Q2 2021 JetBlue Airways Corp Earnings Call
It's great to have you on the team and I'm also very excited to have asthma join me here as well for us.
Welcome to your first earnings call you've been in the room for years, but.
Welcome to the welcome to the seat so good morning, everyone I'd like to start by thanking our inspiring 20000 crew members for their.
Elimination for the most challenging period in our history, and now and taking on the difficult task of restoring operations back to normal levels.
The recovery net travel has come more quickly than we expected. In addition, our recovery has been accelerated by our northeast Alliance with American Airlines, helping us expand in.
Their data more corporate customers in both New York and Boston Vac.
Vaccines have clearly capitalized consumer confidence and we're pleased to see our customers traveling with us in greater numbers.
Thanks for the outstanding efforts of our crew members and taking care of our customers and each other jetblue is well positioned for success and I couldnt be more.
<unk> about the future.
Turning to slide 4 of the earnings deck and.
In the second quarter, we saw strong signs that consumer confidence in travel demand is returning with second quarter revenue doubling compared to the first quarter driven by pent up demand Jetblue reported an adjusted loss per share of <unk> 65.
Cited as we capitalized on the strength of our brand our distinctive positioning and the accelerated pleasure accelerating leisure market and the draw of our focus cities.
To give you more context, the recovery on leisure and VFR travel has been more robust than we had anticipated the quick operational ramp up and.
An unusually severe weather in the northeast has come with challenges, but we are pleased with the continued improvement in demand trends through the summer. We operated a peak 929 flights per day in early July a far cry from the roughly 140 average daily departures in the second quarter a year ago. We also.
Don't expect capacity to be largely restored for 'twenty 2019 levels in the third quarter as a result of the increased demand and growth opportunities from our northeast Alliance and important milestone in our recovery.
As we March towards a full recovery, we will be laser focused on executing our plan to put us back on a power.
Superior margin, we are confident that our competitive advantages our cervix.
Outstanding on both product and cost structure and the disciplined approach of the 3 years preceding the pandemic will drive our long term recovery and sustainable success margin is firmly back as our north star.
And as we start to realize benefits from that and we are starting to realize benefits from our new commercial on revenue initiatives and we'll be sharing more on that shortly.
Moving to slide 5 as we turn to recovery, we continue to generate positive cash from operations in the second quarter and.
For a continued improvement in our operating performance as we progress towards a full recovery.
We are creating a path to restore our earnings power for beyond 2019 levels and generate long term value for our owners in the years ahead enabled by an accelerated recovery on the earnings and margin tailwind from our northeast aligns.
Our attention now.
We expect really rebuilding our margins and repairing our balance sheet.
So we build our margin we are executing various revenue initiatives across the network and business, while continuing to focus on cost control and sound capital allocation.
Regarding on network, we have added new destinations on more service to our focused cities.
It was on our customers' travel again, including 8 new routes set to launch in the coming months.
In August we expect to launch our first transatlantic flight for London, and we remain committed to our long term strategy to bring our unique combination of low fares and great service for this route.
We are disappointed with the continued restrictions on travel between the U S and the UK.
To help another to regulators to safely reopen borders for travel.
We are planning schedule adjustments for this fall to match the current demand environment on lots of parts of the border reopening is clear we expect demand to bounce back quickly just as it has in the rest of our network.
In New York and Boston, we are already seeing the initial benefits.
<unk> of our northeast Alliance with American Airlines.
We believe this partnership will be a key driver in accelerating Jetblue is recovery and an important contributor for a long term growth, including revenue and margin generation.
The northeast Alliance supports our expansion in both New York and Boston and we.
We're excited to see almost 20 new flights.
On multiple new markets from Laguardia launching this fall with many more to come in 2022.
They launched benefits consumers by bringing healthy competition, a much needed choices for travelers in the northeast.
Both Jetblue and American expand flying we remain focused on developing a seamless travel experience for our customers.
And we are making the many necessary investments.
Given the new growth opportunities provided by on Northeast Alliance, we reexamined our fleet to ensure we are well equipped to capitalize fully on both current and near term conditions.
We have a plan to delay our retirement schedule for owned <unk>, which offers an efficient.
Way to profitably grow in the northeast, while protecting our balance sheet.
We will of course remain flexible with our fleet to continue to align with the demand environment.
Our commercial efforts continue to drive incremental revenue and position Jetblue for margin expansion.
In the northeast Alliance I'd like to highlight 3 specific.
Initiative. In addition for the northeast for lines I should say I'd like to highlight 3 specific initiatives.
We are pleased with the early results of our fare options update which is providing a significant revenue tailwind on.
Jetblue travel products subsidiary generated our highest ever single quarter commissions revenue across all products, including.
<unk> vacations.
Finally, we are thrilled to announce the extension of our co brand agreement with Barclays and Master card, which will greatly enhance the value of our programs.
We expect all of these initiatives to significantly drive margin expansion as we look ahead.
With margin is on Northstar, we will make these investments in the northeast Alliance.
Jetblue, we will make investments in the northeast the line.
While adding cost pressures unlock new growth opportunities. These growth opportunities are emerging faster than we expected and we are pulling forward. Some CASM pressure in 2022, as we delay 190 retirement and ramp up capacity and high cost airports, including the Laguardia in Europe.
