Q1 2023 JetBlue Airways Corp Earnings Call

April 25, 2023

Today's call is being recorded.

At this time all participants lines are in a listen only mode.

I would now like to turn the call over to Jetblue director Assistant Treasurer and fuel joke Hayato. Please go ahead Sir.

Thank you Sylvia and good morning, everyone and thanks for joining us for our first quarter 2023 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.

In New York to discuss our results are Robin Hayes, our Chief Executive Officer, Joanna Geraghty, our President and Chief operating Officer, and Ursula Hurley, Our Chief Financial Officer also joining us for Q&A are Dave Clark, our head of revenue and planning and Andre 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 from these statements. Please refer to our most recent earnings release and our most recent 10-K and other filings for a more detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from those contained in our forward looking.

<unk>, including among others, the COVID-19, pandemic fuel availability and pricing the outcomes of the lawsuits filed related to our northeast Alliance and our merger with Spirit Airlines and various other risks and uncertainties related to Jetblue is acquisition of spirit. The statements made during this call are made only as of the date of this call and we undertake no obligation to update the <unk>.

Formation investors should not place undue reliance on these forward looking statements.

Also during the course of our call we may discuss certain non-GAAP financial measures for an explanation and 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 and thanks to you for continuing to do double duty in two different jobs. Good morning, everyone and thank you for joining us today.

Our thoughts are with those affected by the recent storm and flooding in South, Florida, I'd like to start by thanking our 25000 crew members, particularly those down in Fort Lauderdale, as well as all of the employees of Broward County Aviation Department for supporting our customers and each other while prioritizing.

Safety above all through a very challenging event.

I'd like to thank Mark Gal for his leadership at the airport and also <unk> County State and federal agencies for their incredible work to get the airport we open again.

We stay true to our mission to inspire humanity now for 23 years and counting.

We recently celebrated a birthday in February and as I reflect on our progress I could not be more proud of the exceptional brand and experience we've cultivated but continues to disrupt the broader industry.

Jetblue customers simply do not have to choose between low fares and great service.

Before going through our quarterly results I'd like to provide a quick update on our combination with spirit.

We are fully committed and forging ahead with our planned acquisition.

We are more convinced than ever of the strategic logic of the combination we firmly believe that creating a stronger jetblue is the best solution to transform the industry, creating more competition and loosening the dominance of the big four.

Over the past several months support for our combination in recognition of its pro consumer benefits have continued to grow including from the state of Florida, who declined to join the department of Justice law suit that viewed this as an opportunity to grow a high quality and low fat <expletive> of it.

Indeed, the state of Florida has helped promote the combination which is expected to result in the biggest transformation in that travel that Florida has ever experienced including at our Orlando and Fort Lauderdale focus cities I'm. Additionally, Intel strong job creation across multiple airports in the state of Florida.

Disappointing, though not surprising but the department of Justice is trying to block this transaction and by doing so protect the status quo and enabling the largest airlines to continue operating unaffected and setting high failures and limited limited competition.

However, these actions did not change our conviction in the merits of this transaction Jetblue is one of a kind there's no other airline that disrupt disrupts the market like half.

The department of Justice is recognized and applauded and combining with spirit. This will give us the scale to keep the big format toes in even more markets and with all travelers.

As Youll hear we will feel good about the process about the progress I should say, we are making on our organic plan, but as we said at the outset, our combination with spirit will turbocharge, our plan, enabling us to serve more customers at lower fares and great service, while delivering increased value for our stakeholders over the long term.

Even better Jetblue brings even more competition to the industry we.

We are confident in the pro competitive merits of this transaction and we look forward to demonstrating that in coal this fall.

Now, let's turn to slide four and our organic business in our first quarter results.

For the first quarter, we reported a GAAP loss per share of 58 and.

And adjusted loss per share of 34.

Above the better end of our guidance.

Throughout the quarter, our team delivered excellent operational performance against a very challenging ATC backdrop.

Starting shortcoming years in the making has bought over especially in New York and they request for 10% voluntary reductions by carriers creates a significant headwind for the American travelers flying this summer.

While we cannot control the ATC staffing issues, nor what happens in the economy. We are focused on successfully managing everything we can control.

We've made significant progress in building resiliency into our schedule buffering, our operation and continuing to make strategic investments in.

Improving operability by aligning all of our efforts are minimizing operational challenges, we're able to generate more revenue better control of our costs.

Ultimately deliver for our customers.

Looking ahead, we expect to carry this momentum forward with strong sequential pretax margin improvement into the second quarter.

We remain well on track in executing our comprehensive plan to enhance long term profitability and restore our historical earnings power.

In 2023, we're poised to deliver another year of record revenue performance as we continue to expand our product reach and value proposition to more customers across more destination. These efforts combined.

Combined with the success of our structural cost program gives me great confidence in our full year earnings outlook.

Having said that looking beyond 2023, we recognize that we have more work to do to attend our margins back to peak.

<unk> level.

Moving now to slide five.

Looking ahead that were full.

Key margin builders that are critical to the Jetblue investment case.

The northeast aligns our ongoing evolution of our true Blue loyalty program Jetblue travel products and our structural cost program.

John will provide some additional color on the progress we are making with EMEA and true Blue and <unk> will provide an update on our structural cost program.

I'd like now to take a minute to talk about the success of Jetblue travel products.

Since 2019 travel products has achieved profit growth seven fold jetblue travel products continues to provide a platform for profitable growth, while deepening our relationship with customers.

Recently, we announced a very important milestone in opening access to Paisley are homegrown travel booking website to all travelers not just those who have a jetblue flight greatly expanding our addressable market.

We have already seen a meaningful step change in Paisley bookings in the first few weeks.

As we continue to grow as well as through our planned acquisition of spirit. These travel offerings beyond flights will become increasingly relevant even more customers and will fuel profitable growth for jetblue.

Turning to the second quarter, we do expect strong revenue growth to continue as demand remains robust.

And a multiyear structural cost program continues to deliver as we remain on track to hit our full year CASM ex.

Target, giving us confidence.

To reaffirm our EPS guidance of <unk> 70.

So $1 for the full year 2023.

Finally, we continue to solidify our sustainability commitment and demonstrate our leadership in aviation Decarbonization last quarter, we announced the leading agreement with shell aviation for delivery of 10 million gallons of blended sustainable aviation fuel or SaaS.

<unk> X over the next two years, starting this quarter with an option to purchase more to deal with show is a strong signal of the growing engagement of the oil and gas majors in fact production on something that we welcome.

I'd like to close by thanking our crew members once again for delivering solid first quarter results.

<unk> hard work has positioned us well for long term success, despite an uncertain economic outlook and the challenged ITC environment I am optimistic about our future. We built a solid foundation to succeed based on the unique jetblue combination of low fares and great service with that over to you Joanna.

Thank you Robyn I'd also like to add my thanks to our crew members for all that you do to ensure we deliver for our customers I am pleased with the success that we're seeing as a result of the efforts from our team as well as the operational investments and enhanced planning that we've implemented.

The highly congested airspace that we operate in we achieved our operational goals for the quarter and ranked third in the industry in the first quarter for completion factor.

Turning to slide seven for the first quarter of 2023 capacity grew 9% year over year above the high end of our initial expectations driven in part by fewer than expected weather events.

However, we do continue to experience ATC related challenges across our system.

Widely reported yesterday announced that their New York Air traffic control staffing is at 54% of their 2014 target far short of where it needs to be to avoid significant disruptions and accommodate the industry's growth I'd like to thank the FAA for acknowledging the issues and for their close collaboration to ensure the.

And great service.

With that over to you Joanna thank.

Thank you Robyn I'd also like to add my thanks to our crew members for all that you do to ensure we deliver for our customers I am pleased with the success that we're seeing as a result of the efforts from our teams as well as the operational investments and enhanced planning that we've implemented despite the highly congested airspace that we operate in we achieved our operational goals for the <unk>.

Industry, minimizing the impact to customers and.

In line with the FAA slot waiver incentive to carriers, we are fine tuning our summer capacity plans to help mitigate delays, we can control and provide a better customer experience.

Even with the flight cutbacks, we still expect challenges in the operating environment. This summer.

<unk> and ranked third in the industry in the first quarter for completion factor.

<unk> has said that delays are expected to vastly increased year over year with our large footprint in the northeast Jetblue is disproportionately exposed to these challenges.

Turning to slide seven for the first quarter of 2023 capacity grew 9% year over year above the high end of our initial expectations driven in part by fewer than expected weather events.

So we are focused on what we can control like protecting scheduled overnight maintenance time for the fleet can launch on time, we are.

However, we do continue to experience ATC related challenges across our system as widely reported the FAA has announced that their New York Air traffic control staffing is at 54% of their 2014 target far short of where it needs to be to avoid significant disruptions and accommodate the industry's growth.

Also continue to invest in technology to aid recovery during our regular operations and what enforcing our schedule and network planning processes to support operational success. We continue to plan the operation with conservativism with schedule buffers and elevated proved reserve levels.

We expect capacity to be up four 5% to seven 5% year over year in the second quarter and for the full year 2023, we are reiterating our expectations for capacity to be up five 5% to eight 5%.

I'd like to thank the FAA for acknowledging the issues and for their close collaboration to ensure the industry minimizes the impact to customers and.

