JetBlue Airways Corporation

Please stand by. Your program is about to begin. If you need assistance in your conference today, please press star zero. Good morning. My name is James. I'd like to welcome everyone to the JetBlue Airways first quarter 2024 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in listen-only mode. I'd now like to turn the call over to JetBlue's Director of Investor Relations, Kush Patel. Please go ahead, sir.

Thanks, James. Good morning, everyone, and thanks for joining us for our first quarter 2024 earnings call. This morning, we issued our earnings release and the presentation that we will reference during this call. All of those documents are available on our website at investors.jetblue.com and on the SEC's website at www.sec.gov. In New York, to discuss our results are Joanna Garrity, our Chief Executive Officer, Marty St. George, our President, and Ursula Hurley, our Chief Financial Officer. Also joining us for Q&A is Dave Clark, our former head of revenue and planning and newly appointed head of financial planning and analysis, investor relations and strategy. 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. Such forward-looking statements include, without limitation, statements regarding our second quarter and full year 2024 financial outlook and our future results of operations and financial position, industry, market trends, expectations with respect to tailwinds and headwinds, our ability to achieve operational and financial targets, our business strategy and plans for future operations, and the associated impacts on our business. All such forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from these expressed or implied in these statements. Please refer to our most recent earnings release as well as our fiscal year 2023 10-K and other filings for a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from those contained within our forward-looking statements. The statements made during today's 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 at ICC.gov. And now I'd like to turn the call over to Joanna Garrity, JetBlue's CEO.

Thank you, Kush. Good morning, everyone, and thanks for joining us today. It's been a busy start to the year. With the SPIRIT transaction now resolved, we are moving quickly to execute on our refocused standalone plan. Our first quarter beat demonstrates our sense of urgency, and while we are adjusting our full year guidance to reflect headwinds in our Latin flying associated with continued elevated capacity in the region, our early progress supports our confidence that we are building the right plan to create long-term, sustainable value for our owners and all of our stakeholders. As always, the success of our efforts depends on our crew members, and they are stepping up for JetBlue every day. I would like to thank each of them first and foremost for running a safe operation and ensuring a strong safety culture. I'd also like to thank them for supporting one another and our customers as they strive to deliver an outstanding experience every day. Their actions contributed to our better first quarter performance, which included generating an adjusted pre-tax profit for the month of March. In my first two months in this role, building the right senior leadership team has been a top priority. We've been able to appoint several seasoned leaders into key roles, including attracting great outside talent, giving us an ideal mix of expertise and skills at a pivotal time for JetBlue. In addition to Warren's promotion to chief operating officer in January, we welcomed Marty St. George back to JetBlue in February as our new president. It's great to have Marty back here and on the call with us today. In addition, last week we announced that Daniel Schurz has joined JetBlue as our new head of revenue, network, and enterprise planning. Daniel has an impressive track record in the industry and is ready to hit the ground running. Dave Clark, who has demonstrated his capabilities over the past 15 years at JetBlue and is already familiar to many on this call, is transitioning to lead financial planning and analysis, investor relations, and strategy. Among our new leadership team, it's essential that we have alignment on our path forward. I want to ensure they have sufficient time to pressure test our strategy and, frankly, begin executing on more of it before we communicate our long-term plans to investors. We also need to make additional progress with Pratt & Whitney for our team to feel confident in our multi-year growth plans. With these things in mind, we are shifting our investor day from May 30th to the fall of this year. With that said, we remain biased toward action, as reflected by the steps we are already taking, including resolving the Spirit transaction, deferring Airbus deliveries, announcing meaningful network changes, implementing new ancillary fee initiatives, implementing early pieces of our multi-year reliability initiative, and announcing key members of the senior leadership team. As we work toward Investor Day, we will continue to implement early pieces of the strategy in the weeks and months ahead. Now, turning to slide three. During the first quarter of 2024, we began expeditiously implementing our strategic priorities. The investments we've made to build resiliency and recoverability into our schedule enabled us to complete more flights than planned, despite facing weather events which were more severe and in greater frequency than last year. These investments also benefited us financially, setting the foundation to generate more revenue and better control our costs, while positioning us to deliver a better experience for our customers. As a result, I'm pleased to share that our year-over-year revenue performed at the better end of our initial guidance metrics, while both capacity and unit costs exceeded the better end of their respected updated ranges, all of which was well ahead of our original guidance. As we look ahead, we are continuing to work with urgency to strengthen our competitive position. As we discussed last quarter, demand trends in our core geographies and from our core customers have changed considerably since before the pandemic. Many of these changes play to JetBlue's strengths. For instance, leisure travel remains an increasing priority for customers, and there is no longer the same divide between corporate and leisure travel as more people can take advantage of the ability to work from anywhere. However, that also means most of the industry has shifted a portion of their flying to meet this increasing demand for leisure travel, allocating capacity to many of JetBlue's bread and butter routes. Specifically, we continue to see elevated capacity in the Latin region, which represents 35% of our total ASMs and is one of our most valuable and profitable geographies. The elevated capacity in this region is significantly pressuring the overall revenue acceleration we expected to see from the first quarter into the second quarter. We've therefore revised our full year guidance and no longer expect to approach break-even adjusted operating margin for the full year. Marty and Ursula will share more on our outlook for the second quarter and full year, but before we get to the remarks, I want to stress the confidence I have in the near-term actions we are taking and our long-term plan to return to profitability again. We've made progress, and we know we need to continue to do more. Since our last earnings call, we've taken significant steps to rebalance our network, and we expect to continue implementing additional tranches in the coming weeks and months, including trimming capacity in the fall trough to better match supply with demand. Given we are not yet profitable and not growing this year, we have increased the hurdle rate of underperforming markets, and as a result have announced the closure of seven blue cities. It is never an easy decision for us to close a station, and I want to extend a heartfelt thank you to the crew members in those blue cities for their dedication to JetBlue. In addition to significant network changes, we're making solid progress on the $300 million of revenue initiatives we announced during our fourth quarter call, which Marty will elaborate on further. Our team is moving swiftly to continue to launch a number of these initiatives over the remainder of this year, and we remain on track to achieve the $300 million of cumulative top-line benefit in the fourth quarter, with additional ramp expected into 2025 as these initiatives achieve their full revenue potential. As we advance these initiatives and as we evaluate industry-wide changes, we are also rigorously assessing the evolving needs and preferences of our core customers, particularly in how we merchandise our product offering and the experience they receive on board. We know there are still gaps in our product offering where our customers' needs may not be fully met and our team is working swiftly to address them. Finally, a key component of our work to return our business to profitability is ensuring we maintain a low-cost base. In a year where we are not growing, it is imperative that we right-size our fixed cost base to the current operating environment. To that end, we actioned several initiatives in the first quarter, such as offering a voluntary opt-out program, continuing to optimize our real estate footprint, and leveraging technology to help us make decisions more efficiently. Across the board, we are acting quickly to take self-help measures and advance our refocused strategy to return to profitability again. I am confident the benefits of this plan will help us to more effectively compete in our core geographies and, coupled with our low-cost base, strong brand, and the industry's best crew members, will distinguish us from the competition and set JetBlue up for long-term success. I'd like to close by extending another thank you to our crew members for their continued commitment to delivering a safe experience for our customers and for each other and one another each day. The safety of our crew members and customers has always been our top priority, and we, as our number one value, will continue to stress the importance of it in everything that we do. I will now pass it over to Marty, who I'm excited to welcome back to JetBlue. While it is not your first earnings call with us, it has been a while, and I know I speak for all of us when I say how happy we are to have you back in the room. Over to you, Marty.