We remain laser focused on our cost structure and believe we have a good trajectory over the longer term to support our efforts to expand earnings and margin.
Near term, we are working through various cost headwinds as we recover notably with maintenance when landing fees and ramp up questions. We.
We believe some of these pressures will prove temporary.
And on a natural part of a recovery it.
Teams are working hard to mitigate these headwinds and ensure we execute on our fixed cost savings.
We expect to share more color on this important work as we add to our list of cost initiatives following the annual per lining process.
Lastly, we took another step forward in.
Our balance sheet by paying down our term loan part of our balanced approach to capital allocation, we expect to continue paying down high cost debt, while investing in margin and earnings accretive aircraft.
Moving now to slide 6.
Our optimism and Jetblue future growth day by day as we recover from the great.
Where price is in our history, we will continue executing on plans to emerge as a stronger airline equipped for long term sustainable profitable growth.
The sustainability of our future growth is is in fact stitched into our strategy as we work to mitigate risks reduce our carbon footprint and create value for our owners.
<unk> is currently part of our executive incentive plan is tied to ESG.
We continue on our path to achieve net zero carbon emissions by 2040, and we're pleased to report that we recently signed an agreement to purchase sustainable aviation fuel on SaaS.
I ask and took our first delivery earlier this month.
This solid.
Move last year to fuel flights from San Francisco with SAP.
<unk> is 1 of the most promising ways to reduce at travel emissions all stakeholders airlines manufacturers fuel suppliers governments and investors will need to play a part on a role to help grow and scale back on Usher in a new lower.
Blue Harbor in future for aviation.
So in conclusion for me.
Close by again thanking our incredible crewmembers for everything they've done through this pandemic and particularly over the last couple of months as our airline has come roaring back.
Some of it's always had its share of challenges, but your energy and.
<unk> are bringing customers back on setting jetblue on a solid path of recovery.
We're excited we are as excited as ever as we charter course towards generating superior margin with.
I'll hand off to Joanna.
Thank you Robin I'll start by adding my thanks to our amazing crew members, who are rising to the challenge of rapidly restarting.
Our operations to meet pent up demand, while managing an unusual amount of severe weather days. It has truly been a team effort.
We brought our crew members back from leave we are hiring new crew members. Many are picking up extra hours to support the large number of customers flying in our support center crew members have been churning out in strong numbers.
Our op support our operational ramp up we also appreciate our customers who are flying in record numbers again and are excited to connect them to their destination.
Swift rebound in travel demand has come with operational challenges across the industry, which we believe will ease as we move through the summer we're pleased to be in a position today, where.
However, once again and welcoming more jetblue crewmembers to our family.
Turning to slide 8.
We're very excited about a number of revenue initiatives currently underway to drive profitable growth as Robin mentioned, we're encouraged by the early results of our northeast Alliance with American Airlines. This is driving compelling benefits for our.
We are corners to increased options and low fares is resulting in incremental capacity and revenue growth. Thus far codeshare revenue is exceeding our expectations and we are particularly excited by the positive initial response from many of our corporate customers.
Through this alliance, we can provide our business and leisure.
Leisure customers and more compelling network and schedule offering such as our plans to operate up to 12 daily round trips in the fall between Laguardia and Boston.
Last quarter, we continue to rollout codeshare markets and launched the ability to earn points or miles on either jetblue or American for both true blue and advantage members.
Starting this fall elite members of both programs will be able to enjoy benefits on both carriers. So far the NEA has announced a total of 58, new markets 32 flown by Jetblue with many more to come the success I mean at any day will come not just from a greatly expanded network with more jetblue flying but also.
Ability for customers to seamlessly fly on either Jetblue or American operated flights.
We're also very pleased with the contributions from our recent update to our fare options platform, which is trending above the expected 1 point of revenue benefit and currently contributing closer to 2 points of revenue for the third quarter and beyond.
They have been a double digit increase in customer demand to buy up from our blue basic offering we believe we offer the best product at a low price in every category that we serve.
Our jetblue travel products subsidiary remains a bright spot with record revenues across all key products doubling in relative size to the airlines versus pre pandemic.
We have levels.
Jetblue vacations sales were up over 60% year over too.
Travel insurance attach rates continued growing as we better tailor products to evolving customer needs and we recently issued an RFP, which generated a positive initial response. We're also seeing continued growth from car rentals and increasingly.
And on the growth by better targeting our offers via our recently launched Paisley platform. Our continued investment in product development merchandising and marketing a broader travel products provides us a path to reach $100 million and run rate EBIT next year.
Moving to slide 9 we're very bullish and loyalty.
And we are Supercharging our performance in this space by building on our award winning true Blue program and high growth co brand portfolio, we have laid the groundwork to evolve the benefits and value proposition of true blue at additional value and versatility to our currency of points and further enhance our co brand portfolio.
As part of our plans.
Hotel nation, we're very pleased to announce the renewal of our partnership with Barclays and Mastercard for our co brand credit card program. They have both been tremendous partners over the past several years and we are very excited to continue growing the portfolio and enhancing value for all stakeholders.
We expect our new agreement will delay.
Land spend approximately an incremental 1 point to our annualized revenue and margin and many exciting enhancements our in store.
