JetBlue Airways Corporation

Good morning. My name is Sunidra. I would like to welcome everyone to the JetBlue Airways Second Quarter 2021 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, our participants are in a listen-only mode. I would now like to turn the call over to JetBlue's Director of Investor Relations, Joe Cayetto. Please go ahead.

Thanks, Anidra. Good morning, everyone, and thanks for joining us for our second quarter 2021 earnings call. This morning, we issued our earnings release in a presentation that we will reference during this call. All those documents are available on our website at investor.jetblue.com and have been filed with the SEC. In New York to discuss our results are Robin Hayes, our Chief Executive Officer, Joanna Garrity, our President and Chief Operating Officer, and Ursula Hurley, our Acting Chief Financial Officer. Also joining us for Q&A are Scott Lawrence, Head of Revenue and Planning, Dave Clark, VP of Sales and Revenue Management, and Andres Ferry, President of JetBlue Travel Products. This morning's call includes forward-looking statements about future events. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore investors should not place undue reliance on these statements. For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to our press release and other reports filed with the SEC. Also during the course of our call, we may discuss several non-GAAP financial measures. For 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's CEO.

Thanks, Joe, and welcome to your first earnings call with JetBlue. It's great to have you on the team. And I'm also very excited to have Ursula join me here as well. So, Ursula, welcome to your first earnings call. You've been in the room for years, but welcome to the seat. So good morning, everyone. I'd like to start by thanking our inspiring 20,000 crew members for their determination through the most challenging period in our history. And now in taking on the difficult task of restoring operations back to normal levels. The recovery in air travel has come more quickly than we expected. In addition, our recovery has been accelerated by our Northeast Alliance with American Airlines, helping us expand and capture more corporate customers in both New York and Boston. Vaccines have clearly catalyzed consumer confidence, and we're pleased to see our customers traveling with us in greater numbers. Thanks to the outstanding efforts of our crew members in taking care of our customers and each other, JetBlue is well positioned for success, and I couldn't be more excited about the future. Turning to slide four of the earnings deck. In the second quarter, we saw strong signs that consumer confidence and travel demand is returning. with second quarter revenue doubling compared to the first quarter, driven by pent-up demand. JetBlue reported an adjusted loss per share of 65 cents as we capitalized on the strength of our brand, our distinctive position in the accelerating leisure market, and the draw of our focus cities. To give you more context, the recovery in leisure and VFL travel has been more robust than we had anticipated. The quick operational ramp-up and unusually severe weather in the Northeast has come with challenges, but we are pleased with the continued improvement in demand trends through the summer. We operated a peak 929 flights per day in early July, a far cry from the roughly 140 average daily departures in the second quarter a year ago. We also expect capacity to be largely restored to 2019 levels in the third quarter, as a result of the increased demand and growth opportunities from our Northeast Alliance, an important milestone in our recovery. As we march towards a full recovery, we will be laser focused on executing our plan to put us back on a path towards superior margins. We are confident that our competitive advantages, our cervix, outstanding onboard product and cost structure, and the disciplined approach of the three years preceding the pandemic will drive our long-term recovery and sustainable success, margin is firmly back as our North Star. And we are starting to realize benefits from our new commercial and revenue initiatives. And we'll be sharing more on that shortly. Moving to slide five. As we turn to recovery, we continue to generate positive cash from operations in the second quarter. And we expect continued improvement in our operating performance as we progress towards a full recovery. We are creating a path to restore our earnings power to beyond 2019 levels and generate long-term value for our owners in the years ahead, enabled by an accelerated recovery and the earnings and margin tailwinds from our northeast alliance. Our attention now is on squarely rebuilding our margins and repairing our balance sheet. To rebuild our margins, we are executing various revenue initiatives across the network and business while continuing to focus on cost control and sound capital allocations. Regarding our network, we have added new destinations and more service to our focus cities to help our customers travel again, including eight new routes set to launch in the coming months. In August, we expect to launch our first transatlantic flight to London, and we remain committed to our long-term strategy to bring our unique combination of low fares and great service to