Q1 2020 Earnings Call
Available on our website at investor and have been filed with the SEC joining me here in New York to discuss our results or Robin Hayes our chief executive officer Joanna Garrity our president and Chief Operating Officer and Steve priest our Chief Financial Officer. Also joining us for Q&A or Scott Lawrence had a revenue and planning and Dave Clark VP of sales and revenue management. This morning's call includes forward-looking statements about future events actual results, May differ materially from those expressed in the forward-looking statements due to many factors, and therefore investors should not Place undue Reliance on these statements off for additional information concerning factors that could cause results to differ from the forward-looking statements. Please refer to our press release 10-q and other reports filed with the SEC.
Also during the course of our call. We may discuss several non-gaap Financial measures for reconciliation of these non-gaap measures to gaap measures. Please refer to the the tables at the end of our earnings release a copy of birth is available on our website and now I'd like to turn the call over to Robin Hayes JetBlue CEO.
Members of our in-flight Community one supports and the colleagues and to airport crew members.
Ralph gets Monday Charles Chuck Lewis real heavy Vapor bomb and Nicki Thorn what values and amazing members of our jet pack each with a special and unique story, you know Ralph joined us from after retiring from the New York City Fire Department, including two tours of Duty at Ground Zero and we honor him with the cover of our earnings deck today Chuck was note his fellow crew members as a natural and confident leader Jared bought the same warmth and compassion to our people team here in L long that he demonstrated in his previous role as an in flight crew member.
Thanks, Dave and good morning everyone. Thanks for joining us in the day before I start congratulations on your promotion which occurred since the last earnings school. And of course with every else has happened. I haven't really had a chance to celebrate that but you do a terrific job and thanks for all you do for the Jet Blue Team think I could not be prouder about JetBlue family. Not just over the past two decades, but for their service to each of our customers and our communities as they provide an essential service during
Kevin retired off the distinguished service with the where he served for twenty years and had multiple towards Ray was known for his caring nature and Nikki was known amongst Apple colleagues are being extremely kind-hearted and having an excellent sense of humor.
Our hearts go out to their families and loved ones.
As we are supporting them and also to all of our crew members who have been impacted by this virus.
For those that we have lost we remember them every day and we paused briefly now as we remember them as our beloved members of the Japanese family.
Turning to slide four of our presentation.
For the first quarter, we reported an adjusted loss of 42 cents per share driven by an unprecedented falling demand that started late in February. It has been a couple of very challenging and a team have responded with extreme urgency and taking actions at every level to protect JetBlue.
We were fortunate to have entered this crisis with a second strongest balance sheet among airlines in the last two months. We have moved quickly to both protect and strengthen our liquidity positions back to the beginning of March. We have made the site of changes to our growth plan to minimize cash Burns including deep capacity cups of our schedule. We have reduced our capex plan by one point three billion dollars between now and the end of 2022 and by the end of May we anticipate we would have Loadout operating expenses by about by around 50% year-over-year. We are so incredibly grateful for the support received from our business partners and crew members who have helped us minimize cash buyer and during these challenging time.
In March Congress passed and the president signed into law the exact JetBlue is very grateful to President Trump and his administration particularly secretaries mnuchin and Chow as well as Congress, especially Senate minority leader Chuck Schumer her strongly recognizing the value of our industry and for supporting our crew members.
I also want to thank Nick Calio and the team Airlines for America, but they're amazing teamwork as we came together to protect jobs.
This more alone will not solve the longer-term problem that the coronavirus pandemic is creating but it does provide much-needed temporary support for our crew members and buys as vital time to plan for both a change demand environment. And of course the eventual recovery, we reached an agreement with the Department of Treasury and receive 936 million dollars in payroll support in exchange for these funds the US government receive approximately two point six million warrants as consideration the amount granted to JetBlue and also 936 million dollars 251 million dollars must be with be paid to the US government.
Late April. We also applied for the Federal Loan program, which would provide up to 1.1 four billion dollars in further liquidity.
We will continue to evaluate alternatives to raise cash and plan to access the facility if needed given our actions and government support. We believe our balance sheet remains one of the strongest app online and our cash and short-term Investments currently equates to over three billion dollars. The demand environment continues to be exceptionally challenged due to the coronavirus long as we move towards recovery. We have three priorities. The first one is the immediate need to protect the safety of our crew members and customers the second is to minimize cash burn off the third priority is to set JetBlue up for future success.
Success by restoring customer confidence by returning to cash generation and by rebuilding our margins and balance sheet.
We're preparing for a number of recovery scenarios and working with different leading indicators. But JetBlue we expect how Park will look a little different for many of our peers given our Network footprint customer demographics low-cost model and our customers trust in our brand as you'd expect. We're being conservative in our planning and our state's we open and the economy comes back online. We are planning on being flexible and quick to adapt.
We believe that building customer confidence will be a critical part of recovery. Not just for jet blue or the airline industry, but the travel industry overall We Believe confidence will come across functional effort that includes working together with industry Partners local governments regulators and other entities. We also believe that the Border travel industry will need to make a collective effort to stimulate. I'm promote a return to travel only by getting things moving again what we get back to generating cash. We look forward to working with our travel Partners throughout the recovery. We have taken the leadership of industry and started by giving confidence in flexibility to customers with travel waivers. We were also the first carrier to provide free flights to Health Care Professionals for Relief efforts and transport Central Medical Equipment.
It remains critical that we collaborate and support each other in these challenging times.
We believe that not only will we get through this crisis, but we will emerge as a stronger JetBlue over the past few years. We focused on strengthening our balance sheet and preparing for an eventual downturn walk up to the start of this pandemic. We were well on course to deliver on our financial commitments in 2020 as we move into recovery. We look forward to getting back on to executing our building blocks page moving our Network our product offering investing in our Fleet or remaining true to our low-cost Woods
just as important downturns along the way we anticipate looking for opportunities that may not have been possible for JetBlue just a few months ago. JetBlue has been a true Force for good in our industry and not been resilient through crisis for over twenty years.