In line with the FAA slot waiver incentive to carriers, we are fine tuning our summer capacity plans to help mitigate believes we can control and provide a better customer experience.

As we've demonstrated in the past few years, we will maintain a nimble approach with capacity should conditions change.

Even with the flight cutbacks, we still expect challenges in the operating environment. This summer the <unk>.

We have many exciting opportunities across our network and we are focused on restoring targeted capacity across our non slotted focus cities.

<unk> has said that delays are expected to vastly increased year over year with our large footprint in the northeast Jetblue is disproportionately exposed to these challenges.

Later this quarter, we expect to launch service to Paris from New York. We're also thrilled to announce this morning that tickets to our third Trans Atlantic Blues City Amsterdam are now out for sale with service beginning in August as we continue strengthening our relevance and our largest focus city and building on our successful mint platform and over.

So we are focused on what we can control like protecting scheduled overnight maintenance time. So the fleet can launch on time. We also continue to invest in technology to aid recovery during irregular operations and we're enforcing our schedule and network planning processes to support operational success, we continue to plan the operation with conservativism.

Longer term, we are delighted to have announced our growth plans in Florida enabled by our combination with spirit, including reaching 200 daily flights at Orlando and more than 250 daily flights at Fort Lauderdale, as we bring more low fares more choice more high quality service and more jobs to Florida.

With schedule buffers in elevated crude reserve levels.

We expect capacity to be up four 5% to seven 5% year over year in the second quarter and for the full year 2023, we are reiterating our expectations for capacity to be up five 5% to eight 5% as we've demonstrated in the past few years, we will maintain a nimble approach with capacity should conditions change.

Turning to revenue in the first quarter, we grew revenue by 34% year over year, driven by leisure and VFR demand strength across our network with load factors increasing throughout the quarter.

For the second quarter, we are forecasting revenue to increase between four five to eight 5% over year year over year. This includes a half a point impact from the recent closure of Fort Lauderdale Airport due to flooding and the immediate aftermath that said demand trends remain very robust into the second quarter, particularly during peak periods.

We have many exciting opportunities across our network and we are focused on restoring targeted capacity across our non slotted focus cities. Later this quarter, we expect to launch service to Paris from New York. We are also thrilled to announce this morning that tickets to our third Trans Atlantic Blues City Amsterdam are now out for sale.

The service beginning in August as we continued strengthening our relevance and our largest focus city and building on our successful <unk> platform and.

In our Latin franchise continues to drive very strong revenue generation with higher year over year loads and yields our revenue guide is based on a continuation of current trends. We are seeing a strong domestic demand environment throughout the U S and are particularly pleased with the continued improvement in our New York City performance.

And over the longer term, we are delighted to have announced our growth plans in Florida enabled by our combination with spirit, including reaching 200 daily flights at Orlando and more than 250 daily flights at Fort Lauderdale, as we bring more low fares more choice more high quality service and more jobs to Florida.

We've also seen a steady recovery in business travel, which was roughly 80% recovered in the first quarter with sequential improvement expected into the second quarter.

Turning to revenue in the first quarter, we grew revenue by 34% year over year, driven by leisure and VFR demand strength across our network with load factors increasing throughout the quarter.

While we did see a brief drop in demand immediately following the banking sector scare. It has now recovered we continue to manage the business to margin and have great confidence in our full year earnings outlook on the back of our better than expected performance in the first quarter.

For the second quarter, we are forecasting revenue to increase between four 5% to eight 5% over year year over year. This includes a half a point impact from the recent closure Fort Lauderdale Airport due to flooding and the immediate aftermath that said demand trends remain very robust into the second quarter, particularly during peak periods.

Our revenue outlook for the remainder of the year is bolstered by strong revenue streams from the NEA are trimble loyalty program and Jetblue travel products.

Starting with the NDA, which is already a meaningful revenue generator for Jetblue as we've grown daily flight offerings in New York City by over 25% versus pre pandemic levels generating significant benefits for consumers in the process.

Our Latin franchise continues to drive very strong revenue generation with higher year over year loads and yields our revenue guide is based on a continuation of current trends. We are seeing a strong domestic demand environment throughout the U S and are particularly pleased with the continued improvement in our New York City performance.

We expect a year over year margin tailwind in New York as EMEA markets continue to mature.

Call for example that we roughly tripled our service at Laguardia in 2022 compared to pre pandemic levels, we're already seeing meaningful margin improvement as our service matures.

We've also seen a steady recovery in business travel, which was roughly 80% recovered in the first quarter with sequential improvement expected into the second quarter. While we did see a brief drop in demand immediately following the banking sector scare. It has now recovered we continue to manage the business to margin and have great confidence in our full year earnings outlook.

Our <unk> loyalty program also continues to show exceptional growth co brand card spend and active membership increased by over 20% in the first quarter and we forecast continued strength as we launch our newly redesigned Chablis program. Later this quarter, we're expanding the ability to earn and redeem points. The addition of benefit for less frequent.

On the back of our better than expected performance in the first quarter.

Our revenue outlook for the remainder of the year is bolstered by strong revenue streams from the NEA are true loyalty program and Jetblue travel products.

<unk> and increased value for our most loyal customers through.

Through these value enhancements, we expect engagement with the loyalty program to continue reaching all time highs this year and beyond.

In addition, as Robin mentioned, we recently enabled travelers to earn true blue points when booking travel beyond just flights through Paisley Paisley, it's fully integrated into Jetblue true Blue and customers, who book travel on Pes label unearned points and achieved True-blue parks. These enhancements are all part of our multi year journey and evolving our true Blue program.

We expect a year over year margin tailwind in New York as the NAA markets continue to mature recall for example that we roughly tripled our service at Laguardia in 2022 compared to pre pandemic levels, we're already seeing meaningful margin improvement as our service matures.

Helping us close the gap to our peers.

I'll close with another thank you to our crew members for delivering for our customers. While we do expect a challenging summer ahead I'm very excited about the incredible path, we paved to set us up for success together, we're focused on executing our plan to generate solid revenue growth and deliver on our cost goals building a better jetblue for all stakeholders.

Our <unk> loyalty program also continues to show exceptional growth co brand card spend and active membership increased by over 20% in the first quarter and we forecast continued strength as we launch our newly redesigned truly program. Later this quarter, we're expanding the ability to earn and redeem points. The addition of benefit for less frequent <unk>.

I'll now turn the call over to you. Thank.

Thank you Joanna I'd like to add my thanks to our crew members through their tremendous efforts and discipline, we are well on our way to delivering on our comprehensive plan to create value for our stakeholders this year and beyond.

<unk>.

And increased value for our most loyal customers.

Through these value enhancements, we expect engagement with the loyalty program to continue reaching all time highs this year and beyond.

In addition, as Robin mentioned, we recently enabled travelers to earn true blue points when booking travel beyond just flights through Paisley Paisley, it's fully integrated into Jetblue, True-blue and customers, who book travel on Paisley will earn points and achieve true Blue parks. These enhancements are all part of our multi year journey and evolving our true Blue program.

We continue to anticipate closing our acquisition of spirit in the first half of 2024 with a dedicated team running our integration management office, we're ensuring that we are thoughtfully and appropriately prioritizing our efforts to ultimately create significant long term value for our owners.

Helping us close the gap to our peers are.

And all of our stakeholders.

Turning to slide nine as Robin mentioned, our first quarter results were ahead of our initial expectations with strong improvement in revenue and non fuel unit costs throughout the quarter somewhat offset by fuel prices I am, especially pleased with our team's continued cost.

Ursula I'll now turn the call over to you. Thank.

Execution as this quarter marked the fifth consecutive quarter, where we met or beat our quarterly cost guidance.

First quarter CASM ex fuel performance was also aided by one point from higher capacity, given fewer than expected weather events and roughly half a point from operational efficiencies.

Through better operational planning going into the quarter, we were able to deliver a better outcome by controlling for factors such as labor premiums and disruption related costs.

We have been successfully implementing our structural cost program, which is supporting our efforts to mitigate cost pressures related to maintenance and rents and landing fees to date, we have already achieved roughly $35 million since launch putting us well on track to drive approximately.

And all of our stakeholders.

<unk> $70 million and cost reduction this year and $150 million to $200 million in cumulative cost savings through 2024.

Execution as this quarter marked the fifth consecutive quarter, where we met or beat our quarterly cost guidance.

In addition, we continue to expect our fleet modernization program to generate over $40 million of savings this year and $75 million through 2024, as we replace our <unk> hundred 90 fleet with the margin accretive <unk> hundred 20.

First quarter CASM ex fuel performance was also aided by one point from higher capacity, given fewer than expected weather events and roughly half a point from operational efficiencies.

Through better operational planning going into the quarter, we were able to deliver a better outcome by controlling for factors such as labor premiums and disruption related costs.

We've already achieved over $30 million in savings with 12, <unk> hundred 90, <unk> retired to date, including 10 currently parked in the desert and two that we sold.

For the second quarter, we're expecting to generate earnings per share between <unk> 35 and 45.

Driven by strong revenue and continued execution on cost.

For the second quarter.

Forecasting CASM ex fuel to increase one five to three 5% year over year, which includes a point of impact from our reduced summer schedule tied to ATC constrained.

<unk> $70 million in cost reduction this year and $150 million to $200 million in cumulative.

Cumulative cost savings through 2024.

And half a point impact from the closure of Fort Lauderdale Airport.

