Q3 2021 JetBlue Airways Corp Earnings Call
Paul team for the last five years I was known for his generosity and adventurous spirit.
<unk> was a cherished member of our in flight team.
Almost as many years as Jetblue has been operating.
And Alex can Joe joined the Jetblue family in October 2002.
He was a treasured member of the ground ops team at Orlando, where he was always known for being first to chip in and help.
Our Hearts go out to their family friends and fellow crew members and so all of those who've been impacted by COVID-19.
I would now like to thank our truly amazing 21000 crew members.
They continue to deliver for our customers and they give me great confidence that jetblue is well positioned for future success.
Moving to slide four of our <unk>.
<unk> 21 earnings presentation.
For the third quarter, we reported an adjusted loss per share of <unk> 12.
I'm encouraged by the steady progress, we are making while capitalizing on opportunities to enhance our future earnings power.
While the demand environment has been affected by case count we believe that demand is once again poised to reaccelerate into the peak holiday periods and beyond as people adjust to a new normal.
As we look ahead and plan for 2022, we will retain the agility that has characterized our planning process for the loss.
18 months and as we prepare for continued demand recovery.
We are marching towards a full recovery and return to sustained profitability with margin truly as our north star.
Im a firm believer that our unique business model low cost low fares and the superior product positions jetblue to thrive in the years ahead.
Now turning to slide five of our presentation.
Throughout the pandemic, we have not lost sight of our commitment to serve our communities add more diversity to the aviation industry is pipeline and increase sustainability across our operation.
Jetblue continues to lead the industry in ESG as the first airline U S airline to file a SaaS based and Tcf the aligned ESG report.
The executive compensation to ESG tie executive compensation to ESG metrics execute a sustainability linked loan and operate an ESG subcommittee of our board of directors.
We're also pleased to see our initial 2017 investment in <unk> aviation validated as they went public this past quarter.
With our efforts we are honoring our responsibility to our customers our crew members.
<unk> and strengthening shareholders' value as we recover and grow.
I'm pleased to say, we are now well ahead of pace to achieve our target of transitioning 10% of our fuel usage to sustainable aviation fuel by 2030 enabled by our recent deals with SG, Preston Nasty World Energy and World fuel services.
We are taking a diversified approach on staff by engaging with multiple partners.
Our industry has a responsibility to decarbonize and we cannot do it alone earlier. This month the International Air Transport Association member Airlines committed to achieving net zero carbon emissions by 2050.
Following the IATA resolution, we are pleased to see the air Transport action group or a tag adopt a net zero carbon goal for 2050.
<unk> is a global organization comprised of airlines airports aircraft and engine Oems and air traffic controllers.
These commitments underscore and unparalleled and collaborative approach across our entire industry to address key challenges and advanced collectively towards net zero targets.
We are happy to play a role in continuing to lead the industry with the most holistic plan to address sustainability.
We're delighted to see some of our competitors.
Being up to this issue.
We've also recently released our annual ESG and social impact report, which includes the results of our first ever climate with scenario analysis as well as an overview of our corporate responsibility programs focused on youth education, the environment and increasing diversity within the stem fields that fuel our airline both comp.
Hence he reports can be found on our Investor Relations webpage.
Moving now to slide six.
As we will as we work through the annual planning process. Our teams are setting solid goals for our network commercial and cost initiatives and capital allocation priorities.
I could not be more proud of our team's efforts and I am confident we are setting jetblue on a trajectory to restore our earnings power to beyond 2019 levels over the coming years generating long term value for all of our shareholders stakeholders.
Over the course of the pandemic, we launched game changing network moves and continue to pursue strategic initiatives.
Build a strong foundation for our long term success.
We're thrilled to have finally landed in London in the third quarter, a milestone achievement that was years in the making and we look forward to bringing Jetblue is low fares and award winning service to even more customers across the Atlantic just as the U S prepares to ease entry requirements for UK travelers next month.
Our team is doing a fantastic job in rolling out and expanding our commercial initiatives, including the latest evolution of our fare options, which helped drive the industry's best revenue acceleration. This summer our jetblue travel products subsidiary remains a bright spot in recovery delivering over 40% revenue growth versus pre pandemic levels.
And our efforts in loyalty is starting to materially enhance earnings performance.
Our talent.
Let's work to shape, our cost structure is a key pillar of our goal of achieving superior margins. We are deep in our planning process and working diligently to mitigate the external cost pressures tied to the recovery.
Im confident that we will maintain a competitive cost structure and return to our roots as a low cost airline.
Lastly, we made incremental progress.
Progress and deliberate deleveraging our balance sheet by paying off our cares act loans and other bank loan.
Our unwavering commitment to repair our balance sheet as part of our balanced approach to capital allocation.
I am moving to slide seven I'd like to spend a minute discussing in greater detail, our northeast Alliance with American Airlines and the many benefits. This alliance brings to all of our stakeholders.
New York, a capacity constrained region has historically been dominated by just two carriers.
And in Boston, our alliances, enabling jetblue to expand our low fares and superior product to new markets and create a broader and virtual network. This alliance in no uncertain terms to supercharge competition in the region.
It is important to note that our commitment to competition and low fares is steadfast as is our commitment to our home here in the northeast as new York's hometown airline.
We will continue to implement this important alliance and deliver meaningful value to all of our stakeholders, including our customers crew members owners and the broader economy here in the northeast we.
We are fully committed to this alliance and to delivering the tremendous benefits of added competition to our customers.
With American Airlines, we plan to operate close to 500 daily flights in November 300 of which will be flown by Jetblue, given a vastly expanded network and flying the NDA is estimated to generate more than $800 million in and.
Consumer benefits. We're also in the process of hiring 1800, new crew members as a direct result of the growth. The NDA is enabling for us jobs that otherwise wouldn't be created without this alliance.
I'll close with another huge thank you to our crew members with exciting revenue initiatives a firm grip on costs and superior margins as our guiding light I am very confident we are charting a course to emerge from this crisis stronger than ever.
Over to you.
Thanks, Robyn I'll also start by recognizing our extraordinary crew members, who helped us achieve among the industry's quickest ramp up during the most challenging summer in our history.
We were not immune to the operational challenges felt across the industry exacerbated by weather.