Most importantly of all I want the once again thank our 23,000 amazing inspiring crew members, but they're vital role in this tremendously challenging time and we thought I'd like to pass over to join us.
Thank you, Robin. I'd like to start by thanking most profusely our crew members for their outstanding service and loyalty not only to our customers but to each other from the very beginning of this pandemic a few short months ago with predictions and forecasts of every type each day only proved how uncertain the future could be at JetBlue. However each new day brought one absolute certainty and that was the professionalism Humanity faith and commitment of our crewmembers to delivering a safe and secure JetBlue experience while living our values. This constant has been and continues to be an inspiration to us all
Our first priority since the onset of the pandemic has been equally constant ensure the safety of our customers and crewmembers. We've responded quickly to changing conditions and overseeing the range of policies and programs designed to address the threats two crew members and customer safety posed by this virus.
We were early to announce a covid-19 6ha in quarantine framework to implement an internal contact tracing a notification process and as the Press recently reported. We were the first to require customers to wear full coverage.
We have aggressively managed capacity from the very outset doing our best to eliminate any non-essential flying while also ensuring cares act compliance. We have focused on crew protection off my increasing cleaning and disinfection across our operation and all facilities eliminating New York City overnight crew layovers working with crew Transportation companies to ensure social distancing lamenting jump seat buffered mandating the use of facial coverings and the use of other p p e reducing service touch points on board the aircraft modifying and inflate briefings and deferring track events.
I would now like to turn to slide 6 and our revenue and demand trends.
Beginning of last week of February. We saw a sharp falling forward bookings across our Network and revenues and March were down 52% year-over-year.
following a
Very solid start to the year. Our first quarter revenues declined 15% year-over-year resulting from both lower demand volumes and a very challenging fair environment during april-june were down approximately 95% year-over-year while the overall number of bookings remained extremely limited during the second quarter. We expect to see small increases in demand as various geography our Network begin a phased reopening provide some additional detail regarding the level of our capacity changes. We are currently operating around a hundred flights per day this compares to our previous average of approximately one thousand flights per day.
The customers we fly today are largely people who are traveling for critical reasons or do two essential needs and our load factors averaged between ten and 15% for much of April. I believe that we've reached the bottom in terms of demand around mid-april that said we expect to have a better sense of the third and fourth quarter of 2020 by early summer.
We envisioned this environment a very limited demand will continue into at least the short if not medium-term and believe our inherent strengths as a trusted brand with an unparalleled culture and Superior product should serve as well as customers evaluate their air travel options. We plan to continue to be thoughtful as we adapt to changing customer needs as Robin mentioned. We are working on a number of scenarios. And although we are conservative and are planning assumptions. We will respond quickly to changes in demand with capacity pricing and customer policies.
Moving to capacity on slide seven our March capacity declined 19% year-over-year as a result of scheduled reductions and close and cancellations as the pandemic began to manifest the month. We adjusted our March flying levels to mitigate cash losses and rapidly declining load factors. We typically would have managed reductions at this level through a schedule change, but due to the speed an impact of the pandemic we were put in a position of having to make these changes much closer into the travel date. I'm very proud of our crewmembers for reshaping our operation and such a short period of time Andre accommodating customers under enormous pressure.
For April and May we have had more time to adjust our schedules and our working assumption for the second quarter is for capacity to be down about 80% compared to our original plan.
We've been aggressively managing all capacity decisions with the goal of maintaining only and essential level of flying in our markets and complying with the cares act in mid-april. We Consolidated operations, press five Metro areas through June 30th and Now operate at only one or two airports in each including Boston, Los Angeles, San Francisco, New York and Washington, DC.
Based on our production projections for continuing low demand in the near-term. We expect to reduce many markets to less than one flight per day.
Good ongoing.
Foreclosures we have already suspended service to more than 20 of our International cities. We anticipate the situation will remain fluid as we head into the summer as States and foreign governments reopen their geography am giving the meaningful capacity reductions. We've grounded approximately 170 aircraft. This has been a significant source of cash savings as we look to Future cause we expect to remain flexible managing our Fleet and adjusting our capacity in response to travel demand.
How much of our team is focused on navigating the near-term challenges we are also laser focused on how the business will look for customers and crew members as we transition to recovery. Our Focus will be on safe off the ground up which includes healthy crewmembers Clean Air Services more space for your touch points and travel flexibility, even the Goodwill and trust that we built in our brand over the last twenty years. Our mission to inspire humanity is now more important than ever. We believe we are well-positioned to be the airline of choice for customers as they become more comfortable returning to flying off. Thank you again to our crew members for continuing to serve our customers and maintaining a safe operation over to you Steve.
Thank you, Joanna. I would like to have my thanks to our crew members on the front line support centers who in this time of Crisis or working day and night to take care of each other and our customers. I'll start on slide 9 with a brief overview of our financial results for the quarter.
Revenue was one point six billion dollars down 15% year-over-year adjusted pretax margin was minus 9.5% down 13% off for the first quarter of last year.
Lost his $0.97 and adjusted loss per diluted share is 42% effective tax rate for the quarter is 24 per month.
Just to shoot a few short months. The coronavirus is significantly disrupted our business. Thanks to our continued focus at the last few years on managing JetBlue to investment-grade metronome building a strong balance sheet, including our cost structure and strengthen our margins. We believe we are in the best position of any time in our twenty year history to effectively whether this price and emerge even stronger from a financial perspective. We are focusing our efforts over the coming months on three areas preserving a liquidity reducing operation expensive and managing our Capital expenditures.
Moving on to slide 10 and our actions to preserve liquidity.
