JetBlue Airways (JBLU) Earnings Report: Q1 2016 · PDF fileJetBlue Airways (JBLU) Earnings...

CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion

EventDescription:Q12016EarningsCallMarketCapasofEventDate:6.54BPriceasofEventDate:20.33

©2014TheStreet,Inc.Al l R ightsReserved Page1of21

JetBlueAirways(JBLU)EarningsReport:Q12016ConferenceCallTranscriptThefollowingJetBlueAirwaysconferencecalltookplaceonApril26,2016,10:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

KevinCrissey;JetBlueAirwaysCorporation;IRRobinHayes;JetBlueAirwaysCorporation;President&CEOMartySt.George;JetBlueAirwaysCorporation;EVPCommercialandPlanningMarkPowers;JetBlueAirwaysCorporation;CFO

OtherPart icipants

JosephDeNardi;StifelNicolaus;AnalystSaviSyth;RaymondJames&Associates,Inc;AnalystDuanePfennigwerth;EvercoreISI;AnalystMichaelLinenberg;DeutscheBank;AnalystHunterKeay;WolfeResearch;AnalystDavidFintzen;BarclaysCapital;AnalystDanMcKenzie;BuckinghamResearchGroup;AnalystJamieBaker;JPMorgan;AnalystHelaneBecker;CowenSecuritiesLLC;AnalystDaveBeam;UBS;AnalystRajeevLalwani;MorganStanley;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

IwouldliketowelcomeeveryonetotheJetBlueAirwaysfirst-quarter2016earningsconferencecall.

Asareminder,today'scallisbeingrecorded.

(OperatorInstructions)

IwouldnowliketoturnthecallovertoJetBlue'sDirectorofInvestorRelations,KevinCrissey.Pleasegoahead.

KevinCrissey(IR):

Thanks,Operator

JoiningmehereinNewYorktodiscussourresultareRobinHayes,ourPresidentandCEO;MartySt.George,EVPCommercialandPlanning;andMarkPowers,ourCFO.

Thismorning'scallincludesforward-lookingstatementsaboutfutureevents.Actualresultsmaydiffermateriallyfromthoseexpressedintheforward-lookingstatementsduetomanyfactors,andthereforeinvestorsshouldnotplaceunduerelianceonthesestatements.




Foradditionalinformationconcerningfactorsthatcouldcauseresultstodifferfromtheforward-lookingstatements,pleaserefertoourpressrelease,10-QandotherreportsfiledwiththeSEC.

Alsoduringthecourseofourcallwemaydiscussseveralnon-GAAPfinancialmeasures.Forareconciliationofthesenon-GAAPmeasurestoGAAPmeasures,pleaserefertothetablesattheendofourearningsrelease,acopyofwhichisavailableonourwebsite.

NowI'dliketoturnthecallovertoRobinHayes,JetBlue'sPresidentandCEO.

RobinHayes (President&CEO):

Thanks,Kevin.Goodmorning,everyone.Thankyouforjoiningus.

Earliertodaywepostedrecordfirst-quarterresultswithhighermarginsandgreatermarginexpansionthanmostofourcompetitors.Inthequarternetincomewas$199million,or$0.59perdilutedshare.Thisrepresentsyear-over-yearnetincomegrowthof$62million,or46%.Thisincredibleachievementwasmadepossiblethankstothefabulouseffortsofour18,000crewmembers,whocontinuedtogoaboveandbeyondeveryday,exceedingourcustomers'expectations.

Itrulybelieveouruniqueculturedrivesouroutstandingcrewmemberengagement.Andthisdrivesthesegreatresults.

Totalrevenuesgrew6%yearoveryearon14%capacitygrowth.Demandwassolidasourloadfactorhelpedstable,butlowerclose-inyieldspressurizedunit--pressuredunitrevenue,particularlyintheLatinregion.Ourcostperformancewasexcellentthisquarter.

Thelowerfuelpriceenvironmentcertainlyhelped,withourrealizedaveragefuelpricedown43%yearoveryear.Butourcontrollablecostperformancewasalsostrong.CASM,excludingfuelandprofit-sharing,yearoveryearwasdown3.6%.First-quarteroperatingmarginimprovedby5percentagepointsto21.6%,rankingusfirstofalltheUSairlinesthathavereportedearningsthisquarter.

Sowhilewe'veseensomeyieldpressurewhichhashurtcloselymonitoredmonthlyRASM,ourbottom-lineresultscontinuetoimprove.Ournetworkplanisproducinghigherthanindustryaverageprofitmargins,whilewecontinuetogrowfasterthanourcompetitors.Allsixofourfocuscitiesaresolidlyprofitablewithdouble-digitprofitmarginsoverthelast12months.

InBoston,wewerereallypleasedwiththeperformanceofourbusinesstravelmarketthisquarter.InFortLauderdale/Hollywoodwecontinuetobepleasedwithourresults,asevidencedbyacontinuedstrongcustomerresponsetoourdouble-digitcapacitygrowth.

Itisclearourservice,ourbrandandournetworkareanexcellentfitfortheSouthFloridamarket.Overthenextfewyearsweplantogrowthisfocuscityto140dailyflights,orabout75%aboveourcurrentlevels.

WerecognizetheeconomicbackdropcombinedwithJetBlue--werecognizetheeconomicbackdropcombinedwithJetBlueandindustrycapacitygrowthhaspressurizedtheunitrevenueenvironment.Asaresultwe'vemademinorcapacityadjustmentsforthesecondhalfofthisyear.Theseadjustmentsarereallythenormalcourseofbusinessforus,asweaimtomaximizereturns.Webelieveourdisciplinedlong-termstrategicgrowthplanisworking,andweexpectittoremainunchanged.Aslongaswearedeliveringhighmarginsinadisciplinedway,wewillcontinuethecourse.

NowturningtoMint.CustomerresponsetoMintcontinuestoexceedallofourexpectations.IfyouthinkbacktoJetBluebeforeMint,ourmarginsbetweenNewYorkandLosAngelesandSanFranciscowerewellbelowthesystemaverage.Wewerefacedwithachoiceofeithersignificantlyreducingcapacityinthese




marketsorevenpullingoutunlesswefixedtheseresults.Whenweevaluatedthesituationwesawanopportunitytobringabetterproducttocustomersatalowerprice,astrategyonwhichJetBluewasfounded.

TodaywithMint'sserviceonthesesamerouteswe'veseenmarginsimproveddramatically,nowtowellabovesystemaverage.Additionallyinthelast12monthsbothNewYorktoLosAngelesandSanFranciscoproduceddouble-digitunitrevenuegrowtheverysinglemonth.

Mint'ssuccessinNewYork,supportedbyabeliefcustomershavegrownwearyofthehighpricedpremiumofferingsofotherairlines,andtheycraveabetterexperience.WeexpandedMinttoBostoninMarchwithdailyservicetoSanFranciscoandSaturdayseasonallytoBarbados.Resultshavebeenextremelyencouragingsofar.

Withthisbackdrop,andwithcustomersfacingfewerchoicesontheWestCoast,werecentlyannouncedplanstoofferMintonanumberofnewroutesfromBoston,NewYorkandforthefirsttime,FortLauderdale/Hollywood.Betweennowandearly2018weplantoexpandMinttoincludethefollowingyear-roundservicebetweenNewYorkandLosAngeles,SanFrancisco,LasVegas,SanDiego,andSeattleandtoBarbadosonSaturdays--seasonally,MintservicefromNewYorkonSaturdaystoAruba,St.LuciaandSt.Marten.

InBoston,Mintserviceyear-roundtoLosAngeles,SanFrancisco,SanDiegoandSeattle.SeasonalMintservicefromBostonwillbeofferedonSaturdaystoArubaandBarbados.InFortLauderdale/HollywoodweplantoflyMintyear-roundtoLosAngelesandSanFrancisco.

Letmenowhighlightouroperatingperformance.On-timeperformancemeasuredbysystemsarrivalswithin14minutesofscheduledtime,orA14,improved1.5%to73.2%inwhatisour--traditionallyourmostchallengingoperatingquarter.Amoretemperatewinter,though,didhelpcompletionfactor,whichimproved1.8percentagepointsto97.9%,drivingassetandcostefficientavailableseatmiles.

WecontinuedtoexecuteonthenumberofourROICaccretiveinitiatives.InMarchwelaunchedournewco-brandcreditcardswithBarclayCardontheMasterCardnetwork.Martywillprovidemoredetailsonthatveryshortly.Weareexcitedaboutthebenefitsthesecardswillbringthecustomersandtoourbottomline.