Closures and a patchwork of varying COVID-19 travel restrictions at the same time you. Our crewmembers have laid the foundation for a stronger jetblue and I. Thank you for everything that you continue to do to support our customers and one another.
Turning to slide nine.
I am very pleased with our exceptionally strong revenue performance in the third quarter, which declined five 5% year over Tim.
This result was better than our most recent revenue guidance from early September largely stemming from high fare options initiative, which continues to outperform our expectations.
We also benefited from a renewed uptick in demand beginning in mid September.
July and August performance was solid with load factors in the mid eighties, and overall yields largely back to pre pandemic levels, which is simply outstanding considering the vast majority of our customers This summer where leisure and VFR.
September took the brunt of the booking softness associated with rising case counts tied to the Delta variant and the expected post labor day corporate demand recovery that was pushed out to the right.
That said trends did stabilize during the month and are improving we expect robust revenue acceleration throughout the quarter as the holidays approach and demand continues to meaningfully improve.
For the fourth quarter, we are planning for revenue to decline between eight and 13% year over too.
We expect profit to be challenging exacerbated by a slower business travel recovery.
The holidays are performing meaningfully better and we took tactical capacity actions to better align with the demand environment.
Our strong revenue performance is driven by our continued execution on a number of unique initiatives.
Our northeast aligns with American Airlines is unleashing tremendous benefits for our customers.
This alliance.
<unk> is about growth jetblue is growth that would not otherwise be possible.
We are bringing more low fares are greatly enhanced network and schedule and more seats to the northeast.
Together with American we have already launched 58, new routes out of the northeast and added frequencies and more than a 130 routes.
And we will expand through next year, including to 18, new international destinations.
Starting next week, we will begin our long awaited expansion at Laguardia with new flights to Jacksonville Savannah in Sarasota with plans to serve new destinations in 2022, including Nashville, New Orleans, and Portland, Maine.
Growth in the northeast has already provoked a competitive response from the entrenched legacy carriers that have long dominated in the region and who stand to benefit the most from the absence of a viable third competitor in the region.
Our refreshed fare options offering continues to outperform our expectations, we're pleased to see customer behavior and buy up activity driving a revenue benefit in excess of the two points that we called out last quarter validating our view that we offer the best product in every category, we serve all at low fares.
Our jetblue travel products subsidiary had its highest revenue quarter on record in Q3 and for the full year is on pace not only to deliver the highest revenue relative to overall flight revenue, but in absolute terms as well.
This is being driven by very strong performance in vacation packages travel travel insurance and car rentals powered by our Paisley platform.
And the team continues to innovate and expand its offering including the recent launch of flights plus crews bundled for Jetblue vacations, and we're gaining additional traction and lodging options for Paisley with the launch of vacation rentals. These.
These recent trends and new product launches keeps me confident that we are firmly on a path to achieve $100 million and run rate EBIT next year.
Lastly, our teams continue to grow and enhance our loyalty program.
From a revenue perspective, we are nearly fully recovered to pre pandemic levels and continue to accelerate growth rates that are having a material impact on program performance for customers. We are on the front end of a multi year effort to expand benefits and add value to our true blue point currency. Thus.
Thus far we've introduced loyalty benefits that give both jetblue and American customers the opportunity to earn on both airlines as well as our first phase of reciprocal elite benefits.
This creates a new option for Americans 20 million plus advantage members, many of which might not have otherwise considered jetblue.
Over the coming months, we plan to roll out personalized offering and experiences for true blue members as well as enhancements for our mosaic customers. Ultimately we are in the process of transforming our true blue platform I could not be more excited about the future in this space.
Turning to capacity on slide 10.
In the third quarter, our flown capacity declined 1% year over too.
For the fourth quarter of 2021, our planning assumption is for capacity to decline between 4% and 7% year over too given the seasonal pullback in leisure demand and a corporate travel recovery that has been pushed back.
Corporate travel, which historically accounted for approximately 20% of our revenue is currently trending closer to 5% to 10%.
While the recovery has been delayed it is improving significantly each week and we remain optimistic for this segment to recover even more robustly this winter.
We are hitting new highs in the corporate travel recovery, which has recovered approximately a third of 2019 levels.
Over the coming years, we expect the NEA will allow us to capture a greater share of corporate travel in the northeast.
As always we will remain nimble and adjusting to future demand volatility tied to the course of the pandemic.
VFR and leisure demand continues to underpin our strong performance. Our network is designed to carry leisure customers to and from high value geography to that end. We are pleased that authorities have sensibly relax travel restrictions between the U S and the UK.
In the week following the administration of the announcement regarding the reopening of the travel corridor, we saw a step change increase by more than fivefold for bookings in the UK point of sale for November travel and beyond.
As we move through the recovery, we will continue to be nimble and deploying capacity to areas of demand strength. Our network is one of our greatest assets and we will continue to build relevance across our focused cities to serve our customers and achieve long term success. We are thrilled to have meaningfully upside from the NEA ahead of us.
I'll close by expressing my utmost gratitude to our crew members their professionalism and dedication enabled us to navigate all of the challenges we have faced as a team.
We are as excited as ever for our future as we rebuild our margins and restore earnings in 2022 and beyond with that over to you Ursula.
Thank you Joanna I'd also like to thank our incredible crew members for their commitment and hard work in building a solid foundation to ensure jetblue emerges from the crisis as a stronger airline our teams continue to lay the groundwork for our 2022 planning process to ultimately return to la.
Long term financial success and create value for our owners.
I'll start on slide 12, with a brief overview of our financial results for the quarter.
Revenue was $2 billion down five 5% year over too.
Cost per available seat mile was down two 1% year over too.
CASM ex fuel was up 12, 7% year over to you.
Adjusted EBITDA was $140 million and.
And GAAP earnings per share was <unk> 40.
And adjusted loss per share was <unk> 12 cents.
We also recorded a $54 million gain from our investments through Jetblue Tech ventures.
Going forward, we expect to record mark to market gains and losses from our equity investments and other income but will exclude these adjustments in our non-GAAP results.
We were very pleased to achieve pre tax profitability in both July and August as expected and both our third quarter revenue and adjusted EBITDA came in above the high end of the ranges we expected in early September.
This was largely driven by stronger than expected performance of fare options and a mid September pickup in booking which drove the best revenue result in the third quarter of those that have reported.
For the fourth quarter.