We started the year with good momentum ending 2019 with over 1.3 billion dollars in cash cash equivalents and short-term Investments since the start of the crisis. I tell him it's an incredible job raising additional liquidity in mid-march. We quickly raised 1 billion dollars and determined Arrangement and in April. We'd rude down a revolver a 550 million dollars. We also raise a hundred and fifty million dollars of cash to the sale of future points, finally two weeks ago. We received the cash injection for nine hundred thirty-six million dollars from the exact to support our crew members.
the close of April
a cash cash equivalents and short-term Investments reach 3.1 billion dollars or 38% of our 2019 Revenue
As you move into the summer we plan to take further actions to bolster liquidity we recently applied for the federal cared at loan for one point 1 billion dollars, however, I'm not privatising additional liquidity rises in the public markets including issuing secured debt and then trying to sell these back transactions to take advantage of our unencumbered assets
Excluding the cat loan. Our goal is to raise it to seven hundred and fifty million dollars over the next couple of months which would take our total liquidity to approximately 3.25 billion dollars off by the end of the second quarter.
In addition to successfully rise in the quiddity and the shore. We have acted with urgency to minimize our cash burn reduce our expenses and rework our plan for Capital expenditures would be lower. Cash burn from an average of 18 million dollars today during the second half of March through an average of twelve million dollars in April as you enter. May we expect that cash may be just under ten million dollars of the day. We expect to see further improvements in a third quarter. Even our cash burn to range between seven and nine million dollars a day to be all of our cash bonus options. Do not include the care that process.
We are leaving no stone unturned to protect the Financial Security of JetBlue.
starting to slide 11
We spent the last three years executing our structural cost program and building a cost-conscious torture across the whole of JetBlue. We are all in this together and since the start of the pandemic off all about 23,000 crew members have been relentlessly focused on finding ways to manage our costs and preserve our liquidity.
Starting in March we quickly reduce the operating expenses to lower our daily cash burn and extend our liquidity. We took action eliminating all non-essential discretionary spending a minimizing marketing training catering and on both services in addition. We took the opportunity to install Services across twenty-nine airports in order to reduce our cash costs.
Joanna mentioned we are able to cancel some of our flying for the month to avoid some variable costs. However much of our cost base is relatively fixed partly due to the timing of big.
April and especially now intimated we are improving our daily cash burn as you further reduce our variable and fixed cost structure. We continue pulling down capacity aggressively. I'm sure we achieve variable cost savings and we are taking steps to hammer down our fixed costs across the organization. This includes consolidating airport operations parking aircraft. I'm an optimizing maintenance expenses looking ahead anticipate shifting our Focus to more permanent structural cost program cost program savings.
Thanks for these efforts. We successfully move around.
A hundred and fifty million dollars from our cost base during the first quarter.
We expect operating costs including fuel to decline approximately 50% year-over-year in May.
I'd like to extend a massive. Thank you to our amazing crew members who have volunteered to participate in time off programs and to all of us in the JetBlue family for making a personal sacrifice off.
I'd also like to thank our business partners for their flexibility and for working with us to extend payment terms and renegotiate contracts.
maybe just like 12
during the past couple of months we negotiated a deal with our best to rationalize our order book we appreciate their partnership in supporting a new delivery schedule that helps our efforts to protect jet black as a result we expect to take fewer aircraft than our original plan and that capex for 2020 to 2022 is now lower by one point three billion dollars
in addition we suspended our plans to take the for lease aircraft we announced in January deferring Associated engine capex required to add those aircraft to our Fleet we also offer a 3:20 restarting program having completed over half of our Fleet we appreciate the related impact on customer experience but we do not anticipate resuming our efforts until demand improves lastly we have reduced non aircraft capex by suspending all non-essential projects across the organization
moving to slice 13
at the end of March at that to cat ratio was 44% We anticipate principal and interest payments for the end of twenty-twenty have approximately a hundred million dollars per quarter.
Over the past few years. We invested the majority of our cash from operations back into jet blue. It's too early to know what the right level of Leverage and liquidity will be during recovery, but our conservative approach the manager not balance sheet will not change.
We remain confident that we will never get this crisis as we have in the past and emerge even better position to success in the years to come as a trustee travel ban. We may leave efforts to inspire confidence will help support recovery.
On behalf of the JetBlue leadership tume again. I would like to thank our incredible crew members as well as our business partners and our communities for all of their support as we navigate these unprecedented of times. They also the fact that many government agencies out there on the front line supporting essential travel needs our hearts are with those including friends and neighbors may have been impacted by covid-19. We will now take your questions. Thanks everyone Eric. We're now ready for the question-and-answer session with the analysts, please go ahead with the instructions.
Thanks.
Q to ask a question, please. Press star one on your telephone. We request that participants limit questions to one question and one follow-up.
Your first question comes from Duane pfennigwerth from evercore is I
hey, thanks. Good morning morning. Just on the
On the on the on the capex so you so you've taken that down a nicely and it just want to check that implies about $500 million for the remainder of the year. And I'm done. Should we consider this sort of your your final work on twenty-twenty or you're continuing to to work that down?
Good morning, Dwayne. Just before we go any further. I just wanted to have a shout out to our partner, but it's a thing, you know, such a challenging time where they're going through the right sort of response to the crisis. They've been true Partners as we navigate through this event. You're not far off in terms of your mouth. Drain. You're pretty much in the in the ballpark home with regard to like oh we don't I work is never done. We are ruthlessly focused at taking down the cash burn as we navigate through 2020. I'm incredibly proud of them to the team are taking us down from as I said eighteen million dollars the back end of March to today down to sort of ten million dollars in May and hence whether it's on the outside of the business or the opposite side of the business, you can expect us to continue to act with with rigor and expediency to get a cost structure down and continue to reduce their cash, bro.
Thanks, and and then just for my follow-up maybe for robbing or whoever wants to take a shot at it, but just given given the environment all the work you're doing. How do we think about you know plans for Europe and and timing for Europe given given the State of Affairs here? Thank you. Yeah now thanks to I. I'll I'll take that and your first you know a.m.