In the immediate term, we're seeing material growth in the co brand portfolio, including record breaking acquisition on the Jetblue plus card. This is an important funnel to grow our loyal customer base.
<unk> from.
On existing card members is also up significantly both of these will contribute to our growing revenue performance.
Moving to slide 10 in the second quarter, our revenue declined 29% year over 2 it's 32% sequential improvement from the prior quarter and better than our latest planning assumption throughout the quarter demand.
<unk> exceeded our initial revenue expectations. Our recent co brand agreement, which was not included in our planning assumption added approximately 1 and a half points of revenue in the second quarter.
We are pleased to see further month on month improvement into the peak summer months with demand momentum across all of our geographies our leisure fares continue.
<unk> managed to improve and return to 2019 levels. This months supported by the strong recovery in demand and load factors. We ended the quarter with load factors in the mid Eighty's with June capacity largely back to pre pandemic levels compared to an average load factor in the mid sixties in the first quarter on 41% less capacity year over too.
At the end of the second quarter, we were generating average daily cash sales in excess of $20 million, which marks a considerable expansion from the $15 million per day at the end of March.
For the third quarter of 2021, our planning assumption for revenue is a decline between 8 and.
And 9% year over to another.
On a quarter of strong sequential improvement of approximately 20 points. We expect unit revenue to continue to improve on top of increasing capacity with load factors in the mid Eighty's. This summer and yield approaching 2019 levels. Despite our heavier leisure mix, we've seen days with average paid load factors in the nineties.
Another we've been pleased to see a stronger than expected leisure recovery through summer and looking further ahead, we are optimistic for business travel to show a more robust recovery post labor day.
Our customers are guiding us to expect an acceleration in business demand recovery. This fall as people return to the office and travel policies become less restrictive.
That said, we will remain flexible given the potential for future demand volatility due to variance in the course of the pandemic.
Turning to capacity on slide 11 in the second quarter, our flown capacity declined 15% year over too.
For the third quarter of 2021, our planning assumptions.
<unk> is for capacity to be down between flat to down 3% year over too given the strong sequential improvement in demand.
The pandemic, we've been nimble and adjusting our capacity deployment to the prevailing demand environment. While we are not seeing an impact on bookings from variance will maintain this approach.
Given the uncertainty.
Our VFR and leisure revenue is performing nicely and leading the travel rebound. We're also very pleased with the performance from our investments at Lax and Newark, The pandemic opened up unique opportunities to meaningfully expand our presence at these historically capacity constrained airports. In addition.
<unk>, we're continuously optimizing our network focused on reallocating capacity to our highest margin opportunities.
As our northeast of lives with American Airlines continue to accelerate our recovery, we are collaborating closely to reinforce benefits for customers.
Growing in harmonizing our scheduled flying.
Lying to new destinations to serve more customers, adding frequencies and all at low fares were very excited for our partnership to provide a path for jetblue to grow and provide more options to customers out of New York and Boston.
I will close with my deepest thanks for all of our crew members for their hard work.
Billions and ramping the operation to serve our customers and handling the operational challenges with professionalism. Our crew members for the core and the foundation of Jetblue success. As we look ahead I could not be more excited about the future of jetblue as we execute our initiatives to grow revenue and margins and expand.
And our loyal customer base with that over to you or solar.
Thank you Joanna I'd like to add my thanks to our crew members for their hard work to restore Jetblue and set us up for future success.
The robust margin accretive revenue initiatives, you've heard about from Robin and Joanna combined with our ongoing.
Ongoing cost discipline and margin focus gives me enormous confidence in our future.
I'll start on slide 13, with a brief overview of our financial results for the quarter.
Revenue was $1.5 billion down 29% year over too.
Operating.
<unk> expenses were down 27% year over too.
Excluding the benefit from payroll support program, 2 and 3 operating expenses were down 7% year over to <unk>.
Adjusted EBITDA loss was $86 million and GAAP earnings per share was 20.
Antisense and adjusted loss per share was 65 cents.
Starting with our operational performance are.
Our second quarter adjusted EBITDA came in better than the range. We anticipated in early June. This was mainly the result of improving underlying revenue trends the contribution from our.
Co brand agreement and our focus on mitigating cost pressures as we ramp up.
For the third quarter, we estimate our EBITDA will range between $75 million and $175 million, reflecting continued sequential improvement in demand partially offset by continued.
Pressures from fuel prices and airports rents and landing fees.
We expect to remain in positive EBITDA territory through the end of the year and expect to generate pretax profit in both July and August.
Turning to slide 14.
We are pleased to see the progression in.
And the revenue recovery and are deploying capacity to near pre pandemic level to meet demand.
We will maintain a laser focus on cost control as an important contributor and putting jetblue back on a path towards superior margins.
We'll continue to maintain a nimble approach in managing our business.
Cost as we are mindful of the potential choppiness tied to variance and possible travel restrictions.
During the second quarter, our adjusted operating expenses declined 7% year over to in line with our prior assumptions.
This excludes a payroll benefit of 360.
$6 million from P. S P 2 and 3.
Our CASM ex fuel declined meaningfully from a 41 per cent increase year over 2 in the first quarter to a 19% increase in the second quarter.
For the third quarter, our planning assumption is for our.
CASM ex fuel increase between 11% to 13%.
Resulting in a sequential improvement over the second quarter.
