CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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JetBlueAirways(JBLU)EarningsReport:Q32015ConferenceCallTranscriptThefollowingJetBlueAirwaysconferencecalltookplaceonOctober27,2015,10:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
KevinCrissey;JetBlueAirways;Director-IRRobinHayes;JetBlueAirways;PresidentMartySt.George;JetBlueAirways;EVP-CommercialandPlanningMarkPowers;JetBlueAirways;CFO
OtherPart icipants
JulieYates;CreditSuisse;AnalystJosephDeNardi;StifelNicolaus;AnalystJaredShojaian;WolfeResearch;AnalystDavidFintzen;BarclaysCapital;AnalystMichaelLinenberg;DeutscheBank;AnalystTomKim;GoldmanSachs;AnalystAndrewDidora;BankofAmericaMerrillLynch;AnalystJamieBaker;JPMorgan;AnalystHelaneBecker;CowenSecuritiesLLC;AnalystRajeevLalwani;MorganStanley;AnalystSaviSyth;RaymondJames&Associates,Inc.;AnalystDanielMcKenzie;BuckinghamResearchGroup;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Goodmorning.MynameisDenisiusandIwouldliketowelcomeeveryonetotheJetBlueAirwaysthird-quarter2015earningsconferencecall.Asareminder,today'scallisbeingrecorded.
(OperatorInstructions)
IwouldnowliketoturnthecallovertoJetBlue'sDirectorofInvestorRelations,KevinCrissey.Pleasegoahead.
KevinCrissey(Director-IR):
Thanks,Denisius.Goodmorning,everyone,andthanksforjoiningusforourthirdquarter2015earningscall.JoiningushereinNewYorktodiscussourresultsareRobinHayes,ourPresidentandCEO,MartySt.George,EVPCommercialandPlanning,andMarkPowersourCFO.
Thismorning'scallincludesforwardlookingstatementsaboutfutureevents.Actualresultsmayvary--maydiffermateriallyfromthoseexpressedintheforward-lookingstatementsduetomanyfactorsandthereforeinvestorsshouldnotplaceunduerelianceonthesestatements.Foradditionalinformationconcerningfactorsthatcouldcauseresultstodifferfromtheforward-lookingstatements,pleasereferto
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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ourpressrelease,10-QandotherreportsfiledwiththeSEC.
Alsoduringthecourseofthecallwemaydiscussseveralnon-GAAPfinancialmeasures,forareconciliationofthesenon-GAAPmeasurestoGAAPmeasures,pleaserefertothetablesattheendofourearningsrelease,acopyofwhichisavailableonourwebsite.
AndnowI'dliketoturnthecallovertoRobinHayes,JetBlue'sPresidentandCEO.
RobinHayes (President):
Goodmorning,everyone,andthankyouforjoiningus.Earliertodaywereportedourresultsforthethirdquarter2015.
Inthequarter,netincomewas$198millionor$0.58perdilutedshare.Onayear-over-yearbasis,ournetincomemorethandoubled,andoverthelast12monthswehavedeliveredareturnoninvestedcapitalof11.7%.
Thesestrongresultswouldnothavebeenpossiblewithouttheterrificjobperformedbyourover18,000crewmembersduringaverypeakbusysummerseasonwhilewecarriedarecord9.2millioncustomers.
Totalrevenuesgrew10%year-over-yearinthequarter,reflectingsolidunderlyingdemandinallofourgeographies,executionofournetworkstrategyandsuccessfulimplementationoffareoptions.Operatingexpensesdecreased2%year-over-year,drivenbyalowerfuelpriceenvironment.Ascomparedtothirdquarter2014,ourrealizedaveragefuelpriceof$1.85wasdown39%.
Operatingmargininthethirdquarterwas20.8%,animprovementofmorethan10percentagepoints.Ournetworkmaturitycontinuestodrivesuperiorunitrevenueincreases.89%ofourcapacityisnowallocatedtoroutesstartedlessthanthreeyearsagoascompared--atleastthreeyearsago,ascomparedtoonly84%whenmeasuredatthecloseofthethirdquarter2013.
Wecontinuetofocusonourgrowthinhigh-valuegeography.Nearly98%ofJetBlue'sthird-quarterASMsstartedorendedinoneofoursixfocuscities.Marginsareexpandingacrossthenetworkevenaswegrowcapacityfasterthantheindustryaverage.Infact,weclosedthethirdquarterwithourmostprofitableSeptemberinJetBlue'shistory.
WecontinuetobeextremelypleasedwithallaspectsofMint'sperformance,fromcustomersatisfactiontoitsbottomlinecontribution.ThistremendoussuccessledtoourdecisiontoexpandMint'sfootprint.
ThispastSundaywestartedadditionalMintfrequenciesfromNewYorkJFKtoLosAngelesandfromNewYorkJFKtoSanFrancisco.Lookingforward,weareveryexcitedabouttheupcomingMintexpansiontotheCaribbeanandBoston.Nextweek,onNovember7,wewilllaunchMintseasonalservicebetweenNewYorkJFKandArubaandNewYorkJFKandBarbados.
In2016,MintcomestoBostonwithuptothreedailyroundtripstoSanFranciscoandLosAngelesandseasonalservicetoBarbados.Mint'sbestinclassproduct,lowfaresandunderpinnedbytheamazingjobourcrewmembershavedoneindelivery--deliveringtheproject--productcontinuestodoverywell.
Letmenowhighlightouroperationalperformance.Mostmajoroperatingmetricsimproveyear-over-year.
On-timeperformancemeasuredbysystemsarrivalswithin14minutesofscheduledtime,otherwiseknownasA14,improved1.4percentagepointsto77.98--77.8%.Completionfactorimproved0.5percentagepointyear-over-yearto99.3%,drivingefficientcapacitygrowth.
Anotherstrongexecutionstoryisourplanningandrollingoutoffareoptions.Whilewearestillintheearlystagesofthisinitiative,we'rehappytosharethatourtechnologyandtraininginvestmentare
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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payingoffwithpromisingthird-quarterresults.Martywillprovideadditionalcolorontherevenueimpactshortly,butwebelieveweareonpacetoexceedourinitialtargetof$65millionincrementaloperatingincomein2015.
Fareoptionswasmuchmorethantheimplementationofafirstcheckedbag.ItwasasignificantchangeforJetBlue,impactingtheentirecompany,includingouroperation,technologyandculture.