We estimate our EBITDA will range between negative $50 million to positive $50 million.
This sequential decrease is due to the seasonal leisure demand pattern and pressure from the recent material spike in fuel prices.
Turning to slide 13.
Our teams worked exceptionally well to manage the complexity is due to the swift operational ramp up for the peak summer travel period.
As we look ahead, we believe we are charting a course for sustained profitability and superior margins through a laser focus on cost control.
We will maintain a nimble and flexible approach in managing capacity as we have done throughout the pandemic.
During the third quarter.
CASM ex fuel increased approximately 12, 7% year over to within the range of our prior assumptions to ensure appropriate staffing levels for our summer operation.
This excludes a payroll benefit of $186 million from PSP, two and three which we exhausted in August and reflects approximately six points of temporary headwinds. We previously identified in last quarter's call that we expect to persist through year.
And.
For the fourth quarter.
Our planning assumption and for CASM ex fuel to increase between 14% to 16% Euro Virtu, which again includes short term pressure from temporary headwinds tied to the recovery.
This sequential increase is largely a function of lower capacity for the leisure demand trough period, partially offset by underlying improvement in our unit cost trajectory.
We expect to achieve meaningful productivity efficiencies in 2022, as we continue to ramp and welcome new crew members into the operation.
Moving to slide 14.
Our teams continue to work diligently to improve our cost structure and mitigate the near term pressures we are facing as we restore the business and invest in our long term earnings power.
We continue to expect CASM ex fuel to improve from a double digit growth rate in the second half of 2021 to low single digit growth in 2022 versus 2019 levels.
We are in the thick of our annual planning cycle and today I'd like to share an early view of our cost trajectory next year.
We expect 2022 to be a story of two halves.
Assuming a stronger performance in the second half as the recovery ramp.
We expect CASM ex to remain elevated through the first half of next year due to lower capacity assumptions before inflicting in the latter half of the year.
As the recovery accelerates, we expect elevated rents and landing fees to normalize.
And to start seeing benefits from our inner wide price push for productivity to mitigate inflationary pressures.
In addition, we plan to continue investing in our margin accretive NEA is business travel recovers and catching up on a significant amount of maintenance work, we deferred throughout the pandemic.
Following the completion of our planning process, we will share more about our initiatives that will help us achieve our costco.
We are fully committed to keeping our costs low and generating superior margins for the long term.
Moving to slide 15.
In the third quarter, we took delivery of three <unk> to 'twenty and one <unk> hundred 21 LR.
The fleet stood at 280 aircraft at the end of September and we expect to take delivery of two additional aircrafts during the fourth quarter.
Our full year 2021 capex forecast remains unchanged at approximately $1 billion. The majority of which is aircraft capex, which we intend to pay for with cash.
Turning to the balance sheet and liquidity on slide 16.
At the end of September we maintained a strong liquidity position with unrestricted cash and short term investments of $3 $3 billion.
Or 41% of 2019 revenue.
We expect to maintain a minimum liquidity balance of around $2 $5 billion in the medium term inclusive of our revolver and we believe we have the ability to raise cash at attractive rates if necessary.
Our commitment to Delever, our balance sheet, lower our debt service obligations and grow our unencumbered asset base remains a key pillar in our recovery.
Starting in the third quarter.
We continue to take action to repair our balance sheet by paying down the $115 million of cares Act loan and an incremental $105 million of bank debt.
Year to date, we have repaid a total of approximately $1 $5 billion of debt and as a result, we have reduced our annual interest expense by approximately $33 million in 2021.
Our net.
And weighted average cost of debt remains below pre pandemic levels.
While our debt to cap ratio stood at 53% at the end of September.
A slight decrease from the prior quarter.
In addition, our unencumbered asset base grew by approximately $500 million during the third quarter.
We continue to make extremely good progress in returning our balance sheet to investment grade credit metrics.
Looking ahead, we plan to maintain a balanced approach to capital allocation to help achieve our financial targets.
Enabled by our relatively strong balance sheet, which we believe ranks among the best in the industry.
I'll close with another thank you to our inspiring crew members for helping to navigate the most challenging period in our history.
They are playing a critical role in positioning jetblue to exit the crisis on our path towards creating value for all of our stakeholders.
With that we will now take your questions over to you Francie.
Thank you and bright this affects US a reminder to ask a question you will need to press star one on your telephone keypad again, that's star then the number one on your telephone keypad. So we'd draw your question press the pound key.
Your first question comes from the line of Savi <unk> from Raymond James Your line is now open.
Hey, good morning, everyone.
If I may or shall I I think if you look at the second half 2022.
And it costs kind of view that it should be kind of below second half 19, I believe pre COVID-19.
Our structural cost program you were looking to be about maybe one to two points lower than 2019. So on top of that now you have several headwinds, including two to four points of you know from any of you have elevated maintenance and inflation kind of which nets you out to kind of a low single digit pressure in the kind of the best case scenario, so so to get to that kind of be.
2019 level in second half 2022, how much of it is coming from maybe capacity growth versus 2019, and how much of it is maybe more structural cost initiatives that you havent identified or perhaps hadn't executed when you. When you kind of came up with that 2020 guide back in January of 2020.
Good morning, Savi. Thank you so much for the question I want to reiterate we're laser focused on costs and we acknowledge that costs are the key to our success in delivering superior margins.
Our singular focus on mitigating the sustained headwinds, which we highlighted which were cycling through the volume of maintenance events as well as to your point the investments in the NDA.
The way in which we're going to mitigate those as through operating leverage productivity gain optimizing our business partner spend.
Ensuring that our fixed costs achieved in 2020 carry through to 2022.
And as we bring capacity back we will continue to see structural cost benefits that we achieved prior to COVID-19.
So as I look at next year I'm extremely confident that we have a path to achieve the low single digit digit CASM X fuel guidance that we provided.
Got it got it.
Helpful and if I might.
Quick follow up to Joanne you had mentioned kind of buy up a you know in excess of two points to the year over two year revenue and in <unk>. I was wondering if you could provide some color on that kind of the magnitude of you know from the contributions from the other revenue initiatives and and maybe that kind of the progress you expect over the next year or two.