11% to 13% increase includes approximately 6 points of temporary headwinds as follows.
Approximately 3 to 4 points from rents.
Sixties landing fees and roughly 2 points from ramp up labor costs.
Given the faster than expected ramp up and to help manage operational challenges worsens by weather events, we are offering financial incentives to ensure we are appropriately staffed for the summer peak travel period.
Rents and we expect to gain efficiencies over the coming months as our newly hired crew members are trained to support the operation.
Lastly, entering the third quarter and into next year, we expect to incur higher maintenance costs as we begin to cycle through a year's worth of maintenance that we deferred from the pandemic.
To protect liquidity.
This is worth approximately 4 points of CASM ex fuel pressure in the third quarter.
Moving to slide 15.
Looking ahead to 'twenty 'twenty, 2 we are laser focused on aggressively managing our costs and expanding our margins.
We continue to grow capacity and earnings.
We expect CASM ex fuel to improve from a double digit growth rate in the third quarter of 2021 to low single digit growth in 2022 compared to 2019.
This cost trajectory is due to the timing shift.
On maintenance events tied to COVID-19 rents and landing fees inflationary pressures and margin accretive investments in our North East Alliance.
We expect elevated maintenance expenses through the medium term to support our aging fleet and as we worked through a significant volume of events, which we.
Through the pandemic.
While the timing is fluid, we currently expect rents and landing fees to continue to be a headwind into 2022.
But this should normalize over time as industry wide traffic returns and rates stabilize and our key airports.
As Robin.
<unk> mentioned, we are also investing in our transformative North East Alliance, which is already outpacing expectations and will create long term value for our shareholders.
We expect this will drive CASM pressure as we emerge from the crisis.
This will allow us to capitalize on the meaningful growth.
Joanne opportunities from the NEA and a capital light and flexible way, resulting in margin expansion and earnings growth.
The investments include delaying or even 90 retirement schedule earnings accretive growth at higher cost airports and creating a seamless customer experience.
Offered mitigating these headwinds is critical as our operation continues to recover and we're doubling down on our efforts to maintain a competitive cost structure in.
In addition to the progress we are making in reducing fixed costs, we are targeting productivity gains as operations normalize to optimize our cost.
Space as we work towards our goal of generating superior margin.
We are also actively identifying further areas of cost opportunities and expect to share more details on our next set of structural cost initiatives. Following the 2022 planning cycle.
We are committed to generating.
For then pre pandemic earnings in the next few years by growing revenue and controlling costs and we are extremely confident that we are on the right path to expand margin in a sustainable way.
Moving to slide 16.
In the second quarter, we took delivery of 2.8 years.
<unk> 2 <unk> hundred 21, Neo and 2 <unk> hundred 21 L. R.
The fleet stood at 276 aircraft at the end of June and we expect to take delivery of 5 additional aircrafts during the third quarter.
Our 2021 capex forecast remains at approximately 1 billion.
$20, the majority of which is aircraft capex, which we expect to funds using cash.
Turning to the balance sheet and liquidity on slide 17.
At the end of June our unrestricted cash and short term investments were $3.7 billion or 46%.
And all of 2019 revenue.
We remain comfortable with our strong liquidity position and we believe we have the ability to raise additional liquidity at attractive and competitive rates if necessary.
We're now squarely focused on repairing our balance sheet lowering our total cost of debt and grow.
Knowing our unencumbered asset base.
At the end of June our debt to cap ratio was 55 per cent.
<unk> decreased from the prior quarter.
During the second quarter, we made further progress towards delevering by paying down of $722 million term loan.
We also.
<unk> saved over $1.1 billion from a combination of proceeds including the second and third round of P. S. P.
As a result of these actions we've reduced our net debt by over 50 per cent to under $1 billion at the end of June bringing our net debt.
Below pre pandemic levels.
Turning to slide 18.
In 2020, 1 we have repaid a total of $1.3 billion of debt between our revolving credit and term loan facilities.
As a result of these payments we have reduced our interest expense by approximately 30.
Also re in dollars in 2020.1.
In addition to our net debt EBITDA.
Actions have lowered our weighted average cost of debt to pre pandemic levels and increased the amount of unencumbered high value collateral.
As we manage through the recovery, we plan to continue paying down high.
High cost debt.
We'll maintain our balanced approach to capital allocation as we returned to ingress investment grade metrics over the coming years.
I'll close with a huge thank you to our crew members for all of their efforts to ensure jetblue emerges from the crisis as a stronger airline.
We're extremely pleased to see our customers returning in great numbers, and Jetblue is well positioned with a strong balance sheet and a path towards generating earnings growth and creating value for our owners.
With that we will now take your questions.
Okay.
Thank you Sandra were ready.
For the analyst Q&A portion could.
Could you. Please go over the instructions.
Thank you at this time I would like to remind everyone in order to ask a question price Star EBIT number 1.
1 on your telephone keypad.
Well pause for just a moment to compile the Q&A roster.
On your first question comes from Savi <unk> with Raymond James.
Hey, good morning, everyone I'm, just kind of curious on your our capacity outlook for 2020 to 22 into that I'm, just gonna see ex fuel cost guide that you gave it and.
Kind of what your revised plans are along those lines for the E 190.
Seat.
Good morning Savi. Thank you for the question this is <unk>.