The vast majority of our focus and I'm sure we'll get question on this later in the core is you got to play a lot of defense like this when you go through something of this magnitude and you know, we got Thursday, we have two thousand one. We had nothing like this and so as we emerge from this as I talked about earlier in terms of our three objectives, the third one was to emerge and knowing that you know, a dead is going to be higher we're going to do we're doing everything can we mitigate that but, you know the priority for us over the next two or three years has to be to deliver and repair a balance sheet. So most of what you have to do is to play defense to get you that having said that you know for now line like JetBlue, I think there are also opportunities to play a bit of offense and you know, I think that our dedication to which we prove it is now to fly to fly to Europe to start flight to London, you know, I I I think that certainly we wouldn't be selling that today. Certainly. I think you should expect a timing issue.
In terms of you know, we're probably going a little bit later than we intended. But you know, the market will recover at some point and I think that the need for us to enter that market and bring more competition.
It's still as relevant in the future as it was in the past. So expect timing impact and I don't even had a chance to see the news out outside from the Thursday morning from the CMA, which is a competition Authority not too much detail. But but the headline is, you know entering into a sort of a consultation with ba about sort of regulatory relief for slots at Heathrow and Gatwick including markets to allow you entrance into markets like Boston Heathrow. So, you know, we encouraged by that we've been pushing the point with Reagan about two years that the transatlantic was not that competitive that we could bring price discipline. So, I don't know if he turned out to what's going on right now. We know most of what you got to do is play defense. We could we know we're off to emerge as a smaller Airline but as you asked me about London, we still see that opportunity orbit. Probably shifted back a little bit in terms of time.
thanks and if I could sneak one more inmate maybe maybe for robin as well we're in Uncharted Territory and obviously takes a little bit of imagination mm about what the recovery I might look like there there's really no correlation to pass. It's all broken but as you think about the different you know segments within the US that you would serve you know obviously Leisure visiting friends and relatives transcon Caribbean you know how do you think you know what do you think will recover first page or anything in your bookings that's giving us some hints to that and thanks for taking the questions so I'm going to start that thing and I flipped over to Joanna to talk about sort of you know view by segment I I would say that you know anyone who can and when he said they know how this is going to play out his lying no one knows or we can do is prepare for many different scenarios and be ready to adjust and adapt
Play as they start to play out, you know, I do believe that our Network which is put on put on the domestic our low cost structure our trusted brand lead us to our exit this crisis in a relatively favorable position. But you know, even that said, you know, it's going to be some time before demand recovers to where we were in in 2019, So we are spending a lot of time on that. We've got a number of teams that are up to look at that and and work through those scenarios doing in terms of the the specific geographies. I think I'm going to talk to Joanna cuz I know that some of the team has been studying very very closely the morning Dwayne. So as I noted during the prepared remarks, we believe the man bottomed out in mid-april. We are starting to see some very small improvements in bookings, but obviously we're very conservative with with what we're seeing and it's too early to tell if there's a permanent change in the trend as we look at different customers name.
We do believe Leisure will return earlier than business reminder. There's two types of leisure. There's the pure Leisure customer those that are going on vacation and then there's the Leisure customer that visit their friends and relatives and we know based upon prior experience from zika and in situations where there has been civil unrest and countries that shockingly people do still go back to visit their families. So we do think that that VFR segment has the best chance of recovering first followed by pure Leisure as we think about the network International domestic. We obviously believe domestic will recover sooner than Leisure and as Robin pointed out given that our network is predominantly Leisure 80/20 and largely domestic and the fact that we have a meaningful cost advantage to the Legacy carriers. We feel that JetBlue is is the best is best setup for Recovery when recovery happens
During a question comes from Katherine O'Brien with Goldman Sachs.
Good morning, everyone. Thanks for the time maybe taking off maybe following on the back of your last comments Joanna. So on on the comment that you know, your thoughts mid-april was the bottom and demand sounds like that's maybe picked is is based on on a small pickup and bookings here. You know, we just had Spirit commenting that load Factor. So I material in fact it may I guess first. Are you seeing that or or is that mid-april bottom more comment on the clothing and refunds any color there would be helpful. Thanks shirt morning Catherine. So a couple of points and we are seeing load Factor pick up very very slightly. I'm largely Florida Northeast. We also are seeing some modest improvements in no-show rates. So, those are you know, as you think about, you know, very early leading indicators. But again, I think it's important to just go back to you know, there's a lot of uncertainty around the timing in the shape of recovery month.
Focus is to be flexible capacity or capacity decisions will be driven by the pace of demand recovery and cash economics. And and that's our Focus right now.
Okay understood and then you know, maybe once a stiver robin. So can you talk us through your options? You are making to get from under ten million cash burn today that seventy nine million throughout the third quarter. Just trying to think about what portion of that is an improvement is an assumption on an improvement in demand. And and what is further cost guy thinks. I'm not to speak to you. It says there's a few areas in the southern terms of sort of sequential Improvement again, I'm very delighted to start see the progression as we we navigate through the the one thing I do want to emphasize of the starting point in May 10th, the ten million dollars a day that we talked about basically includes everything off topic on the cost of financing but to Joanna this point we've been incredibly conservative on our passenger cash Revenue assumption and that is actually slightly negative.
Due to the current demand environment. So I just want to put that out because I know there's a lot of confusion when you guys are trying to start a lineup Airline by Airline and work out the sort of cash burn. I think that's a good point when we think about starting point in May and by the way just for the absolute Clarity that excludes any sort of care act like Grant relief off as we navigate our way through the year when we seen this significant improvement from March through some a the first thing I'd say is that continued ruthless focus on our cost Reduction Program obviously take time in some cases the flow through and the teams working extremely. Well at doing that. The second key thing is really around the the capital flows through for a non-catholic spend because as you can imagine you stop a bunch of projects at the start of the second quarter, we obviously had a number of projects that were moving forward in March and then you sort of kept it catching up with the work log.