Yeah sure. Thanks Savi for the question you know I'll start walk through each one of them and then Gabe Clark feel free to add additional color if I've missed anything so the way. We're looking about this these are unique jetblue revenue initiatives. There's four of them that sit on top of I think what we view is 2022 being a pretty strong recovery year, both leisure and then taking advantage of the return of the business customer.
Fare options two dot one recall, we launched the latest iteration of this less than a year ago.
Fare options has absolutely delivered on what we expected.
It's our goal is to deliver the best product at a low fare in every category.
How you know how we compete in a segmented marketplace with clearly defined products and price points. So we're just incredibly pleased with the overall performance we had originally.
Anticipated about a one point RASM benefit and we adjusted that in the last earnings call to closer to two and now we're exceeding too so.
So I think just great performance by the team and I think the other piece worth mentioning as we have continued ability to optimize as we learn more and follow customer behavior throughout the year and how they engage with fare options both in the peaks and in the off peak time frame. The two things that are driving the improved performance greater upsell.
And frankly more customers are checking more bags. So so that's what you're seeing on the fare options side of the house in terms of loyalty the second of the four initiatives.
No change from last quarter that the point of RASM. It is purely economics associated with the co brand deal. So as you think about loyalty you to think of the incremental benefit on top of that coming from growth of the program.
Organic growth growth from the NDA and the partnership we have with American Airlines.
And then we have I think a unique opportunity to really focus on serving some of these underserved segments that don't have access to credit and some of the same ways that others may know him as we focus on our D. Eni strategy and then as we mentioned evolving the overall program from 2022 into 'twenty three J.
<unk> the third of the four we see that delivering about $100 million of EBIT next year, we're making great progress Andres Barry and his team the crews plus flights as we mentioned in Paisley I mean should we think about Paisley as offering additional travel benefits to customers, who have booked trips on jetblue, whether that's cars hotels skirt.
And we see a tremendous opportunity there and then finally last but certainly not least is the NDA we are.
We're very confident that this will be margin accretive as we move into 2022 on particularly with the recovery of business travel that said there is a large leisure play here as well, which we're excited about and you know we've continued to tout the benefits of this I mean, I think you see it across the industry with some of the announcements where other carriers around.
Around the competitive landscape, we are going to bring a viable third competitor to this region more seats more routes lower fares better service.
This unlocks unlocks tremendous growth opportunities for Jetblue.
In our geography that we would not have otherwise had you know with that will come greater relevance.
Whether it's through Codeshare loyalty or joint corporate sales. So those are the four initiatives. We're really excited about the momentum we have behind those you factor that in with the improving demand environment and 2022 should shape up to be a good year on the revenue side for us.
Whereas a J T V today sorry.
We havent indicated where it is today, it's on it's on a journey, but we're very confident it will hit $100 million EBIT through the end of 'twenty two.
Got it alright, thank you.
Your next question comes from the line of Catherine O'brien from Goldman Sachs. Your line is now open.
Hey, good morning, everyone.
So one on the Trans Atlantic I know you you called out the recent strength that seems in line with what your competitors have also been seeing but we've also had one of your competitors call out that they expect the domestic network to be more challenged due to industry capacity growth in international over the next couple of years I guess first do you agree and if.
You do would you consider speeding up your transatlantic expansion are you able to with your current slot foil. Thanks.
Sure.
I'll start with Trans Atlantic first and sort of what we're seeing there to give you a little bit more insight. So frankly, we timed the launch.
Like to take credit for it, but we timed it incredibly well with the the change and the 212 best travel restrictions so that could not have happened at a better time, that's ramping up very nicely load factors around 60%, but that jumps after November eight.
If you've read any of the reviews and absolutely fantastic product a fantastic service. We are doing what we do best bringing a better product at a low fare in a historically overpriced market.
And really excited about what we are doing there in terms of future growth opportunities. There. We are focused on London, and New York and Boston next summer and that's where our priorities are in terms of Trans Atlantic as you think about the domestic landscape. We are quite bullish on the domestic landscape. You know we have a set of unique revenue initiatives we are others.
We're talking about pivoting to leisure we are a leisure carrier that is what we do we do it well that is what we are born to do.
Leisure continues to fuel this recovery if it remains strong both on the VFR side and the strictly leisure side. You know that said, we're also well positioned for business recovery as you look at.
Not just what we organically due largely out of Boston, but what the NEA is gonna be delivering for us as.
As well the peaks are strong holidays are looking good. So we're excited about what that what next year brings and and we think the trans Atlantic as frankly gravy on top of what we're already doing.
Okay, Great and maybe just sticking with revenue I know in the past investment at our share of the corporate revenue represents about 20% 30% of total.
I guess.
Two parts one any early thoughts on where that could go with the NDA as you break into some new accounts in the northeast and then you know I'm guessing that vary seasonally any thoughts on you know, perhaps the greater drag that that might represent in <unk> versus <unk>.
<unk> and <unk> and I'm guessing, it's a lower percentage of total revenue. Thanks for.
For the time, so our corporate travel.
Typically represents over the course of the year about 20% of our overall revenue in the fall it moves up to 25%. If you look at other airlines and think about the NAA opportunity there around 30% so anywhere between that 20% to 30% range of sort of how we're thinking about the revenue opportunity from corporate for for the NEA, We're very.
Excited about the partnership and not only does this give us access to you know Americans account.
Accounts, but we'll be able to do joint corporate sales. So we're very pleased about the opportunity on the on the business travel in the corporate side, but again I also want to emphasize there's tremendous leisure opportunities, while we've announced a whole set of routes.
Into the sort of mid Atlantic South got Denver. So now the NDA is is definitely corporate.
Corporate piece of it but there's also a tremendous leisure piece and it's frankly, making jetblue a 5% player a far more relevant competitor in this region with a much bigger network much better opportunities for customers.
Loyalty so all good all good things there.
Great. Thanks, so much for the color.
Your next question comes from the line of the <unk> from Evercore ISI. Your line is now open.
Hey, thanks.
Just on the <unk> hundred 90, <unk> can you, let us know like how.
How restored they are now what percent what percent of the ultimate recovery.
<unk> hundred 90 days, we're seeing maybe in the fourth quarter.
And first quarter.
And I don't know if you have any high level thoughts on kind of margin profile by fleet type.
I want to take that.
Take that thanks for the question. This is Scott I a couple of things. The first is the the nineties.
Our flying and we'll be fine.
