JetBlue Airways Corporation

Good morning. My name is Sarah, and I would like to welcome everyone to the JetBlue Airways' fourth quarter 2021 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in listen-only mode. I would like to turn the call over to JetBlue's Director of Investor Relations, Joe Cayado. Please go ahead.

Thanks, Sarah. Good morning, everyone, and thanks for joining us for our fourth quarter 2021 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.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 Chief Financial Officer. Also joining us for Q&A are Dave Clark, Head of Revenue and Planning, and Andres Barry, President of JetBlue Travel Products. Dave is, of course, a familiar face to many of you in the investment community. This morning's call includes forward-looking statements about future events. All such forward-looking statements are subject to certain risks and uncertainties, and actual results may differ materially. Please refer to our most recent earnings release in our most recent form, 10Q or 10K, for a more detailed discussion of the risk factors that could cause the actual results to differ materially from those contained in our forward-looking statements, including, among others, the COVID-19 pandemic, fuel availability and pricing, and the outcome of the lawsuit filed by the DOJ related to our Northeast Alliance. The statements made during this call are made only as of the date of the call, and we undertake no obligation to update the information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may discuss several non-GAAP financial measures. For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website. And now I'd like to turn the call over to Robin Hayes, JetBlue's CEO.

Thank you, Joe, and congratulations to Lisa and Dave, and good morning, everyone. I'd like to start by thanking our 22,000 crew members who have been extraordinary through 2021. I'm so proud of their efforts to continue to deliver the JetBlue experience our customers expect, regardless of the challenges. The spike in Omicron cases, particularly during the holiday peak, drove an unprecedented increase in sick calls across the industry. The Northeast, where the vast majority of our crew are based, was especially impacted And we recognize this created very difficult travel conditions for our customers. Despite these challenges, our crew members remain focused on running a safe airline. As we look ahead, we believe JetBlue is positioned extremely well for future success, as many of our investments come to fruition in 2022, and we remain well on track to restoring our earnings power. We have a great team of crew members, and I'm confident they will continue to deliver the best service and product in the industry while inspiring humanity. Let's turn now to slide four in the deck. For the fourth quarter, we reported an adjusted loss per share of $0.36. While Omnicron has temporarily weighed on demand in the very near term, we expect sequential month-on-month improvement through the quarter, ultimately returning to sustained profitability in the spring and beyond. In fact, if it was not for Omnicron, we believe we would have generated higher revenue this quarter than in the first quarter of 2019. I'd like to highlight several key achievements in 2021, enabled by the outstanding work of our crew members. We generated revenue close to 2019 levels this summer, outperforming the nine largest US airlines, aided by the solid execution of our commercial initiatives. And we turned a profit in the months of July and August as a result. We put a solid plan in place to deliver low single-digit chasm growth in 2022 versus 2019, methodically identifying savings to help offset significant industry cost headwinds and our investments in the NEA. You'll recall that we were quick to identify and call out these cost pressures in the middle of last year, and we will continue to be extremely transparent with all of you on the trajectory of our recovery. We brought much needed competition and customer choice to the Northeast with our Northeast Alliance. We also disrupted the transatlantic market with the launch of our service to London and our award-winning products and service. We now have a greatly enhanced network with stronger relevance to all customers, both business and leisure, as we come out of the pandemic. Turning to 2022, we look forward to continuing to execute on our plan to create value for all of our stakeholders, our customers, our crew members, our owners, and our communities, with our primary focus remaining on margins. Moving to slide five, the recent surge in COVID case counts nationwide, particularly here in the Northeast, underscores the need to remain nimble and adjust capacity quickly. However, with respect to Omicron, we are confident the worst is behind us and evidenced by recent case count trends in New York City plummeting. We believe demand is poised to re-accelerate through the quarter into a robust spring and peak summer travel season. similar to the setup around this time last year. And we're already seeing demand rebound strongly with net revenue builds at roughly 30% compared to the first week of January. Consequently, while we do not expect to be pre-tax profitable in Q1, we expect the month of March to be much stronger than January and February. I firmly believe that 2022 will prove to be a transformational year for JetBlue's structural profitability as we look to restore our earnings power and create value for our shareholders. And we plan to achieve this by pulling meaningful commercial levers, keeping our relentless focus on costs, and maintaining our measured approach to capital allocation. Despite all the near-term volatility, we plan to leverage our enhanced network enabled by our Northeast Alliance to unlock further value in our key geographies while promoting robust competition. And we plan to bolster relevance and competition in the region even more with the expansion of London service from New York and the exciting addition of Boston transatlantic service later this year as well. I'm also pleased with the ongoing execution of our other commercial initiatives, including fair options and our true blue loyalty program, both of which continue to be important drivers of revenue growth on the cost front. We saw meaningful pressure across the industry in 2021 as the recovery took hold. The nonlinear recovery emphasizes our need to double down on cost control, as Ursula will discuss. I believe our focus on driving tangible productivity benefits will help ensure we become an even more efficient enterprise. We have also demonstrated our commitment to repairing our balance sheet, having paid down approximately $1.9 billion of debt this year. will continue to be measured and balanced in our capital allocation to drive further shareholder value over the coming years. Let's move now to slide six. Today, I'd like to spend a minute highlighting the tremendous momentum from our JetBlue travel product subsidiary. Back in 2018, we announced a plan to deliver $100 million in runway EBIT, and we're marching towards our goal. 2021 was a banner year with record JTP revenues, including 50% commission's revenue growth versus 2019 and $45 million in EBIT contribution. Importantly, we saw growth in all of our main offerings across the JTP portfolio, which is an exceptional result, just considering how challenging this period has been for aviation. We have also been able to leverage JetBlue's core DNA of creating better customer experiences backed by our exceptional service. A few accomplishments to highlight include enhanced flight and hotel vacation packages with accelerated take-aways to key Caribbean destinations. The launch of Paisley as our post-purchase platform to add more ancillary components such as car rentals and additional updates to our travel insurance offering. I'm extremely proud of the ongoing work from the JTP team and I'm optimistic as to how this business will scale up as demand stabilizes and we build customer awareness, putting us firmly on a path to reaching 100 million EBIT run rate this year. Turning to slide seven. Mitigating risk to ensure the long-term sustainability of our business is so imperative for JetBlue, and this is why we're at the forefront of ESG, boasting our efforts where we can have the most positive, measurable impact. Late last year, JetBlue, along with our venture capital subsidiary JetBlue Technology Ventures, formed the Aviation Climate Task Force with nine other airlines and the Boston Consulting Group. Together, we plan to invest in and facilitate the development of emerging technologies to decarbonize aviation. And early this month, we launched our Sustainable Travel Partners Program, enabling our corporate customers to play a direct role in the sustainability of their business travel by purchasing SAS credits. We're also delivering on our commitment to our crew members, our greatest asset, by creating new development opportunities. Growing our talent pipeline is critical to the sustainability of our long-term success. In our Gateway Direct program, which provides a path to pilot and technical operations careers for current crew members, women represent roughly 40% of our first group of selected candidates, far exceeding the industry average. And in our Gateway Select program, open to all aspiring to become pilots, people of color represent more than 44% of our classes compared to roughly 10% of the industry pilots in the US. And now we are expanding these programs to the families of all of our crew members. Thanks again to our crew members. We have so much to look forward to and so much to do in 2022 and beyond. as we work to make JetBlue an even better travel company for our customers, crew members, and owners. And with that, over to you, Joanna.