Capital allows you to navigate your way through the year.
Have the impact associated with that the third item as I commented on our prepared remarks. We couldn't be happier and more grateful for my crew members for stepping up and the control of the voluntary program and by this stage as we get later in the year. We will have the completion of a number of opt-out programs, which means that our underlying labor costs will continue to go down and then final as I mentioned from a a a slightly negative passenger catch basis in May We are continuing to to make them very conservative assumptions about modest Improvement as we go to the fullest and the cash Tampa on Revenue. So I think the story is done a fantastic job as you come to this crisis on the cost standpoint to reduce the birth even in a sense of negative Revenue cash Revenue environment and and your sort see those four factors play out as we navigate our way into the the the latter quarters of the year.
Thank you, Tracy.
Your next question comes from K with wolf research.
Hi, can you guys hear me? Hey, good morning. How you doing? Yeah, we can hear you loud and clear. Good morning. Thanks. I just had a little bit of phone problems before so I followed by every other question. By the way, I just want to say I thought that was a really nice wage thing that you said on a call this morning those very kind and thoughtful about your crew members. So you're going to make you're going to maybe come out until 2 on Thursday know it just it was a nice thing to say and it was it was nice. But anyway to my to my question the 750 million dollars of cash that you talked about raising Steve. Is that all dead or how you or multiple questions that all debt? Good morning Hunter? Yes, it is. I've already getting quite a few external questions and thoughts of saying well the competition they're doing in the markets. We enter this crisis with a very strong balance sheet in relation to others and we have a nice level of unencumbered.
Assets on the balance sheet our focus at this point is continued to tap the commercial debt Market we active in the southern leaseback Market wedding sort of comes to equity or converts not so much a lot of down the list and so yeah our focus at the moment is really around raising debt. Okay. Thanks and then on the hundred and seventy planes, can you tell me what the mix of those jobs are and how many of those are are not coming back?
In terms of the hundred and seventy obviously as we've gone through the network. We've parts of selection. I mean, we we've we've got basically got two fleets, right? Yeah, that's Fleet the the family and in the nineties, we've looked at the network. We've looked at the city pairs that we've gone forward with as you know, we've managed to consolidate services in various cities, you know, the likes of New York Boston now, they go on and said, you know various comments in terms of when demand starts to come back and we start thinking about the aircraft mix we're looking at life scenarios and what that looks like and what we've been back in the associated time frames. And so we're going through that planning at the moment the big Focus versus having the right aircraft to fly the network to start to come back and to sort of minimise cash burn as we go forward. And so we work until that at the moment and you'll hear from more from us in due course.
5D. Thank you.
Your next question comes from Brandon with Barclays.
Thanks for taking my question to see if I guess if I can follow up there on that you do have a pretty sizable Term Loan coming due next March and I understand like that was very easy to draw them quickly and definitely found things to do. But I guess how do you think about you know, staying the maturity profile on the balance sheet with some of the financing you're talking about? Yeah. Thank you Brandon. And again, I make the point that we sort of continuing to keep an eye on that as we navigate our way through 2020 and the biggest Focus we have at the moment is can't seem to raise the quiddity. Obviously, the term loan is secured by a good set up sets behind that facility as we go forward. But again, we came into this this crisis with you know, a conservative approach to debt to cap. So I'm a key Focus as you would expect at the moment is continue to drive liquidity and that's why it's worth about the 750 and making sure that we have over three billion dollars as we as We complain
Hey, good morning everyone in.
The second quarter the treasury team are brutally focused on making that reality at the moment as we get beyond that will start thinking as we can still have to parts of the Year about your financing and and how we play that forward but you know when I think about the only member that set full of Jet Blue and had that how big that is we've also looked at some other wage potential assets as we've continued to work with the the treasury team into the guidance of secretary mnuchin who we would really like to thank for their support with the care that along with the partners at five eighty. I'm I'm comfortable with the how we navigating that so we'll turn to that as we get to the latter part of the year after we secured further liquidity facilities, and then that's
Okay, I appreciate that response to you. And I guess I'm a broader issue. I forget if it was robbing yourself or or even Joanna that mentioned, you know, JetBlue will be a smart carrier on the back end of this. So, you know, that's awful that you guys disclose the one point three billion reduction in aircraft cafe or the next couple of years. But thanks. Can you discuss even the need to take new deliveries even in 2021 if the Outlook is dead. This is going to be a smaller industry at least for some period of time. Yeah, I think it's a good question. But and I'll take it. I mean I just want to say is like immediate Focus has been on twenty-twenty you would expect nothing less and negotiations primarily was based on reducing cash burn during that period you're right. I mean every Airline is going to come out of this crisis small and it's going to take some time to rant. I think we've made really really good progress in reducing have capex by, you know, one point 1 billion and the other the other the other cat backpack.
forward I mean maybe a third of the book over that. And we've made a great start and we we've got to continue to manage this crisis in the recovery on a step-by-step basis and I would expect as you see
From JetBlue in the past where conservative in nature you'll see as go step by step as we navigate our way through this but twenty-twenty has been the key Focus for now and will continue to look at Future years as we navigate this prices and looking for the timing and the speed of the recovery.
Your next question comes from Jamie Baker with JPMorgan.
Hey, good morning. Everybody. I'm Steve. I'm assuming you've sought aircraft lease deferrals or maybe negotiations are still taking place. Can you provide any update their own? Yes, I can. Good morning, Jamie. And this is a reminder in terms of overall Fleet. We've generally been in the position where we've owned our own Fleet. We have limited number of leases it gently think about like forty minutes about some even ninety Fleet. So we are and have been an extensive discussions with our lessors around that but you know, as you can imagine I wouldn't be disclosing the details on the public call. But yeah, I can assure you as you would expect that no stone is left unturned and that includes are less or partners that supporters a JetBlue month.