Iamparticularlyproudofourcrewmemberswhowereabletominimizeitsimpactonouroperatingperformanceandcustomersentimentthroughthepeaktravelseason.Torecognizeourcrewmembersincrediblecontributiontoourstrongresultssofarin2015,Iampleasedtoreportthatwewillmakeitearlypartial2015profit-sharingpaymentof$50million.Martinwillprovideyouadditionalinformationonthisafinancialimplication.
Inclosing,wearehappywithourresultsinthethirdquarterandremainlaserfocusedonexecutinginitiativeswehadpreviouslyoutlinedtoimprovereturns.Wearestillintheearlyinningsofourmulti-yearself-helpplanoutlinedatourlastinvestorday,November2014.Weanticipatethisplanwillimproveourannualbottomlineby$450million,independentofGDPgrowth,industrycapacityorthepriceoffuel.
Andwiththat,IwouldliketoturnthecallovertoMartytodiscussourrevenueresultsingreaterdetail.
MartySt.George (EVP-CommercialandPlanning):
Thankyou,Robin.Goodmorning,everyone,andthanksforjoiningustoday.
Overall,demandinthethirdquarterwassolid.PassengerunitrevenueorPRASMdecreased6/10ofapercentoncapacitygrowthof10.4%.BasedonAforAdata,unitrevenueacrossourcombineddomesticandLatinnetworksoutpacedtheindustrybyfivepercentagepointsinthethirdquarter,whilewesimultaneouslygrewASMsmorethan5percentagepointsfaster.
Ourstrongrelativerevenueperformancecontinuestobetheresultofthematurationofournetwork,ourlimitedexposuretothesofterglobalmarketsandafavorablecurrencyexchangerates,strongexecutionofournetworkandrevenueinitiativesand,ofcourse,terrificexecutionbyourcrewmemberswhodeliveranoutstandingJetBlueexperienceeveryday.
Lookingatourperformanceonaregionalbasis,wesawPRASMstrengthacrossbothourdomesticandinternationalnetworks.LatinAmericaandCaribbeanmarketswerestrongestduetolowerrelativecapacitygrowthandeasiercomparisons.
Onthedomesticside,thetrans-conregionperformedverywell,whileFloridasawsomeyieldpressureduetoadditionalJetBlueandindustrycapacity.SeptemberPRASMdidsoftentowardstheendofthemonthascloseinyieldswerelowerthanexpected.Otherrevenueincreased19%year-over-yearinthethirdquarter,reflectingthefairoptionsrevenuetailwind.
AsRobinhighlighted,welaunchedfairoptionsonJune30andarepositiveaboutitsinitialrevenueimpact.Inthethirdquarterwerecognizedfareoptionsrevenueofabout$40million.Wenowexpecttheincrementaloperatingincomebenefitoffareoptionsin2015tobeatleast$80million.Thisisaheadofourinitialtargetof$65million,andreflectsahighernumberoffareupsellsandmorefirstcheckedbagsthanoriginallyforecasted.
Asareminder,thefareoptionsinitiativeimpactsbothpassengerandotherrevenue.Farespurchasebycustomersforanyoftheoptionsarereportedaspassengerrevenue,additionalbagchargesprimarilypaidattheairportcontinuetobereportedinotherrevenue.
IanticipateyoumayasksomequestionsaboutthesplitbetweenPRASMandotherrevenue.Whilewe
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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recognizeyourneedtorefineyourmodelsforfareoptions,wearenotpreparedtosharethatinformationatthistimeduetoitscommercialsensitivity.
Asrevenuefromafareoptionsgrows,werecognizethattotalRASM,orTRASM,isbecomingamoremeaningfulindicatorofourrevenueperformance.Whilewe'renotpreparedtoannounceanychangesinourguidanceprocess,wearereviewingouroptionsforfuturedisclosures.
NowontoFly-Fi,ourindustry-leadingfreehigh-speedbroadbandWi-Fiproduct.JetBluehasrecentlycompletedtheinstallationofFly-FiacrossourentireAirbusfleet,consistingofmorethan150combinedA320andA321aircraft.
Inaddition,ourfirstFly-FienabledEmbraer190aircraftmadeitsinauguralcommercialflightearlierthismonth.WeplantocompleteFly-Fiinstallationonall60ofour190sbythefallof2016,atwhichpointwewillbeofferingfreeFly-FiserviceontheentireJetBluefleet.WhilemostofourcompetitorschargeforonboardWi-Fi,ourabilitytoofferabetterexperienceforfreeisdrivenbyrevenuegeneratingagreements,suchasourpartnershipwithAmazon,whichweannouncedearlierthisyear.
We'realsoexcitedtofinallysharesomeadditionalinformationaboutourco-brandedcreditcardrelationship.Beginninginthefirstquarterof2016,wewilllaunchanewco-brandcreditcardpartnershipwithBarclaycardontheMastercardcardnetwork.Atthattime,ourcurrentagreementwithAmericanExpresswillend,andexistingcardholderswillbeconvertedfromAmericanExpresstoaBarclaycard.
AmericanExpresshasbeenavaluedco-brandpartnersince2005,andwethankthemfortheirpartnership.Whilewecannotpubliclysharemanyspecificdetailsaboutthenewagreementyet,weareexcitedaboutthenewchoicesthiscardwillprovideforourcustomersandit'slikelypositivefinancialimpactforJetBlue.Wewillhavemoredetailsforyouabouttheagreementinfuturequartersaspermittedunderthetermsoftheseagreements.
Withthat,I'llturnthecallovertoMarktoprovidefurtherdetailsonthequarter.
MarkPowers (CFO):
Thanks,MartyandRobin,andgoodmorning,everyone.Thanksforjoiningustoday.
Thismorning,wereportedthird-quarteroperatingincomeof$351million,morethantwicetheoperatingincomeofthesamequarterlastyear.Pre-taxincomeinthequarterwas$322million,upfrom$132millionlastyear.Pre-taxmarginwas19.1%,that'sanimprovementofmorethan10percentagepoints.
Totalrevenuegrew10.4%,oncapacitygrowthof10.4%.Yieldimproved0.5%whileloadfactordecreased0.9percentagepoints.Astocosts,excludingfuelandprofitsharing,year-over-year,third-quarterunitcostsincreased2.4%.That'sconsistentwithourJulyquarterlyguidancerangeof1%to3%.
Inthequarter,year-over-year,unitcostpressurecameprimarilyfromsalaries,wagesandbenefits,maintenancematerialsandrepairsandotherexpensesrelatedtothelaunchoffareoptions.Specifically,aportionofourplannedmaintenanceexpensesshiftedfromthefourthquartertothethirdquarter.Whiletheshifthadanegativeimpactonthethird-quarter,wedon'texpectittomeaningfullyaffectourfull-yearcostperformance.
