JetBlue Airways Corporation

Good morning. My name is Joanna, and I would like to welcome everyone to the JetBlue Airways Fourth Quarter 2022 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. I would now like to turn the conference over to JetBlue's Director Assistant Treasurer and Fuel, Joe Cayato. Please go ahead.

Thanks, Joanna. Good morning, everyone, and thanks for joining us for our Fourth 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 Berry, 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 form 10Q or 10K 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 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 various risks and uncertainties related to JetBlue's acquisition of Spirit Airlines. 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 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. Good morning, everyone. Greetings here from New York City, and we appreciate you joining us today. I'll start as always with a huge thanks and shout out to our 24,000 crew members. We overcame many challenges together throughout this past year, and we made tremendous progress in restoring the business coming out of the pandemic. And we're set up to further build on that success here in 2023. with a disciplined plan to continue strengthening our foundations both operationally and financially. While we face economic uncertainty, we remain focused on what we can control and we are leveraging our unique value proposition of offering both great service and low fares enabled by our low cost structure. This will result in margin expansion and robust earnings growth. Turning now to slide four, of our new deck template. We closed the year with significant cost and revenue momentum, resulting in an adjusted pre-tax income of $69 million for the quarter and earnings per share of 22 cents. Reflecting back on the full year 2022, we made important progress in positioning JetBlue for longer-term success. We hit a new record annual revenue result, a phenomenal achievement by our team given we were only two years removed from the depths of the worst crisis in aviation history. We continue to see incredible demand for JetBlue's differentiated product of low fares and great service, which was recently recognized by the Point Sky with an Editor's Choice Award for Best Economy Class in the World. We launched a new structural cost program, targeting $150 to $200 million of cost savings by the end of 2024. This program is designed to ensure that we are offsetting some of the inflationary increases in our cost structure and help us maintain a low-cost platform, allowing us to continue to offer even more low affairs. We strengthened our network and built even more relevance for our customers by adding more service to more destinations, including significant growth out of New York, enabled by our Northeast Alliance with American Airlines, as well as building out our transatlantic service between the Northeast and London with additional frequency. We also moved into state-of-the-art wonderful new terminals at LaGuardia and Orlando and recently secured our third slot pair at London Heathrow. Our ESG efforts continue to lead the industry. Last quarter, we announced our most aggressive emissions reduction target yet, with a plan that would effectively reduce our pre-seater missions in half by 2035 compared with 2019 levels. As part of our recently announced science-based target, JetBlue is the only U.S. carrier today to be flying regular domestic flights with fuel supplied by both currently available SAF producers, while supporting a portfolio of emerging suppliers with significant forward commitments. We also made great progress on our diversity, equity, and inclusion goals. Our external customer research shows that JetBlue ranks number one for diversity and inclusion in accommodating travelers in our focus cities. And in our Gateway Direct program, open to our crew members aspiring to become pilots, people of color represent 82% of our classes. As we look ahead to 2023, we are capitalizing on the strength of our trusted travel brand to drive record customer engagement and continued revenue momentum. We are making steady underlying progress on our long-term initiatives to structurally improve our profitability and enhance our long-term earnings power with a low-fare offering that appeals to a wide range of customers, supported by our growing traction on our cost program. This gives me great confidence that we can restore margins towards 2019 levels as we move throughout this year. Beyond 2023, we look forward to transformational long-term value creation for all of our stakeholders with the acquisition of Spirit, which will allow us to create a truly national customer-centric low fare challenger for the big four airlines. This will enable us to bring more of our unique value proposition to more customers across more destinations. As we said before, we continue to expect this transaction to close no later than the first half of 2024. Moving now to slide five. For the first quarter, which is a seasonally trough travel period, we projected an adjusted loss of between 35 and 45 cents per share. We expect continued revenue strength and execution on cost reduction efforts throughout the year with a margin trajectory approaching pre-pandemic levels as we exit 2023, despite significantly higher labor, costs, and fuel prices. As a result, for the full year 2023, we expect to generate between $0.70 to $1 in adjusted earnings per share, which is inclusive of a new pilot deal that we hope will be ratified very soon. This full-year EPS guidance reflects the improvement that we expect throughout the year and highlights the one-way earnings profile of the standalone business into 2024 as we execute on new and existing initiatives across the business. The contribution from our Northeast Alliance will continue to ramp in 2023. We are so encouraged by the improvement in economic growth in New York as measured by GDP after lagging the rest of the country last year. At the same time, both JetBlue and industry capacity in the region recovered more quickly than the rest of the U.S. in 2022, which provides a sequential tailwind in 2023 as that growth matures. we continue to see incredible momentum in our loyalty program, which continues to not only exceed our expectations, but also hits new records. We recently announced the evolution of our True Blue loyalty program, which Joanna will elaborate on shortly. With respect to our network, we are planning to take delivery of four A321LR aircraft this year to support our continued transatlantic network expansions. We are very excited to launch service to Paris this summer, marking our second transatlantic destination and our first in continental Europe as we build customer relevance from our key focus cities. Our JetBlue Travel Products subsidiary took another fantastic step forward last year with 59% revenue growth versus 2021 and 136% revenue growth versus 2019. This progress is a result of continued product innovation across JetBlue Vacations, Travel Insurance, and our new Paisley platform, coupled with increased customer awareness. When we started JetBlue Travel Products, we set a target of $100 million runway EBIT by 2022, compared to $15 million of EBIT in 2019. I am so pleased to share that we are near the $100 million with consistent $20 to $25 million of quarterly earnings with growing momentum into 2023. We continue to be optimistic about the growth potential of this business and aim now to roughly double our current run rate EBIT in the next three years. Finally, we continue to make strides to transform our cost footprint. We remain on track to deliver $250 million of total cost savings through 2024 with execution on our structural cost program and our fleet modernization efforts, which Ursula will touch on here very shortly with more detail. In closing, I would again like to thank our crew members for your dedication and all of your incredible hard work in 2022. I am so optimistic about how we are positioning the business for long-term success and so proud of the role that all of you have played in that. We have a strong foundation in place to execute on our plan to structurally enhance our long-term earnings power and create value for our shareholders. With that, Joanna, over to you.