Okay, that's fair. Can you provide an update on that? Unencumbered asset pool both the size when it was most recently appraised and I I guess be going back the onion a bit the constitution of the pool and you know following on the hunters question. Does that 750 million dollar raise over the next few months any specific loan-to-value options, as you know part of those plans transactions as it's you know relates to the pool. Thanks, right questions. I mean, so just to give you some color we have found seventy unencumbered craft in the fleet, but it's not just around our craft. Obviously. We've got the unencumbered assets with regard to engine spares and and other choice after all that we sort of look at we generally take quite a conservative approach and as you would expect to do where you've been very active in terms of working with the praises to understand the market value age.
So that we can be on the front foot when it comes to raising further that and so you should think of collateral pool. So a directional heading towards two billion dollars, but that excludes things like, you know, the Loyalty program. I don't either sort of subsidiaries where again we have had started to have some good extensive discussions with the treasury and our advisors around sort of the backstop of the government line. So when you think about the sort of 758 ways out for me, we have a nice pool of assets and liquidity with a with a quality assets sitting behind. That way we can get the the requisite lines of a life got the the funds raised and again, that will be a combination. You should assume a Sally's back and sort of uh aircraft at Market. So that's really how we thinking of
So the moment I'm not in power.
As I say we working with the treasury to have the the government lied on the Shelf. So in the event we need it. We right there as a backstop. So that's really how we're thinking about these things off.
Your next question comes from Joseph dinardi with stifel.
Yeah, thanks. Good morning Robin. I appreciate that. There are a number of different scenarios in terms of what it demand recovery looks like but you're kind of raising liquidity based on one of those playing out and then I would assume you would look to raise more if if things perform worse than that to can you just help us understand with maybe what you are expecting over the next couple of quarters from a revenue standpoint just so we can kind of have a baseline to measure against thank you. So Joe, actually I'm going to hand that over to Joanna to talk about the next month or two quarters. I just want to make a you know, a general Point here about demand. I mean raising liquidity is important in a time like this because it off to your sustainability as you come through it. I I want to tell you and I go back to sort of the three objectives. I laid out earlier reducing down our cash burn is important because you can kind of Limp out of this thing off.
A lot of debt Memphis and a lot of time paying that down and so we don't, you know, we don't want to just raise the quiddity to burn it, you know, so we we're raising liquidity, but we've got to aggressively to continue to reduce cash birth and I want to give a shout out to the team because they had been incredible how aggressively we have moved. I mean Steve gave some examples in this comments I look at how aggressive we've been with to get a mission to reduce flying when we got denied we went back and we applied and then got some success we put another application in a couple of days ago for an additional set of market. So for me because even wage, you know, 1 million a day. I know it doesn't sound much but over, uh, a three month. Even. My math tells me that's another ninety million or so that you can sort of you sure. You don't have to then pay down to come out at this. So it's liquidity is Cash burn its balance sheet and then it's a part to repair in that balance sheet as quickly as you can. So that's just how we're approaching it and then I'm going to maybe hang over to Joanna to age.
About you know demand in the next to the couple of quarters of knowing that there are so many uncertainties here that it is actually very hard to to cook. Yeah. Thanks Robin. So, you know just to wage Robbins comment. There is so much uncertainty around the timing and the shape of recovery. So our Focus has been on remaining flexible. We do expect a phase recovery and you know adapting to that changing environment off from a planning perspective. We're assuming an l shaped curve which has recovery beginning in Earnest out into Q3 and Q4. You know, I think at the end of the day recovery is going to be dependent on customers being confident returning to Flying a crew members feeling safe to work. We do think that our model has inherent advantages that will serve us well in the recovery process obviously as we've mentioned predominantly Leisure predominantly domestic, we we definitely have a differentiated product or lower-cost. We think will be critical during this time.
Frame narrow-body airplanes and then obviously our brand, you know, we are trying to stay Incredibly Close.
Monitoring all leading indicators as well as measuring customer sentiment in terms of what customers are going are going to need to get comfortable flying again. And when we see those green shoots, we want to be in a position to take care of them. We have in our view lead the industry throughout this pandemic from are flexible waiver program to the extension of the travel bank would let the industry and capacity Cuts. I think we've been probably third highest in terms of capacity got you know, we've led the industry and social distancing we cap flights back in March 6th positioned further caps provided wipes the customers and as you think about that recovery, all those things are going to be so critical to getting customers back on our planes when the time is right, but again so much uncertainty the planning has Q3 Q4 level of demand coming back but again up in the air for for every carrier right now.
Sure. No, I appreciate that Steve. You guys are I think the first airline to use in advance sale of miles is a source of liquidity. Can you talk about what restrictions that may include in terms of using that asset as collateral as any and then other airlines have kind of talked about what they think the value of the program is. Can you talk about that as well? Thank you know, it's all great to speak to a good morning with regarding. Please leave with regards to the mileage cash purchase we decided to do a transaction with Barclays. It was just a relatively smaller credit you raise the the terms of pretty attractive. We've been very very fortunate to have such a fantastic relationship with Barclays over the last few years. They really stepped up. And so we sort of took the opportunity to add a little bit liquidity in there. It doesn't come with any so restrictions that that we need to be concerned about with regards to the overall program.
Obviously as I mentioned in my earlier comments, we are in advanced talks with the treasury advisors. And one of the things we are sort of discussing is Thursday Little T program. So we have been getting evaluation done. It's not complete yet, but we're working through that process because you know, it is a dead last mature programs and some of the Legacy players, but with that it is a it does give a significant value for JetBlue. So we're looking forward to having that valuation completed and it should be a good source of assets for us as we sort to go forward.