Executingonourstrategicinitiativesisakeyelementofoursuccess.Inthequarter,wemadeinvestmentsintrainingandtechnologytoensurethesuccessfulrolloutoffareoptionsandtominimizeitsimpactonouroperationandcustomersentiment.
Turningtofuel,inthethirdquarter,14%ofourfuelconsumptionwashedgedusingjetfuelswapsandcolors.Includingtheimpactoffuelhedgingandtaxes,ourfuelpriceinthethirdquarterwas$1.85which
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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isdownfromlastyear'spergallonpriceof$3.05or39%.
Ourhedgepositionsremainunchangedsinceourlastguidancewhenwereportedsecond-quarterearnings.Asoftoday,wehavehedgesinplaceforabout15%ofourexpectedfourth-quarter2015fuelconsumptionandnohedgesinplacefor2016andbeyond.BasedontheforwardcurveasofOctober16,weexpectourfourth-quarterfuelpricepergallon,includingtheimpactoftaxesandhedges,tobeapproximately$1.77.
Giventhatwehavenohedgesinplacefor2016,there'snoneedtoprovideadditionalguidance.FormorespecificdetailsregardingourhedgepositionspleaserefertoourinvestorupdatewhichwasfiledwiththeSECandmadeavailableontheInvestorRelationssectionofourwebsitepriortothestartofthiscall.
Asforprofit-sharing,asRobinmentioned,ourstrongresultsdroveourdecisiontorecognizecrewmembersterrificworkbymakinganearlypartialprofitsharingpaymentof$50million.ThepaymentwillbemadeinNovemberwiththebalanceoftheannualprofitsharingpaidearlynextyear.
Pleasenotethisactionwillnotincreaseoftheoverallsizeofour2015profitsharing.It'ssimplyanaccelerateduseofcashthatwouldotherwisebepaidin2016.Inprioryears,theprofitsharingroutewasmoremodestandpaidentirelyinthefirstquarterofthefollowingyear.
Movingtothebalancesheet.Weendedthequarterwith$1.1billionincashandshort-terminvestments.Duringthethirdquarterwemadescheduledofdebtpaymentsandcapitalleasepaymentsof$54million.
Strengtheningourbalancesheetandmanagingriskscontinuestobeapriorityandwebelievewearemakinggoodprogress.Overthelast12months,whileaddingtoourassetbase,wehavereducedournetdebtbynearly$800million,drivingasignificantimprovementinournetdebttoEBITDAratio,whichwasdownfrom2.8timesayearagoto1.1timestoday.Reflectingthecontinuousimprovementofourcreditmetricsoverthelastthreeyears,JetBlue'sunsecuredcreditratingwasupgradedbytwonotchesbyMoody'sinthequarter.
Givenourstrongliquidity,wecontinuetolookforopportunitiestoreduceourdebtandusecashtolowerfutureoperatingexpenses.AgoodexampleofthelatterisourplantobuyouttheleasesonsixA320aircraftwearecurrentlyoperatingbyyearend.Althoughweexpectthisdecisiontoincreaseour2015CapExbyabout$110million,webelievewewillsaveabout$12millionperyearinleasepayments.
Inaddition,thisbuyoutwillreducemaintenanceexpensesrelatedtothereturnconditionsrequiredinthosecurrentleases.Withrespecttosharerepurchases,onSeptember15JetBluecloseditspreviouslyannouncedacceleratedsharerepurchaseprogram.Intotal,JetBluepurchased6.8millionsharesataweightedaveragepriceof$22.06.Inaddition,inSeptember2015JetBlueenteredintoaRule10b5-1tradingplanagreementaspartofitssharebuybackprogramannouncedin2012.Thisprogramcoverspurchasesofupto3millionsharesbetweenOctober30,2015throughtheendoftheyear.
Withrespecttocapitalandfleet,JetBlueendedthequarterwith211aircraftincluding138320s,60E-190sand21A321s.WepurchasedittwoA321aircraftinthethirdquarterwithcashandexpecttotakedeliveryoffourmoreA321sinthefourthquarterofthisyear.Giventhestrengthofourcashfromoperations,thecurrentpresumptionisthatwewillpaycashforallofourupcomingfourth-quarterdeliveriesandpossiblymostofthe102016deliveries.
InordertosupportourrecentlyannouncedMintexpansionplan,we'veconvertedfiveofthe10A321deliveriesscheduledfor2016fromthehigh-densityconfigurationtothelowerdensityMintconfiguration.Inthefourthquarter2015weprojecttotalCapExbetween$345millionand$365million.That'sapproximately--ofwhichapproximately$315millionrelatestoaircraft,includingtheleasebuyoutsI
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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previouslymentioned.
Forthefullyear,2015,wenowexpectnon-aircraftCapExof$120millionto$140millionwhichisdownfrompreviousguidanceof$150millionto$200million.Wenowexpecttotalcapitalexpendituresin2015ofapproximately$900millionto$920million.
Turningtocapacity,weplantogrowASMsinthefourthquarteryear-over-yearbetween8.5%and10.5%.Weplantogrowourfull-yearcapacityby8.5%to9.5%upslightlyfromthepreviousguidancewhichisatthehighendofa7%to9%range.The0.5%increasetothehighendofourfull-yearcapacityguidancerangeisafunctionof,one,theadditionalMintservicedrivenbyhigherutilizationofourMintfleetandtwo,ourcontinued,betterthanexpectedcompletionfactor.
Forthefullyear2016weforecasthighsingledigitpercentageASMgrowthwhichissimilarto2015'sgrowth.Weexpectcapacitygrowthtobefasterearlyintheyearasweannualized2015growth.
Turningtotherevenueoutlook,wecontinuetoseedemandresilienceacrossournetwork.WeexpectOctoberpassengerRASMtodecreasearound2%peryear--year-over-yearrevenue.
AlthoughwedonotprovidequarterlypassengerRASMguidanceonearningscalls,weexpectNovemberpassengerunitrevenuegrowthtoperformbetterthanOctoberPRASM.IwouldalsonotethattheMondayafterThanksgivingfallsinNovemberthisyearversusDecemberlastyear.Inaddition,thetimingofChristmasDaythisyearcompressesthepeakholidayperiod.WeexpectholidaytimingtobenefitNovemberandsoftenDecember.
Movingontocosts.Inthefourthquarter,weexpectCASM,excludingfuelandprofit-sharing,toincreasebetweena0%and2%year-over-year.Lookingatthefull-year2015weareloweringthetopendofourguidance.WenowexpectCASM,excludingfuelandprofit-sharing,toonlyincreasebetween0%and1%versuspriorguidanceofbetween0%and1.5%.