In regards to 2022 capacity, what we're trying to do this morning is provide you a level of transparency around the cost and how you should think about them over.
<unk>, the next quarter as well as into 2022.
We at this time are not specifically guiding to 'twenty 'twenty 2 capacity as we're still working through our planning process and given the volatility and uncertainty in the environment around COVID-19 and the ramp up of business travel there are.
For a wide range of capacity outcomes, but you should be assured that we will set our 2022 capacity level around generating margins and will adjust as we navigate through the recovery.
In regards to the E 190 on at this point.
<unk> I'm, we have delayed the retirement of the 30 owned aircraft and we will evaluate it over time, the optimal time from a cost perspective as well as capitalizing on the any a opportunity to determine the most optimal time to retire those aircraft.
Firstly, if I could.
On that day is there do the other E..1 nineties and go away and and is there kind of a lower and upper bound of what what flexibility you have on on the capacity from.
So as a reminder, we have 61.9 days in the fleet. So.
30 of them are leased so those we intend to return at the appropriate time. So those aircraft will return between 'twenty, 2 'twenty, 3 and 2020.6 B 30 owned aircraft as I mentioned, we will determine the optimal time to retire those.
However, I want to remind you we're keeping them in the fleet to capture the North East Alliance opportunity that is in front of us. So we are making investments in that fleet type them to ensure that we can grow margins and capitalize on the northeast Alliance.
On this opportunity.
And if I might clarify on the northeast alliance opportunity the investments you're making does that.
Get built into the base I do those investments pressures then go away as you kind of leave 2022.
Sure. So there are 2 to 4 points of CASM ex fuel investment to capitalize on the north.
These opportunity.
We those are put in 3 categories. So first and foremost we're investing to ensure that there's a seamless customer experience from an it perspective as well as in airport experience perspective.
The second area, we're investing in is delaying the he went on I D.
Aircraft, so ensuring that the customer experience on that aircraft in the maintenance is associated and embedded into the guidance and keeping that fleet type.
And then the third area of investment is accelerating our growth in high cost high value airports, such as Laguardia and Newark.
You work here in the northeast.
Got it alright, I appreciate the color.
And your next question comes from Dan Mckenzie.
Oh, Yes, hey, good.
Good morning, Thanks for the time here and just kind of following up on that last question.
The accelerated growth in high cost high value airports, specifically Newark Laguardia.
Are there other airports you know that you're looking to grow as a function of the relationship with American Airlines.
Hey, Scott you want to ask that.
Yeah, Hey, Dan its Scott Laurence Thanks for the question if you look at the.
Covers for airports.
JFK Laguardia Newark and Boston.
We anticipate significant growth at those for airports, because he NEA and the opportunity. That's there we've got something that's transformational in terms of the opportunity and the ability to ramp the benefit from that quickly. So.
If you think about you know where we're going.
Or we bet on where we're going in 2019, you know JFK sort of sat at about 175 peak flights, we expect steady state to be over 200 mm Newark going from about 35 to 70 flights Laguardia going from 16 to 50 to 60 and Boston going from 175 to over 230. So.
A lot of growth there we believe its a hugely beneficial for US there are a number of things here in terms of channel shifts and also customer benefit as we see jetblue growing adding competition really challenging the dominant carriers in the northeast.
And you know really a win win here.
You know then the next sort of logical question to that at some point here. Here is you know are you exploring an entry into 1 world you know on what are the pros and cons are at this point as you think about developing that relationship with American.
So Dan it's a natural question to ask because I think that as.
We've looked at global alliances for our story has not changed there that we see a pretty large investment.
For a carrier like Jetblue in things like training and we think that we've got a better mousetrap or open architecture.
<unk> strategy has worked really well for us and it allows us to do so in a really responsible.
For the way in terms of costs. So over the long term value, we'd never rule out opportunities, but right now it seems to make sense to pursue a strategy that's working for us.
Thanks for the time you guys.
Thanks, Tom.
And your.
Your next question comes from Duane thinking back.
Yeah.
Hey, thanks.
Just curious when would you envision guiding to pretax margins or net income margins as some of your peers have started to do.
Good morning, Brian. Thank you for that question.
And so as we provided guidance. This morning, we are going to be EBITDA positive in the third quarter as well as for fourth quarter. I also noted in my remarks that we will be pre tax positive in both July and August as you think about September September has historically been.
A trough month for Jetblue and what I would also highlight is that we're being cautious around the return of business traffic. However, what I would note is that we're extremely pleased with how the northeast Alliance.
It has been accelerating in terms of ramp up so we do believe.
That will provide us some momentum.
You're over too as we look at the September timeframe.
And Duane if I can just build on that because I think it's a great quest.
Question, if I think through the various stages of the pandemic. We started very much talking in terms of daily cash burn.
We then you sort of move.
On the Dol, because we felt that was sort of a measure of on sort of operating performance our ability to drive revenue and manage costs.
As everyone remembers jetblue was probably the most impacted airline in the early days from a revenue perspective, given on geography in the northeast and so.
Extremely aggressive.
Deferring many.
Many cost, including some of the maintenance costs that.
Most of it for 2 you know and I think we're very close here to being able to transition.
Into our pre tax margin, reflecting ultimately that's what we're aiming for on everything we're putting in place.