We remain on track to meet our full year CASM ex fuel target of up one five to four 5%.

This does imply a step up in CASM ex in the back half of the year, which is primarily driven by two factors.

We've already achieved over $30 million in savings with 12, even nineties with higher to date, including 10 currently parked in the desert and two that we sold.

An additional step up tied to our pilot agreement, which is about four point total year over year in both the third and fourth quarter and the timing of maintenance events, which is about two points year over year in the fourth quarter.

For the second quarter, we're expecting to generate earnings per share between <unk> 35 and 45.

Driven by strong revenue and continued execution on cost.

Turning to liquidity and balance sheet on slide 10.

For the second quarter, we're forecasting CASM ex fuel to increase one five to three 5% year over year, which includes a point of impact from our reduced summer schedule tied to ATC constraints.

We closed the first quarter with $2 3 billion in liquidity, including our $600 million revolving credit facility, which remains undrawn.

We continue to take a conservative approach to managing our liquidity, especially in light of the step up in aircraft Capex This year and our ongoing shareholder spirit, our ongoing spirit shareholder prepayments.

Half a point impact from the closure of Fort Lauderdale Airport.

We remain on track to meet our full year CASM ex fuel target of up one five to four 5%.

To that end, we've previously shared our intention to finance a portion of our aircraft deliveries this year and we've raised $116 million an aircraft financing year to date.

This does imply a step up in CASM ex in the back half of the year, which is primarily driven by two factors an additional step up tied to our pilot agreement, which is about four point total year over year in both the third and fourth quarter.

We will continue to evaluate a variety of different products and structures for our financing needs, including leases bank debt and capital markets transactions.

And the timing of maintenance events, which is about two points year over year in the fourth quarter.

Before closing I'd like to touch on fuel volatility in New York Harbor jet fuel prices impacted our weighted average fuel price in the first quarter by approximately 26.

Turning to liquidity and balance sheet on slide 10, we.

We closed the first quarter with $2 3 billion in liquidity, including our $600 million revolving credit facility, which remains undrawn.

That said, New York Harbor pricing has since eased and we expect the impact in the second quarter to be approximately 16.

We continue to take a conservative approach to managing our liquidity, especially in light of the step up in aircraft Capex This year and our ongoing shareholder steer our ongoing spirit shareholder prepayments.

Importantly, we continue to look at hedging opportunities to protect our earnings outlook. As a reminder, our approach to fuel hedging is to enter into hedges on a discretionary basis to mitigate the risk from significant volatility and price spikes and we actively monitor the market to.

To that end, we've previously shared our intention to finance a portion of our aircraft deliveries this year and we've raised $116 million in aircraft financing year to date, we will continue to evaluate a variety of different products and structures for our financing needs including.

Take advantage of opportunities when conditions are favorable as of today, we have hedged approximately 23% of our expected fuel consumption for the full year.

In closing I want to thank our crew members for helping to build a stronger jetblue as we significantly improve our financial performance.

Leases bank debt and capital markets transactions.

Before closing I'd like to touch on fuel volatility in New York Harbor jet fuel prices impacted our weighted average fuel price in the first quarter by approximately 26 cents.

Being out of the first quarter I'm excited about the trajectory of the business in the coming quarters and years.

Based on everything we see today, we have confidence in our full year earnings outlook of 70 to one dollar which implies margins approaching 2019 levels as we move through the year.

That said, New York Harbor pricing has since eased and we expect the impact in the second quarter to be approximately 16.

We are well positioned to continue navigating uncertainty around the economic backdrop later in the year as well as ongoing ATC challenges.

We also look forward to closing the spirit transaction to turbocharge, our organic plan and create even more long term value for our stakeholders.

Take advantage of opportunities when conditions are favorable as of today, we have hedged approximately 23% of our expected fuel consumption for the full year.

And with that we will now take your questions.

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

In closing I want to thank our crew members for helping to build a stronger jetblue as we significantly improve our financial performance.

Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on you touched on the phone you will then hear a three ton prompt acknowledging your request and if you would like to withdraw from the question queue. You will need to press star followed by two and if you're using a speaker phone. We do ask that you. Please lift the handset before pressing.

Coming out of the first quarter I'm excited about the trajectory of the business in the coming quarters and years.

Based on everything we see today, we have confidence in our full year earnings outlook of 70 cents to a dollar which implies margins approaching 2019 levels as we move through the year, we are well positioned to continue navigating uncertainty around the economic backdrop.

Please go ahead and press Star one now if you have any questions. Thank.

And your first question will be from Savi <unk> Raymond.

Raymond James Please go ahead.

Hi, Good morning, everybody. This is Matt on for Bobby.

Your first question when I look at the implied margin guide for two Q you still late in 2019 levels by several points. So maybe could you provide some color on any specific cost lines that might have moved structurally higher.

In the year as well as ongoing ATC challenges.

We also look forward to closing the spirit transaction to turbocharge, our organic plan and create even more long term value for our stakeholders.

And how you think those items could be improved to close the margin gap versus peers.

And with that we will now take your questions.

Yeah. Thanks for the question Matt.

Thanks, everyone. So we are now ready for the question and answer session. Please go ahead with the instructions. Thank you ladies and gentlemen, if you would like to ask a question. Please press star followed by one on you touched on the phone you will then hear a three time prompt acknowledging your request and if you would like to withdraw from the question queue, you will need to press star followed by.

So our objective is to get the business back to consistent profitability, while approaching 19 levels of profitability.

Our Q2 guide is the first step in that process and actually significantly.

<unk> with the CASM ex fuel guide for the quarter. So it's up one five to three and a half and we essentially called out a point and a half of headwinds a point is associated with the investment that we're making in pulling down capacity driven by ATC constraints in New York and the other.

And if you're using a speaker phone we do ask that you. Please lift the handset before pressing any keys. Please go ahead and press Star one now if you have any questions.

And your first question will be from Savi.

Raymond James Please go ahead.

Hey, good morning, everybody. This is bad.

A half point of CASM ex fuel is driven by the Fort Lauderdale Airport closure. So net net if you back out that one five points.

Avi.

First question when I look at the implied margin guide for <unk>.

Still late in 2019 levels by several points. So maybe could you provide some color on any specific cost lines that might have moved structurally higher.

I'm pleased with our controllable cost guide and essentially we would be I think what the consensus is out there on the cost side of the equation. So we're confident in the 35 to 45 EPS for the quarter and it puts us on a path to more closely come in line with 19 profitability levels as we know.

How you think those items could be improved to close the margin gap versus peers.

Yeah. Thanks for the question Matt.

So our objective is to get the business back to consistent profitability, while approaching 19 levels of profitability. Our Q2 guide is the first step in that process I'm actually significantly please.

Sure.

For the year.

Okay. Thanks for the additional color there.

Now also in the presentation you referenced the return to seasonality. So maybe could you provide some additional color on the impact you think that'll have on QQ and any additional color on how to queue is trending in terms of booking rates to date, and our material litigation rates changing or increases increasing like we've.

Pleased with the CASM ex fuel guide for the quarter. So it's up one and a half to three and a half and we essentially called out a point and a half of headwinds appoint is associated with the investment that we're making in pulling down capacity driven by achy ATC constraints in New York and the <unk>.

On other calls.

You very much.

Hi, Good morning, Matt This is Dave I'll take that one overall, we feel really good about the demand we're seeing out there very strong internationally strong domestically as well the peaks remains very strong driven by this leisure demand. So whether it was the holidays at the end of the year or spring break we've seen very strong demand and the peaks we expect the same for.

Other half point of CASM ex fuel is driven by the Fort Lauderdale Airport closure. So net net if you back out that one five points I'm I'm pleased with our controllable cost guide and essentially we would be I think what the consensus is out there on the cost side of the equation. So.

This coming summer.

We're confident in the 35 to 45 cents EPS for the quarter and it puts us on a path to more closely come in line with 19 profitability levels as we navigate through the year.

And as you know the end of this quarter. So a very strong April with a peak stronger strong into the peak may will be it's a bit of a shoulder period. So it will probably be.

A bit lower but that's what we experienced.

Okay.

Okay. Thanks for the additional color there.

Just about every year and in general that the seasonality is returning towards normalcy with just the peaks a bit higher and then the trough obviously have a bit of a headwind from the corporate travel which is.

Also in the presentation you referenced the return to seasonality. So maybe could you provide some additional color on the impact that'll have on <unk> and <unk>.

As mentioned before about 80% recovery, so that's creating a bit more of a peak to trough ratio than we saw before but in general feeling really good about demand throughout the network.

Any additional color on how <unk> is trending in terms of booking rates to date, and where material litigation rates changing or increases increasing like we've heard on other calls.

Okay, Thanks and quickly.

Could you touch on how much it has been booked to date or changes in material adoption rates in that quarter as well.

Thank you very much.

Hi, Good morning. This is Dave I'll take that one overall, we feel really good about the demand we're seeing out there very strong internationally strong domestically as well.

Sure. We're about two thirds booked to date for the second quarter Thats normal for US we have seen the booking curve elongate somewhat.

<unk> remained very strong driven by this leisure demand so whether it was the holidays at the end of the year or spring break we've seen very strong demand on the peaks. We expect the same for this coming summer, including gene at the end of this quarter. So a very strong April with the peaks are strong as we enter the peak may will be you know, it's a bit of a shoulder period.