Lookingahead,weareanticipatingthelaunchofourcabinrestylingprograminJulywithourfirstdeliveryofanAirbusA321inournew200seatconfiguration.Retrofitsofourall-coreA321sareexpectedtobecompletebytheendofthisyear.AndourAirbusA320fleetisscheduledtoberestyledstartingin2017.Aswehavecommunicatedpreviouslyweexpectthisprogramtoadd$100millionofincrementalannualoperatingincomeuponcompletion.

BeforeIwrapup,I'dliketodiscussourinterestinVirginAmerica.Aswidelyreported,wedidconsideracquiringVirginAmericaasawaytomorequicklybuildalargerWestCoastpresence.However,asweexploredthispossibility,thepricereachedalevelwhereitbecameclearourstrategicplanfororganicgrowthofferedabetterpathtovaluecreation.GrowingourWestCoastpresencehasbeenandremainspartofourlong-termgrowthplan.AcquiringVirginAmericawouldhavesimplyacceleratedthatplan.Weareoneofthefastest-growingUSairlines,enabledbyyearsoffocusingonreducingourdebtandstrengtheningourbalancesheet.Ourconfidenceinourexpansionplansmakethisdealanice-to-haveratherthanamust-have.

Weplantocontinuewithourorganicgrowthstrategy,whichincludestheMintexpansionwe'vealreadyannounced,thatIjustdiscussedaswellasotherWestCoastopportunities.OneoftheseisthepotentialfornewfederalinspectionservicefacilityinLongBeachwhichwouldenableinternationalserviceoutofthatairport.




Inclosing,weareveryhappywithourfirst-quarterresults.AndJetBluehasneverbeeninastrongerposition.Weremainfocusedonexecutingourreturnaccretiveinitiativesandourstrategicgrowthplan.Andwiththat,I'dliketoturnthecallovertoMarty.

MartySt.George (EVPCommercialandPlanning):

Thankyou,Robin.Goodmorningeverybody,andthanksforjoiningus.Top-linerevenuegrowthinthefirstquarterof6%wasbetterthanmostofourcompetitorsintheindustry,despiteasoftyieldenvironmentandverychallengingyear-over-yearcomparisons.Unitrevenue,orRASM,decreased7%oncapacitygrowthof14.1%.Loadfactorwasessentiallyflat.

OurEastregionhadthestrongestunitrevenuegrowthofanyregionthisquarter.BostonbusinessmarketsintheEasternregionwereparticularlystrong,withthemajoritypostingpositiveunitrevenuegrowthinthequarter.Transconroutesalsoperformedverywell,withMintunitrevenuegrowthinthequarterupinthemidteens.ThecontinuedstrongcustomerdemandforMintleadtoa$25to$75increaseinMintfaresearlierthismonthinNewYorktobothLosAngelesandSanFrancisco.

FloridaandLatinmarketsweresofter.Asanexample,unitrevenuecontractioninColumbiaandPuertoRicointhefirstquarterhurtsystemRASMbyabout1percentagepoint.TherewereanumberoffactorscontributingtotheweakerRASMenvironment,includingadditionalcapacitybyJetBlueandcompetitors,abettercompletionfactorduetofewerwinterstorms,andwarmerweatherintheNortheastwhichwebelievealsoreduceddemandforleisuresundestinations.WealsohadthemostdifficultRASMcomparisonintheindustry,asourperformanceinthefirstquarterof2015wasabout5pointsbetterthantherestoftheindustry.

AsRobinmentioned,wehavemadesomeadjustmentstoourschedule.Forexample,capacitytoBogotahasbeenreducedby25%forthesummer.Inaddition[someofour]SanJuansummercapacityhasbeenreallocatedtodomesticmarkets.Finallywehavereducedouroverallfalltroughperiodcapacitybyapproximately1%.Thesechangesaremoresurgicalthanbroadstrokes.

Ourstrategicgrowthhasbeendrivingexcellentbottom-lineresultswithexpandingmargins.Webelievethatourplanisworkingandweremaincommittedtoit.Asalways,noneoftheseresultswould'vebeenpossiblewithouttheoutstandingcustomerserviceprovidedbyallofourcrewmembers.

Otherrevenuegrew20%thisquarter.Wewerehappywiththisresult,consideringourexitfromthecargobusinessandloyaltymarketingrevenuebeingdownduetoourcreditcardtransitionfromAmericanExpress.Fareoptionswasastrongcontributor,andwebelieveremainsontracktoproducemorethan$200millioninoperatingincomein2016.We'verecentlystartedtopricefareoptionsdynamicallyinselectedmarkets.Whilewecan'tdiscussfuturepricing,we'recurrentlyevaluatingcustomerbehavior.Andwewillcontinuetoreviewopportunitiestoexpanddynamicpricingintraditionalmarketsinthefuture.

InthemonthofMarchwehavelaunchedournewdomesticco-brandcreditcardforthepartnersBarclayCardandMasterCard.Hopefullyyou'veseenouradvertisements,andhopefullyyou'vesignedupforacard.Thiswasamulti-yearundertaking,asitincludedswitchingexistingcard-holdersfromAmericanExpressandcreatingnewcardswithuniqueindustry-leadingbenefits.

WearenowmarketingthreedifferentJetBlueco-brandedcreditcards.

ThebaseJetBluecreditcardisournoannualfeecard,whichisofferingalimitedtime10,000pointTrueBluebonus.

TheJetBlue-pluscardisourpremiumcardwitha$99annualfeeanda30,000pointTrueBluebonus.This




cardalsoincludesafreecheckedbagwhenusingthecardtopurchaseJetBlueflightsandtheabilitytoearnmoreTrueBluepointsonJetBluepurchases.

FinallyourthirdcardisaJetBluebusinesscard,whichissimilartothepluscardbutdesignedforbusinesseswithbonuspointsonpurchasesinseveralbusiness-orientedcategories.

Allthecardsprovidecustomerswithsignificantlyenhancedbenefitscomparedtoourpriorco-brandedcard.ThenewcardsoffermorepointsperdollaronJetBluepurchases,acceleratorswhichincreaseTrueBluepointsearnedonspendcategorieslikegrocerystores,officesupplystoresorrestaurants.FinallyallJetBluecardsarefreeofanyforeigntransactionfees.Atsteadystatewecontinuetoexpandannualincrementaloperatingincomebenefitsfromthenewcardagreementareapproximately$60million.

TheconversionofAmericanExpresshasgoneverywell,withallcardmembersnowconvertedandnearlyallbeenactivatedtheirnewcards.Itisintheveryearlydaysintermsofnewcardmemberacquisition.ButsofardirectmailandJetBluechannelsareproducingaboveexpectations.

Withthat,I'llturnthecallovertoMarktoprovidefurtherdetailsonourresults.

MarkPowers (CFO):

Thankyou,MartyandRobin.Goodmorning,everyone.Thanksforjoiningus.

Thismorningwereportedfirst-quarteroperatingincomeof$349million.Thisrepresents38%growth.Pre-taxincomeforthequarterwas$323millionPre-taxmarginwas20%,animprovementof5.4percentagepoints.

AsRobinmentioned,amongtheUSairlinesthathavereleasedtheirfirst-quarterresults,ouroperatingmarginranksfirst.Ourpre-taxmarginisinthetopthree.Inaddition,ouryear-on-yearoperatingandpre-taxmarginimprovementsranksecond.

Totalrevenuegrew6.1%inthequarteroncapacitygrowthof14.1%.Yielddecreased8%whileloadfactorwasdown0.1percentagepoints.

Withrespecttocosts.Thefirstquarterwasanotherperiodofstrongcross-control.Excludingfuelandprofit-sharing,year-over-yearunitcostdecreased3.6%.ThatissignificantlybetterthanourJanuaryguidancerangeofflattodown2%.Wecapitalizedonmilderwinterweatherthanexpectedwithgoodcostcontrolandgreatoperationalexecution.Maindriversbehindthedifferencebetweenourresultandguidancecamefromfewerde-icingeventsthanforecasted,lowersalaries,wagesandbenefitsthananticipated,andthetimingofsomeadvertisingwhichwillmovetofuturequarters.