Here is to drive.
Significant margin expansion into next year and beyond.
Okay, and then just just for a follow up with respect to these deferred retirements can you just remind us kind of where you stand on 2022 and 2023 Capex and is there any is there any element of this that's about delays delivery delays or have you shifted capex.
Or is the message you know the capital plan is the same where we're just going to fly more on this on this higher CASM. Some fleet that we expect it to retire.
Thanks for the follow up question Duane so on.
Regards to the capital plan for 2020, 1 we've got it at $1 billion.
Growth of Capex, which is mainly associated with the aircraft growth in terms of 'twenty 'twenty..2 we intend to take 12 aircraft next year and that will drive approximately the same capex profile to 2021.
In regards to 'twenty to 'twenty 3 we have a step.
Up in the quantity of 8.8 to 20 deliveries.
So you will have a slightly elevated capex profile in 2023, <unk> compared to 2021 and 'twenty 'twenty 2.
In regards to the investments and fleet has it changed the simple answer.
There is no. The decision we've made is to simply delay even 90 retirement with which is a capital light and balance sheet friendly decision in order to support the ramp up of D. N a.
Okay. Thank you.
Yeah.
And your next question comes from Catherine O'brien with Goldman Sachs.
Hey, good morning, everyone. Thanks for your time.
<unk>.
My first question is really maybe a follow up to to Duane first question. So you know youre expecting to be pre tax profit for July and August sounds like not so for.
For and based on your answer Duane It sounds like you know that's really just more of you on on leisure revenue dropping off and maybe a little bit of a slower rebound and incorporate or you know just the continued flow or I don't mean like relative to your prior expectations just that that is ramping up slower than than leisure generally.
So it sounds a little bit more revenue base I guess first is that right and then second.
Moving for we're getting to that pre tax profitability is it really just about corporate corporate ramping up from here or are there any other cost items, we should be keeping an eye on the second half that that might impact that.
<unk>, yes.
Thanks Scott.
I'll take that it's.
Robin I think that.
All right.
The comment on September is right I mean, if you look at sort of historically for <unk>.
Jetblue, that's always been on almost a challenging challenging month, and so that combined with sort of some uncertainty.
Around the pace of corporate travel, we all reading a lot about.
Some companies moving office openings back from September to October. So, we're just sort of want to be cautious.
About that when we think about what we're focused on with very with focus on margin and again EBIT.
It's really something that we entered into the year with and I think we said at the time.
Some point this will transition back to a margin when I look at all the revenue next year as you know we talked today about how fare options is closer to 2 points, we talked about the true Blue program, we've talked about how quickly jetblue travel products.
EBITDA driving margin and you've seen the cost that is the additional content that is driven by the NDA and we believe the NDA to be very accretive and so when you look for to those revenue initiatives together with.
We're very confident about their ability to drive margin as we head into.
2 into next year I think our caution is just around that we've been here before we still are concerned that a spike in volume in cases or other concerns could impact future demand and we said if over a year now this could remain a growing non linear path.
So we certainly don't want to get ahead ourselves in setting expectations, but we have been extremely aggressive about lining up a set of revenue initiatives and are focused on cost to drive margin expansion.
Rapidly into 2022.
Okay understood and then maybe just a quick follow up.
Paulson slides yogurt debt payments for the rest of the year shown.
I'm not showing any more prepayments I think that's just a little bit of a placeholder for now for <unk>.
On your current cash flow outlook might there be some additional issuances you would look to prepay and then just more generally how are you thinking about P thing incremental debt prepayments.
Gating factors for you to do more on this front. Thanks for all the time.
I appreciate the question.
So we're very focused on repairing the balance sheet. The goal is to get back to pre COVID-19 investment grade metrics and we have I'm extremely pleased.
Pleased with the progress that we've made today in regards to Delevering.
We are in.
<unk> that we don't get ahead of ourselves and given.
Their potential variance and international travel restrictions, so I do want to maintain a healthy cash balance as we go forward we have.
Have identified future debt prepayment opportunities and you should be assured that going forward. This is a priority on to get back to the 30% to 40% debt to cap target that we had coming into COVID-19.
Okay.
Your next question comes from a bird C band with stifle.
Hey, good morning, and thanks for the time.
What what's the best way to think about the renewed credit card agreement on longer term is the baseline that that deal add something around $60 million of revenue. This year and then you guys just build on that in the future through acquisitions and <unk>.
Increased spend.
Hi, great. Thanks for the question. This is Joanna so first just really proud of the worst for team has done specifically around the co brand agreement.
This was initially tied to the potential for securing the government loan and I think they did an excellent job pivoting around a longer term renewal with a number of very.
Interested.
How do you use Barclays Mastercard have been just tremendous partners. During this so as we mentioned during.
Opening remarks, this will add a point of revenue based purely on the economics of the program and that's based off of 2019 numbers Theres a few sources of value tied to both co brand, but also longer term true blue obviously seeing.
Wrong improvements in unit economics of the overall co brand deal.
And additional incremental value do you think about the growth of the program. We've designed the partnership to really incentivize everybody involved to double down in terms of card acquisition tapping into parts of.
The economy that may.
Maybe haven't been able to necessarily secure credit card very much supporting some of our D E and I initiatives. If you look at the Jetblue plus card, we think there's tremendous opportunity there we've seen record breaking numbers of them.
