JetBlue Airways Corporation

Good morning. My name is Joelle. I would like to welcome everyone to the JetBlue Airways third quarter 2023 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in listen-only mode. I would now like to turn the call over to JetBlue's Director of Investor Relations, Kush Patel. Please go ahead, sir.

Thanks, Joelle. Good morning, everyone, and thanks for joining us on our third quarter 2023 earnings call. This morning, we issued our earnings release and the presentation that we will reference during this call. All of these documents are available on our website at investor.jetblue.com and on the SEC's website at www.sec.gov. 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, our head of revenue and planning, and Andres Berry, president of JetBlue Travel Products. During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in these statements. Please refer to our most recent earnings release and our most recent 10K and other filings for more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements. The statements made during this call are made only as of the date of the call, and other than as may be required by law, 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 of these non-GAAP measures and a reconciliation to the corresponding GAAP measures, please refer to our earnings release, a copy of which is available on our website and on SEC.gov. Finally, I'd like to add an important note for today's call regarding our proposed transaction with Spirit Airlines. Given our trial has now begun, we will not be taking questions or commenting on Spirit beyond what is in today's prepared remarks. We appreciate your understanding and look forward to answering your questions once the trial has concluded. And now I'd like to turn the call over to Robin Hayes, JetBlue CEO.

Good morning, everyone, and thanks for joining us today. I'd like to start by thanking our incredible crew members for their hard work, dedication, and service to our customers. This summer, airlines faced an exceptionally high number of disruptions given air traffic control and weather challenges. and our outstanding crew members rose the occasion each and every day to support our operation and deliver the JetBlue experience. Before getting into the results, as many of you are aware, the antitrust trial related to our proposed merger with Spirit Airlines began today. We look forward to presenting our case to court over the next few weeks, as we strongly believe our combination with Spirit is the best opportunity to disrupt the industry by increasing competition and choice. creating a long overdue national low fare challenger to the dominant Big Four airlines. We expect the trial will proceed according to the process the judge laid out and is currently scheduled to conclude during the first week of December. Assuming a successful outcome, we remain on track to close the transaction in the first half of next year. For obvious reasons, it would be inappropriate for us to comment on any matters relating to this transaction while a judicial proceeding is underway. And therefore, as Cooch mentioned, we won't be answering any questions related to Spirit on today's call or making any other public comments while the trial is underway. Now moving to the results and slide four of our presentation. We reported a third quarter adjusted loss per share of 39 cents. We planned and prepared for several challenges in the quarter, including the wind down of the Northeast Alliance, air traffic control delays, and shifts in post-COVID customer demands. However, weather-related disruptions were significantly greater than expected, and increases in jet fuel costs also weighed on results. While we are certainly not satisfied with these results, our team is working hard to mitigate these headwinds while also working to protect the customer experience. Turning now to slide five, we are updating our four-year outlook to reflect the impact of these midterm headwinds, including higher fuel prices, and industry capacity that is outpacing domestic demand. We now expect a full loss per share of 45 to 65 cents per share. Our team remains focused on taking steps to control what we can control while identifying additional levers to deliver value to shareholders. First, with respect to weather and ATC staffing challenges, we are pleased that the FAA has extended its 10% slot waiver in New York through to October 2024, which we will be taking full advantage of. This is a critical step in affording much needed support to a fragile ATC system. Importantly, the waiver was announced well ahead of the 2024 planning cycle, providing time to efficiently reallocate capacity, which we were not able to do in 2023. Secondly, as customer travel patterns continue to evolve, we're taking steps to better match capacity with demand. While overall demand remains healthy compared to pre-pandemic levels, inflationary pressures including the recent uptick in fuel prices, are impacting margins in certain markets. We recently announced the closure of two blue cities and other capacity adjustments. As we look ahead, our capacity growth is expected to moderate in the fourth quarter and will be driven primarily by international markets, which have demonstrated yield resiliency this year. Finally, the NEA wind down continues to progress. We began returning LaGuardia slot pairs to American And as we head into 2024, we plan to continue reallocating capacity out of LaGuardia as we return additional slot pairs. These changes are expected to benefit revenues and costs in 2024, as LaGuardia is one of our most expensive airports. Turning now to slide six, while we continue to face challenges in the near term, we firmly believe we have the right building blocks in place to position JetBlue for success. A large footprint in the slot-constrained New York market is a key competitive advantage. New York remains our largest focus city with well over 200 departures per day and has historically been a profit engine for JetBlue. While margins in New York have not recovered from their pre-pandemic levels as quickly as the rest of the network, we're encouraged by the continual progress we are seeing in the market. We clearly have more work to do, but our competent margins in New York will fully recover to pre-pandemic levels over time. We're also driving long-term structural improvements in our profitability from JetBlue travel products, where we have seen a 30% year-over-year increase in commission revenues for hotels and cars year-to-date. In addition, our redesigned TrueBlue program continues to be an important source of loyalty revenue, which increased as a percentage of total revenue by approximately one point year-to-date compared to 2022. Finally, we continue to deliver steady programs, progress, I should say, on controllable cost execution this quarter. We've seen great success from our structural cost program, which is on track to deliver $150 to $200 million savings by the end of 2024. We also continue to make strides in our ongoing fleet modernization program as we benefit our E190 fleet with the margin accretive fuel efficient A220s. In conclusion, I'd like to thank our crew members again as they continue to go above and beyond to deliver for our customers and for each other day in, day out. While near-term headwinds persist, including the Pratt & Whitney GTF engine issue, which Ursula will provide an update on, we are focused on controlling what we can control. I'm confident we have the right foundation in place to navigate the current challenges and work towards improving margins and driving profitable growth. With that, over to you, Joanna.