Q1 2022 JetBlue Airways Corp Earnings Call

Good morning, My name is Lee your operator today I would like to welcome everyone to the Jetblue Airways first quarter 2022 earnings Conference call. As a reminder, today's call is being recorded.

This time, all participants are in a listen only mode.

I'd like to turn the call over to Jetblue as director of Investor Relations. Joe <unk>. Please go ahead Sir.

Thanks, Mike Good morning, everyone. Thanks for joining us for our first quarter 2022 earnings call. This morning, we issued our earnings release and a presentation that we'll reference during this call all of those documents are available on our website at investor Dot Jetblue Dot com and have been filed with the SEC.

Here to discuss our results are Robin Hayes, our Chief Executive Officer, Joanna Geraghty, our President and Chief operating Officer, and Arcelor Hurley, Our Chief Financial Officer also joining us for Q&A are Dave Clark head of revenue and planning and Andras, Barry President of Jetblue travel products.

This morning's call includes forward looking statements about future events, all such forward looking statements are subject to certain risks and uncertainties and actual results may differ materially.

Please refer to our most recent earnings release and our most recent Form 10-Q or 10-K for a more detailed discussion of the risk factors that could cause the actual results to differ materially from those contained in our forward looking statements.

Including among others, the COVID-19, pandemic fuel availability and pricing the outcome of the lawsuit filed by the Doj related to our northeast Alliance and the outcome of any discussions between Jetblue and spirit Airlines with respect to a possible transaction, including the possibility that the parties will not agreed to pursue a business combination transaction the conditions to the completion of the possible.

And the possibility that jetblue may be unable to achieve synergies and operating efficiencies within the expected timeframe or at all and to successfully integrate spirit's operations with those of Jetblue. The statements made during this call are made only as of the date of the call and we undertake no obligation to update the information investors should not place undue reliance on these forward looking statements.

Also during the course of our call. We may discuss several non-GAAP financial measures for a reconciliation of these non-GAAP measures to GAAP measures. Please refer to the tables at the end of our earnings release, a copy of which is available on our website and now I'd like to turn the call over to Robin Hayes Jetblue CEO .

Thanks, Joe Good morning, everyone I'd like to begin on slide five of our earnings presentation.

I'll start by thanking our more than 23000 crew members for their continued dedication to caring for our customers.

Waving focus on running a safe operation, even as we work through recent challenges.

We realize these difficulties have been impactful to our customers crew members and we know that we haven't lived up to their expectations in recent weeks, but we are taking swift and significant action to get the operation back on track in the near term and deliver the jetblue experience that customers love and expect while not losing sight of our longer term strategic initiatives.

As you will see in our updated guidance. These actions will have a short term impact for margin, but it's the right thing to do to build the competence of our customers crew members and set ourselves up for success as we look to maintain our revenue and cost momentum beyond the summer.

Our fourth quarter results were characterized by very strong demand acceleration with revenue coming in more than six points ahead of our initial view in January .

We delivered positive year over three revenue growth in the month of March as we exited the quarter with tremendous revenue momentum driven by very strong underlying travel demand across all of our core segments.

Unfortunately, a confluence of events resulted in the temporary operational setbacks here in April so it has significantly impacted our second quarter outlook.

As you will recall last month at the Investor Conference, We discussed our plans to moderate our capacity plan for the year.

A rising fuel prices and building more operational resilience.

We continue to experience elevated levels of pilot attrition I'm trading pressures.

This was further compounded by unprecedented levels of weather and ATC disruption in April resulting in a nine people think completion factor nine points lower than our historical average.

To help restore our operational reliability, we are reducing our capacity growth even further as we plan more conservatively for the summer I'm, making investments to Derisk the operation.

These actions will create more resiliency in the operation and set us up for better.

And then even better June and strong summer peak.

While our return to profitability has likely been pushed out by a quarter. We're confident that this reset puts us on the right Paul.

Before we get into the results for the quarter I'd like to make a brief comment regarding our proposal to acquire spirit.

We are very pleased by the determination of the spirit board that I'll offer could reasonably likely to lead to a superior proposal and recognition of the compelling value for all stakeholders, but jetblue was off of it.

We will respect the confidential nature of the process as we engage with spirit under the terms of the merger agreement with frontier I'd have nothing further to add on this topic beyond what we outlined in our conference call a few weeks ago.

Please keep in mind that the outlook and forecast that we discuss on this call have been prepared without taking into account all consideration a possible transaction with spirit.

We remain focused on the operation as we look to capitalize on the very robust demand environment ahead of us while continuing to execute on our strategic initiatives.

We are well positioned to return to profitability in the back half of the year and deliver value for our customers.

Customers crew members and communities over the long term.

Now, let's turn to our quarterly results starting on slide six.

For the first quarter, we reported an adjusted loss per share of <unk>, we experienced a remarkable V shaped recovery following the homochrome wave hitting a new daily sales records along the way.

This demand momentum positions us incredibly well to recapture the recent run up in fuel prices and we're excited for the strong summer travel period ahead of us.

As we strive to provide the high quality of service that our customers have come to expect from US, we're taking proactive measures to invest and improve our operational performance is Joanna will discuss.

We're also maintaining our summer hiring pace, despite the reduced capacity outlook and in partnership with New York Mayor Eric Adams, We hosted over 200 candidates at all hugely successful jhatka hiring event last month as we work together to revitalize our hometowns economy, a vibrant tourism industry.

All of this is reflected in our second quarter and revised full.

Your outlook.

Moving to slide seven despite the column operating on fuel environment, we're seeing underlying momentum about path to transforming jetblue structural profitability.

We are making great progress on many of our longer term initiatives in 2022.

It will be meaningful drivers of our earnings growth in coming years.

Our ability to grow in high value geography is bringing more value to customers and promote competition would not be possible without the northeast Alliance with American Airlines.

We are now operating more flights out of the New York Metro area today than ever before with plans to increase service up to 300 flights per day.

This compares to an average of roughly 200 flights a day pre pandemic.

The process, we are creating 5000 high quality jobs in our hometown of New York to support this growth.

I would note that given what we have experienced here in April our intention is to treat the ramp up to 300 flights per day in New York very conservatively.

To ensure we have more capacity to recover quickly from weather events.

I'm also pleased with the strong execution of our ancillary revenue strategy, which continues to provide customers with additional value and choice, while driving strong unit revenue performance.