Over the past couple of quarters, but I'm still roughly two thirds.

Okay. Thank you.

Thank you next question will be from Andrew <unk> of Bank of America. Please go ahead.

Yeah.

Hi, good morning, everyone. Thanks for the questions.

Just in terms of kind of the change in your capacity given the ATC issues in the market how should we think about your potential being able to reallocate some of that flying.

So it'll probably be a.

A bit lower but that's what we experienced just about every year and in general the seasonality is returning towards normalcy with just the peaks a bit higher and then the trough obviously have a bit of a headwind from the corporate travel which is as mentioned before about 80% recovery. So that's creating a bit more of a peak to trough ratio.

In terms of how much of the cut capacity in New York do you think you can backfill into other markets.

Hey, Andrew this is Joanna thanks for the question.

I'll provide sort of a broader answer and then get specifically into your capacity redeployment question. So we're obviously very concerned about New York City for the summer.

And then we saw before but in general feeling really good about demand throughout the network.

Okay. Thanks, and quickly could you touch on how much <unk> been booked to date or changes in material inflation rates in that quarter as well.

<unk> continues to be significantly understaffed as we've said in the prepared remarks. This is a continuing issue and frankly I'm only getting worse. This summer. So we do appreciate the transparency around their staffing challenges.

Sure. We're about two thirds booked to date for the second quarter Thats normal for US we have seen the booking curve elongate somewhat over the past couple of quarters, but I'm still roughly two thirds.

It's obviously a concern across the NASS, but more acute in the New York region.

Okay. Thank you.

Thank you next question will be from Andrew <unk> of Bank of America. Please go ahead.

And while we are pleased that the FDA has given carriers relief on the slots I mean this is obviously something that's not good for customers.

Hi, good morning, everyone. Thanks for the question.

I guess just in terms of kind of the change in your capacity given the ATC issues in the market.

And it's not good for Jetblue coming with pretty significant financial impact.

How should we think about your potential being able to reallocate some of that flying in I guess in terms of how much of the cut capacity in New York do you think you can backfill into other markets.

Into Q2 and potentially into Q3. So while this is the right decision for us given the need to protect the operation.

This is going to be our most challenging summer ahead.

Hey, Andrew This is Joanna thanks for the question, we don't provide sort of a broader answer and then get specifically into your capacity redeployment question. So we're obviously very concerned about New York City for the summer.

We are not going to be redeploying the capacity that we pulled if you look at our network footprint. Because we are so concentrated in New York and the northeast and because there are staffing challenges across the entire nast.

<unk> continues to be significantly understaffed as we said in the prepared remarks. This is a continuing issue and frankly I'm only getting worse. This summer. So we do appreciate the transparency around their staffing challenges.

Our decision is to.

Reinvest those crews in a higher reserves.

And reinvest that aircraft in additional aircraft time to help mitigate the delays that we expect that we're going to see this summer.

It's obviously a concern across the NASS, but are more acute in the New York region.

Is definitely a challenging environment. We're frustrated our customers are frustrated we do appreciate the fact that the FAA is working with us and being transparent, but this is something that needs to get fixed and unfortunately, there is not a short term fix to it.

And while we are pleased that the FDA has given carriers relief on the slots on this is obviously something that's not good for customers and it's not good for jetblue coming with pretty significant financial impact.

So that's the decision we've made for the summer.

And we'll navigate on as best we can as these challenges arise.

Into Q2 and potentially into Q3. So while this is the right decision for us given the need to protect the operation.

That's really helpful. Thank you.

Just a second question Robin when I think about kind of strategically over over the longer term just in terms of the fleet given everything going on with the Oems.

This is going to be our most challenging summer ahead, we are not going to be redeploying the capacity that we pulled if you look at our network footprint. Because we are so concentrated in New York and the northeast and because there are staffing challenges across the entire nast.

And whatnot just in the event the spirit deal does not go through how do you think your long term growth profile changes given kind of your order book shrinks, a little bit starting in 'twenty four 'twenty five.

Our decision is to reinvest those crews in a higher reserves.

And reinvest that aircraft in additional aircraft time to help mitigate the delays that we expect that we're going to see this summer.

Thanks for the question, Andrew and of course, I'm going to I'm going to start by giving you.

Strike by the answer of saying, we're confident in our case and the spirit transaction.

Closing because it's great for consumers.

If it doesn't then I think clearly we still have an order book, we are challenged by delays as other airlines and we would have to look at opportunities.

So that's the decision we've made for the summer.

Both short to medium term in the leasing market and then longer term to layer in sort of additional position.

And we'll navigate as best we can as these challenges arise.

Positions, but.

That's really helpful. Thank you.

I think everything we've got is focused on the <unk> transaction I think.

Then just the second question Robin when I think about kind of strategically over over the longer term just in terms of the fleet given everything going on with <unk> with the Oems.

I look at the government challenges and keeping FAA staff, which is a problem is in the making and is joining us. It has just been getting worse I think it just as the importance of jetblue expanding its national footprint and we wanted to do that not by pulling down New York, Because New York is home, where the hometown airline review, we're proud to be based on.

And whatnot in the event the spear deal does not go through how do you think your long term growth profile changes given kind of your order book shrinks, a little bit starting in 'twenty four 'twenty five.

New York City.

By building a more national presence and spirit is going to help us do that much quicker than we would be able to do.

Thanks for the question, Andrew and of course, I'm going to I'm going to start by giving you your.

Strike by the answer of saying, we're confident in our case and the spirit transaction.

We can bring those benefits to consumers and the employees of both airlines our crew members met team members more quickly.

Closing because it's great for consumers.

If it doesn't then I think clearly we still have an order book, we are challenged by delays as other airlines and we would have to look at opportunities.

Great. Thank you everyone.

Thank you next question will be from Jimmy Baker of Jpmorgan. Please go ahead.

Both short to medium term.

Yeah.

Hey, good morning, everybody.

In the lithium market and then longer term to layer in sort of additional positions.

Actually I was thinking what you should do for your earnings deck in the future as feature analyst photos taken from Jetblue flights and <unk> picture is great, but it would be a lot of fun to.

Positions, but.

I think everything we've got is focused on the <unk> transaction I think.

I look at the government challenges and keeping FAA staff, which is a problem is in the making and as Jeremy said has just been getting worse I think it just as the importance of jetblue expanding its national footprint and we wanted to do that not by pulling down New York, Because New York is one where the hometown airline review we are proud to be based on.

Try to go for a run for the money.

So the second quarter question that was asked before about the margin deficit relative to 2019.

Obviously, something that jumped out to us as well.

I think I've missed something at the end of your prepared remarks, you said margins for the year would be approaching those of 19 I mean did you did you mean moving in the right direction, we're actually starting to rival those margins. So I'm just trying to square what I think I might have misunderstood.

New York City.

But by building a more national presence and spirit is going to help us do that much quicker than we would be able to do.

They'll bring those benefits to consumers and the employees of both airlines our crew members and their team members more quickly.

Against the $72 EPS guide.

Great. Thank you everyone.

Yes, thanks for the question Jami and I have been telling everyone that it's.

Thank you next question will be from Jimmy Baker of J P. Morgan. Please go ahead.

Its fair game anyone can.

Amit Pictures to again on the cover of our earnings presentation.

Yeah.

Hey, good morning, everybody.

So thanks for the question I think as we navigate through the year, we're making progress towards achieving 2019 margin levels.

Actually I was thinking what you should do for your earnings deck in the future as feature analyst photos taken from Jetblue flights <unk> picture is great, but it would be a lot of fun.

Feel good about the momentum that the business has heading into the second quarter, the revenue and demand environment and continue to be really strong.

Try to go for a run for the money.

So the second quarter question that was asked before about the margin deficit relative to 2019.

We navigate in the back half of this year, we actually are in a position where unit revenue.

Obviously, something that jumped out to us as well, but I think I've missed something at the end of your prepared remarks, you said margins for the year would be approaching those of 19 I mean did you did you mean moving in the right direction, we're actually starting to rival those margins. So I'm just trying.

It could be slightly down year over year, as we cycle against some very strong comp and that seems reasonable and achievable, especially in light of the revenue initiatives that we have.

We've got the NEA and New York continues to recover we are pleased with the progress that we've been seeing but it continues to be a tailwind.

Square, what I think I might have misunderstood again 70 per dollar EPS guide.

Yes. Thanks for the question Jami and I have been telling everyone that it's fair game anyone can submit pictures to again on the cover of our earnings presentation.

As we roll out our loyalty program, we will continue to make.

Progress as well as Jetblue travel products and I'm extremely pleased with the cost execution and the progress of our structural cost program. So that's what gives us confidence in our full year EPS number and as I mentioned, the first milestone is making progress toward <unk>.

So thanks for the question I think as we navigate through the year, we're making progress towards achieving 2019 margin levels I feel good about the momentum that the business has heading into the second quarter, the revenue and demand environment continue to be really strong and as we know.

2019 margin level got it got it okay.

That's really helpful. And then just on fuel hedging program is obviously still in its infancy, but by the looks of things.

And again in the back half of this year, we actually are in a position where unit revenue.

Could be slightly down year over year, as we cycle against some very strong comp and that seems reasonable and achievable, especially in light of the revenue initiatives that we have.

Might already be underwater I can't say for certain but just looking at the $3 50 all in during.