Turningtofuel.Fuelpricesremainapositivestoryyearonyear.Wehadnofuelhedgesinplaceinthefirstquarter.Includingtaxesourfuelpriceinthequarterwas$1.17,downfromlastyear'sper-gallonpriceof$2.06,or43%.Lookingahead,wehavenofuelhedgesinplaceforthesecondquarterof2016.BasedontheforwardcurveasofApril15,weexpectoursecondquarterfuelpricepergallon,includingtheimpactoftaxes,tobeapproximately$1.33.

Forthesecondhalfoftheyearwe'vehedgedapproximately20%ofourexpectedfuelconsumptionusingswaps.We'vealsoaddedmodesthedgesin2017withabout5%ofconsumptionhedged.Formorespecificdetailsregardingourhedgedpositions,pleaserefertoourinvestorupdatewhichwasfiledwiththeSECandmadeavailableontheinvestorrelationssectionofourwebsitepriortothestartoftoday'scall.

Lookingatthebalancesheet.Weendedthequarterwith$1.3billionincashandshort-terminvestments.Duringthefirstquarterwemadescheduleddebtandcapitalleasepaymentsof$51million.Looking




aheadweexpecttopayregularlyscheduleddebtpaymentsintheremainderof2016of$403million,includingasecond-quarterpaymentof$36million.

Giventhedebtmaturityschedulefor2016includingthefinalmaturityofadoubleETCinNovember,weplantocontinuetofocusoncashdeploymentonbalancesheetimprovementthisyear.Wewillassessopportunitiesforadditionalcapitalreturnsthereafterandupdateyouonourplanstowardtheendoftheyear.

WithrespecttoROIC.Ourtrailing12after-taxreturnoninvestedcapitalwas14.5%.Thisisupyearonyearbymorethan5.5percentagepoints,andwellinexcessofourcostofcapital.Webelieveourgrowthplanscontinuetocreateeconomicvalueandreduceriskthroughdiversification.We'realsoworkingaggressivelyoninitiatives,includingstructuralprogramssuchasourcabinrestyling,thatweexpectwilldriveROICevenhigher.

WithrespecttoCapExandfleet.JetBlueendedthequarterwith217aircraftincluding138A320s,60E190sand27A321s.WepurchasedtwoA321aircraftinthefirstquarterwithcash.In2016weexpecttotakedeliveryof10A321sincluding2inthesecondquarter.Giventhestrengthofourcashfromoperations,thecurrentpresumptioncontinuestobewewillcontinuetopaycashforalldeliveriesin2016.Attheendofthequarterover30%ofourfleetwasunencumbered.InsupportofourincrementalMintexpansion,whichincludesgrowthfromNewYork,BostonandFortLauderdale/Hollywoodwe'veconverted9ofour10A321deliveryscheduledfor2017totheMintconfiguration.Thesearenotincrementalaircraftorders,andsimplyrepresentadjustmentstoconfigurationspecificationsofaircraftalreadyonorder.

Giventhechangesthatwe'veannounced,letmequicklysummarizeourorderbookthrough2017.In2016willtakedeliveryof10A321aircraft.Fourhavealreadybeendelivered,includingtwothismonth.OurlatestdeliveryrolledoutoftheproductionlineinMobile,Alabamathisweek,andisthefirstAirbusaircraftevermanufacturedintheUnitedStates.Oftheremainingsixaircraft,threewillbeintheMintconfigurationandthreewillbeintheall-coreconfiguration.In2017weexpectdeliveryof10A321s,thefirstarrivinginall-coreconfigurationandtheremaining9configuredforMint.

IntermsofCapEx.Inthesecondquarterof2016weprojecttotalCapExbetween$170millionand$180million,ofwhichapproximately$125millionrelatestoaircraft.Forthefullyear2016wecontinuetoexpectnon-aircraftCapExof$150millionto$200millionandtotalcapitalexpendituresofapproximately$820millionto$920million.Seetheindustrialupdateformoredetailsonthispoint.

Turningtocapacity.Weexpectcapacitygrowthof9.5%to11.5%inthesecondquarterof2016and8.5%to10.5%forthefullyear.

Turningtotherevenueoutlook.AprilRASMisexpectedtodecreaseroughly12.5%yearoveryear.Toputthisinitsproperperspective,AprilRASMishurtbyEasterfallinginMarchthisyearandbyalaterPassoverandrelatedschoolvacationperiod.TheSundayreturnflightsafterPassoverfallonMay1thisyearversusAprillastyear.Forgreatercontext,theSundayafterPassoverwastheseventhbestrevenuedayforusin2015.

WeestimatetheEasterandPassovertimingmovedabout3percentagepointsofRASMfromApriltoMarchandMay.WiththisdisclaimerthatweonlyhaveabouthalfofMayandnotquiteathirdofJunebookedatthispoint,weexpectouryear-over-yearRASMinthesecondquartertobebroadlyinlinewithourfirstquarter'snegative7%.BeyondthesecondquarterweexpectcapacitygrowthdeaccelerationtoprovideaRASMtailwind.

Basedonsellingschedules,ourASMsareprojectedtogrowapproximately6.5%inthesecondhalfoftheyear.Thisisadeaccelerationofgrowthofmorethan5pointscomparedtothefirsthalfoftheyear.Lookingtocosts.Inthesecondquarterweexpecttheyear-over-yearchangeinCASMexcludingfueland




profit-sharingtobenegative0.5%topositive1.5%.

Lookingatfullyear2016weareloweringthetopofourCASMguidanceexcludingfuelandprofit-sharingbya0.5pointtogrowthbetween0%and1.5%.Weofcoursecontinuetoworkaggressivelytocomeinatthelowerendofthatrange.

Andinclosing,wearevery,verypleasedwithourfirst-quarterresults.Ourcrewmemberscontinuetobehighlyengagedandprovideoutstandingcustomerservice.Weareexcitedtokeepexecutingonourlong-termstrategy.

Andwiththat,Robin,MartyandIarehappytotakequestions.

KevinCrissey(IR):

Operator,wearenowreadyforQ&Awiththeanalysts.Canyougoaheadwithinstructionsplease?

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

JosephDeNardiwithStifel.

JosephDeNardi(Analyst-StifelNicolaus):

Mark,IÕmwonderingifyoucouldjustflushoutthe2QRASMguide.Maybetalkaboutwhyyouguysfeelcomfortableguidingtoitnowcomparedtonotdoingthatinthepast.Andmaybespecificallywhatthisshift,IthinkyoumentionedwhattheshiftfromAprilintobothMarchandMaywas.ButifyoucanbreakthatdownbetweenMarchandMay?

MarkPowers (CFO):

Goodmorning.Howareyou?It'sMark.LetmeactuallyaskMartyperhapstocommentonthat.


Great.ThanksMike,andgoodmorningJoe.Thanks.I'mgladyouaskedthequestion.Ithinkingeneralwe'vegivenmoreguidancethanwegenerallyhaveinthiscall.ObviouslytheonlymonthwetrulyguidedwasApril.ButIthinkwe'reverycomfortablesayingthatsequentiallyofthethreemonthsinthequarter,Aprilisabsolutelytheworstmonth.Andifyouthinkaboutthetwopictureswegave,it'smoreofamathexercisethananythingelse.

AndyoucansortofmakeyourownjudgmentasfarashowMayandJunego,becausewegenerallydon'tguidethatfarout.TheonethingIwillsayis,themoveofwhatwasnormallypeakAprildemandintobothMarchandMay,aswesaidinthescript,it'sworthabout3points.Andyougetabouta1or1.5pointofthatbenefitactuallyisgoingtobeinMay.SothenormalshapeoftheApril/May/JuneRASMcurveisgoingtobealittlebitdifferentin2016.


Okay.AndthenRobin,I'mjustwonderingifyoucouldtalkabout,justgiventhecommentaryaroundtrimmingsometroughcapacityin4Q.Canyoujusttalkaboutwhatyou'remanagingthebusinessto?Isittomaximizeearnings?Imean,Iget--Iunderstandwhyyou'relookingtotrimcapacity.Butwhynotdomore?Itfeelslikewe'reinthealittlebitofamiddleground.Somaybejusttalkaboutwhatyou'remanagingthebusinesstorightnow.





Sure,Joe.Goodmorning.Iappreciatethequestion,andcongratulationsongettinginfirst.IthinkifIwindtheclockbackafewyearswherewewereveryheavilycriticizedformanagingtogrowthandweweretakingaverylong-termview,Ithinksomeoftheinvestmentswemadebackthenarenowreallypayingoff.We'vemovedtoaworldwherewe'remanagingtomargin,we'remanagingtoROIC.ThecapacitythatMartytalkedabouttrimmingwascapacitythatwetookoutbecauseitwasnegativetomargin,negativetoROIC.