Good luck and good luck in the big debate with a hunter if you need an airline CEO the rest of that for you I am available.
Your next question comes from the line of sight with Raymond James.
Hey, good morning. And just a quick clarification to see if you had mentioned a four items that are kind of bridging your cash burn from what you're seeing today May and and what you think you can go back to the third quarter one was just maybe the passenger Revenue drag going away non aircraft cap is coming down and then kind of the early the opt-out programs kind of taking effect. I missed wage Sports Factor was I was wondering if you could remind me again. It's just a general continued focus on cost reduction, you know better than than than most the amount of money last couple of years around the structure of cost program taking many hundreds of millions of dollars out of JetBlue's cost structure that stood as in good put us in good shape coming into this crisis wage is always more to do and again the teams have really stepped up to go that level deeper and so you can seem to see the the flow of some of those initiatives going from 50% for example to 100% off.
of initiative as you go through the next
A few months. So that's the fourth item of talking about great and I'd like to that fits right in with question. I had which was you know, the maintenance contract or some of the big for the engines were some of the big items you were working with the last couple of years and that was done in a time where capacity was really Supply was really tight, you know with for tomorrow's and so I wonder if you is this an opportunity and all these are long-term Partners, but an opportunity to go to your kind of mro Partners and and get perhaps kind of bit a longer-term deals that you know has probably have a better set you up with a better long-term. Yeah, I mean and and I wouldn't assume Savvy that we haven't been talking to them because again, there's a number of our partners. This is such an unprecedented crisis. I think about Partners like oh, yeah problem Whitney as we've gone through this crisis. They've been their shoulder to shoulder with us as we went through this liquidity crisis. And so yeah, I mean we spent many many many months in fact birth
Right a year-and-a-half going through these energy maintenance contracts, but, you know going through that sort of experience with these business partners has been been terrific and, you know now our of money that set up again, so those those conversations continued and and we're pleased with the progress that we making and if I can just clarify the for at least aircraft that you would like to lease earlier this year is that just suspended or just that just deferred it's suspended. Thank you. Have a good day.
Your next question comes from Helene with Colin.
Thanks very much operator. I appreciate the time and things for squishing me and at the end two questions one is did you talk about the number of people who took leave or are you having everybody continue to work and just do fewer hours? I can I'll I'll take that, you know, our crew members have really stepped up. But we've had a since we sort of put a a series of voluntary programs about over 11,000 about 60% of our crew members have faith in some form of voluntary time off. There was a real sense of like we are in this together. We're going to get through this together and I couldn't be so I couldn't be more proud of just how many five. To take some voluntary time off.
Okay. All right. That's that's helpful. Thank you. And then my other question is, you know Robin we spent a lot of time earlier this year talking about sustainability and you know what you guys were doing enough front and I know that that probably takes a back seat to you know, what's going on right now with with the virus and everything like that. But you know, how are you thinking about that? Because I know that was going to be an important issue for you, you know this year and going forward so I don't know but I need it is not it is not taking a back seat at all. I mean investors who are really committed the space. They're looking at how companies handle events like this. What what decisions do you take so it is critical and when we think about the future size and shape of JetBlue and we haven't spent that much time on this call talking about that. You're under the leadership of Tracey lawlor who leads our strategy team. We created a number of foam
Terriers and one of them is the SG because as we come out of this there are a number of things I think will be doing differently as an airline.
As an industry and I think she is absolutely call to that. And and so it's not going to go away. You know, we're in the middle of something now. That is we never been through we know we have to be aggressive about the other side. We didn't work hard in the last ten years to get the second best balance sheet in the US too wasted all as you know, kind of as we go through this crisis so we know we have a lot of difficult decisions ahead of us off we're managing that as we sort of, you know work through what the future size and shape of JetBlue is but is actually one of the main pillars of that work and it absolutely should be
Great, that's really helpful. Thank you. Thanks Helen.
Your next question comes from Mike linenberg with Deutsche Bank. Yeah, good morning. Everyone. I guess two questions here one just Joanna and maybe Steve can log in as it relates to you had mentioned earlier about transatlantic getting pushback. Obviously given the backdrop. How do you think about the 20? I mean the first airplanes are coming in later this year and I would think that you know, probably not the most optimal time to to induct a new airplane type combined with the fact that there's probably going to be some, you know, call non-value-added expenses associated with you know pilot training in the like, how do you think about that? And as we move through the year does that potentially get pushed back as well your thoughts on that? Hi my copy that good morning to you. I see Thursday. We said I mean
We have been evaluating a number of Demands scenarios as we sort of go through this and before the crisis. We are incredibly excited about replacing the nineties chef and 20 is obviously a pivotal part to that the eighty-twenty business case because of its sort of newer Technologies and the economics of the aircraft crashed strong economics and a real game-changer for JetBlue. And so, you know as Robin said, we don't want to be tone deaf. We going through this crisis we when we come out the other side of this we can see each be excited about the 20s and the the benefits that can bring to Jet Blue and it also gives us thoughts about you know, what can we retire and how we saw the gate that as we go forward thinking about new 190 Fleet and so I don't think you should think that anything changes the economics these aircraft are spectacular and I'm pleased to have them in the order book club.
As as we sort of looking we've been talking to are but as we go forward that remains intact and and we're looking forward to bringing the 220s into the fleet. Yeah, and if I can if I can just add them and we're going to stay on by the way. I know some of you might have to drop off we'd be able a couple of questions like which will cover but I'll I'll add Mike is you know, when we think about like demand what's going to come back, you know, we met running scenarios the different segments of and geographies and you know, I think we all look at business travel and where we think that we know we know it's going to take some time to come back and where we have markets that have like a Boston Thursday. We have multiple frequencies a day, you know, those markets may be actually better served with a you know, a less frequency for a period of time and an airplane like a 220 could be really helpful for that wage. Actually helping us serve it more positively so I can't think the Steve's point. You know, we made some I'm very happy. I want to call that are buses while they've been a really good part of this was not easy for them. The party was dead.