The fleet comes out entirely a out of the out of storage as of November 19th.
In terms of the EUR 90.
Its profile versus the rest of the fleet pre Covid I mean, obviously, we had some maintenance headwinds on that airplane.
And it's a.
Again, I think serving a very good purpose as we focus on the shorter haul flying, particularly in Boston and as we ramp up the the NEA.
So again I think.
While that we.
We have that that fleet.
Here a bit longer.
Because of the NAA opportunity again.
We.
I think we're in a position to see that airplane producing given the profile of the missions that we can we can find it on.
Yes, the only thing I'd build on that Duane It's Robin. Good morning. This is Scott, but I think we've really learned without airplane over the years, the type of Michigan, where it come.
Performed well and I think as we pivot back to our EMEA schedule as we pivot back to higher frequency shorter stages.
Certainly what we've been flying it during Covid, where we were really flying it for sort of.
Cash generation purposes, I think.
We feel really good about the ability for the one nine Peach also drive and contribute.
Margin.
Thanks, and then maybe just to stay on that fleet type everything you've said about the <unk> NDA being certainly more relevant here in New York that that makes a lot of sense.
If it doesn't go the way you anticipate.
And you've been very transparent about the cost headwinds related to this fleet type into next year.
This does not go the way you anticipate do those costs just go away and do these 190 to go back into storage and Thats just a cleanup question I. Appreciate your thoughts thank you joining.
I appreciate the question I mean, obviously, you're going to expect me to start the answer by saying that we are very confident that it will be extremely successful I mean, when I look at Jetblue pan out over the years.
One of the things that limit limited off just the.
The lack of the ability to grow New York, New York has always been.
Market, where we've made we've made.
Pretty good margins and others have struggled so there's no reason not to believe.
I mean, I won't be successful and I think most any most industry observers see that too.
To.
Everything that we said around sort of allowing jetblue to build more relevant some of the things that <unk> talked about giving people a reason to get the credit card to engage more heavily in the true Blue program, all those things flow from having a bigger more relevant network. However, I don't want to Dodge Your question, So what if what if.
Wrong about order that will the cost simply come out I mean, if you look at the CASM guide that we say it really relates to keep them on one line to beyond the original plan to set them down which was really a one for one with the $2. One two came in and it reflects the fact that we have more flying in higher cost airports.
Of course, if they.
It doesn't happen.
The slots that will be flying the additional stock that will be flying.
Would no longer be flying and you would see a you know you'll see the.
Apple cost reduce as we would have less exposure to some of those high profile. So the purposes of the award timing.
Please I'll say it again, we're very confident that EMEA will be incredibly successful and do everything we believe it will but if we were wrong about that or if for some reason the Doj was successful, which I don't believe there will be but if they were then.
It would be relatively straightforward to back those costs, though.
Okay very clear thank you.
Your next question comes from the line of Ben <unk> from Seaport Global Your line is now open.
Oh, Hey, thanks, good morning, guys.
Just a couple of questions here I guess going back to the script you know a few things that you guys shared restoring earnings power beyond 2019, and superior margins for the long term. So if I go back to 2019, Jetblue was pretty clear that the debt.
There was a transition year on the <unk>.
Wait for a better 2020, so I guess, what I'm wondering is you know you guys, saying that you think you really have a business plan here for better margins versus 2019 steady state.
Restaurants are I'm sure good morning, Dan.
So Dan as you referenced and I would remind us all that we were on a path to deliver.
What CASM X fuel pre COVID-19, so we exceeded cost expectations in 2019, we significantly closed the gap versus our peers and we were on track to deliver record cost performance in 2020.
Costs are a vital pillar of our business model and when you couple our commitment to deliver flattish unit cost trajectory to drive superior margins over the long term with the unique revenue opportunities that are currently outperforming and that flat CASM ex fuel commitment.
And it's a meaningful and powerful formula to restore earnings power and expand our margins over the long term.
Okay got it and then going back to an earlier question, 20% to 30% of the revenue coming from corporate travel versus 20% historically, if I heard that correctly is that an outlook for 2022.
And I guess it is.
Is it I'm just wondering.
About the resistance to reinstating you know kind of the margins that you've reported historically I'm just wondering if it's tied to the lack of visibility the visibility around the timing of when corporate travel returns no no. So let me be clear. So 2019 on average our corporate contribution was about 20% of revenue in the fall of 25%.
Because obviously more corporate supply in the fall as we look at the industry and the potential opportunity with the NDA because that will obviously drive more corporate on the Jetblue and the industry is on average about 30% corporate travel. So we're at 20 the industries up 30 somewhere between there lies the opportunity for jetblue with the with the NDA.
Okay. Thanks for the time you guys.
Your next question comes from the line of cutting.
Hum from M. D M partners. Your line is now open.
Hi, everyone.
So you're calling out six six points of transitory cost pressures.
It gives you the confidence that in this inflationary environment, we want to see stickier stickier labor costs or maybe a better way to ask it is how many people are you planning on hiring in 2022 are from now till the end of 2022 and just like what how is the wage rates changed absolutely.
Yeah. Good morning, Connor. Thank you for the question so to your point.
Have highlighted both short term and longer term headwinds in regards to labor.
On the short term labor challenges, we believe that those are going to get mitigated as we ramp up hiring and essentially the network sets into a new norm will be able to longer term drive productivity efficiencies, which we believe will offset the longer term inflationary pressure.
<unk> that we're seeing so we entered you know obviously the recovery occurred much quicker than we had originally anticipated throughout the summer.
So there was a need to ensure that we paid appropriately to cover the operation mm. We're hiring in preparation for next year and as I mentioned, you know once the networks normalizes, we will be able to drive those productivity efficiencies over the long term.
Okay. Okay, and then maybe to just piggyback on <unk> crusher unless he wasn't 90. So I'm just curious on how much of your 2022 capacity plan is tied to the NDA.
And if.
Obviously, if that's block does that basically just go away with you in 90 days I'm, just trying to get a sense for the moving parts both on the cost side and the capacity side of the question.
Uh huh.
Yes. So this is John I'll try to grab that I mean, if you look at the NAA.
That represented about two thirds of our.
Capacity, just sort of going into this race for airports that are involved.
What I would highlight is the E. One nineties are not big ASM contributors right. They don't generate a lot of capacity because they tend to fly shorter stages.