Inclosing,weareclearlypleasedwithourthirdquarterresults.Ourcrewmembersremainhighlyengaged.We'reexcitedtokeepdeliveringonourplansfor2015andbeyondandwiththat,operator,we'rereadytotakequestions.
KevinCrissey(Director-IR):
Thanks,Denisius,canyoupleasepreparetheanalystsforQ&A?
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
OurfirstquestioncomesfromJulieYatesofCreditSuisse.Pleasegoahead.
Julie Yates (Analyst-CreditSuisse):
So,justtrying--Iknowyouguysaren'tgoingtoprovidenecessarilyabreakoutofthefarefamilycontributionandtheunderlyingPRASMbutitcertainlyseems,uppingthecontributionfromfarefamilieswithOctoberbeingdown2%,thatthere'sanunderlyingdeterioration,perhapsintheyieldenvironment.
SocanyouspendalittlebitmoretimetalkingaboutwhathappenedinlateSeptember,whatyou'reseeinginOctoberandmaybewhatthedriversare,ifthat'samorecompetitivecapacitycominginorifsomeofthisindustryyieldweaknessisjustcatchingupandimpactingtheJetBluemarketsnow.
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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MartySt.George (EVP-CommercialandPlanning):
HiJulie,it'sMarty.Letmetakethatone.Ithinkyousortofgavehalftheansweralready,Imean,andwereportedearlier,wesawsortofaone-timeblipinthatsecondhalfofSeptember,thefirsthalfofOctober.We'vedefinitelyseenabouncebackinthelastfewweeks.
So,wereallythinkitwasatemporaryissueanditwasn'tloadfactorofanissuebutitwasmoreclose-endyieldsforthatsortofendofSeptember,beginningofOctoberperiod,butthathasbouncedback.Wedidjust,MarkjustguidedthatwewereforecastingNovembertobeobviouslybetterthanOctoberandhonestly,there'salotofchoppinessthisyearwithholidaysasfaraswhatmovesbetweenNovemberandDecember.
Thecombined,NovembertoDecember,bothlookbetterthanOctobersowereallythinkit'saone-timeissue.
Julie Yates (Analyst-CreditSuisse):
Okay.Andyou'reseeingaffirmationthatit'saone-timeissuebasedonyourforwardbookingsfortheholidaysandsuch?
MartySt.George (EVP-CommercialandPlanning):
Iwouldsay,well,ImeanIcan'tgivetomuchguidancemorethanwhatwesaidalready,butI'dsay,basedonthelastcoupleofweeksofbookingswe'veseen,we'veseenitreallycomebacktowhereitwasbeforethatsoftness.
Julie Yates (Analyst-CreditSuisse):
Okay.Andthenjustonthecreditcard,Irealizethere'ssomeconstraintswithyournewpartnerbutyou'vegiventhe$60millionnumber,IbelievewithInvestorDaylastyear,is--inthatcontextcanyouprovidewhetheritwasinline,betterorworsethanwhatyouhaveprovideduslastyear?
MartySt.George (EVP-CommercialandPlanning):
Yes.We'renotinapositiontogiveanydifferentguidancethanwhatwegaveduringInvestorDay.
Youknow,IwillmakeacommentthatIthinkImadeonthelastinvestorcallwhichis,aswe'velookedat--youknowweknowourdealobviously,aswe'velookedattheannouncementsfromsomeofourcompetitorswhohavealsocameoutwithreviseddeals,there'sawiderangeofstructureasisfarashowthosecashflowsgoand,youknow,theoperatingincomeaccretionthatwereportedatInvestorDayisbasedonthecontractthatwesigned.Youknow,obviously,asresultscomeinwe'llbeupdatingthatbutwehavenochangeinguidancerightnow.
Julie Yates (Analyst-CreditSuisse):
Okay.Thankyouverymuch.
Operator :
OurnextquestioncomesfromJosephDeNardiwithStifel.
JosephDeNardi(Analyst-StifelNicolaus):
Thankyou.Goodmorning.
Justonthecapacityoutlookfornextyear,Ithinkwestartedthisyearoffacouplepointslowersoasthe,
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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andweendedupalittlebithigher,isthebiastogrowmoreassumingthismarginperformancecontinuesasyougointonextyear?
MartySt.George (EVP-CommercialandPlanning):
Hi.Goodmorning,Joseph.
Listen,ifyoulookattheguidancethatwelaidoutfor2015,wetookitupbasicallyfortworeasons,onewasthatwiththedepartureofoneofourcompetitorsoutofNewYorktotheWestCoastandourMintmarketswesawtheopportunitytoaddcapacitythere,andsecond,weareperformingfromacompletionfactorperspectivesignificantlybetterthanwehadoriginallyguided,andyouknow,really[freely]forecastedatthebeginningoftheyearandIthinktiestogreatexecutionbyourteam.
Withrespectto2016,ifyoulookattheguidancethatwebasicallyjustgave,itisverysimilartotheguidancefor2015.We'vetalkedbothatInvestorDay,inindividualinvestormeetingsandoncallsthatthishighsingle-digitrangeisaboutthesweetspotforJetBlue.
Ithinkthemostimportantthingis,thegrowththatwe'retalkingabout,theincrementalMintcapacitywehadinthefourthquarterof2015iscomingwiththesameassetbaseandit'sabsolutely,positivelymarginaccretive.
JosephDeNardi(Analyst-StifelNicolaus):
Okay.Thankyou.
Operator :
AndournextquestioncomesfromthelineofHunterKeaywithWolfeResearch.
JaredShojaian (Analyst-WolfeResearch):
Hi,goodmorning.ThisisactuallyJaredShojaianinforHunter.Thanksfortakingmyquestions.
Mark,Iwantedtoaskyouaboutthefuelhedgesorlackoffuelhedgesand2016.Ithinkatthispointhistoricallyyouhadmorehedgesfortheupcomingyearthanyoudonow.Soisthisachangeinstrategy?Ordoyouplantolayeronsomemorehedgesatalaterpointoftime?Andifitisachange,canyouhelpusunderstandyourthoughtprocess?
MarkPowers (CFO):
Butit'saneasyquestionbecausethere'snochangeinmythoughtprocess.Icontinuetolookatitasawaytomitigaterisk.Westillconsiderhedginginourtoolkit.
AndJimLeddyandhisteamcontinuetolookattheenvironmentandwhatwelookattheenvironment,welookatwhatotherairlinesaredoing.Thepricingofthevariousproducts,asweconsiderourfutureoptions.Butthere'sreallynophilosophicalchangeyet.