During the first quarter and how New York Harbor have settled down at the forward curve.

Do you assume you lose money on your hedges this year.

We've got the NEA and New York continues to recover we are pleased with the progress that we've been seeing but it continues to be a tailwind.

And we do at the moment, but there it's immaterial.

Okay Alright helpful. Okay. Thank you everybody.

As we roll out our loyalty program will continue to make.

Jeremy a very happy birthday, I don't want you thinking that we have forgotten us.

<unk> as well as Jetblue travel products and I'm extremely pleased with the cost execution and the progress of our structural cost program. So that's what gives us confidence in our full year EPS number and as I mentioned, the first milestone is making progress toward.

Thank you never do thank you, Rob and I appreciate that thank you very much.

Thank you next question will be from Mike Lindenberg of Deutsche Bank. Please go ahead.

Yeah, Hey, good morning, everyone, Hey, Joanne I wanted to go back to the point that you made about no short term fix with the aerospace issues, specifically in New York and the FAA is I guess, what you said.

2019 margin level got it got it okay.

Really helpful and then just on fuel.

At 54% staffed up at the levels that they need to be what's the risk that we.

<unk> program is obviously still in its infancy, but by the looks of things you might already be underwater I can't say for certain but just looking at the $3 50 all in.

Get to September and I realize mid September on things slow a bit.

Given 54% and no short term fix.

During the first quarter and how New York Harbor has settled down.

Are you going to have to go back to the FAA or are they going to come back to you and say can you guys continue to run an abbreviated schedule.

At the forward curve.

Do you assume you lose money on your hedges this year.

Yes. So the real question just yes, just to be clear, it's it's 54% of 2014 staffing level. So I don't know who manages the 2014 in the year 2023, but it's a 2014 staffing level I think that's an important point.

And we do at the moment, but there it's immaterial.

Okay Alright helpful. Okay. Thank you everybody, Jamie a very happy birthday, I don't want you thinking that we have forgotten us.

The second piece is we don't expect a problem. This fall obviously, it's a trough and this has been an ongoing issue for years, it's gotten worse. So we managed through the challenges we have built an operation around trying to mitigate our regular operations. So it's something.

Thank you never do thank you, Rob and I appreciate that thank you very much.

Thank you next question will be from Mike Lindenberg of Deutsche Bank. Please go ahead.

Given our footprint that we have gotten quite good at but we don't expect the fall itself to be to be a problem. But this is a multiyear kind of path of Fas down to try to remedy it staffing shortages and and it's not going to it's not going to.

At 54% staffed at the levels that they need to be.

What's the risk that we get to September and I realize mid September on things slow a bit, but given 54% and no short term fix.

To get fixed in the near time were significantly presents itself is in convective weather activity and when there are peak periods and there is just a lot of travel.

Are you going to have to go back to the FAA or are they going to come back to you and say can you guys continue to run an abbreviated schedule.

Okay, Great and then just my second question I guess, maybe this is Dave just.

Yes, great question, Yeah, just to be clear, it's it's 54% of 2014 staffing levels. So I don't know who manages the 2014 in the year 2023, but it's a 2014 staffing levels I think that's an important point.

Within the context of demand trends remaining robust I mean, we're hearing that from other carriers I think one other carriers I did call out some softness to Heathrow I think it's more just a function of everybody being forced to utilize slots right now under the use it or lose it rule or.

Im not sure if youre seeing that I mean, you said, you're a relatively small player maybe youre not seeing it to and from Heathrow to Boston and New York and then I think there's been some comment about maybe transcon and pricing any any markets in particular, where maybe you are seeing some softness.

Given our footprint that we've gotten quite good at but we don't expect the fall itself to be to be a problem. But this is a multiyear kind of path of Fas down to try to remedy it staffing shortages and and it's not going to it's not going to.

And within the context that overall demand is actually quite good the majority of your markets. Thank you.

Good morning, Mike.

And thanks for the question and no I'd say, there's no parts of our network, where I would say, we're seeing any softness at the highest levels. Those markets that did have a very high business mix before COVID-19 has seen the biggest traffic reduction, but we've appropriately skilled capacity in those two account for that so we feel pretty good.

To get fixed in the near time were significantly presents itself is and conduct of weather activity and when there are peak periods and there is just a lot of travel.

Our European.

Okay, Great and then just my second question I guess, maybe this is Dave just.

Markets continue to ramp well, we're pleased to be at five flights to London, a day from New York and Boston combined.

Within the context of demand trends remaining robust I mean, we're hearing that from other carriers I think one other carrier, though did call out some softness to Heathrow I think it's more just a function of everybody being forced to utilize slots right now under the use it or lose it rule.

And to have that second Heathrow from New York flight in there on a daily basis. So no concerns for us as we look ahead to the summer for Europe seeing very strong early demand trends. So feeling quite good about the continued progress and ramp of our European franchise.

Im not sure if youre seeing that I mean, you said you are a relatively small player maybe youre not seeing at June from Heathrow to Boston and New York and then I think there's been some comment about maybe transcon and pricing any any markets in particular, where maybe you are seeing some softness.

Great. Thank you.

Thank you next question will be from Duane.

Evercore ISI. Please go ahead.

Hey, thanks.

And then within the context that overall demand is actually quite good the majority of your markets. Thank you.

I wanted to ask you about your hotel inventory on Jetblue travel products.

Good morning, Mike and thanks for the question and no I'd say, there's no parts of our network, where I would say, we're seeing any softness at the highest levels. Those markets that did have a very high business mix before COVID-19 has seen the biggest traffic reduction, but we are appropriately scaled capacity in those two account for that so we feel pretty good.

Or are you getting your hotel inventory from.

And are you working to create direct relationships with hotels in this business.

And I guess, just broadly do you have any anecdotes as to why the value proposition is more compelling to our customer then booking separately or maybe through an OTA.

Our European.

Markets continue to ramp well, we're pleased to be up five flights to London, a day from New York and Boston combined.

Hi, Duane and thank you for the question.

A couple of pieces, we do have direct relationships with hotels.

And to have that second Heathrow from New York played in there on a daily basis. So no concerns for us as we look ahead to the summer for you're seeing very strong early demand trends. So feeling quite good about the continued progress and ramp of our European franchise.

And we do see that that helps a lot on the servicing side and to create a compelling value proposition for customers.

We do also supplement that with.

Other third parties that we source, but the vast majority of our bookings are the hotels, we have direct relationships with.

Great. Thank you.

Thank you next question will be from Duane <unk> with Evercore.

And then in terms of the value proposition.

It's taking what made Jetblue airlines special which is not having to pick between good price and good service and taking out the broader travel and I think thats what customers are appreciating.

Evercore ISI. Please go ahead.

Hey, thanks.

I wanted to ask you about your hotel inventory on Jetblue travel products.

I appreciate that and then maybe just a little.

Or are you getting your hotel inventory from and are you working to create direct relationships with hotels in this business.

Modeling one just for my follow up on on hedges.

Can you comment on the values and your hedge disclosure represent floors and it seems like they would be sort of modestly out of the money today. Thanks for thanks for taking the questions.

And I guess, just broadly do you have any anecdotes as to why the value proposition is more compelling to our customer then bookings separately or maybe through an OTA.

Yeah. Thanks for the.

Hi, Duane and thank you for the question.

Question, Duane So just as a reminder.

Couple of pieces, we do have direct relationships with hotels.

We view hedging as a way to.

And we do see that that helps a lot of them.

Mitigate risk and volatility in the market there were always monitoring the market.

Servicing side and to create a compelling value proposition for customers.

We do also supplement that with.

Found a period after the banking crisis, where pricing made sense for us to re enter the hedging market in a meaningful way. So that's when we.

Other third parties that we source, but the vast majority of our bookings are the hotels, we have direct relationships with.

And then in terms of the value proposition.

Layered on most of these hedges so.

It's taking what made Jetblue airlines special which is not having to pick between good price and good service.

We feel okay about them, we get to participate in downside and downside in the downside obviously the way. These are structured structured in terms of when prices fall.

Thinking about the broader travel and I think that's what customers I appreciate it.

I appreciate that and then maybe just a little.

And confirm and I can confirm that there are slightly out of the money at the moment.

Modeling one just for my follow up on on hedges can.

Okay. Thank you.

Can you comment on the values and your hedge disclosure represent floors and it seems like they would be sort of modestly out of the money today. Thanks for thanks for taking my questions.

Thank you next question will be from Dan Mckenzie from Seaport Global. Please go ahead.

Hey, good morning, Thanks, guys.

Going back to the script on planning the operation conservatively and buffering operations in New York City.

Yeah. Thanks for the.

Question, Duane So just as a reminder.

You touched on the cost hit in the script I am wondering what the revenue hit is from that that loss flying and I guess, where I'm going there theres, a pretty big profit impact and what I believe is 50% of the fine that should go away at some point it would be great. If you could just kind of give us a sense for what that might look like and whether it's going to take a fully staffed.

We view hedging as a way to.

Mitigate risk and volatility in the market there were always monitoring the market.

We found a period after the banking crisis, where pricing made sense for us to re enter the hedging market in a meaningful way. So that's when we.

ATC to get back to that historical $3 EPS target.

Layered on most of these hedges so.

Good morning, Dan. Thanks for the question. This is Dave as we pull down on New York City Flying we did it pretty surgically to ensure that we are hitting.