And obviously, they've only got 100 seats. So the stage on that airplane as we move forward into 2022 is going to continue to be somewhat limited just based upon the high frequency flying as we restore some of the.
Frequencies, Boston, Laguardia or things like that that we haven't been able to traditionally access.
So yes.
Again, I think if you look at that end and I guess the concept of what we touched on earlier.
The ASM generation associated there is it probably is not.
It's not going to be significant.
If I can just add to that though I do think from a capacity plenty that's very true I think.
If you think about what we were flying in New York per day, pre NDA and what would be flying in New York Post MDI and then you take into account some additional growth in Boston because nai.
You're talking probably in excess of 100 departures a day.
Additionally, because of the <unk>.
And so while they are short stages. It has a very disruptive effect on low fares. Because these are some of the market penetration they suffered from the high fives and so whilst from a capacity point of view.
It's not that significant but as you may remember pre COVID-19 in 2019, I think the one nine days were about 4% to 5% of our total capacity in terms of I assume.
You'll see the impact it has as significant just because of the number of additional flights a day allows us to offer a out of New York.
Great I appreciate the color.
Your next question comes from the line of Helen Becker of Cowen. Your line is now open.
Thanks, very much operator, hi, everybody. Thank you for the time shoot shoot one of the areas that you are really strong and is the Caribbean. So we had some issues in Haiti I don't know what's going on in Puerto Rico wondering if you can just give us an update on how you're thinking about that market into fourth.
Quarter end first corner.
Given how.
Yeah.
Earlier this year.
Helane. Thanks for the question I will give sort of a top line and I'll, let Dave take a little deeper on Haiti, specifically, obviously tough situation I know they've had a rough year with a variety of things happening VFR has performed very well throughout the quarter. We've got good loads and Ah you know higher fares, despite there being some pressure on industry capacity.
Pleased with its performance into the holiday period. So overall, you know VFR holding up well, David if you want to give a little color specifically on Haiti sure and just overall the region Caribbean and Latin America was our strongest performing revenue region in Q3, it had the highest year over to revenue growth. So if you look at it as a portfolio performing quite.
Well as Joanna mentioned, the VFR demand was quite strong, but we also saw a lot of leisure traffic to us as customers look for outdoor activities and doctor vacations. The Caribbean is despite very nicely. So we are all doing well, yes, some challenging spots J.
<unk> being one of them, we continue to work through it but the region as a whole spend a strong point for our network.
That's really helpful. Thanks, and then my other question and I don't mean to.
Oh, I apologize I'm not going to be a jerk about but as you think about adding capacity out of Laguardia and New York, specifically JFK as well you know you've got this area. As you guys know is it's just fraught with ATC delays weather like today or how do you see.
<unk> about getting around the delays that all this excess or extra maybe not excess capacity will cause in the area.
To keep the operation from like.
Falling apart getting to Wade and like I said, I don't mean to be a joke about it but.
No no no were ethylene or rest assured we talk about it a lot here as well.
Listen the New York area is a very high value geography, there's a lot of people that live here.
Who want to fly out of here and there's a lot of people don't want to visit here and in the absence of any meaningful reform with nexgen.
It's in aerospace that we I think have done an exceptionally good job navigating through we've got a great team. That's focused on how do you operate in the North East frankly, other carriers have tried and haven't gone up particularly well.
And you know we have a unique operating model.
Specific to how we set up New York too I think protect the operation as best we can we have a greater number of out and back flights between from it from the northeast to other locations to try to ensure that there's a level of stability across the system and we do have disruptive days I think I will point out that the incremental growth that we have is actually a net neutral.
We'll to the region because its slot constrained in Laguardia and JFK, so you're not seeing incremental flights necessarily as much as youre, saying jetblue does incremental flights, but the industry as a whole it it'll be the same number out of the region, but.
Our team does a really great job and we're really trying circumstances.
And I think you know you see customers still flying jetblue because they recognize that this is a complex market and.
We do it we do it well we focus on completing flights and getting customers to where they want to go heavy leisure that's what we know they want to do and that's what we prioritize.
That's that's hugely helpful. Thank you very much thanks, everybody for me today.
Right.
Your next question comes from the line of Jamie Baker of Jpmorgan. Your line is now open.
Hey.
Good morning, everybody.
Okay.
Robin a question on London, and I guess, Europe, and more broadly how do you intend to build a brand there.
I know what worked well here in the U S, but different times different market.
Well Jamie.
I will do that because I know you have.
I'd be pegged to the London Guy I guess, that's very fast.
Hello.
What gave it away, yes, exactly no look I mean, we have a whole time to do that we have we wanted to wait until we got the UK was.
Open.
We got some very creative ways of doing it.
I think stay close to.
Close to our low cost routes and whilst.
Sure the point of South split between the U K and U S. I will tell you I'm already extremely pleased as to how much of our business is coming out of the UK point of sale, where we really haven't done too much to.
Promoted and is significantly ahead of what we had even expected to be the case sort of steady state. So I think clearly what is understood over there through a significant amount of media that we've had is that we.
We're doing it differently and we're offering a much more accessible premium service, which is a very good premium service.
Hmm.
Kotwal coach we call it cool Colfax at all sort of restoring some of the glory days of transatlantic flying with a decent food and of course free Wi Fi and.
<unk> TV, including the BBC.
Okay. That's helpful. Thanks, Robin and then second in the next three or four or five years. What do you think is the biggest structural risk either to jetblue or the industry and I'm looking for kind of big picture themes. This isn't a modeling question. So you know.
ESG the next industry labor cycle overcapacity pandemic risk.
Those sorts of themes.
To the extend it all goes wrong.
What do you think would would ultimately drive that.
I think of the Big picture and I think this is why we have been doing so much in the area of.
Sustainability I truly believe going into COVID-19.
We're having a lot of discussions with both <unk>, which is as you know the U K Trade Association IATA and you started to talk to some of the European Airlines around how it was done the things that.
Influence, how that thinking about planning and positioning.
Think.
I've been really pleasantly I really being really really happy how well the U S. Airline industry has responded to this challenge in a relatively short space of time, you know, we do not what we want.
People, who fly on us to know that we care about the environment and that we are doing everything we can to reduce our carbon footprint because if we don't.