JaredShojaian (Analyst-WolfeResearch):
Okay.Thankyou.
Andthen,questionforRobinorMarty.SoImean,itfeelslikewiththatOctoberPRASMguidance,itfeelslikeyou'reRASMoutperformanceisreallystartedtoslowhere.Isthereanythingabnormalaboutthefirsthalfofthisyear,somespecifictailwindsthatwearestartingtolapthataren'tcontinuingintothesecondhalfofthisyear?
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AndImeanisthereanyreasonwhynextyear'sRASMperformance,aswelookforward,can'tbejustasstrongonanoutperformancebasistotheindustry?Oragain,Imeanaretheresomespecifictailwindsthatyoustartedtolaphere?Thanks.
RobinHayes (President):
Letme--maybeI'lltakethefirstpartofthat,Marty,andthenyoucantakethesecondintermsofnextyearandthanksforthequestion.Goodmorning.
No.Oneofthethingsweverytrack,trackverycarefullyisourrelativerevenueperformancetotheindustryandwe'veactuallyseenthatcontinuethroughSeptemberataprettysimilarratetowhatwe'veseentherestoftheyearsowedon'tbelievethattherevenueoutperformancehasstartedtoslow.Obviouslywedon'thaveOctober'sdatayet,butIdon'tthinkthere'sanythinginOctoberthatwethinkwouldbestructurallydifferenttoSeptember.
So,no,Ifeel,westillfeelverygoodabouttherelativerevenueperformance.
WeusetheAforA,sortofacomparativeset,andifwelookatsortofthedomesticperformance,then,really,betweenMay/JunethisyearandSeptember,we'vebeenrunningasortofhigh2%to3%outperformanceandthathasn'treallychangedmuch,infactthelowestmonthofrelativeoutperformancewasJuly.
MartySt.George (EVP-CommercialandPlanning):
Andwithrespectto2016,IthinkhonestlyRobinansweredmostofthequestionwhichis,ifyoustartwiththeassumptionthatthere'saslowing,it'sareasonablequestion.Onarelativebasisversustheindustry,Idon'tthinkwe'reseeingthat.
Ithinkifyoulistentotheguidancethatwe'veheardfromourcompetitorsearlieronduringthisearningsseason,andthenyoulookatwhatwe'retalkingabout,Ithinkwefeelverycomfortablethatwe'remultiplepercentagepointshigherinRASMgrowththanourcompetitors.
SofromaJetBlueperspective,I'mnotsureIagreewithyourpremiseandthesecondthingI'llmentionisformuchof2016,we'llbelappingthe--wewon'tbe,excuseme,wewon'tbelappingtheadoptionoffareoptionsuntilthreequartersofthewaythroughtheyearmoreorless,andwealsohaveourcreditcardkickingin,soinadditiontowhatwe'reseeingasfarasthesecularJetBlueperformanceversustherestoftheindustry,wealsothinkyoulayerontopofthattheinitiativesthatweoutlinedatinvestorDayandweareactuallyverybullish.
JaredShojaian (Analyst-WolfeResearch):
Okay.Thankyou.
Operator :
OurnextquestioncomesfromthelineofDavidFintzenofBarclay.
DavidFintzen (Analyst-BarclaysCapital):
Hey.Goodmorning,everyone.
Onthesortof,thegapinthethirdquarterbetweenPRASMandRASM,andIknowMartysaidyouguysaren'tgoingtotalkalotindetailaboutthis,butisitfairtoassumethatyouleavethequarterwithamuchbiggerthan60basispointgapbetweensortof,asthebackseatintheairportarespooling,orisitthatsomethingthatcomesinandthenisfairlystable?
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MartySt.George (EVP-CommercialandPlanning):
Iam--goodmorning,Dave.I'mnotsureIfullyunderstandthequestiontoanswercorrectlysolet'sfollowupafterwards.
RobinHayes (President):
Rephrasethequestion.
MartySt.George (EVP-CommercialandPlanning):
Yes,couldyoutrytorephraseitmaybe?
DavidFintzen (Analyst-BarclaysCapital):
No,justyouroperatingRASMoutperformedPRASMby60bps,obviouslythere'sachunkofthebagoffeescomingintoother,whatI'mtryingtokindofgaugeiskindofwhereweleftthequarterandrunrate.
AtleastI,youknow,itcouldgetbetter,itcouldgetworse.Igetthat.It'sstilldevelopingbutatleasttosortofhavesomethingtoframeitintoQ4andkindofplugthatholeinthemodel.
MartySt.George (EVP-CommercialandPlanning):
Okay.Thatmakessense.[Again]Iapologizeforthatthefirsttime--
DavidFintzen (Analyst-BarclaysCapital):
No,Ididn'tphraseitverywell.
MartySt.George (EVP-CommercialandPlanning):
ButtheonethingIwouldsayisthat,aswelookattheperformanceoftherelativebundleswithinfareoptionsandthealacartepurchase,we'reseeing,youknow,we'rejustnowstartingtounderstandthetrendsasfarasatwhatperiodsdopeoplebuybundles,atwhatperioddopeopletrytobuyalacartandalsothepenetrationofourBluePlusfare,excuseme,theBlueFlexfare,whichhasthenochangefees,andwhatwe'reseeingisthatthere'ssomeprettydramaticdifferenceinperformancebetweenthepeakperiodsandtroughperiods.
SoIthink,ifwecansortofbookmarkthatquestionforafutureearningscallbecauseIkindofwanttogothroughacoupleofmorepeakperiods,youknowsortofaThanksgivingtoChristmas,sothatIcanreallygiveeffectiveandunequivocalguidanceforthatperformancebecausewe'rereallyseeing--we'reseeingdifferencesbetweenpeaksandtroughs.It'snotunexpectedbutIdon'tthinkwehaveenoughdatapointstotrulycomeupwithalong-termtrend.
DavidFintzen (Analyst-BarclaysCapital):
Okay.No.That'sfair.
That'sactuallyveryhelpfulasastartingpointandthenmaybeaquickoneforMarkontheleasedaircraftyouarebuyingout,isthatsomethingyoudidunderthesortofnaturaltermsofthosedeals,orareyoufindingopportunitiestokindofbuytheseleasedaircraftearlyfromthe[one]source?
MarkPowers (CFO):
Butalittlebitofboth.Itmakesalotofsensebecausetheseareairplanesthatweclearlywouldputinourdensityprogram.
