got a carry on bag. And he calls me from the airport and he said, I will never ever fly these people again, I promise you. And it's like, it's not worth it. You Know, it's not worth ticking off your, your, your customers to make them have this visceral reaction that they'll never fly you again. So what we did is we just were up front and said, hey, you want to, you want to go for a 39 fare or $49 fare, and you want to bring a backpack on board and you want to put it under your seat, do it. You got it. But if you want to do a carry on or you want to check a bag and you want extra leg room and you want free Wi Fi, how about if we do bundle all that together and charge another 50 bucks? So we'll say 49 and then 99. You can have free check bag, free carry on, free Wi Fi, and it's a couple more inches of legroom. And they say, wow, that's a great deal. I'll do that. Thank you, Breeze, we love you. And then they come on the airplane and they go, wait a second, how much was that first class seat? We said, that's only another hundred bucks. And they go, okay, I'm. Next time I'm gonna buy that. And what we find, which is really unusual, instead of people trying to game the system and we get less revenue the next time, the people who fly us the second, third time, they end up spending more because it's aspirational and we get these really high MPS scores. And now you've seen the other ULCCs and other people trying to do the same thing that we're doing, trying to hurry and run first class seats out of their airplanes and coming up with these bundles. But, you know, we got a great head start doing it, and people just love Flame.
- [49:14]
B
Breeze airlines aren't typically viewed as sort of, if you will, that innovative. In Breeze, one fast company is most innovative company in 2025. How do you keep innovating when you're, you know, at the end of the day, you're moving people from point A to point B. I mean, there's, there's only so much you can do as it relates to changing the amenities or the overall experience of air travel. Yet you seem to a, throughout your career, continually innovated as it relates to the companies you've started. But as you sit there with Breeze now, how do you and your team sit around and say, how are we going to continuously be innovating on this product and service?
- [49:53]
C
Well, I think, you know, I think technology is really key to that. Technology has to help you innovate. You know, I, I would love for everyone who, who booked an Ascent seat or our first class section to get it, get a text the day before saying, hey, we got this amazing and you know, buffalo filet mignon sandwich or in Rochester, these famous wings. You want to click here and we'll serve them to you on the airplane and have that kind of level of service. But we ought to get the basics right first and then we'll move on to that kind of stuff. So AI getting to know our guests, getting to know what their travel patterns are and what they really enjoy, and being able to serve that up to them, I think is kind of the next big thing. You know, doing AI with predictive maintenance and a lot the operation side has the use of AI as well. So, and then just listening to your guests and listening to your team members and, and, and coming up with ideas, kind of the next big thing that we're going to do that will be kind of transparent a little bit to, to our guests, but it's going to help our operation immensely is we're, we're actually buying two private jets that are going to be rescue planes that will provide, we'll be able to take technicians and parts or a fresh crew, pilots and flight attendants if we're experiencing a mechanical delay or weather delay to, to avoid, to try and eliminate, you know, even more cancellations or delayed flights. And, and that will just happen. Imagine you get up to, to Portland, Maine and you say, hey, sorry, ladies and gentlemen, this airplane has, has this issue. We've identified what it is. Just let you know we've just taken off out of Charleston, South Carolina with our company jet with two technicians and the part on board. They'll, when they, they'll get here in about an hour, taking 30 minutes to fix it. And so here we're going to give you 20 bucks to go have some lunch. You know, it's just that those kinds of innovations the people really appreciate. Your flight didn't get canceled, they didn't have to reroute you. They just go to lunch and your plane's fixed and ready to go. So, you know, those are things that we're doing behind the scenes to be even more reliable and, and, and amazingly so we save a ton of money by doing that because, you know, we'll have to cost for it, but we'll save a lot more than we'll spend. So you know, you just got to keep thinking outside the box and you know, with safety is your number one priority. But then thinking about how can we make this airline better for our, for our guests. So they love us even More than they love us today.
- [52:40]
B
I know they're from listening to previous interviews. David, I heard you say one thing that is people look back on you at some point. You know, you'd love for people to say that you made their lives better. And it's very clear that both through the service you provided as well as the companies you started, you made a lot of lives better. The other one is that you make your own luck. And it's very clear that you're, you're, you're a hustler. You're someone who doesn't let either degree of difficulty or, you know, challenges get in your way as it relates to moving from one thing, creating all these airlines and doing so successfully as you have, as you. A lot of people think that there are entrepreneurs and there are managers and that there, you're sort of in one of the other buckets. You're either a great entrepreneur who comes up with lots of ideas, or you're a great manager who can take the idea and actually implement it. You've been fortunate and capable to do both. How do you feel those two sides of your brain working all the time and kind of competing with each other? Or is it, is it all one approach, if you will? And if there is one side of the brain that's, that's, that's actually winning out, is it more on the entrepreneurial side or more on the manager side?
- [53:48]
C
No, I think it's, for me, it's, you know, the managing tedious day to day stuff is. I, that's why I have great people. I think where I kind of excel is the idea and then operationalizing it, you know, because when I'm in a room with, you know, all of our executives and I'm saying, why can't we just do this? And they're saying it's too complicated. I'm saying, okay, well, you make everything sound so easy and you kind of simplify everything too. And, and sometimes I do and it's not possible. But a lot of the times, you know, being able to unravel, complicate, complic. Complex issues and simplify them just by saying, no, we do this first, then we do this second. So. And this third. So you can't come up with an idea unless in your mind you can operationalize it and, and, and prove to everyone else using facts and data, that you could actually do it differently and do it better. And so there's always that tension of new idea. How do we operationalize it, how do we effectuate it? How do we make it happen. And so when you have a rescue plane, you have to figure out what plane you're going to have, who's going to fly those planes, how, what's the call out time, how close to the airport they're going to be, where are the reserve crews going to be? So you can have pilots and flight attendants on reserve. How are you going to mass all the parts into a warehouse where. How are you going to have extra technicians to be able to do it? So there's a lot of factors that go into it. So in my brain, I go through all those and anticipate all that stuff and figure it out. So when those things come up, you know, I feel like I have an answer for it or I don't and say, yeah, that's not a good idea. We shouldn't do it.
- [55:33]
B
Well, you've clearly had a lot of answers over a very, very interesting and successful career, and I'm super thankful of you taking the time to share it with us today on the Walker webcast. I'm also, as I mentioned, a very thankful shareholder of a Breeze. And I look forward to seeing you either in Utah or maybe you and I all hop on a Breeze flight at some time together, and I can. I can actually see what it's all about.
- [55:58]
C
Let's do it. We gotta do it.
- [56:00]
B
Be great. David, thank you very much. It's great to talk to you. Really appreciate it.
- [56:05]
C
Thanks, Willie.
- [56:06]
B
Have a great day. You too.