Other sectors do the percentage of carbon emissions that come from aviation will climb from the two or 3%. It is today.
We're going to have an even bigger target on our back. So I think that's the macro list. That's the biggest macro risks that I would.
I would point to it okay very helpful. Thank you Robin and team take care. Thank you.
Your next question comes from the line of Andrew The Doral Bank of America. Your line is now open.
Hi, good morning, everyone.
First of all can we go back to costs for a minute because.
The model I'm, just having a hard time finding because.
Cost line.
A lot of leverage to drive CASM down in the back half of next year or so maybe first question can you give us any kind of rough estimates on what kind of capacity youre assuming in the back half of 'twenty two to get to that level and then two in the pandemic I've been looking at costs more on an absolute basis as opposed.
ASM basis, and when I look at your cost structure.
Next year do you think there'll be any line items that will be lower in 2022 than they were in 2019.
Good morning, Andrew.
A question so in regards to the capacity level that we're expecting next year. So we do envision full year 2022 to be up versus 2019, and we expect that capacity to ramp up progressively as we navigate through the year, depending on the shape of the Recut.
So as we acknowledge we live in a fluid environment and so we'll put a stake in the ground in terms of our capacity level.
To basically drive margins and profitability.
I think in overarching comment is that we're still not in the new norm. So the operation is still very fluid and it hasn't yet settled down.
But what I can point you to is we're starting to see some efficiencies come through because we are.
Getting to a more <unk>.
Level setting normalization so meaning.
We had if you look at Q3 to Q4 of this year, it's a two point sequential CASM increase.
And capacity is decreasing five.
So capacity as it's coming back we are getting to a more normal level with less volatility and so we're starting to see cost efficiencies come to fruition that had previously been math throughout COVID-19.
So as I look into next year, you know the levers to be pulled our first and foremost as the network.
Normalizes and its hiring is optimized and we have to drive productivity like that is essential for us to gain meaningful cost efficiencies as we navigate through the year I think stuck in I'll reiterate we need to ensure the fixed cost that we took out of 2020 our.
<unk> as we navigate through 2022.
And we're going through the 2022 planning process right now and I can tell you no stone is going unturned.
So I feel extremely confident that we've got levers to pull in order to achieve the low single digit CASM ex fuel commitment next year.
Okay, and then one one short follow up for me in terms of the London Flying can you kind of can you quantify what the CASM tailwind is going to be from that next year.
Yeah. This is Joanne I'll take that it's de Minimis I mean, just to give you a sense of the ASM. London's currently contributing its less than half a percent so de minimis.
Okay. Thank you.
Your next question comes from the line of Ravi Shankar of Morgan Stanley. Your line is now open.
Thanks.
Everyone. How is it just a couple of follow ups.
Thank you.
You said on the call that holiday travel is looking really strong, but I'm not sure. If you quantified. It apologies. If you did if you could just give us a sense of what holiday travel is tracking like versus 2019.
And second.
Not to beat.
Beat the horse on the whole our margin versus cost story here, but I just wanted to clarify Robyn you said at the top of the call that you are laser focused on margin first of all.
You said that you're highly focused on cost and theres been a lot of talk on the revenue opportunity with NEA international as well so the risk of being an all of the above.
What is the priority here or are you focused on EBIT dollar growth are you focused on margin improvement are you focused on cost control.
What's the like if you're going to kind of rank order that that'd be great sure I mean, I'll take that and then maybe I'll maybe answer the second part of your question and.
Maybe one of the thing can take that sort of comment about how that margin is on the old store I think the reason we spend so much time talking about cost is that.
We knew them ahead of Covid.
We have to do a lot of work to drive more efficiency in our cost structure. So we had the structural cost program that.
And then ended up delivering more than the $250 million to $300 million goal. We set as we went through Covid. We also took some further opportunities to reduce our fixed cost structure as well.
And so and as we come out of Covid, we need to be laser focused on maintaining that focus on costs and there were a lot of challenges that go with operating in the northeast and.
And so we have to be very laser focused on that so that we can maintain our commitment to our cost.
Cost structure, because ultimately that's what allows us to offer low fares now the reason I think margin is.
I think the proof point that margin as our North Star is a decision that we took to enter into the NDA with American It does drive some additional costs, which we outlined in the last earnings call. Because we are keeping the one mine to our la.
Long ago, and our mix is changing to a more flying into a higher cost of airports, but we did that.
Margin, so I don't want I want everyone to be under no illusion margin as our north star, but we ain't going to take our eye off the cost structure are either.
And Ravi this is Dave just following up on the question about the holidays. The holidays continue to book well as we've seen in the third quarter July and August those peak travel periods performed very well right now the holidays were about even with where we were at this point in 2019, they were behind for quite a while because of the delta variance.
So we were falling behind in August and early September we have now been catching up over a month and about even in December, especially is performing well the last several weeks, we've actually taken more revenue bookings this year than we did at the same time in 2019 over those bookings.
Very helpful. Thank you.
Some friends, who will take a couple more questions.
Thank you. Your next question comes from the line of Crystal for your line is now open.
Good morning, everyone. Thanks for taking my question so going back to this this focus here on productivity could you help us frame.
How you're thinking about and what are some of the metrics that we should look at here is is it is it ASM per per FTE and I guess as a part b to that do you believe that you can.
When fully recovered meaning on a 2019 ASM based can you run the airline as fewer ftes relative to 2019.
Is this is a total passengers per FTE and then also on fuel.
As we look out to 2022 and 2023, assuming we're fully recovered there.
Should we expect that line to to improve as well versus 2019. Thank you Hi. This is Joanne I'll take the first part just to give you a sense of how we look at it. So it's a combination of departures and customers per FTE. Obviously, each work group has a specific set of metrics or tech ops is a little bit different it's less about departures and customers but.
But rest assured we are looking I'm looking at it at every level and are very laser focused on it I'll point out a couple of things number one we will see genuity benefit with hiring that.
That we wouldn't have had post pre COVID-19 as we bring more more crew members on so that's a tremendous benefit.
Two in it and a nurse will mentioned it but I cannot emphasize enough the volatility of the schedule has created a level of inefficiency into the operation that will go away into next year as things stabilize so when you think about pulling capacity close in you know you pay for a certain amount of crew cost when you do that when you think about pivoting the net.