Loyalty front the team continues to enhance the value proposition.

Running through Blue program by adding earning and redemption opportunities for our customers.

And last but certainly not least I'm always impressed by our Jetblue travel products team as they double bed revenue growth in Q1 compared to the first quarter of 2019.

The business is scaling very nicely I mean remains on track to hit $100 million and run rate EBIT contribution this year.

Notwithstanding some of the short term investments we have outlined here our business model thrives when we keep costs low which is the other key lever to restoring our profitability.

Volatile fuel environment and the investments we are making in our operation.

It's oney.

Only serves to highlight the urgency with which we need to manage our controllable costs and drive productivity.

Having said that it is important to note that the operational disruption in April really masked the underlying progress we are seeing in our CASM ex fuel performance in Q2, which is actually trending in the right direction. After adjusting for the short term headwinds as isolate will discuss further shortly.

In the first quarter, we exercised an accelerated 3800 20 options.

The exit about 190 fleet by 2026.

Fleet modernization program is key to driving a more efficient cost structure, while also putting jetblue path towards net zero.

And given our reduced capacity outlook. We are also exploring the potential to further accelerate the timing of some of our older aircrafts.

We're looking forward to sharing more detail with you at our Investor Day next month on all of the work our team is doing to position Jetblue for success as we look to strengthen our earnings power in the coming years and deliver value for our owners.

Turning to slide eight.

The work is never done on insuring.

One ensure ensuring our long term sustainability and we recently announced another deal for SaaS supply.

You meet us.

As part of our objective to be at the forefront of innovation and help Decarbonize aviation Jetblue travel.

The Tech venture subsidiary has made further investments in two additional starts up.

Power systems is a leading provider of space battery systems and that company is working on carbon capture and conversion technologies.

We've also invested in the TPG wise climate fund as a limited partner focusing on Decarbonising transportation.

All of this great work would not be possible without our crew members and we continue to invest in protecting the sustainability of our talent pipeline as well Jeff.

Jetblue Foundation, which supports aviation related stem programs.

The awarded grants to 10 chance of organizations to help increase advocacy for inclusion gender and racial parity within stem at aviation.

In conclusion, we absolutely recognize the short term margin impact of the April disruption on the <unk>.

Operational investments, we are making to spring and summer.

But they are essential to restore all of our customers' confidence and drive the higher revenue mix enabled by the NDA through the vessel schedules and benefits that will appeal to corporate and high value leisure customers.

I'll close with another thank you to our crew members I'm always amazed and inspired by your resilience and hard work, taking care of our customers and of course each other.

With that over to you Joanna.

Thank you Robyn I'd also like to thank our crew members for always supporting each other and caring for our customers, especially when the operation experiences significant stress as we have seen this month severe weather are compounded by ETP challenges, particularly across Florida, and the northeast have had an outsized impact on our operation are 95% of <unk>.

Daily flights operate.

By being well on track with our summer operational preparation, we have reevaluated our capacity planning assumptions for the summer in light of these challenges.

Turning to capacity on slide 10.

We began adjusting may capacity last month, and we are continuing these adjustments into the summer in second half of the year as we focus on building a more operable and resilient schedule that takes into consideration the reality of the operating environment, including elevated pilot attrition pilot training delays stemming from disruption to plant trees.

Schedule is due to them a crime business partner staffing shortages and APC staffing shortages and.

In addition to our capacity adjustments, we are redoubling, our efforts to bring the jetblue experience back to our customers and our crew members.

This includes maintaining our hiring pace for this summer despite the lower capacity outlook getting ahead of supply chain pressures by pre purchasing key supply and additional ground equipment for our airport and technical operations teams.

Making infrastructure investments throughout our network such as Redeveloped, the south lobby at JFK to support additional customers and Cobra documentation checks as well as additional gate hold seating and improvements to the roadway to better manage congestion during peak times.

We are also investing in additional checking kiosks as well as investing in additional resources for our crew members to better support them with hotels and transportation when there is bad weather and flight or disrupted.

Finally, as our capacity has come down we are investing in more spare aircraft and dedicated maintenance line to provide our maintenance teams with additional touch time with aircraft. We believe our operational investments and capacity reductions will improve our operational performance in the coming months, while we continue to fly a record number of customers.

For the first quarter of 2022, our capacity declined 3% year over three as we proactively trimmed our scheduled throughout the quarter in response to rising fuel prices and operational challenges and we've now made additional cuts to make our operations more resilient for the second quarter, we expect capacity to increase any.

Range between zero to 3% year over three years.

First quarter since 2020 that we expect to operate at levels above 2019, a significant milestone in our recovery.

We recently launched three new Blue cities in the first quarter, including parts of IR to Kansas City in Milwaukee later this quarter, we plan to launch service to Asheville, as well as our inaugural Canadian Blues City Vancouver, Our transatlantic service continues to perform very well and we are excited to begin service to London from Boston This summer at Gatwick.

Service beginning in July followed by Heathrow in August .

For the full year 2022, we are now planning to grow capacity between zero and 5% versus 2019 to reflect our more conservative planning assumptions turning.

Turning to corporate travel this continues to be a positive momentum story as business bookings have recovered to approximately 75% of 2019 levels as we exited the first quarter compared to roughly half at the end of last year.

We expect a continued acceleration in Q2 and beyond especially as we drive improvements in our operation.

We are leveraging the NEA to grow our airline for both leisure and corporate travel travelers with a much enhanced network and schedule driving a competitive value proposition for customers.

As we execute our near term plan, we will monitor the demand in fuel environment closely and we will remain nimble with our capacity with the ultimate goal of returning to profitability in the second half of the year.

Turning to slide 11 during the first quarter, our revenue declined seven 2% year over three which came in more than six points higher versus our original forecast in late January we initially anticipated a step function increase in demand following President's day weekend as case counts dropped and we are very pleased to see pent up.

Demand materialize beyond our expectations.

Load factors improved meaningfully from an average of 62% in the month of January to 80% in March and in April our loads are now tracking in the mid eighties.

As we bring new crew members into the operation, we are building towards rightsize staffing levels, and restoring efficiency and productivity levels over the long term for.

For the second quarter of 2022, we expect revenue to increase between 11% and 6% year over three.

This includes up to a four point revenue impact from the operational disruption.

And despite the meaningful impact to the quarter and the year. We are set to generate our best quarterly revenue result in the second quarter and are positioned to accelerate this momentum through the summer.