Butwe'rerunningtheCompanytothosemetrics.AndIthinkhadwetakenmorecapacityout,thenthatwouldhavehadadirectimpactonour--onmargin.Giveyouanexample.A1pointofcapacity,2pointcapacityadjustmentinthefirstquarter,ifwehadreduceditthenitwould'vebeena$10millionhittoourincome.Sowe'remanagingtomargin.We'remanagingtomaximizingincome.We'remanagingtomaximizingROIC.

Backtoyourvery,veryrelevantquestionofwhydidwechangewhatweguide.Well,we'renottonedeaf.Weknowthere'salotoffocusatthemomentonunitrevenueandthatinvestorsarelookingforaninflectionpoint.sowewantedtogiveasmuchcandorandtransparencyaswecouldtosaythatwiththe--asMayandJuneprogressesasweseeitnow,andthenaswemoveintothesecondhalfoftheyearwherewehaveasignificantamountofcapacityslowdowncomparedtothefirsthalf.Webelieveallofthosethingsarepointingtounitrevenuesmovingintherightdirection.ButIalsowanttobeverytransparent.WearerunningthisCompanytomaximizemargin,maximizeincomeandROIC.


Veryhelpful.ThanksRobin.

Operator :

SaviSythwithRaymondJames.

SaviSyth (Analyst-RaymondJames&Associates,Inc):

Hey,goodmorning.JustwouldliketalkalittlebitmoreaboutMint.Robin,asyoumentionedIthinkwhenyoufirstrolledthisout,itreallywasaboutgettingthosetransconmarketstoatleastkindofperforminlinewiththesystem.Andyourpointtodaythatit'sabove.AndifIlookatyourfleetplanandlookingatyour2017,itlookslikemaybe11%ofyourfleetisgoingtobeMintaircraft,andmaybealittlebitmoreonaseatbasis.

SohowshouldwethinkabouttheseMintroutes?Andarethey--isexpectationthattheyperformedinlinewithsystem,oraretheysogoodthatmaybethesefewroutesactuallyperformbetterthansystem,becausethere'sthisopportunitythatyouareunlocking?


Thanks,Savi.Iappreciatethequestion.Goodmorning.I'mgoingtoaskmygoodfriend,Marty,andtheleaderbehindMinttoanswerthatquestion.


ThanksRobin,andthanksSaviforthequestion.AsfarashowweshouldlookatMint,Ithinkifyougobacktowhenwefirstannouncedthis,asIthinkalotofpeopleonthiscallwillrecognize,therewasalotofskepticism.

Butwefundamentallysawsomethinginthemarketplacethatwethoughtcreatedanopportunity.Ifyou




gobacktotheoriginalbusinessplanofJetBlue,whatthefounderssawinthelate1990swasaeconomy-classmarketintheUSthathadhighfaresandbadservice.That'sthesamethingwesawinthepremiummarketthreeorfouryearsagowhenwestartedworkingonMint.Wesawamarketwithveryhighfares,routinelyseeingfaresinthemid-$2000range,andservicethatfranklywethoughtwasnotcommensuratewiththatprice.

Sowesawtheopportunitytogointherewithamuchbetterproduct.AndIthinknomatterwhereyoulook,thisissortofunanimouslygreaterthanthebesttransconmarketintheUS.Andalsohassignificantlylowerfares,eveninlightofthefareincreasesthatwehavedone.Soifyoulookatthegrowththatwehaveputin,it'sbecausetheresultswe'reseen.Wesaid--wehaven'tgoneintoalotofdetailontherouteP&L.WegavesomeguidanceinthescriptabouttheunitrevenueforMintandhowwellMintunitrevenueisgoing.IalsomentionedthatwealsodidsayintheoriginalscriptwasthatourcurrentMintmarginsarewellabovesystemaverage.

OntheMintrouteswe'redoingextremelywell.We'reveryhappyforit.Theroutesthatwe'reexpandinginto,everyoneoftheroutesthatweannouncedafewweeksago,ourroutesthatarecurrentlybeingflownbyall-coreA320s.AndweputtheminairplanesonthemspecificallybecauseweseeagreatopportunitytoimproveP&Loneveryoneofthoseroutes.Iwillalsosaythatwe'reveryopen-mindedasfaraswherewecanputMintinthefuture.Ithinktheseroutesareabeginning,butthey'reabsolutelynotanend.

Butatthesametimeweseealotofvaluewiththeall-coreA321.Soeverytimewemakeadecision,wehavetomakethatindividualtrade-offoftheall-coreairplanesversustheMintairplanes.Butthisis,astheysayinternally,agoodproblemtohave.We'vegottworeallygoodchoices.


That'sveryhelpfulcolor.Thanks,Marty.AndmaybeifIcanaskanotherquestiononthe,youmentionedonthekindofColumbia/PuertoRico,theweaknessyou'reseeing.Itwasn'tcleariftheover-capacity,wasitonthoserouteswhereyou'reseeingmaybetoomuchcapacity?Oristheeconomicweaknessinthedestinationmarketshavinganimpactaswell?Iwouldthinkthatmostofyourpoint-of-saleisUS,butwantedtoclarifythat.


Soletmetaketheroutesseparately.SpecificallyonColumbia,there'sjustsomestructuraleconomicchallengesinthecountry.AndcertainlyinBogotawedobookthemajorityofourrevenueinpoint-of-saleBogota.WepulleddowncapacityinBogota.ToalessextentwepulleddownsomeseatsinMedellin.WedidnotpulldownseatsinCartegena.CartegenaisgenerallyaUSpoint-of-salemarketthat'sactuallyholdinguprelativelywell.Soit'sreallythechallengeintheSouthAmericaneconomy.

WithrespecttoPuertoRico.Firstofall,we'recomingoffagreatbaseinPuertoRico.Ithinkifyoulookathowwe'vetrendedinLatinAmericarevenue,PuertoRico,it'saveryimportantmarketandabigchunkforASMs.Wehadsomecompetitivechallenges,let'ssayprobably2012and2013,2014and2015.Ithinkthosereallyresolvethemselves.We'veseenalittlebitofcompetitivecapacitycomeinin2016.AndIthinkinresponsetothatwe'vepulledalittlebitofcapacityoutourselves.

Buthonestlythisisstillamarketthat'sgotstrongprofitability.We'reveryhappywithourresultsdownthere.Butwehaveotherplacestoputcapacityinthepeaksummer.SoIdon'tlookatthisasalong-termseachangeinPuertoRico.Iseethisasbeingverytactical,justsortoftakingadvantageofmarketdynamicsatthetime.We'restillthelargestcarrierintheCommonwealthofPuertoRico.WeplanonbeingthelargestcarrierinPuertoRicoforever.Andweareveryhappywithourresults.





Allright.Veryhelpful.Thankyou.

Operator :

DuanePfennigwerthwithEvercoreISI.

DuanePfennigwerth (Analyst-EvercoreISI):

Thanks.Goodmorning.Onthefullquarterguidance,whichisappreciated.AndmaybeImissedthisinyourpreparedremarksbutitlookslikeitimpliesdownabout4%to5%forMayandJune.Canyouputafinerpointonthat,likethatdoesthatsoundreasonableforbothmonths?


Duane,goodmorning.It'sRobin.I'llanswerthat.Igiveyoufullmarksfornotbeingsatisfiedwiththeimprovedguidanceweprovide.Andintruestyletryingtogetalittlebitmore.No,wewon't.Ithinkwewantedtojustgiveyouasenseofhowthequarterwaslooking,becauseparticularlywiththeprofileofourbusiness,MarchandAprilarealwaysvery,verychoppy.SoIknowyou'reanexcellentmathematician.AndI'msureyoucanworkoutwhatthatmeansfortherestofthequarter.AndobviouslyourvisibilityonMayisgreaterthanourvisibilityintoJuneaswell.


Iappreciatethat.I'mnotsureIagreewithallthosecomments,butIappreciatethat.Canyouhelpusunderstandthetimingofthecontributionandtheramponthenewcreditcardagreement?