On subscriptions and acquisition rates to the Jetblue plus card, which obviously has stronger spend as well.
So do you think about co brand specifically, we were very much at the front end, but I think what we believe is very strong growth trajectory than as you pivot into true blue the underlying loyalty program. There's a number of areas of opportunity. There. We are in the midst of redesigning that program to be far more customer centric.
It's already an award winning program customers love It, but we think we can drive greater attachment and greater stickiness through through a design that really speaks to customers' wants and needs also continuing to double down on earn and burn redemption opportunities with OE partners and then obviously the NDA is going to give on even additional.
Additional.
Incremental sort of value to our underlying true blue program. So it kind of cuts across a number of different areas.
We often talk about how Jetblue co brand and true Blue program is relatively immature.
This case I think what that means for us is tremendous ramp and tremendous growth over the coming years.
Closing what has been a GAAP for us for quite some time.
Thanks for that Joanna just just 1 follow up for Ursula.
On the cost side. So you know on inflationary pressures you certainly talked about them in and clearly they are more acute on your core airports.
Go forward, maybe just from a longer term basis, you know what.
Do you see as the relative advantages to your peers is it really just going to be you know you get stage growth from adding Europe and other parts of your network and then get gauge growth from refreshing. The fleet are there other items that you would put it in those buckets. Thank you.
Yeah. Thanks for the question and so we're extremely focused on.
Ensuring that we continue to take.
Take out the $150 million to $200 million of fixed costs, we need to ensure that neither maintained into 2022.
I think the other area of opportunity is doubling down on productivity, so as the operation and the network settled.
Into a new norm, ensuring that we're gaining efficiencies across the work groups to ensure that we're offsetting some of the labor and external inflation that we're seeing today.
Also what I would note is in regards to our first structural cost program.
50 per cent of the savings within that program are deemed variable and so what's happening at the moment is that those savings are being masked by COVID-19 and so again as we reset the network on the operation comes back to a new norm, we expect to see.
Back in CS as we scale back up so between the fixed costs.
150 to 200 million the structural cost program 50 per cent savings, which are variable and then doubling down on productivity I feel very confident on our path and delivering a low single digit CASM.
Affect fuel number in 2022.
Thank you.
And your next question comes from Ravi Shanker with Morgan Stanley.
Thanks, Good morning, everyone I'm, sorry, if I missed this in the prepared.
Hasn't men's but did you quantify how much that any EBITDA contributor to revenue and EBIT into Q on kind of how we see that pacing over the next 12 months and even longer maybe.
Hey, it's Scott. So you know I think we're very pleased with how the NDA is rolling out.
So far and while we're not quantifying that I would say that you know we're in the very initial stages, we've got about 40% of.
Sort of code deployed on a non stops and you know very little code deployed on the connecting markets.
We move forward and some of the announcements that are out there on a frequent traveler reciprocity.
For us to get those kind of things, we look forward to ramping up quickly.
The other piece here is that.
As we see business traffic return and you know you've seen some of the as we've announced on whether that's Boston Laguardia Boston D C a coming back to a higher frequency.
Schedules as well.
For the whole.
Sort of looking at some channel shift and you know I think that's 1 of the things about the NDA that we're pretty excited about because.
We create an environment, where our corporate customers see more jetblue service, they see our fare structures, which means that you know they're realized fares on the average fares will actually come down in a number of these markets as you see jetblue compete.
<unk> at.
At the same time.
We've been traditionally sitting around 20%.
Leisure customers and.
As we look at that rate every point of that that we increase is worth about $25 million. So just on in revenue.
So again I think across the board we look at this.
No that it's a win win for us and.
As we roll that out as we see the customer response, we're happy so far if I could just maybe add as well.
Sure.
We're excited is an understatement I mean, this is providing a very formidable third competitor and on northeast geography that customers will not only.
The benefit from lower fares, but also greater competition in a much more robust network and if you think about just the size of what we're accomplishing Laguardia pre NDA was about 16 daily flights, it's going to grow to 50 to 60 daily flights a day JFK was 175, that's going to grow to 220 to $2.40.
It's 35 to 70 to 80, Boston 182, well over 200. So I mean this is a meaningful on a meaningful partnership alliance and we could not be more excited about the value that it's going to drive for jetblue, but but even as importantly for our customers who are in need of that third competitor.
And frankly, just greater competition across the northeast.
Got it thanks for the color on maybe as a follow up I know that things were pretty uncertain with the UK right now, but can you just help us understand like what are the next steps there or do we track kind of do you guys need a plan B what are you hearing in terms of our.
<unk> crowd restrictions.
Thanks for Ravi on the London, Guy, So I'll I'll take that.
Lucky you Yeah, Yeah no.
I think you know the history right I mean, we will be very frustrated that the.
Total hasn't opened I mean, there's no reason for opening it's not data driven.
Because there's many other countries where the lower vaccination rates that are open. So now we'll move on we'll continue to work that issue.
We are going to fly we do expect to successfully complete our etops certification.
We'll continue with our first flight in August August the.
Girl 11th.
We will fly I'll schedule every day per plan initially.
There is a lot of sort of a training events that go with them. This type of flying that we need to get through so we will do that and then as I sort of made in my remarks. It was a little bit talk to why and I, probably are probably books you would want them.