In fact looking beyond the near term headwinds, we anticipate June RASM to be approximately 20% year over three and we expect June to be a nicely profitable months as we head into the peak summer.

I am pleased to see the record demand for travel on Jetblue all across our network further fueled by the continued execution of our commercial initiatives.

Based on our revised capacity plan, roughly 80% of our flights touch the northeast as we continued to build out our northeast Alliance.

Through the growth enabled by the NEA. We can continue to do what we do best bring down airfares, and underserved and overpriced markets and deliver better service to more communities.

By growing our northeast footprint, we're bringing even more competition to customers in the northeast, creating jobs and generating broader economic benefits, while also positioning to capture a greater share of the corporate travel wallets in the region.

Loyalty continues to perform exceptionally well and we achieved another month of record acquisitions and spend on our co brand credit cards. We've also expanded our elite loyalty perks to true Blue mosaic and advantage members starting on March 23rd in addition to space available extra legroom seats, we are rewarding our most loyal customers with two <unk>.

Complementary checked bags and same day confirmed changes this is on top of reciprocal lead benefits launched earlier in the quarter.

Our suite of ancillary products is resonating well with our customers who are finding great value in choices with our different options I am pleased with the ongoing execution as we generated an ancillary revenue per customer increase of 70% in the first quarter year over three or segmented offering is also helping to shift the mix of our customers driving a benefit.

For Jetblue.

We're seeing acceleration across all customer segments and outstanding performance in the premium leisure category in particular.

Enclose thanks again to our crew members for your patience and perseverance and helping jetblue manage through challenging circumstances I remain excited about our long term trajectory and look forward to sharing more at Investor Day next month now I will turn the call over to you our solar.

Thank you Joanna.

I would also like to add my thanks to our crew members for their dedication to taking care of our customers and each other.

Have laid the groundwork and are executing every day to position jetblue to deliver for all of our stakeholders.

I'll start on slide 13, with a brief overview of our financial results for the quarter Rob.

Revenue was $1 $7 billion down seven 2% year over three.

Cost per available seat mile was up 17, 5% year over three.

CASM ex fuel was up 13, 9% year over three and.

And GAAP loss per share was <unk> 79, and adjusted loss per share was 80 cents.

We are extremely pleased with the demand and revenue momentum, which accelerated throughout the quarter and resulted in first quarter revenue that was roughly six points ahead of our original January guidance. I am also pleased that we executed within the range of our original cost guide despite abnormally elevated winter.

Weather events looking.

Looking ahead as Joanna noted, we are reducing our full year capacity growth outlook to a range of zero to 5% as we work to restore operational reliability and as we remain mindful of elevated fuel prices in the back half of the year.

That said the strength in bookings is driving revenue in the second quarter that is expected to be up 10% to 15% year for three which will set a new high watermark for quarterly revenue and Jetblue is history.

Despite the dramatic spike in fuel prices, we have been able to recapture and nearly all of the cost increase.

Turning to slide 14.

During the first quarter CASM ex fuel increased 13, 9% versus 2019 in line with our original guidance.

As a reminder, incentives and premium pay tied to the omicron and weather disruptions were worth roughly three points of CASM ex fuel in the first quarter.

For the second quarter, we are forecasting CASM ex fuel to increase 15% to 17%.

The sequential increase versus Q1 reflect some inefficient close in capacity reductions in Q2, frontline premium and incentive pay to support the operation ramp up costs as we maintain our hiring pace for the summer.

And our recently signed deal with ALPA if.

If we adjust for the cost impact of the operational disruptions in April or Q2, CASM ex fuel would have been approximately 10% demonstrating solid underlying improvement as we started to see progress in areas such as maintenance.

All in the April disruption input impacted.

Impacted our pre tax margin in the second quarter by approximately six percentage points and keeps us at a loss for the quarter.

That said, we expect to be solidly profitable for the month of June as we exited the quarter with strong momentum.

Looking ahead as we build a more resilient operation and reach a more optimal staffing level, we expect to gain further efficiencies and productivity after the summer, meaning we won't need to rely as much on things like premium and incentive pay driving continued CASM X fuel improvement as well.

We move through the remainder of the year.

While the operational disruption in April has delayed our return to solid pretax profitability. We are investing meaningfully this summer to restore operational performance and we believe we are on a path to building back our margins and creating value for our owners through strong revenue growth.

With disciplined cost control and a methodical approach to capacity decisions as always we'll continue to be nimble and adjust course as needed.

We are very excited about the deliveries of next generation fuel efficient aircraft as we embark on a multiyear fleet monetization program.

As a reminder, E. Two twenties are 35% to 40% more fuel efficient hersey compared to the <unk> they are replacing.

While the <unk> hundred 21 meals are 15% to 20% more fuel efficient versus our <unk> hundred 21 C O.

Moving to slide 15.

We now expect our full year capacity to increase in the range of zero to 5%.

<unk> 10 points lower at the midpoint versus our prior forecast.

We are reducing capacity as we work to overcome operational challenges, which are driving incremental cost through premiums and incentives on top of people related ramp up cost.

Following this sizable reduction we now expect CASM ex fuel for the full year 2022 to increase in the range of 10% to 15% versus 2019.

Paired with our initial expectation for an increase of 1% to 5%.

The difference between our previous full year CASM ex fuel midpoint to the new guidance midpoint, a 10 point difference breaks down as follows.

Six points driven by the capacity reduction.

A total of three points from the spring operational challenges and the investments, we're making for the summer as previously outlined by Joanna.

And one point from inflationary pressures from.

Some pilots and our business partners.

A slower growth rate creates a number of opportunities and additional cost levers that we can pull including optimizing maintenance spend accelerating aircraft retirements and cutting discretionary spend across the entire organization.

We believe we're taking the right actions to get back on track and fortify our long term value creation framework, which we are excited to share more about at our Investor Day next month.

Along with the details on the next phase of our structural cost initiatives.

Turning to capital allocation on slide 16.

In the first quarter, we continued to make progress on our balance sheet, while investing in our fleet and maintaining a strong liquidity position.

During the first quarter, we paid down approximately $83 million of debt and we funded approximately $160 million and capital expenditures.

At the end of March our adjusted debt to cap was 54% and we closed the quarter with liquidity of $2 $9 billion or 36% of 2019 revenue.

Turning to the fleet.