HiDuane,it'sMarty.Thanksforthequestion.Sowe'reveryexcitedaboutwhat'shappenedwiththecreditcardagreement.Andwearereaffirmingtheguidancethatwegaveasfarastherunratebenefitofthecreditcardgoingforward.It'salittlebitearlyforustomakeanypredictionsasfaraswherethatmoneymayactuallybegoing,butwereveryhappywithwhatwe'reseeingsofar.

We'reatapointnowwherewe'resixweeksintothecreditcardprogram.We'realready--letmebackup.There'sgenerallyadrop-offwhenyoubasicallysendpeopleanewcreditcardandsay,yesbytheway,thiscreditcardyou'vehadforyearsischanging.Throwitaway.Youneedanewone.Youhavecallmeupandactivateit.

There'sgenerallyadrop-offfromthat.Fromwhatwe'rehearingfromBarclaysCard,we'vehadmuchlessdrop-offthantheyhaveseeninotherconversions.Sixweeksinwe'realreadyatmorecreditcardaccountsthanwehadwithAmericanExpress.Sowe'reveryhappywithwhatwe'reseeing.Ithinkit'salittlebitearlytomakeapredictiononhowthingsaregoingtoramp-indifferently.

I'llcomparethisbacktotheguidancethatwehadgivenoriginallyaboutthebenefittofareoptionswherewe--thenumberweoriginallygavebackatInvestorDayandinthefirstorsecondcallafterfareoptions,wehadseenthingstrending,butitwasalittlebittooearlytocall.Butwewillrevisetheguidanceifwedoseeanychangeinit.Butwe'reverycomfortablewiththenumberwe'reseeingrightnow.It'sjustalittlebittoosoontosay.


Iguessjustasafollow-upthere,canyouquantify,Iguess,theheadwindduringthistransitioninthefirstquarter?





Imean,thebiggestchallengewehadinthefirstquarterwaswehadaoverathree-monthperiodwherewewerenotacquiringanynewcreditcardaccounts.There'satransitionperiodwhentheoldaccount-holdersortoffreezestheportfoliobecausethey'reintheprocessofnegotiatingthesaleofit.Andtheybasicallywantastaticbasetoworkwith.

So--andIdon'thavethatexactdate.Ibelieveitwas--butdefinitelyinthefourthquarter,likeinOctoberorNovember,westoppedsolicitingnewcreditcards.Andwe'reagrowingairlinewithgrowinggeography.We'realwaysaddingcreditcards.Wetookaprettybigperiodwhereweweren'taddingadditionalcreditcards.

Alsoitwasatimeperiodwherethenormalcourseofbusiness,notseeingactivitiesthatyouwouldnormallyseefromAmericanExpressweren'thappening.Becausetheyweren'tgoingtogarneranyofthebenefitfromit.Theywerebasicallyinvestinginalongtermthatwasgoingtoaccruetoanewpartner.That'sreallywhathappenedduringtheperiod.Andagain,becausewetransitionedattheendofthequarter,thatreally--thatwasthesituationthemajorityofthequarter.


Thanksverymuch.

Operator :

MichaelLinenbergwithDeutscheBank.

MichaelLinenberg (Analyst-DeutscheBank):

Hey,everybody.HeyMarty,IhadaquestionforyoujustbackonMint.Youtalkedaboutthenewmarketsandhowyouexpecttoseemarginimprovement.AndIappreciatethat.ButwhenIthinkaboutthemarketsthatMintisintoday,thosearemarketswherethereisclearlysignificantdemandforthathigherendproduct.AndI'mjustcuriousasyoulookatsomeoftheseotherMintmarkets,itdoesfeellikethattherecouldbesomediminishingreturnshere.AndsoIlookatyourfleetplannextyearandyouhave9ofyour10goingintotheMintratherthanthecore.

Whathaskindofevolvedhere?BecauseIwouldthinkthatlotsofconversationsanddialogue,evenoverthelastyearorsotherewassortofalotofbackandforthaboutwhetherornottherewerethatmanymoremarketsthatyoucouldputtheMintproductin.AndsoIguessthemathcomesdowntothatthemarginimprovementthatyouseeinthesemarketsthatconverttoMintmorethanoffsetpotentialopportunitiestodeployA321corecraft,atleastinthenearterm.Couldyoujustrunthroughsomeofthethinkingthere?Becauseitdoesfeellikeit'sabitofaseachange.


Sure,Michael.Goodmorning,andthanksforthequestion.Ithinkyou'reactuallymakingaveryimportantpointthatIdon'twanttobrushover.AndIthinktheoverarchingsummarythatIwouldsayis,Mintisbeenapleasantsurpriseforusfromtheverybeginning.Whenweoriginallyannounceditwehadabusinesscase.Wehaveblownawaythenumbersinthebusinesscase.We'verecentlylaunchedBoston/SanFranservices.

ThatwasamarketthatIthinkinalotofwaysfitsomeofthecharacteristicsthatyoudescribed,notasmuchpremiumdemand,notquiteasclearasfaraswhatthevaluepropositioncouldbe.Alsomarketthat'sbeenavery,verygoodsurpriseveryquickly.Atfirst,Idon'tthinkI'veseenaloadfactorthatdidn'tstartwithanineonthatroutefromdayone.It'sbeenextremelylucrative.




I'llgiveyouaquickanecdotewhichyou'llappreciate.WhenweoriginallywerefloatingtheideaofMintwithsomeofourlargecorporateaccountsandtalkingtosomecorporateaccountsinNewYork,andwedon'thavethatmany--atthatpointintimewedidn'thavethatmanybigcorporatesinNewYork.AndwetalkedtothemaboutMint.Wetalkedaboutpricing.Theysaid,yes,we'rein,weloveit,wetotallywanttodoit,we'lldefinitelysupportyou.Andthiswasbackthreeyearsagoorfouryearsago.

WehadthesameconversationinBoston,andinBostonwehaveaverylargecorporateaccountbase.Wewenttocorporateaccounts.Wehavegoodshareswith,43%marketshare.Andsaidthesamethingtothemandtheysaid,nowe'renotinterested.Ourcustomersdon'tflypremium.We'renotsureit'sgoingtowork.Lookslikeagreatproduct,butit'snotforus.Wealsosaid,bythewaytherearetimeswhentheMintfareislowerthanthecorefareonAmerica,Delta,United.Areyousure?Theysaid,yeswe'renotinterested.Twoyearslaterthey'resayingtous,heythatMintservice,wekindofwantthat.That'showgooditwas.

Sofromthatperspective,theseareourmarketsthatwe'reveryconfidentoftheabilitytogetcustomersintothiscabin.Interestinglyenough,thinkaboutthepeoplethatwetalkedaboutoriginally,smallormediumbusinesses,high-endleisureandlargecorporate.Allthreelegsofthosestoolhavebeenverystrongcontributors.AndIthinkifyoulookatthemarketsweenteredin,wearecomfortablethatwe'regoingtogetthatexactsamedemandinthosemarkets.


Okay,verygood.Andthenjustasecondone.AndMarty,Iguessthisoneistoyouaswell.JustwithNewarkpotentiallybecomingsomewhatlessconstrainedlaterthisyearperthenewsortofDOTFAArules,IthinkyouhaveaboutadozenflightsadayorsoinNewark.AndIknowthat'safunctionofyourcurrentslotposition.ButIdothinkthatyouhaveaccesstomaybethreegates.Soitwouldseemthatyoucoulddo,ifyouwantedto,probablyscheduleabitmoreservicethanwhatyou'recurrentlyoffering.Isthereanopportunitythereforyou,orisitmorejustfocusedonLaGuardia/Kennedy?


HeyMichael,it'sRobin.I'mgoingtotakethatbecauseIlovetalkingaboutcongestedhighfareairports.


Notaproblem.


Again,goodmorningandthanksforthequestion.Look,actuallywe'reover20flightsadaynowonaverageoutofNewark.Sowe'vedoneagoodjobovertheyearsgettingtheoddslothereandthere.GreatnewsabouttheairportsortofmovingtoalevelIIunslottedairport.Obviously,gatesandotherfacilitiesdoactasaformofconstraint.Butwe'reveryhappyaboutthenews.

Andnoannouncementstoday.ButwearelookingverycloselyatNewark,andwedefinitelyseeanopportunityforexpansionthereaswell.Wedoextremely--Newarkisthesortofairportwedoextremelywell,wherethere'saconstrainedairportwithaincumbentcompetitorthatchargesveryhighfaresandwecangoinandofferabetterproductatalowerpriceanddoverywell.SowatchthisspaceonNewark.


Okay.Thankyou.