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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Sowewouldliketoputsomeinvestmentsintheaircraft.Ithinkthe--ifIcorrect--correctlyrecall,theleasesonthoseplaneswereupshortlysoitwasreallyaquestionofdoweextendtheleasesorbuytheaircraftand,frankly,consideringtheinvestmentwe'regoingtoputintheaircraft,buyingtheaircraftwasjustmuchmoreshareholderfriendly.
DavidFintzen (Analyst-BarclaysCapital):
AndIwouldtakeitthat'sgottobesomeofyourhighestimplicitinterestrate,isthatsomethingyouthinkyoucandomoreofin2016?
MarkPowers (CFO):
Iwon'tcommentontheleaseratebutIdon'tthinkit's--weweren'tcherrypickingthehigher-pricedleasesbutweare--wewillcontinuetolookat,particularlyaswegearuponthedensityprogram,we'llcontinuetolookatotheropportunitiestodoearlybuyoutsoftheseleasesthatwehaveinplace.
DavidFintzen (Analyst-BarclaysCapital):
Okay.Makesalotofsense.Allright.Thanksforallthecolor.
MarkPowers (CFO):
Thanks.
Operator :
OurnextquestioncomesfromthelineofMichaelLinenbergfromDeutscheBank.
MichaelLinenberg (Analyst-DeutscheBank):
Yes.Iguessacouplequestionshere.
Marty,youhighlightedsomeofthepositivetailwindsin2016.Youtalkedaboutthecreditcarddealandreallygetting,youknow,amuchfullerbenefitofthefareoptions.Howdoesthe,youknow,addingtheadditionalseats,theseatingdensificationprogram.Doesthatgetstartedwhat?Midyear?Andhowdoesthatstarttoflowthrough?
Imean,Iguessit'srevenueaccretivebutmaybeitnegativelyimpactsRASM?AndhowquicklycanyousellthoseadditionalseatsbecauseIknowinitiallyyoumayonlyhaveafewshellsflyingaroundwiththeadditionalseatssometimesit,sometimesyouhavetocarrythatdeadweightandyouhavetospoolupintoasufficientnumberofaircraftbeforeyoucanactuallysellthemwithintheschedule.
Canyoujusttalkaboutthat?
MartySt.George (EVP-CommercialandPlanning):
Sure,Michael.Thankyou.Goodmorning.
MichaelLinenberg (Analyst-DeutscheBank):
Goodmorning.
MartySt.George (EVP-CommercialandPlanning):
Theseatdensificationprojectstartsinthesecondhalfof2016.
MichaelLinenberg (Analyst-DeutscheBank):
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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Okay.
MartySt.George (EVP-CommercialandPlanning):
Andthegoodnewsisthatwhenyouarebuildingamodelfor2016,weactuallydoneedtobe,keeptrackofthoseplanesseparatelybecausetheydohaveafourthin-flightcrewmemberonboard.Sothey'llberoutedtotheextentwherewefeelcomfortable,we'retryingtogetthatrevenuerelativelyquicklybecausewehavetoschedulethem.Wehavetoschedulethemdifferentlybecausetheyhavedifferentcrewrequirements.
AndIthinkaswegetcloserinto2016,Ithinkwecangiveyoumorecolorasfaraswhattheshapeoftheyearisgoingtolooklikebutweare,aswesaidduringInvestorDay,we'reverybullishaboutthebenefitsofthedensityimprovement.Andagain,it'saproductthatourcustomersunderstandrightnowandloveontheA321andwe'reexcitedaboutbeingabletobringthatproductto320whilealsoimprovingourrevenueperformance.
Wethinkintheworldofvery,verylowcapitalintensiveprograms,fareoptionsanddensity,wethinkarebothextremelyROICfriendly.
MichaelLinenberg (Analyst-DeutscheBank):
Okay.Great.
Andthenjustasecondonehere.IsawsomewherethatIguesswhatJetBlueisgettingoutofthecargobusiness,sopresumablyit'smargindiluted,maybeit'sevenlossmakingbutwhat'sthattheP&Limpact?
Imean,arewegoingtosee,youknow,lessrevenue?Lesscost?ItobviouslywillhavesomeimpactonRASMIguessbutitwillalsohelpCASM.Imean,howshouldwethinkaboutthatandwhendoesthathappen?Whendogetoutofthecargobusiness?
MartySt.George (EVP-CommercialandPlanning):
So,we'reofficiallyoutofthecargobusinessasof,Ithink,aboutaweekagoso--.
MichaelLinenberg (Analyst-DeutscheBank):
Okay.
MartySt.George (EVP-CommercialandPlanning):
We'regoingtoactuallystartreflectinginourresultsgoingforward.Andtheimpactsonthebottomlinewillbedeminimus.
Thedrivertomakethatdecision,youknow,itwasamarginallyprofitableprogramsowhatwealsorecognizewasthatasseatdensificationcame,thechallengeswehaverightnowwithgettingcargoonairplanes,onanarrowbodyfleet,itjustgetssignificantlyworsewhenweaddtheseatsontheairplanebecause,ourchallengerightnowiswedon'tdo,runrelativelyhighloadfactorsinsomeofthebestcargomarketsandputtingtheextraseatsontheAirbus,wesortoflookedaroundthecornerandsaidtoourselves,ourabilitytomaintainthisbusinessprofitablywasgoingtobeseriouslystretched.
RobinHayes (President):
IfI,IjustwanttoaddacoupleofthingsifIcould.Imean,firstofall,it'snotlostwith,onusthatwehadanumberofcrewmemberswhoaredirectlyimpactedbythischange.
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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Imeanthattheyhavedoneanamazingjobbuildingourcargobusinessandwe'reverygratefulandthankfulforeverythingthey'vedoneandobviouslyworkingwiththosecrewmembersonotheroptionsintheCompany.
ButIthink,inadditiontoMarty'spoint,forustoreallydocargosuccessfullyandgrowthemarginsandbuildthebusiness,itwould'verequiredsomesignificantcapitalinvestmentaswell.AndIthinkwhenwethinkabouthowweprioritizecapitalspendandhowwelookatthethingsthatwilldrivethebestreturns,wejustcouldn'tgetthereintermsofbuildingthisbusinessandsowetookthedecisiontorestructureitandjustmythankstoEdMcDonaldandthecargoteamforeverythingthey'vedonetotakeuswherewearetoday.
MichaelLinenberg (Analyst-DeutscheBank):
Okay.Great.Thanks,guys.
Operator :
OurnextquestioncomesfromthelineofTomKimofGoldmanSachs.
T omKim(Analyst-GoldmanSachs):
Thanksforthetimehere.MarkorMarty,IwantedtofollowonMichael'squestiononseatdensification.Irealizeit'skindofearlybutcanyougiveusyour,atleastyourinitial,expectationsaroundwhereCASM,exfuel,exprofitshare,shouldbefornextyear?