Like to highlight our recent revision to our aircraft order book I'm pleased to have a revised agreement with Airbus in place as we exercised an accelerated 3800 20 options for delivery starting in 2022 through 2026.

These 3800 Twenty's will ultimately replace our 30 owned even nineties and allow us to fully exit the E 190 fleet by the end of 2026, driving a meaningful CASM tailwind and providing a solid platform for margin expansion and earnings growth.

For the full year 2022, our Capex forecast remains at approximately $1 billion, mainly for aircraft, which we intend to fund with cash.

In closing we recognize.

That we've had to pivot this year as we need to get our operations back on track and regain our customers and Crewmembers Trust.

While this means lower utilization and productivity level versus our original plan. We can now take advantage of the reduced growth outlook to pursue further structural opportunities such as further optimizing our maintenance spend and reevaluating accelerated aircraft retirements.

As we think beyond 2022, we're looking forward to our Investor Day next month, where we'll provide you with a framework for Jetblue as long term earnings power and deep dive some of our key strategic initiatives that will drive out are out your financial targets and create value for our owners.

As we look to expand our margins beyond pre pandemic levels in the coming years.

I'll close with another thank you to our crew members for their resilience and hard work in managing through all the challenges that come our way.

With that we will now take your questions.

Thanks, everyone. Lee we are now ready for the question and answer session with the analysts. Please go ahead with the instructions.

Thank you.

Ladies and gentlemen to ask a question. Please press star one on your telephone keypad again, if you have any question simply press star one on your telephone keypad.

Your first question comes from the line of Catherine O'brien from Goldman Sachs. Your line is open.

Hey, Ron Thanks for the time.

Just thinking about some of the staffing issues you know it sounds like there are some short term headwinds in the industry are facing tied to Omaha and training to lease and just being at Max training throughput, but then Theres also elevated attrition and addition of staffing issues and airport.

For control, which aren't direct lender Jetblue is control can you just walk us through when you see each of those buckets, the shorter and long term issues within Jetblue Labor Force and then throughout the more general travel infrastructure when when do you see those easing and and I guess, what can you do today to influence the pace of those getting back on track.

I know you've laid out some of them operational.

Boosters that youre going through the summer, but just like specifically on on hiring and getting staffing backup. Thanks. So much sure. Thanks Katherine for the question. So the teams have done a fantastic job across all of our work groups really ramping up hiring for the last year. If you recall, we ramped capacity faster than any other airline last summer.

We've had a couple of challenges across the industry, whether it's the delta variant on the crime that have created a level of volatility across the industry. What we're striving for is to find a place where the operation is more reliable and where there is a certain degree of certainty that we can plan around getting ahead of many of these staffing issues is critical.

Because there is a long lead time for some of some of the rules. So I fully expect our airports team our in flight team and our technical operations teams to be fully staffed as we step in through the summer time frame and into a more I think normal course of business, where we see I think meaningful pressures and it's something I think everybody is seeing across.

The industry is on the pilot front, we are seeing elevated attrition levels with pilots.

And so we've ramped up to Max capacity, there, we will catch up.

On some of the training delays, but we have to plan for a world, where we just have elevated pilot attrition and adjust our training our training plans and adjust our simulator capacity et cetera, et cetera to just speak to this kind of new world, where pilots are just going to be a bit a bit more challenging from a hiring and retention perspective.

We continue to have a very strong pipeline that we built out a number of pilot gateways years ago, recognizing at this potentially could be a problem down the road, we have great retention among the pilots that come through our gateway programs.

But at the end of the day given the legacy carriers have accelerated retirements through Covid of pilots. There's just you know I think a challenge the whole industry is facing right now in terms of pilot hiring and it will be facing I think for the foreseeable future with regard to the external factors I cannot speak to when we think the FAA is gonna be fully stopped.

We've obviously seen acute pressures down in the Jacksonville Center in Florida, but I think everybody you know around the United States is looking at these these talent challenges I think on.

The good news front, we've got a great pipeline people like working here and we're going to continue to double down on our culture, and and I'm, making sure that jetblue continues to be a preferred airline employer.

Okay, Great and then maybe just one on the June you gave us June RASM up 20%.

It's showing some nice acceleration over the course of the quarter. There I guess just you know.

Given the cuts you have had to make do you feel more confident than a normal year about the June number just given some of the closing cuts like can you maybe give us an update I know booking curves got really shortened during COVID-19 . It sounds like we're moving back to normalization. So just just maybe like your confidence level and anything that might make you more.

More confident on June and in a normal year. Thanks, so much for your time, yes, I mean, we're extremely confident about the revenue landscape right now we are seeing extremely robust demand.

Across our leisure segment premium domestic is extremely strong mint.

Q1 was six points better than core our VFR markets are performing exceptionally well. So we're very very bullish on the on the revenue front.

Both from a total revenue, but also from a a.

On a unit revenue perspective, we're yielding up in a meaningful way fares and yields are now above 2019 levels and we we do expect June and the summer to be very strong.

Thank you.

Thank you and your next question comes from the line of do want sending groups from Evercore. Your line is open.

Hey, thanks.

Duane here good morning.

Robin I appreciate the brief.

<unk> comment, but when do you expect to hear a response from spirit.

What have you learned so far since unveiling this to the world and what do you think is taking so long.

Thanks Duane.

And good morning in terms of any questions you might have about the timeline I would suggest that you address those two.

Spirit.

And I'm not really going to comment any more at this stage other than the L.

Our team is working very diligently and very hard.

To move things along as quickly as possible.

Okay fair enough.

And then sorry to go here, but just on the gross take down.

This deal surprisingly unsurprising.

Many investors believed that the inverse.

Apply growth acceleration you were guiding too ambitious.

Ambitious aggressive.

Last quarter.

Multiple large carriers saw this coming last year and took their growth rates down kind of proactively yet.

Jetblue expressed a lot of confidence just last quarter just on this call three months ago.

Higher and you can sort of pull off the summer. So so what specifically broke down here in just three months time or was this just a forecasting problem.

Yeah, I think at the end of the day, we've had I think exceptional revenue performance for the last year. If we could continue to proceed at this growth pace I think we will continue to have exceptional revenue performance. There is clearly not a demand issue. We've been I think planning well for the summer, but there were a series of things early this year that.

Transpired I think pilots pilot training delays stemming from omicron in Q1. So that's January and then in March we communicated that we will be moderating capacity into may and beyond obviously, we would've liked to of course corrected quickly, but in this volatile world, where you know there's new variants that happened upon you and attrition.