Operator :




HunterKeaywithWolfeResearch.

HunterKeay(Analyst-WolfeResearch):

Thankyou.Goodmorning.


Goodmorning,Hunter.Howareyou?


Hi.Good.Thanks,Robin.HeyMarty,canyoueducateusalittlebitontheLauderdalemarketandhowMiamiInternationalcompetesagainstHollywoodforsomeofthelocaltraffic?Andwonderingifthere'sanykeydistinctionsthatweshouldbeawareofbetweenthosetwoairportsthatmakethemmaybealittlebitlesscompetitivewitheachotherthanjustthesortoftypicalgeographywouldsuggest?

Becauseobviouslythere'sgoingtobealotofgrowthinthatmarket,notjustfromyouguysoverthenextcoupleyearsbutfromsomeotherairlinesaswell,too.Sohowareyouguysthinkingaboutthosetwoairportsinthecontextofsortoffightingoverlocalgrowth,localshare?


Hi,Hunter.Goodmorning,andthanksforthequestion.WelovetalkingaboutFortLauderdale.Wethinkit'saveryimportantmarketforusandit'shadalotofgrowthinthelastcoupleofyearsfromJetBlue.AndasRobinsaidearlier,moretocome.

WelookattheFortLauderdaleversusMiamiandjustthrowPalmBeachinthere.Welookatthose,thebalancebetweenthosethreeairports,fromalotofdifferentlenses.Andit'sfunny,JetBluewe'restillalowcostairline.Thenumberonelenswelookatiscost.AirportfeesforenplanementatLauderdaleareafractionofwhatitcosttoflyoutofMiami.WethinkthatgivesusagreatopportunityrightoffthebatbecausewecanofferlowerfaresinFortLauderdalethanwecouldofferinMiami,whichwethinkgivesusagreatopportunityonthepricingfront.

Secondissueonthedemandfront,whatwethinkisgreataboutFortLauderdaleisithasitsowncatchmentarea.That'savery,verystrongcatchmentarea.Miamiobviouslyisabigcity,agreatcityandagreatcatchmentarea.Theycertainlydocompeteagainsteachother.MostpeopleatJetBluehavedonethatdrivemanytimes.Thedistancebetweenthosetwoairportsisnotthatfar.Ifyoulookathowwepenetratethemarket,obviouslyBrowardCountyisbyfarourmostimportantoriginationpointforcustomers,andsomedownfromPalmBeachCounty.FromNorthernDadeCountywedopenetratethatmarketwell.

ThethingIwanttostressmorethananythingis,thereasonwedo--IthinkoneofthereasonswedosowellinFortLauderdaleisthatwehaveafantasticvalueproposition.Ifyoulookattheothertwoairlinesthathavethebigtop-of-the-linespaceinSouthFlorida,AmericanorSpirit,weclearlyhaveadifferentiatedvaluepropositionanddifferentiationproduct.SoIthinktheabilitytohavethebestproductinSouthFloridaandalsoalwayshavetheabilitytohavelowerfaresinSouthFloridathaninMiami,wethinkgivesusagreatopportunityforgrowth.


Okay.ThanksMarty.AndthenRobin,gettingbacktoJoe'squestionearlierinthecallabouthowyou'rerunningthisbusiness.Youtalkedabout,correctmeifI'mwrong,butyousaidbasicallymaximizingEBITdollarsandmaximizingprofits.Butisn'tthereadifference?Yousaidyou'renottonedeafearlierwhen




askedaboutguidingto2QRASMtoo,whichIthinkisagreatcomment.Iappreciatethat.

Butisn'tthereadifferencebetweenmanagingyourbusinessforshareholderwealthcreationandmanagingyourbusinessforprofitmaximization?AndIthinkatthispointtheshareholderwealthcreationthingisparticularlysensitivewhenyouseethesestocksallgodowndayafterdayintheexactsameguidancepoint.Atwhatpointdoesthefocusshifttomaximizingshareholderwealthandstemmingthebleeding,whichisfeelingprettypainfulforsomeofyourownersasopposedtojustmaximizingprofit?


Yes.No,Imean,IalsodidmentionROIC.Imean,we'vecontinuedtomakegreatstridesonimprovingourROICmetrics,andwecontinuedtofocusondoingthat.Look,personallyIthinkthestockprovidesagreatvaluerightnow.Ifyoulookatwherewe'reareinthespacewithasortofapositiverevenue,unitrevenuetrendtowardtherestofthisyear,atighthandleoncosts,deliveringatop-of-costmargininthefirstquarter.WhenIthinkaboutallofthatandalsoreallyintermsofsomeoftherevenueinitiatives.We'restillintheearlystagesofthingslikethecreditcardandthecabinrestyling,Ithinkallofthosegotogethertodriveshareholderwealthcreation.

AndsoforanairlinelikeJetBluewherewehavetobeveryconsciousofdeliveringhereandnow,butalsoonourlong-termplan,Ithinkwe'reexecutingwell.Thecommentsthatarebeingmadeaboutunitrevenue,Idounderstand.Andthat'swhywekindofchangedhowwekindofdescribethequarterbecausewedidwanttobesympathetictothat.Butattheendofthedayweare,byimprovingourmargin,improvingournetincome,drivingastrongerROICperformance,wethinkinthemediumtolongtermthat'swhatdeliversthemostvaluetoshareholders.


Okay.Thankyou,guys.

Operator :

DavidFintzenwithBarclays.

DavidFintzen (Analyst-BarclaysCapital):

Hey,goodmorningeveryone.IguessquestionforMarty.WhenIthinkbackto,IguessitwasNovember14whenyouguysrolledoutalltheinitiativesandthecabinrestyle,$100millionincrementalEBITcontribution.Thatwasobviouslyaverydifferentpricingenvironment.Whenyoulookattheworldtoday,howdoyoufeelaboutthat$100million?Arethere--istherealittlemoredilutionintherevenueenvironmentweneedtotakeintoaccount,orkindofwhat'schangedbetweeninhereandlate2014?


Hi,David.Goodmorning.Thanksforthequestion.Weabsolutelyfullyagreewiththeguidancewegaveoriginally,$100millionincabinrestyling.Obviously,somethingshavemovedsinceweoriginallymadethatannouncement.IwillalsomentionthatwedidthrowinadditionalfeesontheA321all-corefleet,whichwe'reactuallygoingtostartseeingthissummer.

Sototheextentthatwe'velookedatthatoverallpackage,westillfeelverycomfortablewithwhatthat'sgoingtoproduceforourownerswhenthatfullyrollsout.Andhonestlyifyoulookatoverallindustrydynamics,pricescomeandgo,demandcomesandgoes.Ithinkthere'samuchlongertrendlinehere.Idon'tthinkanyofuslookedatthecurrentdemandenvironmentandthepricingenvironmentatthisdemandandsaid,thisisgoingtobethenewnormalforever.





Okay.Appreciatethat.AndthencomingbacktoLauderdale,howdoyouthinkaboutMintfittingintoLauderdaleatsomepoint?Obviouslyyou'redoingsomeofthetranscons.DoesthatfurtherdifferentiateyourfranchiseinLauderdale,particularlydownintoLatAmdowntheroad?


InterestingquestionaboutthefutureofMintondifferenttypesofmarkets.IthinkifyoulookathowMinthasprogressed,whatwe'veshowniswe'renotafraidtotakeMinttounconventionalplaces.IthinkplaceslikeArubaandBarbadosIthinkweregoodexamplesofsomeprettysignificantchangesversuswheretheUSindustryhasflowninpremiumtransconmarkets.Icangiveyoualookatthingsliketheotherislandswe'reflyingthisyear.St.Martin,amuchshorterhaulthanthesix-hourflighttoBarbados.Alsoplaceswherewethinkthere'sverystrongpremiumdemand.

WithrespecttoFortLauderdale,it'samarketwedoverywellin.We'vegrownalot.We'reveryprofitable.WedoseetheopportunityforstrongpremiumdemandtotheWestCoast.Sowe'reexcitedabouttheadditionsthatweaddedfromFortLauderdale.Aswe'vetalkedaboutthingslikethree21LRs,ifwewantedtoflylongerdistance,notnecessarilyfromFortLauderdalebutfromelsewhereinthesystem,wethinkaMint-likeproductwouldbeveryimportanttothat.