We feel okay about it when we get to participate and downside and downside in the downside obviously the way that these are structured structured in terms of when prices fall.

Shorter haul routes smaller gauge flights.

And confirm and I can confirm that there are slightly out of the money at the moment.

And routes that generally.

We felt would have the least impact if they lost a frequency so based on that with the capacity impact of the poll as well as any revenue impact is quite a bit less than the departure pool. So we put about 10% of departures out of our capacity is much much smaller than that and the revenue is really to be determined we have initial estimates, but we'll see as we go through the quarter.

Okay. Thank you.

Thank you next question will be from Dan Mckenzie from Seaport Global. Please go ahead.

Hello, Hey, good morning, Thanks, guys.

Going back to the script on planning the operation conservatively and buffering operations in New York City.

How things come in so it's tough to size of the moment, Dan if I could just add I mean, we're very prepared for this summer. Most airlines are unfortunately, the FAA is not and so these are obviously the steps that we've had to take but last summer. We made a number of investments to try to insulate the operation from air traffic control challenges.

You touched on the cost hit in the script I'm wondering what the revenue hit is from that that last line and I guess, where I'm going there theres, a pretty big profit impact and what I believe is 50% of the fine that should go away at some point it would be great. If you could just kind of give us a sense for what that might look like and whether it's going to take a fully staffed.

Some of which were transient nature some of which.

<unk> to get back to that historical $3 EPS target.

It stayed with us things like investing in more people and crude services and planning the network in a way that.

Good morning, Dan. Thanks for the question. This is Dave as we pulled down our New York City Flying we did it pretty surgically to ensure that we are hitting.

Allows us to more easily manage days, where there are whether it's convective activity. So a higher percent of outback slate that enabling you to kind of cleanly cut those flights and contain it to a specific a specific route. We've also made a number of investments in technology, new solver that enables us to more quickly repair flight. So you know as we think.

Shorter haul routes smaller gauge flights.

And routes that generally.

We felt would have the least impact if they lost a frequency so based on that but the capacity impact of the poll as well as any revenue impact is quite a bit less than the departure pool. So we put about 10% of departures out of our capacity is much much smaller than that and the revenue is really to be determined we have initial estimates, but we'll see as we go through the quarter.

Jetblue footprint in the northeast, we are making operational decisions planning decisions and investments to enable us to operate in this aerospace because this is something that's not going to change in the very in the very near term.

How things come in so it's tough to size up the moment, Dan if I could just add I mean, we're very prepared for this summer. Most airlines are unfortunately, the FAA is not and so these are obviously the steps that we've had to take but last summer. We made a number of investments to try to insulate the operation from air traffic control challenges.

Obviously have more reserves as most carriers do the capacity pull the summer in New York has enabled us to.

Kind of redistribute those reserved a couple of points into into our operational plans. So that we're more resilient for the summer, but we're fully prepared for the summer timeframe. We are fully prepared for the next few years of challenges that we expect will present themselves because of this ADC staffing shortage, we need the FAA.

Some of which were transient nature some of which.

Have stayed with us things like investing in more people and crude services and planning the network in a way that.

To continue to focus on a longer term fix because this is coming out of cost to jetblue and frankly across the customer's customers deserve and shed should get more out of.

Out of the FAA in terms of the services that they provide.

Yes, very good.

Second question here as we think about the 2023 revenue outlook I'm just wonder if you can flush that out a little bit more.

Jetblue footprint in the northeast, we are making operational decisions planning decisions and investments to enable us to operate in this aerospace because this is something thats not going to change in the very in the very near term.

And I Wonder if you can speak to the revenue recovery in the capacity constrained airports in 2022 and to what extent Jetblue RASM. It at those airports lag the industry and how last year's trends are inflicting and contributing to the outlook. This year. So the RASM hit.

Obviously have more reserves as most carriers do the capacity pull this summer in New York has enabled us to.

Kind of redistribute those reserved a couple of points into into our operational plans. So that we're more resilient for the summer, but we're fully prepared for the summer timeframe. We're fully prepared for the next few years of challenges that we expect will present themselves because of this ADC staffing shortage, we need the FAA.

What the RASM hit was from overcapacity last year in the constrained airports.

And I'll, let trends this summer are eating those airports this year.

Thanks, Dan This is Dave I'll take that one clearly in 2022, we had a headwind in <unk>.

Our slot at airports.

Luiz came back into effect and us and the rest of the industry needed to fly those slots, which ramped up capacity a bit faster than the demand was ramping up. We also in addition to that our strong growth in New York City.

To continue to focus on a longer term fix because this is coming out of cost to jetblue and frankly across the customer's customers deserve and shed should get more out of.

Tabled by the northeast Alliance led to a lot of capacity that was relatively new and that capacity. It always goes to ramp. We're now seeing the flip side those headwinds last year have turned into a tailwind this year, which is great and I think maybe the easiest way to size. It because if you look at the first quarter was just completed our New York City year over year, RASM was 10 points better.

Out of the FAA in terms of the services that they provide.

Yes, very good.

Second question here as we think about the 2023 revenue outlook I'm just wonder if you can flush that out a little bit more.

And the rest of our system. So we're seeing that catch up happening, it's still it's still behind it.

Not caught up to where it was relative to the system before COVID-19, but a 10 point improvement last quarter on a year over year basis, obviously shows the rate at which it's starting to catch up.

What the RASM hit was from overcapacity last year in the constrained airports.

And I'll, let trends this summer are eating those airports this year.

Yeah. Thanks, so much guys.

Thank you next question will be from Catherine O'brien of Goldman Sachs. Please go ahead.

Thanks, Dan This is Dave I'll take that one clearly in 2022, we had a headwind.

Hi, good morning, everyone. Thanks for your time.

And our slot at airports.

So maybe just on the maintenance costs, you called out that maintenance expense will be a headwind in the second half and gave us some good information on the on the <unk> specifically.

User lose came back into effect and us and the rest of the industry needed to fly those slots, which ramped up capacity, but customer demand was ramping up. We also in addition to that our strong growth in New York City.

Can you just help us think about them.

Enabled by the northeast Alliance led to a lot of capacity that was relatively new in that capacity that was supposed to ramp.

Is like the magnitude of the timing impact this year.

I know this is always going to be lumpy around events, but as 2023, a good comp for this year or romance events still elevated from a pandemic recovery perspective.

<unk> seen the flipside those headwinds last year have turned into a tailwind this year, which is great and I think maybe the easiest way to size. It because if you look at the first quarter was just completed our New York City year over year, RASM was 10 points better than the rest of our system. So we're seeing that catch up happening it's still it's still behind it.

Hey, Thanks for the question good morning.

It is always going to be somewhat volatile, it's really just driven by the number of events within the quarter and it just happens to be.

Not caught up to where it was relative to the system before COVID-19, but a 10 point improvement last quarter on a year over year basis, obviously shows the rate at which it's starting to catch up.

The fourth quarter this year at somewhat heavier than what we saw.

Last year, so there's going to be volatility, we will try to be as transparent as possible as we navigate I think the important thing here is that our full year CASM ex fuel guide, we're reiterating and this was expected we knew that we were going to have a meaningful step up in the fourth quarter of this year.

Yeah. Thanks, so much guys.

Thank you next question will be from Catherine O'brien of Goldman Sachs. Please go ahead.

Hi, good morning, everyone. Thanks for your time.

So maybe just on the maintenance costs, you called out that maintenance expense will be a headwind in the second half and gave us some good information on the on the <unk> specifically.

Got it and then maybe just on your European service, you've always hinted that it'd be London in a couple of other cities, where you have gaps.

Can you just help us think about them.

Is like the magnitude of the timing impact this year.

Here in New York City, and Boston fires does Amsterdam round out that list or could there be more should we still think about Europe as a couple of percentage points of total capacity fully ramped or has anything changed based on the initial performance of these routes.

I know it is always going to be lumpy around events, but as 2023, a good comp for Nuomi this year or a man's events still elevated from a pandemic recovery perspective.

Sure. Thanks, Katy this is Dave I think the easiest way to look at it is with our fleet plan, which has about 26 transatlantic capable aircraft in at both the Airbus <unk> hundred 21 LR XLR.

Hey, Thanks for the question good morning.

Maintenance is always going to be somewhat volatile, it's really just driven by the number of events within the quarter and it just happens to be.

Looking at what we've now announced between London, Paris, and Amsterdam as those ramp up.

The fourth quarter this year at somewhat heavier than what we saw.

We'll be about.

Last year, so there's going to be volatility, we'll try to be as transparent as possible as we navigate I think the important thing here is that our full year CASM ex fuel guide, we're reiterating and this was expected we knew that we were going to have a meaningful step up in the fourth quarter of this year.

10 flights per day and take care about the first 11 of those 26 airplanes. So theres certainly more trans Atlantic capable aircraft coming.

Take sort of a year or two to get to them.

The order book, but we expect based on our initial results to continue growing we now have the big three markets, which really adds relevance for us in the north Atlantic After that I think you can see us be a bit more sort of creative and spread over where we want to go in and use some of the features of our aircraft that are unique and fits the markets really well.

Got it and then maybe just on your European service, you've always hinted that it'd be London in a couple of other cities, where you have gaps.

Here in New York City, and Boston fires does Amsterdam round out that list or could there be more you know should we still think about Europe as a couple of percentage points of total capacity fully ramped or has anything changed based on the initial performance of these routes.