<unk> across the industry I think we've done a pretty strong job pivoting and adjusting our capacity to reflect our resources and the environment Nobody could have anticipated that Florida in April would have 115 minutes of ATC delay aren't 50 out of 115 hours of ATC delays or that month compared.

22 in 2019. So you know these are challenging times and I think we're doing the responsible thing by taking capacity down and right sizing it to reflect the resources, we have in the external environment.

Duane let me just build on that because I know it's a good. It's a good question you know I think that.

<unk>.

We we readdress the Jonathan.

Jonathan we actually made a change in my that we announced in early March we.

Also at that point, you know suggested it would continue into the <unk>.

Pharma you know I think what Youre seeing today is just a couple of things first of all we wanted to be as clear and transparent with investors about how we're thinking about the rest of the year.

Because you'll still think airlines court schedules every weekend and so.

It is still a very non linear volatile process and so I think what we're trying to do is kind of set the stage for the rest of the year. I'd also we could be a Q2 clearly of almost over investing in being too cautious as we go into the summer.

And extremely deliberate approach that we're taking because we know how important it is for us to drive margin for us to deliver the benefits on the EMEA if off to continue to be the preferred airline in the north east vault customers premium leisure and wholesale leisure travel we know we have to deliver.

Stable operation and we have become increasingly concerned about some of the external environment constraints that we may see this summer based on what we've seen in April and so we want to respond quickly and decisively.

To that.

Listen I appreciate.

The thoughts and maybe just one last follow up.

Here you on attrition rate, it's something we've been hearing about for a long time over a year right. It's not a new issue. It's something we've been hearing about for over a year to what extent is staff productivity surprising you.

If you could just comment on that.

Maybe offer a broad kind of in our silicon can chime in we need to get to a more stable environment to start seeing productivity settle and when youre hiring to just backfill the person who left the month before that's not a great place to be and so our focus is on driving stability.

Ross the operation and at that point, we're confident that we will start seeing.

Some of the productivity.

That we need to see going forward. So I think back half of the year as we stabilize I think we're cautiously optimistic that we'll be in a in a better place.

I think just add Dwayne like coming into this year, we were very focused on a growth track and driving productivity and utilization ramp up throughout the year, given the pivot and the reduction in capacity on a full year basis means that we're going to have significantly lower aircraft utilization and.

Really a delay in the productivity benefits, we do expect once we get to that optimal staffing level to see productivity improvement in the fourth quarter.

In addition, with the capacity reduction. It also means that we can take advantage of other structural initiatives such as replanting maintenance and also looking at potentially accelerating incremental aircraft retirements and so those are some structural cost areas.

That we're now very acutely focused on to ensure that we can deliver on our cost discipline not only this year, but as we enter 2023.

I appreciate the thoughts thanks Duane.

Thank you and your next question comes from the line of Mike Lindenberg from Deutsche Bank. Your line is open.

Oh, Hey, Hey, good morning, everyone, Hey, Rod Robyn.

You were speaking on CNBC or something this morning, you had mentioned something about 270 million to 60 option than I saw a headline that said $180 million is that what was 122 number and one is a longer term number can you just clarify what that.

Several hundred million dollars of course, the fixed ops, what that is and what's the timeframe.

Uh huh.

I didn't do a CNBC interview this morning.

Afternoon.

I did a couple of interviews that really relates to the three points of CASM headway.

Headwind talked about so.

If we think about first of all the cost of the April disruption itself. So we ended up canceling a large number of flights those.

Flights are being crude.

And.

But we're fully operational so that is a very significant CASM headwind on top of that in order to recover from some of the weather events. We saw a big outflow in terms of premium pay so that's really about half of about three points of CASM.

You were referring to and then the rest of it is taking a much more cautious.

Cautious approach for the rest of the spring and summer. So for example, even though capacity significantly down we're maintaining call. It timing plans, we are putting additional resilience and redundancy into the JFK operation and that makes up the there was a couple of examples and that makes up the.

Other one and a half points.

The three points of CASM that represents the other half is about one and a half points. Okay. That's helpful. Thanks, and then just.

I wanted to go back on the attrition thing.

Sort of think about Jetblue historically, I mean, it's a destination carrier for for airline professionals, historically and yet now it does seem like maybe for some it's a stepping stone and I'm not sure like what can you do is this is this a secular shift or beyond showing.

A lot more money at the pilots.

Obviously, you are a growth carrier and thats something thats attractive to pilots for now you can't grow.

Is this something Thats with you for the next six months or is this something more structural and it goes on for several years, where you're constantly playing catch up to to attract the people that you have.

Attract in the past thanks, Mike really appreciate the question. So it's not an issue of attraction, we have a strong pipeline.

Particularly on pilots they like coming here issue becomes obviously time to upgrade it becomes pay.

Hey, if you want to fly wide bodies, there might be different pads that you want to take but we remain a very attractive carrier we need to plan for elevated levels of attrition recognizing that there may be some pilots that choose to leave.

And your zero to four because of a different life choice, but then we also do a great job retaining pilots as well and.

And so it's a bit of a mixed bag. We've got a number that's David and we have a number that leave we need to plan, our training and our simulator capacity for an elevated level of attrition, but we also need to ensure that those who come and want to stay at a carrier like jetblue stay which many of them. Many of them are we havent gateway programs, which are fantastic. They bring crew members and from Jetblue family members friends et cetera.

We've been doing this for several years now we're now generating a decent size number of pilots coming through the pipelines that have a real stickiness to jetblue, our culture and the type of organization that we our attrition is very low among those cohorts and so we are looking at continuing to increase the number of folks that come.

That come through there, but I think the industry as a whole I think is is looking at what do we do about the pilot shortage a legacy carrier retirements accelerated this pilot shortage issue by by a few years it could very well lead to lower aggregate capacity growth over the next couple of years.

But we are pivoting our philosophy around how do we build a mall.

Model, where we have elevated attrition, where we had the gateways that crew members and their family members and other aspiring pilots come through and they want to stay at Jetblue.

And then continuing to build out partnerships with other carriers theater carriers around the United States.

They also I'd like to add to that Mike.

I think the other structural change youre going to say is that the pay rates.

Full pilots across all of the larger lines will start to converge.

And I think we're already we're.

We're already seeing that I think youre going to continue to.

To see that I think that is something that could be around for a number of years great. Thanks for that thanks, Robyn. Thanks go ahead.