this route. We're disappointed with the continued restrictions on travel between the US and the UK and urge regulators to safely reopen borders for travel. We are planning schedule adjustments for this fall to match the current demand environment. And once the path to the board reopening is clear, we expect demand to bounce back quickly, just as it has in the rest of our network. In New York and Boston, we are already seeing the initial benefits of our Northeast alliance with American Airlines. We believe this partnership will be a key driver in accelerating JetBlue's recovery and an important contributor to our long-term growth, including revenue and margin generation. The Northeast Alliance supports our expansion in both New York and Boston, and we're excited to see almost 20 new flights and multiple new markets from LaGuardia launching this fall, with many more to come in 2022. The Alliance benefits consumers by bringing healthy competition and much-needed choices for travelers in the Northeast. As both JetBlue and American Expand flying, we remain focused on developing a seamless travel experience for our customers, and we are making the many necessary investments. Given the new growth opportunities provided by our Northeast Alliance, we re-examined our fleet to ensure we are well equipped to capitalize fully on both current and near-term conditions. We have a plan to delay our retirement schedule for our own E190s, which offers an efficient way to profitably grow in the Northeast while protecting our balance sheet. We will, of course, remain flexible with our fleet to continue to align with the demand environment. Our commercial efforts continue to drive incremental revenue and position JetBlue for margin expansion. In the Northeast Alliance, I'd like to highlight three specific initiatives. In addition to the Northeast Alliance, I should say, I'd like to highlight three specific initiatives. We are pleased with the early results of our fare options update, which is providing a significant revenue tailwind. Our JetBlue travel product subsidiary generated our highest ever single quarter commissions revenue across all products, including JetBlue vacations. Finally, we are thrilled to announce the extension of our co-brand agreement with Barker's and MasterCard, which will greatly enhance the value of our program. We expect all of these initiatives to significantly drive margin expansion as we look ahead. With margin as our North Star, we will make these investments in the Northeast Alliance. We will make investments in the Northeast Alliance that, while adding cost pressures, unlock new growth opportunities. These growth opportunities are emerging faster than we expected, and we are pulling forward some chasm pressure in 2022 as we delay 190 retirements and ramp up capacity in high-cost airports, including LaGuardia and Newark. We remain laser-focused on our cost structure and believe we have a good trajectory over the longer term to support our efforts to expand earnings and margins. In the near term, we are working through various cost headwinds as we recover, notably with maintenance, rents, landing fees, and ramp-up pressures. We believe some of these pressures will prove temporary and are a natural part of a recovery. Our teams are working hard to mitigate these headwinds and ensure we execute on our fixed cost savings. We expect to share more color on this important work as we add to our list of cost initiatives following the annual planning process. Lastly, we took another step forward in repairing our balance sheet by paying down our term loan, part of our balanced approach to capital allocation. We expect to continue paying down high cost debt while investing in margin and earnings accretive aircraft. Moving now to slide six. Our optimism in JetBlue's future grows day by day. As we recover from the greatest crisis in our history, we will continue executing our plan to emerge as a stronger airline equipped for long-term, sustainable, profitable growth. The sustainability of our future growth is, in fact, stitched into our strategy as we work to mitigate risks, reduce our carbon footprint, and create value for our owners. Importantly, part of our executive incentive plan is tied to ESG. We continue on our path to achieve net zero carbon emissions by 2040, and we're pleased to report that we recently signed an agreement to purchase sustainable aviation fuel, or SAS, at LAX and took our first delivery earlier this month. This followed JetBlue's move last year to fuel flights from San Francisco with SAS. SAF is one of the most promising ways to reduce air travel emissions. All stakeholders, airlines, manufacturers, fuel suppliers, governments, and investors will need to play a part and a role to help grow and scale SAF and usher in a new lower carbon future for aviation. So in conclusion for me, I'd close by, again, thanking our incredible crew members for everything they've done through this pandemic, and particularly over the last couple of months as our airline has come roaring back. Samler has always had its share of challenges, but your energy and commitment are bringing customers back and setting JetBlue on a solid path of recovery. We are as excited as ever as we chart a course towards generating superior margins. With that, I'll hand off to Joanna.