Monday and you know we can always look at it and say wish we could have got more. I think it's really really good for us that we've got Clarity where we are we can go forward we can plan for a lower capex a headliner focus on getting our cash burn to other initiatives around on are quite complex and operating expense for the rest of the year. Okay, very helpful, and then just a quick one to Steve.
I'm not even sure you even mentioned this in the comments, but just in the release it talks about, you know adding Hedges through the June September and December quarter obviously taking, you know, being o Mystic and taking advantage of the low fuel price. What what to what extent are those Hedges? What's the what's the coverage? I guess maybe that's actually very difficult to ascertain given that you don't know what your capacity plans are going to be like over the next six months. But just if you could give us some more color on on that hedge book Thank You black person just to clarify. My these are not incremental how disease are in place before we sort of went forward so long, you know post-crisis. Obviously, we've been completely focused on cash burn and wouldn't be sort of entertaining that obviously it's reporting capacity significantly the proportion of the fuel that's life has gone up pretty significantly when you're flying about 10% of the schedule. So you should think about a lot of stuff in the top 50% range compared to where it was dead.
Before but in terms of I will insurance and everything else that we've got. We got on those things. It's it's not particularly significant, but nothing new since the crisis and again, the the Hedge side of things as moved up as a as a factor of the reduced flying and the reduced a SMS that we got in the network.
Your next question comes from Andrew Dora with Bank of America.
Hey, good morning. Everyone. Most of my questions have been asked and answered but just had one for Steve on the the Barclays Point Sale you guys seem to to act pretty quick on. This just took was the ability to pull forward some of these mileage sales a part of your agreement with Barclays at already predetermined rate or was this all negotiated as a crisis unfolded thanks off again. I just want to wait right? We have a number of like very strategic Partners at JetBlue and Barclays have clearly there with us. You know, they were very quick to reach out to us as we sort of got into this club Tractive turns on the table. And when we looked at it and thought the level of it was just a a good opportunity for us to get a small amount of incremental liquidity attractive or so. I wouldn't read any more into it than than what you see that
Okay, and so did this did that money come in and March or April?
I think it was in March.
Thank you.
Your next question comes from Chris South Apollo with s i g.
Morning, and thanks for getting out here. So two questions earlier in your prepared remarks. I believe perhaps in response to someone you spoke about looking at home leading indicators with respect to demand in the in the second half secures. Are are you talking about bookings infection rates hospitalization rates? And then the second question, you know, Jesus Christ is here obviously isn't is is not localized to a certain part of the economy or or you know a specific industry. So as we think about the value chain for Aviation, here's a whole I'm guessing that there are opportunities certainly Upstream around perhaps airport cost catering and things like that where there
cost of in the past
That had been fixed and largely perhaps inflexible. I'm guessing at this point. There's opportunities going forward to visit these so outside of all the work that you've done on the maintenance side and some areas as part of your structural costs program. Could you talk about perhaps what opportunities there might there might be up and and Midstream in the up and Industry markets with respect to cost going forward. Thank you. I know the first part that you wanna on the indicators, I will say that we're going to keep our comments quite high level because we think that some of the Insight packages and some of the ways world nowadays, you know, we see as a sort of sort of um, something we want to kind of keep within JetBlue but I'll ask you wanna to maybe at a high level sort of share some of the things that we're looking at. Thank you. Great. Hi, Chris. So, we have a number of indicators. We're looking at obviously all the statistics through the wh Okoboji account all the factors that are playing into whether the curve is flattening or Not Dead.
Obviously monitoring all of the shelter-in-place restrictions and all the travel advisories across International locations taking a look obviously at unemployment data and other macroeconomic factors were monitoring. Google Trends looks um and trying to make sure that we understand what customers are shopping for what they're looking at how we stack up next to other campers credit card spend consumer sentiment indicators. We obviously have a number of tools that we use that measure traffic to our website our bookings data GDs data. So there is a whole variety of factors. We also began this week asking a number of questions around customer sentiment as well. So, you know, all of these sources are what we're relying on to arrive at a you know recovery stage indicator for for each category.
Hi, Chris, Steve here. I just want to make sure I'm absolutely clear is the essence of your question our ability to in Source activities from a cost standpoint.
Well, whether there's opportunities to revisit some costs up in Midstream that in the past have for whatever reason you might have just you know accepted them for for what they were you will but but but given the pressure across pretty much the entire value chain gear. I I'm guessing folks are looking for Relief everywhere is and so as we think about cost and and perhaps also the footprint of the network is we come out of this what opportunities there might be outside of the work you've done on maintenance within the cost Reduction Program which which you know, my understanding was was sort of like the the biggest piece there. Thanks.
Great question Chris. I thank you for clarifying I think if I get up to a strategic level we are doing a piece of work around sort of future size and shape of Jell-O in terms of what we look like coming out of this crisis. You also sort of think about you know, with traditionally looked at what the split is between the worlds and ourselves and and wage business partners to do we've taken the opportunity to do navigate through this crisis. As I said in my prepared remarks to bring some of that work in-house over so twenty-nine airports where we've done certain things like that. You know, I believe we can sit you continue to see some consolidation in the business partner space as we navigate this crisis. But again, the one thing I would say, we've spent the last three years going through every single cost line and every single function across JetBlue as partners stretch of cross program, so we know where the opportunities are and as we start to continue to go through size and shape song.
With a strategic business plans as you continue to do there will be further opportunities for us to take our cost structure down and ultimate cash cash cash outflows down. So
Great question, very strategic approach and that's something where we are focused on as we come out the other side this crisis.
Thanks everyone and that concludes our first quarter 2020 conference call. Thanks for joining us. Have a great day.
And again that will conclude today's conference. Thank you for your participation.