JetBlue Airways Corporation

Good morning. My name is Lee, your operator today. I would like to welcome everyone to the JetBlue Airways first quarter 2022 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in the listen-only mode. I would now like to turn the call over to JetBlue's Director of Investor Relations, Joe Cayado. Please go ahead, sir.

Thanks, Lee. Good morning, everyone. Thanks for joining us for our first quarter 2022 earnings call. This morning, we issued our earnings release and a presentation that we'll reference during this call. All of those documents are available on our website at investor.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. This morning's call includes forward-looking statements about future events. All such forward-looking statements are subject to certain risks and uncertainties, and actual results may differ materially. Please refer to our most recent earnings release and our most recent Form 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, the outcome of the lawsuit filed by the DOJ related to our Northeast Alliance, and the outcome of any discussions between JetBlue and Spirit Airlines with respect to a possible transaction, including the possibility that the parties will not agree to pursue a business combination transaction, the conditions for the completion of the possible transaction, and the possibility that JetBlue may be unable to achieve synergies and operating efficiencies within the expected timeframes or at all and to successfully integrate Spirit's operations with those of JetBlue. The statements made during this call are made only as of the date of the call, and we undertake no obligation to update the information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may discuss several non-GAAP financial measures. For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website. And now I'd like to turn the call over to Robin Hayes, JetBlue's CEO.