Thank you. Your next question comes from the line of Savi <unk> from Raymond James Your line is open.

Morning, everyone.

Just if I might follow up on Mike and <unk> questions just.

Based on kind of the capacity growth that you have in mind for the next few years just how many pilots are you or do you need to hire and how many of them might come from your kind of internal programs.

And to follow up also Robin on your parent question.

If that is the case and then does that mean kind of legacy versus kind of like your cost or unit cost. But then also start to narrow versus kind of legacy carriers, because there's a bigger gap there between where you're kind of L band.

Band is versus like a carrier pay then.

Yeah Savi on the second one.

I don't think it from a huge issue for Jetblue.

Rates were already pretty close and in fact with this adjustment that we just did and I think you'll find if you compare compare out 300000 pay rates versus some of the legacy is youll find that very similar so it was more of a comment.

Maybe some of the other carriers that have lower pay rates and how those will probably be too.

Just my just my opinion in terms of go forward right.

We'll provide more color at Investor day about how we're thinking about multi year, but I think that we're going to continue to clearly prudently plan planned more conservatively around.

Pilot attrition until we have a better sense of how long this is going to be I mean, the good news for Jetblue is enjoying I mentioned that we saw that gateway programs number of years ago.

A meaningful number of pilots and so it's not like we're sort of starting from scratch last year and trying to get this thing going and we have every confidence.

As we recruit more and more through these programs.

Those pilots that have more traditionally seen it is remaining as a destination.

Carrier. So I think that's how we're thinking about the next few years, but I certainly think that.

My opinion and some of you heard this before that the access to pilots really becomes the governing factor for growth in the in the industry over the next few years.

That's helpful.

And if I might just Joanna just to follow up on some of the kind of the ATC type issues I am just trying to understand.

It's kind of a Florida saw a lot of capacity being added to it over the last several years and that accelerated in the last couple of years. I think is this is this more of a near term staffing issues on that they need to address or is it becoming kind of a congested aerospace like you have in the northeast I was kind of curious if there's something fundamentally structurally changing in Florida or.

Kind of an issue that just needs to be addressed yeah, I mean, I know you're down in Florida, I think everybody's in Florida right now so I think it's probably a temporary issue with just the amount of capacity and there. We do think once international opens up a bit more once the COVID-19 document checks go away to inbound international and Youll start seeing I think a rebalancing of capacity into other leisure.

Beyond Florida.

But I think you've also got a winter summer thing playing out as well there, but I do think there are structural issues regarding S. A a a T C staffing they've talked about it before.

I think April was a particularly acute month, if you look at Jetblue network footprint, 45% of our flights touch, Florida and so it makes perfect sense that when you have a significant a T C Center understaffed five call it 50%.

With that volume of flights you have going into there's no way that that you aren't going to see a significant amount of delays from those carriers have a very big footprint in Florida. So I think the capacity will be largely hopefully short term as carriers rightsize their networks over time, and Covid Doc checks come away, but I do think theres FAA staffing shortage.

It could be potentially a more protracted item and so we continue to be very focused focused on that.

Helpful. Thank you.

Thank you. Your next question comes from the line of Conor Cunningham from M. T. M Partners. Your line is open.

Hey, everyone. Thank you for the time I think that investors I mean, a lot of there's been a lot of conversation about structural versus temporary here. So I'm just trying to trying to unpack it unpack like what's actually going to be your long term utilization rate of the airline going forward like why shouldn't we just assume give.

The host of issues that you have that you'll then it'll be a challenge for you ever to get back to this 12 hour offline per day I mean can you just speak to the utilization.

You know in the context of hiring problems, you're reading more into tough.

Tougher airports like New York and so on so if you could just speak to that that'd be great.

Good morning, Conor Thanks for the question as I mentioned at the beginning of the year. We were acutely focused in on a growth track with high utilization given the meaningful step back it due to the challenges that we've seen in April utilization is going to be down.

Double digits throughout the remainder of this year I also think as we think about 2023 mm capacity most likely will be.

Below our original anticipated capacity growth and one of the structural levers I highlighted was taking another look at aircraft retirements in light of the lower utilization levels and can we have the ability to drive some structural cost savings that quite frankly, some of our peers were able to take advantage of.

Having retiring fleets throughout COVID-19 . So that's an opportunity that we're looking at given this research and the lower utilization levels that we'll expect this year as well as into next year given the constraints.

Okay.

Okay. That's helpful and then.

So you've got your head count is actually up fairly nicely in the first quarter for your class you've done.

You talked about the productivity conversation earlier, but I'm trying to pinpoint when we should expect it seems like that's going to expand further that gap between capacity and headcount.

In the near term, but then should gradually improve as that might drive to requeue event, when we peaked out or shall.

Should we just expect them to kind of be elevated through early part of next year.

Yeah, I would expect us to see a level of staffing stability and operational stability and that will drive productivity in the fourth quarter. So we're making investments in the short term in order to continue hiring and staffing through the summer and we believe that will bring them a level of resiliency.

The operation that will be at optimal staffing levels in order to get that productivity in the fourth quarter.

One thing I'd just add on the.

The number.

Number is the <unk> capacity is slot staging gauge is up so for example.

More 321 at least all 322, both of which are in flight crew members.

And so and then in terms of customer support or reservations.

Seen any big increase that relate to just the.

And you've seen this across the industry the vast number of additional calls coming in.

So disruption so those two areas are sort of driving a disproportionate increase in actual head count.

Okay I appreciate it thank you.

Thank you. Your next question comes from the line of Helen Becker from Cowen Your line is open.

Thanks, very much operator, hi, everybody and thank you for the time Robin you actually just partly answered my question about bigger aircraft like how can you accelerate delivery of bigger aircraft to alleviate some of your staffing issues, especially with pilots and then my other question is related to scaling.

Up to 300 flights in the New York area, Ken This air traffic control system handle.

That level of.

Airport utilization and I know, you said you'd be more conservative, but how should we think about getting there from here.

No. Thanks, Helane in terms of your first question.

No. We don't have any plans to accelerate any more airplanes. We talked recently about the two <unk> I think what this adjustment allows us to do is to.

As I mentioned earlier I look at some of the.

The time and opportunities that exist for some of our older airplanes, and et cetera, right out of that because back to Carlos Cobo, whilst I recognize that aircraft utilization.

