EXCLUSIVE: bluWave Airlines COO Interviewed on Half-Year Report

According to bluWave Airlines COO Johnathon Neilsen, the company’s half-year results for 2012 are enroute to climb above past earnings records set by the firm since its inception in 2010. This interview comes after the airline released its Q2 results on July 26, demonstrating stabilization and a positive outlook for the rest of the year. However, the company was hit hard by high fuel cost as it entered its second year of operations, triggering Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the District of Nevada in January 2011.

Although Neilsen joined the airline earlier this year after it resumed normal operations, he says that the firm has a lot to offer its market and that the management is steering the company clear of any obstacles that get in their way. The COO was formerly the Vice President of Operations at Qantas Virtual, which has since closed.

Late last week, we were able to speak with Neilsen on the phone where he was excited to talk about the airline’s progress and his prospects for the rest of the year.

VAFlash: We’ll get to the results in a moment, but earlier last month you and Connor Levens [President and CEO of bluWave] visited Embraer’s facilities in São Paulo, Brazil. Did anything come out of that trip? Or was it “just for show.”

Neilsen: Connor’s “Celebrating the Fourth of July in São Paulo?” blog post was “just for show” as we didn’t really spend the holiday in Brazil, but in terms of anything that came out of it, I can’t really say too much. We took a tour of their facilities with some of Embraer’s executives, exchanged a few business cards, and walked through the cabin of a few of their aircraft. But, honestly, the trip was only to get a feel of what they had to offer. We don’t intend on buying any regional aircraft any time soon, and we don’t expect to have anything come out of this except for a few occasional calls from Embraer executives inviting us out to dinner. Other than that, we’re happy with our seven-threes.

VAFlash: You mentioned on the phone last week when we scheduled this interview that your forecast for Q3 2012 earnings were looking relatively low. Can you provide us with any sort of insight or clarification as to what you mean by “relatively low?”

Neilsen: Again, there’s not much I can say about that. However, due to the fact that we’re a private company, I can afford to give you a few details.

First, we’re confident that the guidance that we’ve given in our half-year report will only be an underestimate to our actual earnings in both Q3 and Q4. As you know, we’re not a public corporation so we do not have to disclose our earnings to the public, but I can tell you that one of the things our investors are happy with are our operating margins. They’ve remained very attractive through the years and that’s been driven by our increase in overall operational efficiency in combination with the restructuring efforts put together by Connor throughout 2011.

In addition, we’re having good success with our “springboard” initiatives which entail jumping into markets that are out-of-reach to our competitors, like the Bay Area and San Antonio.

VAFlash: Of course, it’s only a matter of time until your competitors tap into those “springboard” initiatives and the board goes dull, in which you’ll have to discover newer, untapped markets.

Neilsen: Not necessarily. When those markets “go dull,” as you put it, it doesn’t mean we have to reach out to find something else at the pick of a hat. We can afford to build upon what we already have and bet against our competitors in the overall market share. This will enable us to grow and become more visible to other potential customers while maintaining our overall target market in the west coast; as we reach eastward, that is.

VAFlash: Speaking of eastward, are there any new highlights on the drawing board as it pertains to moving further east?

Neilsen: If you’re betting on a quick hop, skip, and a jump to Myrtle Beach, I can assure you that is not the direction we’re headed in. What about heading east, yet west of the Mississippi? Yes. That’s what it’s looking like for the time being. After all, we can’t go anywhere west of California except for Hawaii (which requires an ETOPS rating on our 737s). We’re not expecting getting an ETOPS rating anytime soon. Although, you’ll know when we get one. (Those filings will be all over the FAA’s databases, which are in the public domain!)

VAFlash: What does “west of the Mississippi” mean for the second half of 2012?

Neilsen: In layman’s terms? Nothing. We’ve rapidly expanded throughout much of 2012 and we’re not going anywhere new, indefinitely, until 2013.

VAFlash: What about long-term growth? How solid are the targets you’re setting for the company and will you be able to continue to invest with the returns you’re currently receiving?

Neilsen: Yes, absolutely. We’ve positioned ourselves such that, at our core, we remain strong and our growth prospects over the long-term stay positive. We are committed to our strategy for accelerating profitable growth by launching service in up-and-coming areas throughout the country, betting on economic recovery and giving back to the community by creating jobs.

Take the Bay Area for example. We continue to be committed to making it easy for our passengers to get to their final destination as quickly as possible once they land, and in the areas surrounding the Bay, you have three (3) major destinations to choose from: San Francisco, Oakland, or San Jose. It’s exuberantly frustrating to travel from SFO to Oakland or Silicon Valley, and with SJC and OAK within their immediate vicinities, there’s no reason not to serve them.

Additionally, serving these airports required us to hire a total of twenty (20) plus flight crews. I don’t want to brag, but in this case, everybody wins!

VAFlash: Something that you have a strong belief about is the moral character of each bluWave employee. From an operational standpoint, where does this impact the airline most and is this really about saving cost?

Neilsen: Great question. When I was in college, I heavily studied the impact of “employee morale” on a company’s overall efficiency. Contrarily, Connor studied the same subject as it pertained to a company’s overall earnings. These two studies go hand-in-hand and companies that don’t spend the necessary amount of time and resources in bonding with their employees are destined to have a much harder time getting what they need out of their workforce.

Connor often refers to TWA as a major player in this area, as he believes they single-handedly defined employee morale as is pertains to the airline industry. From baggage handlers to veteran captains of L1011s, TWA employees knew how to put 110% of their effort in to get the job done right. That same mentality is what we aim for here at bluWave and I’ll put my job on the line if someone can prove us wrong.

Anyway, to answer your question: where does this impact the airline most? Easily in customer service, first. On-time efficiency, second. We rank right up there with JetBlue and Alaska in terms of treating our customers the right way, with Southwest in the latter. These are two categories that we’re proud to strive in, and it’s not to say that they still don’t need maintaining, but we’re happy with where they currently stand.

In terms of saving cost, you better ask Connor this one. Undoubtedly does it increase earnings potential, but just do the math: if customer service is ranked highly along with on-time efficiency, how can anyone say earnings are twice as likely to get shot down? Not me!

NOTE: This document is fictional. There is no real-world airline known as bluWave Airlines, Inc.

For additional information, read the original press release here.