MarkPowers (CFO):
Twoquestionshere.Idon'tthinkwereactuallygoingtostartguidingCASMnextyear.Again,densificationwillhave,obviously,aterrificimpact,inagoodway,onourCASMstructurebutIdon'tthinkwe'reinapositiontoreallygetaheadofourselvesonCASMnextyear.
RobinHayes (President):
Yes.WenormallyofferthatflavorintheJanuarycallandIthinkwillcontinuetodothatbutappreciatethequestion,Tom.
T omKim(Analyst-GoldmanSachs):
Allright.Thanksalot.
Operator :
OurnextquestioncomesfromthelineofAndrewDidoraofBankofAmerica.
AndrewDidora(Analyst-BankofAmericaMerrillLynch):
Goodmorning,everyone.
JustwantedtoaskanotherquestiononkindoftheyieldsoftnessthatyousawattheendofSeptemberbeginningofOctober.Wasthiskindof--wasthismoresystem-wideyieldsoftness,wasitspecificmarketsthatmaybeyoucancommenton?Andasyouhaveseenthatkindof,asyou'veseenthosebookingsbounceback,hasthatalsobeeninthosemarketsormoresystemwide?
Thanks.
MartySt.George (EVP-CommercialandPlanning):
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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IthankAndrew,forthequestion.Imean,wedidnotreallyseeanyspecificmarketsanditwasreallyaclosed-endyieldstory.
It's--itwasmoreorlessacrossoursystemandit'scomebackacrossthesystemsonoIdon't.I'veheardsomeofourcompetitorsgiveguidanceonmarketslikeOrlandowedon'tseeOrlandobeanybetterorworseoranythingelseandit'sheldupverywell.
AndrewDidora(Analyst-BankofAmericaMerrillLynch):
Okay.Thanks.
Operator :
OurnextquestioncomesfromthelineofJamieBakerofJPMorgan.
JamieBaker (Analyst-JPMorgan):
Hey.Goodmorning,everybody.Questionnumberthreeondensification.
Couldyougiveusanestimateastohowmanyadditionalflightattendantsyouaregoingtorequireoncetheentire320fleetisdensified.Obviouslytryingtonaildowntheincrementallaborexpense.Alsoontheincremental15seats,howdoyouthinktheaveragefareonthosecomparestowhatyourcurrentaveragefareis?Areyoumodelingforittobe5%loweror50%lower?
MarkPowers (CFO):
I'lldothelabor,theflightattendantpiecefirstwhichistosimplysaythatyouclearly--thatwillbeoverthetermofthismulti-yearprogramanincrementalcostoffsetbytherevenuethatMarty'sgoingtotalkaboutbutIwouldsaythatin2016theflightattendanthiringisprobablygoingtorepresentlessthan0.5pointofourfull-yearCASM.
JamieBaker (Analyst-JPMorgan):
And--onaheadcountbasis?Justsowecouldkindofworkupsomeofthenumbersourselves?
MarkPowers (CFO):
ButIdon'tthinkwe'regoingtogothere--
JamieBaker (Analyst-JPMorgan):
Or--sorry,goahead.
MarkPowers (CFO):
IdorecallyourpieceandIdon'tthinkwe'reactuallygoingtoidentifythespecificsofthatCASMnumber,whichisfranklyafairlysmallnumberin2016.
JamieBaker (Analyst-JPMorgan):
Okay.Fairenough.Andthesecondpartofthequestion?
MarkPowers (CFO):
IstoMarty.
MartySt.George (EVP-CommercialandPlanning):
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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Withrespecttotherevenue,youknowlisten,I'vedonethesecalculationsmanytimes,you'vedonethesecalculationsmanytimesinyourpreviouslife.Ithinkit'sasortofastandardexpectationasfarashowyouwoulddoastillmodelandtrytofigureoutwhattheincrementalrevenueisgoingtobe.
IwilltellyouwhywethinkthisisveryleveragedforJetBlue,specificallybecause,aswetalkedaboutbefore,wearestillacompanyasit,withoutthestrongleisureorientationthathasgotextremelyhighpeaks.Soduringthosepeakholidayperiods,theschoolvacations,Easter,Thanksgiving,Christmas,wehavetimeswhenthere'saclosetoinfinitedemand.
Soduringthosetimeperiods,weareverybullishaboutthebenefitoftheincrementalseatsandwe'realsobullishaboutthebenefitjustonthenormalcourseofbusiness.ImeanwedoruninourleisuremarketsespeciallysomeoftheCaribbean,transcon,Floridamarkets,wetendtorunprettyhighloadfactorssowe'reveryexcitedaboutit.Ican'tgetintomoredetailotherthantheguidancewegaveonInvestorDay,though.
JamieBaker (Analyst-JPMorgan):
No.Thoseareallgoodpoints.Iappreciateyoumakingthem.Thanksalot.
MartySt.George (EVP-CommercialandPlanning):
Thankyou.
Operator :
OurnextquestioncomesfromthelineofHelaneBeckerofCowenCompany.
HelaneBecker (Analyst-CowenSecuritiesLLC):
Excuseme.Thanksverymuchoperator.Thanksforthetime,guys.Justaquestionhereon--sorry.Idon'tknowwhymyvoicedoesthatbutitdoeseveryonceinawhile.
Onsalesandmarketingexpense,it'sup16%morethanitwasupinninemonths,forthequarter.AndI'mjustkindofwondering,IwouldthinkthatnumberwouldgodowninQ3andmaybeupinQ4.Soistheresomethinggoingonthatweshould--thatwillhavethosenumbersincreasingatthishigherrategoingforward?
MartySt.George (EVP-CommercialandPlanning):
Yes.Imean,thanksHelene.Goodmorning.
Ithinkonethingthat'simportantaboutthatisthatmost--again,we'renotchangingourannualexpectationsforthatlineitemagoodbitofit'stimingandtheonethingIwillsayissalesin,salesin--revenuegeneratingactivitiesinQ3areactuallydrivingQ4demand.SowhenwegoouttherewithsomeofourmarketingexpenseinQ3,itactuallyisspecificallymovedtowardsfillingseatsinSeptember,October,soit'sactuallymorenormalcourseofbusinessandit'smoretimingthananythingelse.
HelaneBecker (Analyst-CowenSecuritiesLLC):
Okay.Thanks.Mostofmyotherquestionswereaskedandanswered.
Operator :
OurnextquestioncomesfromthelineofRajeevLalwaniofMorganStanley.