So more to come but for most of next year, you'll see us ramping up these markets we've already announced.

Yes.

Thank you.

Sure. Thanks, Katy this is Dave I think the easiest way to look at it is with our fleet plan, which has about 26 transatlantic capable aircraft in at both the Airbus <unk> hundred 21 LR XLR.

Thank you next question will be from Helane Becker at TD Cowen. Please go ahead.

Thanks, very much operator, hi team thanks for the time.

Fort Lauderdale issues that you had with the weather I'm wondering if there are any read throughs that you can take for how the team handled it.

Looking at what we've now announced between London, Paris, and Amsterdam as those ramp up.

It will be about.

Into handling other disruptions elsewhere in the network when they occur.

10 flights per day, and think about the first 11 of those 26 airplanes. So theres certainly more transatlantic capable aircraft coming in.

Hey, Helane thanks.

I'll start with sort.

Every time there is an event we do a post action review and in this case the team, whether it's Broward County Aviation Department, and Mark and his team or the Jetblue team.

It will take sort of a year or two to get to them.

Two the order book, but we expect based on our initial results to continue growing we don't have the big three markets.

Which really adds relevance for us in the North Atlantic after that I think you can see us be a bit more sort of creative and spread over where we want to go in and use some of the features of our aircraft that are unique in the market is really well.

There's always learnings, but overall the team did an exceptionally good job not only do we.

Have to restart the operation one operation down to restart the operation. We also have to support the crew members who are impacted in the local communities because they've been personally hate losing cars and things of that nature and so.

So more to come but for most of next year, you'll see us ramping up these markets we've already announced.

Given that we have a footprint in the northeast and we see a lot of these types of events and we've gotten pretty good at managing irregular operations, obviously theres nuances to each one of them, but this one I think the team did an exceptionally exceptionally good job in.

Thank you.

Thank you next question will be from Helane Becker at TD Cowen. Please go ahead.

Thanks, very much operator, hi team thanks for the time.

Taking care of the safety of our customers and our crew members and then restarting the operation when it was safe safe to do so but yes, we do an after action report on all of these so that we can take learnings and incorporate them into the next event.

Fort Lauderdale issues that you had with the weather I'm wondering if there are any read throughs that you can take for how the team handled that.

Into handling other disruptions elsewhere in the network when they occur.

Okay. That's really helpful. Thank you and then my follow up question is just on kind of going from first half breakeven, which is looks like on an adjusted earnings basis, where you'll be to profit of 70 cents to a dollar in.

Hey, Helane thanks.

I'll start with sort.

Every time there is an event we do a post action review and in this case the team, whether it's Broward County Aviation Department, and Mark and his team or the Jetblue team.

I guess in the second half right. So how are you thinking about the third and fourth quarter. The third should normally be a very strong corner fourth maybe not so good.

There's always learnings, but overall the team did an exceptionally good job not only do we.

But I'm wondering how we should think about bridging that.

Our breakeven to it somewhere between 70% and a dollar thanks Joe.

Given that we have a footprint in the northeast and we see a lot of these types of events and we've gotten pretty good at managing irregular operations, obviously, there's nuances to each one of them, but this one I think the team did an exceptionally exceptionally good job in.

Good morning, Helane, obviously in the first quarter of this year.

It's typically always the seasonally weakest.

So then the year tends to ramp from there what.

Taking care of the safety of our customers and our crew members and then restarting the operation when it was safe safe to do so but yeah. We do an after action report on all of these so that we can take learnings and incorporate them into the next event.

What you have to believe for us to achieve the 70 to $1 is that we continue to see a strong demand and revenue environment I mentioned earlier.

Okay. That's really helpful. Thank you and then my follow up question is just on kind of going from first half breakeven, which is looks like on an adjusted earnings basis is where it'll be two profit of 70 cents to a dollar in.

Our full year guidance allows for unit revenue to be slightly down year over year, and we are cycling through obviously strong comp year over year, but that seems reasonable given the.

The jetblue initiatives that we have in place right continued recovery in New York Jetblue loyalty program.

I guess in the second half right. So how are you thinking about the third and fourth quarter. The third should normally be a very strong corner fourth maybe not so good.

Launching our.

And then as well as Jetblue travel products. So on a topline perspective, that's what you need to believe.

But I'm wondering how we should think about bridging that breakeven.

On the cost execution side I'm very pleased that for five quarters in a row, we've either met or beat our controllable cost guidance and so the continued execution of the structural cost program in the second half of the year I feel really confident and so those are the things.

Breakeven to it somewhere between 70 cents on the dollar thank you.

Good morning, Helane, obviously in the first quarter of this year.

Typically always the seasonally weakest.

So then the year tends to ramp from there.

That we feel good about and very strong that we can deliver the 70 cents to a dollar.

You have to believe for us to achieve the 70 to $1 is that we continue to see a strong demand and revenue environment I mentioned earlier our.

That's very helpful. Thank you.

Thank you next question will be from Connor Cunningham at <unk>.

Our full year guidance allows for unit revenue to be slightly down year over year.

Research. Please go ahead.

Everyone. Thank you.

And we are cycling through obviously strong comp year over year, but that seems reasonable given the.

You had a couple of questions on RASM, So I'll, maybe I'll, maybe ask it a different way.

I mean, youre outperforming pretty nicely in the second quarter relative to what we've heard from some other carriers. So.

The jetblue initiatives that we have in place right a continued recovery in New York Jetblue loyalty program.

Is the way of thinking basically whatever the domestic market does jetblue is ultimately going to outperform this year just given the tailwind from the EMEA and some of the other revenue initiatives that you've put in place.

Launching a.

And then as well as Jetblue travel products. So on a top line perspective, that's what you need to believe.

On the cost execution side I'm very pleased that for five quarters in a row, we either met or beat our controllable cost guidance and so the continued execution of the structural cost program in the second half of the year I feel really confident and so those are the things that.

Good morning, Conor This is Dave Thanks for the question, Yes, I think thats a good way to think about it I think given our exposure to the slot in markets and the recovery that they've had.

Mentioned that headwind last year turned into a tailwind this year I think we're well positioned in the domestic market compared to the industry as a whole and then just also we're about 30% to 33% international too. So we're certainly getting some benefit from the improvements there as well.

We feel good about and very strong that we can deliver the 70 cents to a dollar.

That's very helpful. Thank you.

Thank you next question will be from Connor Cunningham at Melius Research. Please go ahead.

Okay, and then maybe a longer term question.

<unk> is obviously your seasonally weakest quarter.

Everyone. Thank you Hum you had a couple of questions on RASM, So I'll, maybe I'll maybe to ask it a different way.

<unk> add capacity from fourth quarter to first quarter.

Theres been obviously a lot of changes in how people are booking and what that may look like going forward, but just long term why why wouldn't jetblue somewhat reshaped our capacity to drive long term provinces.

I mean, you're outperforming pretty nicely in the second quarter relative to what we've heard from some other carriers. So.

Is the way of thinking basically whatever the domestic market does jetblue is ultimately going to outperform this year, just given the tailwind from EMEA and some of the other revenue initiatives that you've put in place.

Are your competitors are talking about looking at first quarter and how they make it a little bit but I'm just curious about the thought process for you guys as well. Thank you.

Yes, and I would say absolutely.

Good morning, Conor This is Dave Thanks for the question, Yeah, I think thats a good way to think about it I think given our exposure to the slot in markets and the recovery that they've had and as mentioned that headwind last year turned into a tailwind. This year I think we're well positioned in the domestic market compared to the industry as a whole.

Every time, we complete a season, we immediately scrub it and learn from it as we plan the capacity for the next year and we certainly saw some different trends. This winter that will factor in so of course, we don't want to react to any one season and look for larger trends over time, but we'll continue to update our capacity plan.

And then just also we're about 30% to 33% international too. So we're certainly getting some benefit from the improvements there as well.

As we see customer behavior in terms of all.

Yes.

Thank you.

Next question will be from Chris Stefan notebooks.

Okay, and then maybe a longer term question.

Susquehanna Susquehanna International Group. Please go ahead.

<unk> is obviously your seasonally weakest quarter, but you typically add capacity from fourth quarter to first quarter.

Good morning, everyone. Thanks for taking my question, So Robin Joanne I'm curious.

It's been obviously a lot of changes in how people are booking and what that may look like going forward, but just long term why why wouldn't jetblue somewhat reshaped our capacity to drive long term profit. Some of your competitors are talking about looking at first quarter and how they make it a little bit but I'm just curious about the thought process for you guys as well. Thank you.

Your capacity guide for this year of five and a half to half the three point.

You have your you have the key.

<unk> spoke to there is always weather.

There's always additional slippage with deliveries and certainly there's increasingly macro and consumer risk in the second half so I'm curious.

Yes, and I would say absolutely.

Why shouldn't we look at the closer to the lower end of that guide is a kind of a more realistic starting point.

Every time, we complete the season, we immediately scrub it and learn from it as we plan the capacity for the next year and we certainly saw some different trends. This winter that will factor in so of course, we don't want to react to any one season and look for larger trends over time, but we will continue to update our capacity plan.

For the full year.

I mean, I'll add and then Robin feel free to jump in we're confident where we sit today that that's the right.

That's the right capacity guide for the year, but you are correct I mean this summer.