2 of the woods, but.
As you know we're looking at September.
We'll day of week September just to sort of bring down.
Some of the some of the flying and then we will keep it we will continue to review on a month by month basis. There was news today that the.
The UK will open of the U S for U S.
I like to travelers I don't know if that's going to happen on all we've been asked many times with the potential good news. It then been dashed.
But we'll continue to stay flexible and will sort of match the capacity to the demand.
Very good thank you.
And your next question.
In fact, when it comes from Helane Becker with Cowen.
Thanks, very much operator, hi, everybody and thank you very much for the time congratulations to all the new participants on the call.
Sure. So 2 questions 1 is congestion at the east northeast airports and I'm kind of wondering about the decision to flow.
Laguardia Boston.
As you think about 12 flights a day on that market is that really like the best thing to do with those aircraft.
And can you make better use of those slots.
And in routes that may have more business utility.
Eileen Thanks for the question you know our focus is always about putting our aircrafts on the most margin accretive routes at this point in time, given the partnership with American Airlines, you know, we believe that the strongest on use of those aircraft moving forward.
Asleep congested airport as you noted, but it's congested for a reason and that's where the people on and that's where they want to fly.
And frankly, you know we view it as a smart investment obviously some of this is dependent on the return on all business travel. So we're watching that very closely but we've seen nothing in our bookings to suggest that business travel won't be coming back on the fall, but again, we'll remain nimble as we need to.
Gotcha, that's very helpful. Thank you and then 1 thing nobody to talk to you about this time.
Net investment and Jody and I guess, they're getting ready to come public. So I don't know how you guys are thinking about.
That what.
Youre doing without or are you just going to keep that investment is there a point in time, where youre going to monetize it.
I don't know any color you might want to give on that is yes.
And maybe I'll just give a little calling on are still feel free feel free to add you know we're very excited about that partnership I'm not going to get into the details of their current a potential public offering, but you know I will say its an important part of our strategy moving forward, particularly around Evo Evo Evo Evo electric take off on landing.
Yeah, I can't pronounce it correctly.
And you know we're very excited about what that brings I think you've seen a number of additional announcements from other carriers in the recent months, we very much believe that our partnership is much further advanced than on where those announcements are and excited about about what they are going to bring to the future of that type of travel.
That's really great. Thanks very much.
Yeah.
And your next question comes from my cleaning Berg with Deutsche Bank.
Hey, good morning, everyone and congrats Joe on your new positions.
Quick 1 here to either Dave.
For Scott.
You know when you look at your yields I guess on a year over 2 year basis. It looks like you're probably down maybe 10.11, 12%, but then your stage length is up.
Don't know what it is up on a year over 2 year basis. So on a stage length adjusted basis, our yields roughly flattish is that the right.
Matt.
Hi, Mike Good morning, and thanks for the question, we're really pleased with how both fares and yields are coming up it really depends throughout the network since we've pivoted to a much more leisure centric network over the past few quarters and for the summer. We're really pleased with where the yields are even if they are slightly below historical 2019 levels.
1 level deeper in some regions like especially transcon on the east we are seeing yields to be higher in other parts of the network. They are lower but overall really pleased with the total result.
Great. Thanks, David and then just my second question just on Ursula and the non op area. There's a 39 million dollar I guess some of its interest income and then there's some sort of charge.
I'm not sure if that was called out in specials or if in the release, what what is that.
Thanks, Mike for the question. So there was a level of investment that we needed to put forth in order to pay down the $722 million term loan.
Hey.
Alright.
Very good thank you.
They are for your next question comes from Jamie Baker with J P. Morgan.
Hey, good morning, everybody, Hi, Jami Rubin Martin.
I believe for you just a couple of London related technical questions I know you've been operating some proving runs I'm curious if that's mostly related to.
Crew familiar.
Irritation or if there are any aircraft performance issues, you could share with us right now.
No. So we had the 3 round trip proving runs that is part of the FAA certification process.
You should even assume the diversion to catheter vanquish you probably saw it.
So part of.
That whole process. They went very well and we're very confident of our ability to with CV talked to you for authorization.
Okay and a related follow up you know the configuration I believe it's a 138 seats correct me if I'm wrong on.
Is that dictated by the aircraft.
It was all else given the range or is that the profit maximizing cash.
Figuration based on you know Jetblue analysis I'm just curious why 138 is the right configuration, what would you have done differently, Jeremy just kill it.
It's been too long for me to be able to answer.
Yeah, Yeah, no yeah look clearly.
We spent a lot of time with that on that you know as you know when we launched mint on Transcon, we had a from cabin of a 16.
<unk>, we spent a lot of time.
Thinking through the optimization, we ended up where.
Where we are with a 24 on the phone and then sort of on the back.
Thanks for kind of takes care of itself and we sort of look at the mix of even more and coal.
Also say because it's a new airplane the configuration does have a high level of flexibility if we want to change it in the future.
Compared to the sort of traditional CRA a plane.
Okay that'll do it for me. Thank you thanks Robin.
Yeah.
Yeah.
Yeah.
And that concludes our second quarter 2021 conference call. Thanks for joining us have a great day.
And again that will conclude today's conference. Thank you for your participation.
[music].
Yeah.