Thanks, Joe. Good morning, everyone. I'd like to begin on slide five of our earnings presentations. I'll start by thanking our more than 23,000 crew members for their continued dedication to caring for our customers and their unwavering focus on running a safe operation, even as we've worked through recent challenges. We realize these difficulties have an impact on our customers and crew members, and we know that we haven't lived up to their expectations in recent weeks. But we are taking swift and significant action to get the operation back on track in the near term and deliver the JetBlue experience that our customers love and expect. whilst not losing sight of our longer-term strategic initiatives. As you will see in our updated guidance, these actions will have a short-term impact on margin, but it's the right thing to do to build the competence of our customers and crew members and set ourselves up for success as we look to maintain our revenue and cost momentum beyond the summer. Our first quarter results were characterized by very strong demand acceleration, with revenue coming in more than six points ahead of our initial view in January. We delivered positive year over three revenue growth in the month of March as we exited the quarter with tremendous revenue momentum driven by very strong underlying travel demand across all of our core segments. Unfortunately, a confluence of events resulted in a temporary operational setback here in April that has significantly impacted our second quarter outlook. As you will recall, last month at an investor conference, we discussed our plans to moderate our capacity plan for the year in light of rising fuel prices and building more operational resilience. We continue to experience elevated levels of pilot attrition and training pressures. This was further compounded by unprecedented levels of weather and ATC disruption in April, resulting in a 90% completion factor, nine points lower than our historical average. To help restore our operational reliability, we are reducing our capacity growth even further as we plan more conservatively for the summer and make investments to de-risk the operation. These actions will create more resiliency in the operation and set us up for better May and an even better June and strong summer peak. While our return to profitability has likely been pushed out by a quarter, we're confident that this reset puts us on the right path. Before we get into the results for the quarter, I'd like to make a brief comment regarding our proposal to acquire Spirit. We're very pleased by the determination of the Spirit Board that our offer could reasonably likely to lead to a superior proposal in recognition of the compelling value for all stakeholders that JetBlue has offered. We will respect the confidential nature of the process as we engage with Spirit under the terms of their current merger agreement with Frontier and have nothing further to add on this topic beyond what we outlined in our conference call a few weeks ago. Please keep in mind that the outlook and forecast that we discuss on this call have been prepared without taking into account all consideration a possible transaction with Spirit. We remain focused on the operation as we look to capitalize on the very robust demand environment ahead of us while continuing to execute on our strategic initiatives so that we are well positioned to return to profitability in the back half of the year and deliver value for our owners, customers, crew members, and communities over the long term. Now let's turn to our quarterly results starting on slide six. For the first quarter, we reported an adjusted loss per share of 80 cents. We experienced a remarkable V-shaped recovery following the Omicron wave, hitting a new daily sales record along the way. This demand momentum positions us incredibly well to recapture the recent run-up in fuel prices, and we're excited for the strong summer travel period ahead of us. As we strive to provide the high quality of service that our customers have come to expect from us, we're taking proactive measures to invest in and improve operational performance, as Joanna will discuss. We're also maintaining our summer hiring pace despite the reduced capacity outlook, and in partnership with New York Mayor Eric Adams, we hosted over 1,200 candidates at our hugely successful JFK hiring event last month, as we worked together to revitalize our hometown's economy and vibrant tourism industry. All of this is reflected in our second quarter and revised four-year outlook. Moving to slide seven. Despite the current operating and fuel environment, we're seeing underlying momentum of our path to transforming JetBlue's structural profitability. We are making great progress on many of our longer-term initiatives in 2022, and these will be meaningful drivers of our earnings growth in coming years. Our ability to grow in high-value geographies, bringing more value to customers, and promote competition would not be possible without the Northeast Alliance with American Airlines. We are now operating more flights out of the New York metro area today than ever before, with plans to increase service up to 300 flights per day. This compares to an average of roughly 200 flights per day pre-pandemic. And in the process, we are creating 5,000 high-quality jobs in our hometown of New York to support this growth. I will note that given what we have experienced here in April, our intention is to treat the ramp up to 300 flights per day in New York very conservatively. and to ensure we have more capacity to recover quickly from weather events. I'm also pleased with a strong execution of our ancillary revenue strategy, which continues to provide customers with additional value and choice while driving strong unit revenue performance. On the loyalty front, the team continues to enhance the value proposition for our award-winning True Blue program by adding earning and redemption opportunities for our customers. And last, but certainly not least, I'm always impressed by our JetBlue Travel Products team, as they doubled their revenue growth in Q1 compared to the first quarter of 2019. The business is scaling very nicely and remains on track to hit $100 million in run rate EBIT contribution this year. Notwithstanding some of the short-term investments we have outlined here, our business model thrives when we keep costs low, which is the other key lever to restoring our profitability. The volatile fuel environment and the investments we are making in our operation only serve to highlight the urgency with which we need to manage our controllable costs and drive productivity. Having said that, it is important to note that the operational disruption in April really masked the underlying progress we are seeing in our CABSM X fuel performance in Q2, which is actually trending in the right direction after adjusting for the short-term headwinds, as Ursula will discuss further shortly. In the first quarter, we exercised and accelerated 30 A220 options to support the exit of our 190 fleet by 2026. And our fleet modernization program is key to driving a more efficient cost structure, while also supporting JetBlue's path towards net zero. And given our reduced capacity outlook, we are also exploring the potential to further accelerate the retirement of some of our older aircraft. We're looking forward to sharing more detail with you at our Investor Day next month, on all of the work our team is doing to position JetBlue for success as we look to strengthen our earnings power in the coming years and deliver value for our owners. Turning to slide eight. The work is never done on ensuring our long-term sustainability. And we recently announced another deal for SAS Supply with Umetus. As part of our objective to be at the forefront of innovation and help decarbonize aviation, our JetBlue Tech Ventures subsidiary has made further investments in two additional startups. Electric Power Systems is a leading provider of airspace battery systems, and Air Company is working on carbon capture and conversion technologies. We've also invested in the TPG Rise Climate Fund as a limited partner, focusing on decarbonizing transportation. All of this great work would not be possible without our crew members, and we continue to invest in protecting the sustainability of our talent pipeline as well. Our JetBlue Foundation, which supports aviation-related STEM programs, recently awarded grants to 10 charitable organizations to help increase advocacy for inclusion, gender, and racial parity within STEM and aviation. In conclusion, we absolutely recognize the short-term margin impact of the April disruption and the operational investments we are making for spring and summer. But they are essential to restore all of our customers' confidence and drive the higher revenue mix enabled by the NEA through the better schedules and benefits that will appeal to corporate and high-value leisure customers. I'll close with another thank you to our crew members. I'm always amazed and inspired by your resilience and hard work taking care of our customers and, of course, each other. With that, over to you, Joanna.