SoIthinkthefactthatwehaveproven,firstofall,thatourcrewmemberscandeliverapremiumproductandcandeliveritbetterthananybodyelse.Andsecond,thatcustomerswillrespondtoJetBlueofferingapremiumproductbyshiftingshare,Ithinkthere'salotofrunwayaheadofthegrowthofMint.


Okay.Appreciateallthatcolor.Thanks.

Operator :

DanMcKenziewithBuckingham.

DanMcKenzie (Analyst-BuckinghamResearchGroup):

Thanks.Goodmorning,guys.Withrespecttotherevenueoutlookforthesecondquarter,Iunderstandtheholidayshift.Butstrippingthisout,I'mwonderingifyoucanhelpaddsomecoloraroundsomeofthekeybuckets.

SoLatinAmericaversuswalk-upfares,say,versusgrowthmarketsorcompetitivecapacity.Justgiventhenumberofstrengthsthatyouciteinthebusinessandthegeneralstrengthswe'reseeingfromotherairlinesdomestically.IguessI'mjusttryingtounderstandwhereyoumightbeseeingsomesequentialdeteriorationhere?


Hi,Dan.Thanksforthequestion.Canyoujustrestatethatonemoretime?Ifeellikethefirsthalfofthequestionandthesecondhalfofthequestionaredifferent.IwanttomakesureIanswerexactlywhatyou'retryingtogetat.


I'mwonderingifyoucouldaddsomecoloraroundsomeofthekeyrevenuebuckets.AsIthinkaboutthoseLatinAmericaversuswalk-uppricing,whatthosetrendsaredoingversusperhapsthegrowthmarkets?AndI--we'reseeingsomedomesticallyseemsprettygoodfromtheotherairlinesthathave




reported.Andyouguyshavebeentalkingaboutalotofpositivethingsthataregoingoninyoursystem.I'mjustwondering,I'mjusttryingtoseparateoutwherewemightbeseeinganysequentialdeterioration.


Okay.That'sveryhelpful.Thankyouforthat.Firstofallletmegiveyouahighlevelviewofhowweseethecompetitiveenvironmentshakingoutfortherestoftheyear.Andactuallyit'salotofit'sessentiallyenoughaJetBluestory.Onethingwedidn'tstressinthescript,andmaybeweshouldhave,isthatifyoulookatourASMgrowthfortherestoftheyear,Ithinkwemadesortofaglancingcommenttoit,butIthinkit'sworthstressingalittlebitmore.Weannualizedalotofourgrowthaswehitthirdquarterandfourthquarter.So,forexample,rightnowourschedulegrowthforsecondquarterislike11%inASMs.Thirdquarterit'sdownto7%andfourthquarterit'sinthe5%s.Soourcompsgetalotbetterfromthatperspective.Sowethinkthat'sactuallyabigupsideforus.

Withrespecttowhatwe'reseeinginthedemandenvironment,Ithinkaswesaidinthescript,we'reseeinggooddemandinthebusinessmarket.Andwe'reveryhappywehavethatgoodmixofbusinessandleisure.AndreallyIthink--Idon'tthinkwhatwe'resayingisallthatdifferentthanwhatwe'rehearingcompetitorssay.Clearly,LatinAmericahasbeenachallengeforus.Butagain,it'saverystrongfranchise.It'sstillextremelyprofitable.Idon'tthinkwecanlookatthisasanysortofcrisis.


Understood.Okay.AndIguessjustgoingbacktothecorporate/leisuremix,canyousharewiththatmixistodayandhowwouldyoucomparetheyear-over-yeartrendsinthose?Iguessifyoucouldjustperhapsalso,followinguponmypriorquestion,perhapstalkaboutwalk-uppricingandmaybehowthosetrendsmightbeaffectingtherevenueoutlook?


Hi,Dan.Thanks.Wellfirstofall,Igetveryskittishtalkingaboutpricingingeneral.ButIfeelprettygoodtalkingaboutwhat'shappeninginthecorporatemarket.Whatwe'reseeinginourcorporatesisthattheirtotaldemandforairtravelamongallairlinesisflat,flattoslightlydown.Whatwe'reseeingJetBlueisactuallyincreasingourshareintheoverallcorporatemarketspace.AndIthinkthereareacouplethingsthatarecausingthat.

Firstis,wedocontinuetoaddinincrementalroutes.I'llgivequickshotouttoCleveland.WestartedClevelandearlier.Clevelandhadavery,verygoodstartoutofthegate.NodisrespecttoCleveland,butthat'saclassicbusinessmarketandhasdoneverywellforuswithourcorporateaccounts.SoIthinkthat'sbeenabighelp.Andthesecondthingis,Ithinkascorporatetravelaccountsgetstressed,andIthinkifwe'reseeingcorporatetravelerswholookingtogetmorevalueoutofthebuck,that'saperfectopportunitytotakeanotherlookatJetBlue.Andwe'reseeingitinournumbers.Thattendstobeaverygoodtimeforus.


Verygood.Thanks,Marty.Appreciateit.

Operator :

JamieBakerwithJPMorgan.

JamieBaker (Analyst-JPMorgan):

Goodmorning,gentlemen.





Hi,Jamie.


Soacoupleofinterestingthingshavehappenedrecently.One,andyouaddressthis.Youthinkyouhavethebandwidthtotakeonamergerbutyouoptedtowalkawayandkeepyourpowderdry,andthat'sfine.ThesecondissueisthattheDOTtentativelyapprovedNorwegian'sUSflights.SoI'mbasicallywonderingifeitheroftheseeventshaveanyimpactonhowyoufeelaboutwide-bodyand/ortransatlanticflying?Oranyeventualdecisiononthatfrontissimply,Idon'tknow,mutuallyexclusivefromthetwoaforementionedissues?BecauseNorwegiandefinitelyseemstobebeatingyoutothepunch.Andyouclearlyhaveadditionalbandwidthtotakeonmorethanwhatyou'redoing,otherwiseyouwouldn'thavebeensittingacrossthetablefromVirginAmericaafewweeksago.Anythoughts?


No.ThanksJamie.Andgoodmorningtoyou.Yes.No,IthinkI'lladdressthesortofforward-lookingintentbehindyourquestion.Look,weareveryfocusedondeliveringourcurrentplan.ButasIsaidwhenIthinkyoufiredthequestionatmeatyourInvestorDay,wedo,whenwelookatoursuccessinMintandflyingintomarkets,highpremiummarketswithhighfares,thanwedothinkthatthatpresentsalonger-termopportunityforJetBlue.

Now,Ithinkoneofthethingsthatweputalotofvalueonisthesimplicity.AndsoasIthinkIsaid,the321LRissomethingwe'relookingveryseriouslyatbecausewethinkthattheincrementalamountofcomplexitythatthatprovidesisverymanageable.Ithinkastep-uptowide-bodiesisamuchbiggerdeal.Ithinkit'ssomethingthatonecanneversaynever,it'ssomethingpotentiallyfurtherout.Rightnowwe'refocusedonthecurrentplan.AndwecontinuetoevaluatetheA321LR.


Gotit.Andsecondquestion,stilltryingtogetabetterhandleonrevenueperformanceinMarch.Irealizethat'skindofoldnewsnow.Butforaportionofthequartertheadvantagefaresatthebigthreehadgoneaway.ButthenDeltastartedbringingthembackrightasAmericanwasconsideringdoingthesame,andnowtheyhavereturned.Ifanything,Iwould'vethoughttheabsenceofadvantagefareswould'vehelpedyouearlierinthequarterandthenhurtyouinMarch.Butthat'snothowthecadenceofRASMplayedout.Werethereanychangesintheindustry'sfarestructureasthequarterrolledonthathadanimpactonyou?Ordidyourrevenueperformancejust,Idon'tknow,marchtoitsowndrumduringthequarter?


Marty,wouldyou?


Yes.ThanksJamie,andthanksRobin.Firstofall,againweallgetskittishtalkingaboutpricing,butI'lldomybesttotrytoanswerwithoutgoingtojail.


Yes,ofcourse.





OnethingI'llsayisthat,withespeciallyadvantagepricing,wedon'treallyplayinthemarketswhereadvantagepricingisbig.Wesaidthispublicly,andI'dliketoremindeverybody.Wegenerallydon'tcarryalotofconnectingcustomersdomestically.Internationallywehaveahigherconnectingpercentage,butourconnectingpercentageonthesystemlevelisintheteens.SotheimpactoftheBurlingtontoLosAngelescustomergoingoverfourdifferentgatewaysatadvantagepricingisreallynotthatbigofadealforus.Wedocarrypeopleatsomepointtooneof(inaudible)itineraries,butwedon'treallyplaythatgame.