Aircraft utilization probably needs to be a bit lower than it has been historically, reflecting the space now obviously.

Our aircraft utilization also creates the opportunity to drive some retirements in a world where we.

We look at sort of structurally lower growth because of a pilot.

Supplied in terms of the growth.

Growth in New York, one of the areas that we have been adjusting is Europe .

And we have some of the capacity changes that we might have reduced our flying in and out of Europe .

Obviously from a.

JFK and Laguardia perspective, we just looked at airports.

That is something that's much harder to do.

So we do have we do have slightly less dependency.

And the New Yorker space. Following this capacity adjustment than we did before because of the changes that we're making in Europe .

Got it that's very helpful. Thanks Robyn.

Thank you.

Thank you and your next question comes from the line of Jamie Baker from Jpmorgan. Your line is open. Please go ahead.

Hey, good morning, everybody without commenting on the deal specifically just given the first half challenges do you standby the leverage recovery guidance that you gave us when you announced the bid.

Uh huh.

Standalone outlook.

Obviously were so just trying to quantify the need to potentially issue equity.

Hi, Jamie Good morning. This the plant the original plan still stands for the offer for spirit to be a full cash offer obviously, we've taken one step back in terms of our projections.

For full year profitability this year, but we still.

Have a strong balance sheet and our offer.

Stands as is our 2022 leverage.

We will now be a you know slightly above a one times, which is obviously a slight change compared to the presentation that we laid out a lot a couple of weeks ago, and that's really driven by obviously the April step back here.

And second and specifically to Robyn.

Look 2007 was it different here for the industry for Jetblue.

The constitution of Jetblue.

Board is different today, but.

It's worth noting there's precedent for senior leaders being let go when operations have suffered.

How would you characterize your recent conversations with the board could you say how much.

That time has been split between discussing the merger and discussing the operational challenges.

Well first of all Jamie let me as I often do on this call and wish you a very happy birthday weeks.

Not forgotten.

No look I think the operational concerns of concern to all of US the leadership team the board and more importantly, our crew members and clearly as you know we operate in the most congested complex geography in the country and what we have to do is just.

Get better.

Managing that.

I mean as you know weather comes in slides will get canceled there'll be HTC to life.

And really we continue to make it a lot of investments to allow us to get better.

And so I think that the.

The pivot that we are announcing here in terms of reducing capacity distressing. This summer investing in staffing all of these things all the things that will help us deliver a better more stable operation we can't control the weather.

We can try and control everything enough and that's what we're laying out to do but the number one priority from that for me for the leadership team for the board right now is restoring our operational performance because that is the path to margin recovery and whilst I fully accept we take a step back in the second quarter.

There is enough there'll be no catalyst for driving better cost performance and improved revenue.

A stable operation and that's what we're focused on.

Okay. Robyn I appreciate that also worth noting that I share my birthday with Piedmont hub in Charlotte proving that there's always an aviation angle.

Jamie with you always.

Take care. Thank you.

Thank you. Your next question comes from the line of Dan Mckenzie from Seaport Global Your line is open.

Oh, Hey, thanks, good morning, guys.

A couple of questions here profitability in the back half of the year I'm. Just wondering if you could elaborate on how we get there.

Is it is it being driven by premium revenue corporate demand. So is there some revenue acceleration from here.

Or how much of the profitability is tied to better utilization.

Good morning, Dan as mentioned in our remarks, and the revenue and demand environment continues to be really really strong and so we're expecting profitability as early as June and that's really driven by you know a topline RASM number of like 20% as of right now.

As we navigate through the year, we expect especially in the third quarter demand in the revenue environment to be extremely strong.

In two age of this year, we'll also see.

Four point improved sequential improvement from a CASM ex fuel perspective, so we will start to gain some efficiencies as we discussed earlier around maintenance as well as productivity in the fourth quarter. So that's.

That's the roadmap, but maybe to give more detail on topline and I'll pass it over to Dave.

Sure Dan Thanks for the question just a little bit more color on the revenue. In addition to the really strong demand environment. We're seeing we have a couple of other factors that will improve as we go through the year first just a reminder, that we had a four point revenue headwind this quarter from the operational disruptions that should not continue past Q2, and then the NEA is off to a great start and ramping up well.

We expect that to continue throughout the year. So we expect to have additional revenue acceleration.

<unk> performs better and better.

Okay. Thanks for that.

Then I guess just bigger picture for those investors that take a longer view of the story you have lots of patients.

Going back to the Powerpoint.

The goal of expanding margins beyond 2019.

So the $2 50 to $3 share target.

At this point, what's what's the path and timeframe for getting there today is it how much corporate travel has to come back what size or scale from a growth perspective is required.

And.

Our new revenue initiatives or cost initiatives needed to offset some of the challenges we are seeing today, yes.

Yes, maybe I'll sort of take a high level and I think first of all it's a great payout to investor day because.

I plan on Investor day, it's going to really lay out that multi year.

Paul.

I think that.

I think 23 will be the first year, we're actually comping against the year before as opposed to 2019. So it feels like it's a new a new beginning but look on the revenue side I think we've talked about a lot of the catalyst and I think.

We have a lot of very strong revenue initiatives that are ramping up nicely I mean, if we didn't have that four points of headwind for the very significant operational disruption.

We talked about earlier.

Top of the range for the quarter would be 20 points and so.

And by the way, we do factor in a set amount of weather events like we don't want to just always talk about the weather, but Joanna describe how meaningful it was the in Florida. For example, the first 20 days of April we were in ground stop a ground delay programs for over 115 hours and I think if you compare that to 2019.

It was 2022 hours so significantly.

Impact and so I believe that we will work through those challenges.

We're already we've seen a better traffic control environment in the last 10 days of April so that's encouraging and hopefully that will.

Continue so they talked about the bump the NDA revenue the growth of Jetblue travel products.

And then on the cost side.

Thank that.

We are making good progress on some of the underlying cost initiatives that we've talked about before we'll share more of that at Investor Day. We've also concluded the work on a new multi year structural cost program that we've been working on for the last several months, we have been working with some external.

Partners on that and we'll be laying that out at Investor day as well so no continued and accelerated revenue momentum.

When we get past.

Some of this noise of what we're seeing this year.

And I fully recognize.

But difficult for people to model when you sort of put these big pop up numbers appear into the quarter, but when you take the revenue acceleration and you take the structural cost initiatives will share more about we're very kind of some of the benefits from some of that and we'll be sharing more of that investor day as well.