Work to introduce new flying it means that the markets, where you have staffing that maybe excess staffing that you otherwise would've used in a normal time and so as the network stabilizes as we continue to hire more crew members to make up for where crew members have left at a lower January at a lowest annuity number that will drive meaningful.
Benefit across across the operations. So I think that's the most important thing to remember and that we will get much better as we cycle through and step into 2022 right. Now we are in ramp up mode. You know, where we're hiring a lot, but theres also a training throughput issues. So we can't bring everybody on overnight, we have to meter them in so you'll see a level of inefficiency into Q4.
And into Q1, as we continue to ramp up and get to the right staffing complement moving forward, maybe Ernst do you want to take the second part of the question.
Yeah, I would just reiterate what Joanna said, so as we navigate through the 2022 planning process, we envision the network normalizing them. We go work group by work group in terms of the metrics that we track them I would also highlight that will also focus on where it can be better leveraged.
Technology, and where can we fundamentally improve processes and this is not only in Joanna as frontline work groups, but also corporate support centers as well. So that's why we feel very confident that there's a path to deliver meaningful value here and as we look at achieving that low single digit CASM ex fuel number next year.
Okay, and if I could just a second question here on the 20% to 30% opportunity on the business side, but just curious what type of mix is that contemplating in terms of industries is that similar to 2019 or perhaps should we.
Consider a different mix and by extension.
Different level of value. Thank you.
Sure. Thanks, Christopher for the question. This is Dave the mix would be largely the same we already have about three quarters of our business and corporate exposure in New York and Boston. So growing this area won't change the mix significantly for us.
Thank you.
Your next question comes from the line of Brandon <unk> of Barclays. Your line is now open.
Hey, good morning, and thanks for taking my question here. So I just want to circle back to the NDA Robin or Joanna.
Can you guys talk to the anticipated benefits of this partnership and how important is that revenue sharing portion of it because I think that might be where some of the Chris.
Criticism is coming out of this and then you did talk about a couple of points from the NDA, but that's being accretive to the Alex I'm, assuming that's more of the short haul mortgage fine, but it was a little clarification there too. Thank you.
Sure Brian.
I'll keep it saw high level, just because of time and then we can we can follow up but you know.
I think of our NDA I mean again.
This is a thoughtfully, enabling jetblue to increase our presence in Europe by nearly 50% that is extremely significant.
Network relevant point of view that is very important in terms of being more attractive to corporate flying.
I can't tell you when we look at our data how much of a high share of wallet of we have of peoples measure income and a lower share of wallet in the ER.
Business on the business side, and so the ability to fly more places the ability for Americans Hy.
High value customers to fly on Jetblue, the ability to offer more.
Voice for our own true Blue members, especially out of my exact members men overlay all the benefits of co.
Coach.
So it is a multi pronged approach and all I would say is that I look back historically Jetblue, New York has always been a stand out performer from a margin perspective, and this is another enabling us to grow that beyond what we could have possibly done without anyway.
Okay.
Great and frankly, we'll take one final question from the analysts.
Thank you. Your next question comes from the line of Hunter Keay of Wolfe Research. Your line is now open.
Oh, Thank you for getting me on I appreciate it's squeezing me in so.
So listen I know, we know that the NDA is going to drive some cost on the east coast, but how are you feeling about the ability to keep costs down on the West Coast, where you just kind of Reoriented the west coast strategy around at Bellway acts.
I asked the question for frontier, just pull out of <unk> because of what Rob was doing with with airport cost. There. So when you think about this margin is the North Star concept are you sure that you're going to be able to have the west coast strategy be accretive to that in the context of all the moving parts.
So Scott I. Appreciate the question I think first and foremost the west coast strategy is anchored around the transcon and if you look at our performance and in particularly in L. A X.
Mint has been the standout for US and continues to be the case that was the case before COVID-19 and through Covid and today.
So again I think the west coast strategy is based upon ensuring that we leverage the having the best products at the best price.
He also comes into that as well.
So again.
The West Coast strategy is one where we can drive margin in a significant.
<unk>.
A portion of the that success will come from Mint flying and expanded mint flying and expanded transcon.
Alright, and then Robin.
Some of the things that Jetblue has historically done well on costs and what are some where some things where you see the most room for improvement.
On costs without answer exclusively on costs I know, it's not huge.
Costs were just kind of like you know overhead and.
Just anything that you think you guys can probably do a better job going forward relative where you've been in prior years.
I think they'll go down.
Yes.
We did it.
Exactly.
Sure.
Hum.
I'll be back in April.
Uh huh.
Uh huh.
Yeah.
Okay.
Sure.
I think that right now.
All nominees.
Yeah.
Great.
Hello.
Okay.
Im sorry Im sorry.
Okay.
The Guy and I wasn't trying to avoid your question on costs, but to recap I would say that between the period of 2017 and 2020.
We went through the structural cost program.
A significant number of our maintenance cost.
Cost issues.
Dubuque called tissues, you will recall that those buckets I mean, historically, if you compare our cost performance.
Other airlines one of the areas, where we have performed.
Performed less well was on maintenance costs and that's why so much of the structural cost program was focused on on that and putting the right agreements in place as we took delivery of new airplanes to smooth over time. So I'm very pleased that with the efforts that the team have made in all of those areas as we went into.
Covid.
So it's a really hard look at our fixed cost structure and sort of commit.
Committed to delivering over $150 million of fixed cost savings and we are well on the way in accomplishing that.
And as we as we come out of Covid I think this long term commitment.
Think about the next five years I don't see any reason why jetblue com continued to deliver flattish CASM on sort of mid single digit increases in capacity and.
That's what will kind of I think provide some quantitative. So this is a new jetblue from a cost perspective, I know a lot of it gets marked at the moment because of what we've done with the network and how are we managing through Covid, but I truly believe coming.
Maintaining our discipline and focus on call plus the additional revenue initiatives.
A unique story in the industry in terms of the one that can drive margin and drive margin next year. You know this is not.
Time to drive margin in three or four years as planned to drive margin into 'twenty, two and that's what we're focused on.
Thank you.
Great. Thanks, Robin and that will conclude our third quarter 2021 conference call. Thanks for joining us this morning and have a great day.
And again that will conclude today's conference. Thank you for your participation.
[music].
Yeah.