<unk> presents itself as far worse than anybody has anticipated even in the face of the capacity pulls we've made that could obviously impact completion factor.

As we see customer behavior in terms of all.

Thank you.

Thank you next.

Next question will be from Chris Sakai loopholes.

Going forward and obviously, if there's a significant change in the macroeconomic environment that could also.

Susquehanna Susquehanna International Group. Please go ahead.

Good morning, everyone. Thanks for taking my question, So Robin Joanne I'm curious.

Impact our capacity guide because we want to stay nimble with capacity and adjust as conditions warrant. So based upon what we know now we think that is the right capacity guide for the year, but we are mindful of the broader environment that we operate in and we will plan the business accordingly.

The capacity guide for this year of five and a half two and a half three point.

You have your you have the <unk>.

As you spoke to there is always weather.

There's always additional slippage with deliveries and certainly there's increasingly macro and consumer risk in the second half so I'm curious.

Yes, the only thing I would say to add to that is that.

Idea of putting the slide out of Q2 is to make the summer more probable.

Why shouldn't we look at the closer to the lower end of that guide is kind of a more realistic starting point.

That should mean that we are able to complete more clients I mean, I think our team do a really really good job.

For the full year.

I'm trying to complete slides, even in very challenging circumstances.

Yes.

I'll add and then Robin feel free to jump in we're confident where we sit today that that's the right.

Talked about Fort Lauderdale earlier.

That's the right capacity guide for the year, but you are correct I mean this summer.

That was the beginning of a very tough five days, because we had the fort Lauderdale closure by bled into whether into the New York area.

<unk> presents itself as far worst than anybody has anticipated even in the face of the capacity pulled we've made that could obviously impact completion factor.

You see the lives on Saturday night.

And then it led into weather and thunderstorms in Florida on Sunday. So it was a very challenging event.

Going forward and obviously, if there's a significant change in the macroeconomic environment that could also.

I think our team did a really good job trying to get as many people home that they could so those are things I'll say high completion factor will help us operate.

I see that we are sort of.

Publishing but.

Again, there's always be puts and takes in it right now we feel good about the guide that we are laying out.

Yes, the only thing I would say to add to that is that.

Okay. Thank you and so I just wanted to I think you might have said for the second half.

Putting these flights out of Q2 is to make the summer more probable.

The potential for unit revenue down, but just on the math here on the full year revenue guide the capacity guidance implies around it's around two points of acceleration in traveling.

That should mean that we are able to complete more flying so I mean, I think I've seen to a really really good job trying.

Trying to complete slides, even in very challenging circumstances.

Second quarter to the second half so.

Just wanted to make sure I understood understood your prepared comments.

We talked about Fort Lauderdale earlier.

That was the beginning of a very tough five days, because we had the fort Lauderdale closure by bled into whether into the New York area.

The math is correct here how are you anticipating growing RASM in the second half while most peers are guiding us for deceleration and I know you have the NDA you have travelled products and some other initiatives going on here, but want to understand sort of the thought process here. Thank you.

Do you see the lives on Saturday night.

And then it led into weather and thunderstorms in Florida on Sunday. So it was a very challenging events and yet I think our team did a really good job trying to get as many people home, but that could so those are things all play a high completion factor will help us operate.

Hi, Chris This is Dave I'll take that one and we can loop offline afterwards, if you'd like with the team, but we do not need to see positive RASM in the second half of the year, given our Q1 performance given our guidance for Q2, we can then be.

Property that we are sort of publishing but.

Again, there's always be puts and takes in it right now we feel good about the guys that we are oh.

Slightly negative RASM.

For Q3, and Q4 and still achieve the revenue and EPS numbers.

Okay. Thank you and so I just wanted to I think you might've said for the second half.

Okay. Thank you.

The potential for unit revenue down, but just on the map here on the full year revenue guide the capacity guidance implies around.

By the way I would also add I think a game.

With the capacity changes that youre seeing in the new region. This summer, which are quite significant not just from jetblue, but from other airlines. It is possible some of that demand spilled into the full we don't know that yet we did see some of that last year.

One two points of acceleration in traveling.

Second quarter to the second half so.

Just wanted to make sure I understood your prepared comments.

The math is correct here how are you anticipating growing RASM in the second half while most peers are guiding for a deceleration and I know you have the NDA you have travel products and some other initiatives going on here, but want to understand sort of the thought process here. Thank you.

And so I think whilst that's not we're not assuming that today.

I think that what they want to focus on the economic uncertainty that's out there we're very watchful about that we're thinking about that.

Some I think some rare.

Revenue tailwind here linked to just continued New York recovery spilling demands out the peek into the into the four and some of the jetblue in the initiatives.

Already outlined.

Yeah.

Thank you.

Thank you next question will be from Stephen Trent with Citi. Please go ahead.

Slightly negative RASM.

For Q3, and Q4 and still achieve the revenue and EPS numbers.

Good morning, and thanks, very much for taking my questions.

Okay. Thank you.

Just two quick ones for you here.

Yes by the way I would also add I think a game.

First I'm wondering.

With the capacity changes that youre seeing in the new region. This summer, which are quite significant not just from jetblue, but from other airlines. It is possible some of that demand spilled into the fall. We don't know that yet we did see some of that last year.

It's possible that.

You guys can expand your sustainable aviation fuel purchases.

Beyond.

Los Angeles.

And two.

Any high level view as to where you guys expect to get your pilots over the next five years.

And so I think whilst that's not at all.

We're not assuming that today.

If you're partnering with a flight school or something like that would just love to hear that thank you.

I think that what they won't focus on the economic uncertainty that's out there we're very watchful about that we're thinking about that.

Thanks for the question on our sustainable Aviation fuel then.

Some I think some rev.

That's something our team is extremely focused on.

Revenue tailwind linked to just continued New York recovery spilling demand that the peak into the into the fall and some of the Jetblue in the initiatives that we've already outlined.

It's become it's become the goldwasser of the airline industry, so I'm not going to be too specific about what we're thinking about but it's clearly something that we're committed to in the 10% target by 2030 is something that we are working towards everyday.

Yeah.

Thank you.

Thank you next question will be from Stephen Trent with Citi. Please go ahead.

On the on the pilot issue I mean, it's something that I'm incredibly proud of is several years ago.

Good morning, and thanks, very much for taking my questions.

Blue credit some internal some gateway program to take pilots.

Just two quick ones for you here.

First I'm wondering if it's possible that.

And train people wanted to become pilots and train them Kodak Gateway programs, we have I think now.

You guys can expand your sustainable aviation fuel purchases.

Beyond.

Close to 1000 pilots, who have either been through one of those programs are in one of those programs or due to come into one of those programs. This year.

Los Angeles.

And to.

The high level view as to where you guys expect to get your pilots over the next five years.

The retention from these pilots is extremely high.

We're partnering with a flight score or something like that would just love to hear that thank you.

More recently, we've opened up programs internally for our crew members. So if you want to come and work at jet, but if you look at Jetblue.

Thanks for the question on sustainable Aviation fuel then.

After two years, you want to become a pilot training.

That's something our team is extremely focused on.

And then also that apply for family members as well, so really removing a lot of the economic and practical.

It's become it's become the gold rush of the airline industry, So I'm not going to be too specific about what we're thinking about but it's clearly something that we're committed to in the 10% target by 2030 is something that we are working towards everyday.

Challenges that come with learning to fly so I think where it couldnt be more pleased about that.

And we're going to continue to.

On the on the pilot issue I mean, it's something that I'm incredibly proud of is several years ago.

In partnership with others.

In the industry. So again, we are not having any issue right now hiring attracting pilots we are seeing a heightened levels of attrition.

<unk> credit some internal.

Gateway program to take pilots.

And again that is another thing that drives the cost headwind that we're having to navigate but we feel good about our ability to attract and train pilots in our gateway programs have just been so transforming for so many people over the years transformative I should say.

Trying to take people, who want to become pilots and train them quit out gateway programs, we have I think now.

Close to 1000 pilots, who have either been through one of those programs are in one of those programs or due to come into one of those programs. This year. The retention from these pilots is extremely high and.

I appreciate that Robin Thank you.

More recently, we've opened up programs internally for our crew members. So if you want to come and work at jet, but if you look at Jetblue.

Thank you.

At this time, we have no other questions registered I'll turn it back to our speakers for closing remarks.

Then after two years you want to become a pilot we'll train you.

Great well. Thank you very much that will conclude our first quarter 2023 conference call. Thank you all for joining us have a great day.

And then also about twice the family members as well, so really removing a lot of the economic.

That's cool.

Challenges that come with learning to fly so I think where it couldnt be more pleased about that and we're going to continue to work in partnership with others.

The industry. So again, we are not having any issue right now hiring attracting pilots we are seeing a heightened levels of attrition.

And again that is another thing that drives the cost headwind that we're having to navigate.

But we feel good about our ability to attract and train pilots in our gateway programs have just been so transforming for so many people over the years.

Performance, if I should say.

I appreciate that Robin Thank you.

Thank you at this time, we have no other questions registered I'll turn it back to our speakers for closing remarks.

Great well. Thank you very much that we will conclude our first quarter 2023 conference call. Thank you all for joining us have a great day.

Thank you.

And again this will conclude today's conference. Thank you for your participation and we do ask that you. Please disconnect your lines.

[music].

Q1 2023 JetBlue Airways Corp Earnings Call

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