ThesecondthingI'dsayis,ifyoulookatwhatwesawinouroverallbookingsoverthefirstquarter,weclearlysaw,I'dsay,thesortofsecondhalfofMarchgoingforward,wereallysawbookingssolidifytotheextentthatwewereseeingchallengingyieldenvironmentupuntilthen.Wereallyseethingssortof,Idon'tknowifIwanttousethewordflattenedoutbecauseitdependsonhowyoulookatthemetric,butingeneralIthinkwe'vecertainlyseenourbookingssortof,notlongbeforeEasteruntilnow,Ithinkit'smuchstronger.It'sdefinitelystableversuswhatwe'veseenbefore.


Okay.Iappreciateitverymuch.Thanks,guys.

Operator :

HelaneBeckerwithCowenandCompany.

HelaneBecker (Analyst-CowenSecuritiesLLC):

Hi,guys.Thankyousomuchforgettingmeintowardstheendhere.Mostofmyotherquestionshavebeenaskedandanswered.ButIknowIheardyourcommentsearlieraboutPuertoRico,andIknowthere'sanewairportoperatorwhoismakingsomeprettybiginvestmentsintheairport.AndI'mjustkindofwonderingifyoucouldjustdiscusshowthatwillbenefityourservice?Andifoncethosearedone,itmakessensetogrowthatmarket?


Hi,Helene.It'sMarty.Thanksforthequestionandgoodmorning.We'vebeenworkingwiththatnewoperatorforawhile.AndIthinkoneofthethingsthat'senabledourgrowthinPuertoRicotodate,andinwe'vegrownagoodbitoverthelastfourorfiveyears,istherelationshipwe'vehadwiththeCommonwealth,withthelastadministrationandthecurrentadministration.We'reinterminalA,andwe'vebeeninterminalAforseveralyearsbecausewewantedtobeinapositiontogrow.

We'reveryexcitedaboutthenewoperator.We'veworkedwiththemalreadyinCancun.Sowehaveexperiencewiththem.We'reveryoptimistic.We'reveryhopefulthattheeconomicsituationinPuertoRicoresolves.ButI'llsaythediasporaofPuertoRicanstoFloridahasactuallyworkedoutforus.I'dliketobeinapositionwherepeoplearemovingbackandforthratherthanmovinginonedirection.ButhavingaPuertoRicancommunityinmorepartsoftheUSwethinkisaverygoodthingforJetBlue.


Andthatbringsmetomyfollow-upquestion.DoesCubarepresentasimilaropportunity,givenyourSouthFloridapresence?


Cuba,wethinkitrepresentsaverysimilaropportunity.Cubaisavery,verybigmarket.AgreatVFRmarket.AndforthoseofuswhohavebeenthereIthinkwewouldalltellyouit'llbeagreatreachmarket




whenitopensupfully.Sowe'reveryexcitedaboutit.We'relookingforwardtoseeingwheretheDOTcomesoutandtheirdecisionwithrespecttowho'sgoingtogetwhatrouteauthorities.TheoneadvertisementI'mputtinginforJetBlueis,weareinfamousforgoinginandreducingfaresandstimulatingmarkets.IthinkamarketlikethisthatgetsVFRdemand,weareexactlytherightcarriertogeteverythingweaskfor.


Helene,ifIcanjustbuildonthatlastpoint.Cubatodayhasabout60%ofthenumberofinternationalbusinessesthattheDominicanRepublichas,whichisthelargestmarketintheCaribbean.AndultimatelyitdoesthatwithoutsignificantaccesstotheUSmarket.I'mtalkingvacationershere.

Soitwouldn'tbehardtoconcludethatoncethereissortofscheduledairservicesthosenumberswillgrow.Andthatclearlyisgoingtotakesometimeforinfrastructuretocatchup.ButonceitdoesthenCubahasthepotential,Ithink,tobethelargestinboundCaribbeanmarket.


Okay.Thankyou.Andthen,haveyoueverquantifiedtheimpactofdensificationonyourunitrevenueperformancelaterintheyear?Iguessitwasgoingtobeadraguntilthewholefleetisdone.Sohaveyouevertriedtoquantifythatforus?


I'llanswerthatveryquickly.Theimpactthisyear'sverysmallbecausewe'rejusttalkingabouttheadditional10seatson,Ithink,the2014or2015all-coreA321s.Oncewestartgettingintonextyear,2017andbeyond,thanthe323getsdone.We'llstarttolaythatoutinalittlebitmoredetail.

MarkPowers (CFO):

Intheinvestorupdatewedohavethatscheduleoftheresellingprogrambyfleettype.


Great.Thankyousomuch.

Operator :

DarrylGenovesiwithUBS.

DaveBeam(Analyst-UBS):

Hi,everyone.ThisisDave[Beam]steppinginforDarryl.Onlyonequestionhere.CanyoutalkabouthowmuchofanopportunityyouhavetobuildoutLAandSanFranciscoorganically?


Hi,Dave.It'sMarty.Thanksforthequestion.Goodmorning.Letmetakeitonahigherlevel,thengomoremicro.WehaveachallengeontheWestCoastwithfacilities.It'scertainlyoneofthethingswefindattractiveaboutVirginAmerica.We'vebeenworkingwiththeairportauthoritiesbothairports,tryingtogetadditionalgateaccess.Andwe'restilloptimisticthatwewillgetthereatsomepoint.

Notfornothing.It'soneofthereasonswhywehaven'tfocusedontryingtogrowinLongBeachforquiteawhile.Wethinkit'sagreatairportforSouthernCalifornia.WeexpectNorthernCalifornia,wherewe'resimilarconstrainednow.Weactuallydon'thaveourowngatesinSanFranciscotoday.Andwe'realwayslookingforopportunitiestogrowmore.





Idowantjuststress,Ithinkbothofthosemarketsremainprioritymarketsforustoserve.We'veseenalotofsuccesswithourMintexpansion.AndwedobelievethatthereneedstobeaccessforairlineslikeJetBluetocomeinandoffermorechoiceandlowerfares.Andwe'regoingtobeworkingextremelyhardtomakesurethathappens,bothinLAXandSanFrancisco.

DaveBeam(Analyst-UBS):

Okay.Great.Thankyou.

Operator :

RajeevLalwaniwithMorganStanley.

RajeevLalwani(Analyst-MorganStanley):

Hi,guys.Thanksforsqueezingmeinattheendhere.Justtwoquestions.One,justkindofbacktoFortLauderdale.Justaddingallthatcapacityandgrowingthatmarket,howdoesthatimpactyourLatAmexposure?I'massumingitpushesitupafairamount.I'mjustwonderingifyou'recomfortablewiththat,givensomeofthepressuresyou'reseeing?

Thentheotherquestionisonthecapitalreturnside,orcapitalallocation.Asyougetthroughthisyearandyoufinishpayingdowndebt,repaythenumbersthatyounotedearlier,shouldwejustassumethatgoingforwardit'sgoingtobeallcapitalreturns,buybacks,dividends,etcetera?


Hi,Rajeev.It'sMarty.Letmetakethefirstquestionfirst.WesearchforLauderdalegrowth.WehaveaprettystrongLatinportfoliooutofFortLauderdalenow.AndI'dsaythelastfewrouteswe'veaddedfromLauderdalehaveincludeddomesticroutes,routeslikeNashvillewhichstartsbeginningofMay,SanDiegowhichstartsinJune.AndthenweannouncedNewOrleansforthisfall.Soweseegrowthbothdomesticallyandinternationally.Andwehaveagreatinternationalpresencehererightnow.SoIdon'tthinkwelookatthisasamarkedchangeinouroverallLatinexposure.

MarkPowers (CFO):

Andwithrespecttoyoursecondquestion,I'llsimplyrepeatourstatementinthepreparedremarksisthatwewillassessadditionalcapitalreturnoptionsandupdateyouonourplanstowardstheendoftheyear.


Well,thanksforthequestionseverybody,andjoiningusthismorning.AndbacktoKevin.

KevinCrissey(IR):

That'sit,everybody.Thatconcludesourfirst-quartercall.Thanksforjoiningus.And[Dreese]andIareavailableifyouhaveanyfollow-upquestions.Pleasegiveusacall.Thanks.

Operator :

Andagain,thatwillconcludetoday'sconference.

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