Understood. Thanks for the time you guys.

Asked and answered, but one one for Robin I guess.

When I look at this as short term cuts to capacity just seem like shoes operational problems.

Kind of longer term, how much does M&A.

Attempt to solve this labor issue as opposed to just accelerating the growth of the airline interested to get your thoughts there. Thanks.

No. Thanks.

I do think Youre right I mean, some of what Youre seeing now is just trying to say.

With the summer and we can talk about how much we should derisk it.

But I think we recognize that we need to plan.

<unk> I mean to give you a sense I mean this is the first time in Jetblue is history.

June blockhouse, ISI EMS will be significantly below aprils.

April and June tend to be the strongest month, we have.

In quarter two so it's a very sizable change I think when we think about the longer term I do think the pilot supply issue will be a governor of you in capacity in the U S for.

A period of time.

And.

When I think about.

M&A the reason that we believe.

The opportunity is for the Jetblue and spirit merger is it would allow us to supercharge and accelerate the organic plan and bring in a large group of pilots into the airline creating more growth opportunities kind of creating a bigger destinational carrier potentially reducing.

Attrition, so I think that airlines, who want to pursue and organic plan and we've been that obviously for many years I do think that is more challenging over the next few years given the.

Pilot supply environment.

Got it thank you Robert.

Thank you. Your next question comes from the line of Chris with powerful.

He is from Cisco on International your line is open.

Good morning, everyone. Thanks for taking my questions.

So I realize that theres a lot going on here the any of the potential spirit deal, but CASM X has been a key area of focus and for some pushback on jetblue since.

The structural cost program was first communicated in I believe 2014.

And I get the moving parts of the 10% to 15% CASM next guide, but on your spirit call you indicated that.

You would not expect that to go lower I think on what was a 60% 70% larger base due to <unk>.

Certain dis synergies I realize you can't comment on spirit here, but yes.

Directionally.

How should we think about your core exit rate for CASM. This year and again this is probably more suitable for investor day, but at a high level.

What should we put in these structural versus temporary cost buckets at this point. Thank you.

Good morning, Chris and so when you look at the 2022 CASM ex forecast if you take the midpoint of 12.5%.

We have four points of nonrecurring investment and one of those was driven by the omicron hit to Q1 of this year and then the remaining three that we've highlighted here today in regards to the investments in the spring and summer operations. So those are nonrecurring and you should expect.

And to fall away as we enter 2023.

So then that brings you down.

And you essentially as a reminder, you have three years of inflation aerie pressures across the business. When you look at labor and business partner Sun.

But even outside of that we have you know incremental costs that we need to offset and as Robin mentioned, we are looking at structural levers given the reduction in capacity. So think of re flowing through your maintenance plan and investment level I think.

How can we accelerate incremental aircraft to drive you know cost savings over the next few years, given the lower utilization and as Robin mentioned in addition to that we also have hired.

External help to put to get help us put together.

The next set of structural cost initiatives.

Jetblue business model work, if we have a lean cost structure compared to the peer set and we acknowledge we have to execute that and we look forward to providing you guys more color at Investor Day next month.

Okay, if I could get one more in on the corporate side based on any survey work or other data that youre looking at what does your mix of users look like now versus pre pandemic.

Are you seeing a shift in say your mix of <unk> consulting in pharma or health care.

Now versus 2019 and what.

Should we think about in terms of that mix.

For your 2022 guide thank you.

Thanks, Chris for the question. This is Dave I'll take that one one of the great storage over Q1 has seen the corporate customer come back and we've seen that mix really start to return back to what we've seen before the pandemic. So lots of growth in the consulting sectors finance sector finance sectors edgy.

Education, So we're really back now pretty close to where we were pre pandemic.

Is terrific and has really helped fuel that growth.

Corporate recovery was about 50% for us as we exited 2021 and it was at 75% as we exited Q1 so.

Really good growth and return back to our historical mix.

Thank you.

I think we will take one final question from the analysts.

Wonderful your last question comes from the line of Scott Group from Wolfe Research. Your line is open.

Hey, Thanks for squeezing me in can you talk about your exposure to New York Jed.

Any potential to reduce that or do you think this is just temporary and it'll sort of fix itself over time.

Yeah I appreciate the question art.

Our exposure to the New York Harbor Index and this in the second quarter was to the tune of about six to seven cents on our fuel price.

Since.

Since we marked fuel and over the last few weeks.

Our cover index has drastically come down compared to where it was a month ago, but as I said.

Minimal generally speaking minimal impact six to seven on the corner.

Okay, and then as I look out to next year.

Sort of taken 10 points of capacity out of this year would you. If you can would you hope to sort of get 10 points of capacity growth next year and then assuming you can grow next year, you think CASM is down in 'twenty three.

Alright.

First of all I don't think it's realistic to tighten attempts in our capacity this year and into next year because of the game.

Aircraft, all fleet or demand that is driving that change that we would normally say well when the demand comes back you ramp it up we know demand is exceptionally strong it's really sort of pilot.

<unk> and until.

We see a different.

Current trajectory in terms of attrition in the sort of the <unk>.

The pilot is being produced in the U S.

We need to take a more.

Prudent approach and so I think youll see that from us.

Investor Day.

And in terms of.

Multi year CASM outlook, the way I think about it is strip out the one time CASM.

Numbers that we've seen here due to sort of exceptional circumstances really goes I look at that then that cumulative number is sort of three years of inflationary pressure and everything else that you see in Austin. The other airlines talk about and then as we exit into 23, then we have the benefit of the structural cost initiatives.

Unfortunately masked by some of the.

Issues, we've seen in Q2 you have some.

Initiatives that we'll be talking to you about and then we have the ability on the maintenance on the climate side to retire some of our sort of more costly OTA.

So I think all of that comes together.

To drive.

Outlook, when I look back at 2018 and 2020.

And getting back to sort of the cost discipline now I think the difference between then and now is inflationary pressure in the industry I think we have to wait and see a little bit how that continues to play out, but we need to make sure that we're doing everything on the productivity I think on the maintenance front and everything else that we're doing.

Two to drive.

Calvin growth outlook in the face of motivated capacity, which will go to drive margin expansion.

That's helpful. Thank you guys appreciate it.

Thank you thanks, everyone that concludes our.

Our first quarter 2022 conference call. Thanks for joining us have a great day.

And again, ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.

Yeah.

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