RajeevLalwani(Analyst-MorganStanley):
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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Time.Firstquestionwasjustoncompetitivecapacity.Areyouguysseeingafairamountasyoulookoutattheschedules?Justgiventhestrengththatyou'veseeninyournetwork?
MartySt.George (EVP-CommercialandPlanning):
Hi,Rajeev.It'sMarty.Goodmorning.Ifyoulookatthebalanceof2015we'renotreallyseeinganychangeintrendsincompetitivecapacity.
WeareseeingalittlebitinBostoninearly2016butIthink,giventhepracticeswe'veseenoftheindustryasfarasloadingschedulesthatfarout,Ithinkit'stooearlytosortofcalltheballastowhetherthat'storealornot.We'rereallyfocusedonourcapacitygrowth,weknowwhatourresultswerelastyear.Wegotoplacesweneedmorecapacityandthat'sreallyhowwemanage,wedon'tspendalotoftimefocusingonwhatourcompetitorsaredoingmonthtomonth.
RajeevLalwani(Analyst-MorganStanley):
Okay.Andjustanotherquestionasitrelatestolabor,anycolorthereonthepilotandnon-pilotside,justgivenwhatwe'veseenintheindustryandhowthatkindofmakesitswaytoyouremployees,Iguess?
RobinHayes (President):
Sure.No.Appreciatethequestion.Goodmorning.
Intermsofthe,onthepilotside,weobviouslyhaveanegotiationunderwaywithALPA.Iwouldsayweareintheearlystagesofthat.Idon'twanttosortofmakeapredictionofhowlongitwouldtake,butthat'snotsomethingsortofIwouldsaywe'resortofimmediatelyclosetofinalizing.Intermsoftherestofourcrewmembergroups,maybeI'lljusttakeasecondtoexplainhowitworks.
Wehaveavaluescommitteesthatadvocateforthosecrewmembersandwehaveaprocessthatreallylooksacrossthelandscapeandlooksatwhat'shappeningwithequivalentworkgroupsinotherairlinesandoversortofatwoyearcycle,weworkthroughasortofapayandcompensationreviewtomakesurethatourcrewmembersarepaidsortofapuremarketrate.
That'snotobviouslysomethingtheyhavetobargainornegotiate.Thatsomethingtheygetanditreflectswhatotherairlinesaredoingandsoclearly,aslabor,laborratesgoupatotherairlines,thenthatwillcreatesomeupwardpressureforourcrewmembersbecausewewanttomakesurethatwepayfairlyandpaycompetitivelybecauseourcrewmembersdoanincrediblejob.
RajeevLalwani(Analyst-MorganStanley):
Andhowdoesthattwoyearcycleplayout?Meaningarewegoingtoseeitnextyear?Isitjustdifferentforthevarioustypesofemployees?
RobinHayes (President):
Itsongoingsowehaveourcustomersupportcrewmembers,airports,in-flight,efforts,oursystemsoperationsteamandourtechnicaloperationsandmaterialsteamsowehavethosesixgroupsthatwereviewandtheyarestaggeredsortoffairlyevenlyoveratwo-yearcycle.Butthepointisit'smuchmoreofacontinuouschangeratherthanthetraditionallabormodelwherenothinghappensforyearsandyearsandyearsandthenthere'sacontractandabigreset.
Soasthingschangewekindofkeepupgraduallyandthat'showwe'vealwaysworked,howwe'vedoneitforthelastseveralyearsandthat'showwillcontinuetodoittomakesureourcrewmembersarereceivingamarket-ratecompensationpackage.
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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RajeevLalwani(Analyst-MorganStanley):
Veryhelpful.Thankyou,gentlemen.
Operator :
OurnextQuestioncomesfromthelineofSaviSythfromRaymondJames.
SaviSyth (Analyst-RaymondJames&Associates,Inc.):
Goodmorning,justafewfollow-upquestions.Onthefareoptions,Ithinkthecontributionwas$40millioninQ3.
AndI'mkindofsurprisedthatis$80millionin2015,anddefinitelybetterthanexpectations,butIwouldexpectmaybeQ4tobebetterthanQ3butmaybethereissomeseasonalityinthereandIwonderifyoucanelaboratealittlebit.
MartySt.George (EVP-CommercialandPlanning):
Hi.Thanksforthequestion,Savi.Goodmorning.
IthinkthebiggestreasontoexpresscautiononincrementalmoneyabovethatisthatyourememberwelaunchedfareoptionsonJune30,atthatpointallrevenueonthebooksonJune30wasnotsubjecttothefirstbagfeeandasyougetintothepeakperiods,ThanksgivingandChristmas,wehadagoodnumberofcustomersonthebooksduringthattimeperiod.Sointerestinglyenough,sofarthehighestpercentageofcustomerswhoaresubjecttofareoptionshasbeeninSeptember.
Novemberisactuallylowernumberbecausewehavesomuchonthebooks,soagainaswesortofworkoffthepreviousreservationsofpeoplepriortofareoptions,therewillbealittlebitofnoiseinthere.AndagainlikeImentionedearlier,intheconversation,IthinkwithDave,aboutthesplitbetweenthefareoptionsrevenueinRASMandPRASMandthingslikethatthere'sstillalotofchoppinessintherebasedonthepeak-and-troughelementofthetimeperiodasfaraswhatwesee.
AndIthink,honestly,I'mgoingtogobacktotheoriginal[sourcesfrank]thatwementionedwhatwetooktheguidanceupto$80million.Wehadforecastedabiggerdecreaseinfirstbagcheckedthanhasactuallyhappened.
We'venotreallyseenthebehaviorchangethatwehadoriginallyexpectedsoIwanttomakesurethatwe're,we'vegotsortofafullpeak-and-troughperiodunderourbeltsbeforewesortofcallanythinghigherthanthenumberwe'vegivenalready.
SaviSyth (Analyst-RaymondJames&Associates,Inc.):
Allright.Thanksthat'shelpful.
ThanksMarty.Andonthefollow-upontheseatdensity,IwaswonderingifonthetimingbetweentherevenuegenerationandthecostgenerationIknowyou'renotreadytoprovidekindofcostcolorbutwhat'sthetimingdifferencebetweensomeofthosecostsrampingupbeforetherevenueisstartingtoshowup?
MartySt.George (EVP-CommercialandPlanning):
Yes.I'lljusttakeastabatthatonlybecauseitis,again,amulti-yourprogramsoit'snotgoingtobesortofa--you'renotgoingtoseeaoneforone.It'sgoingtotake,asweknow,ayearplusbeforewehaveenoughdensityofdensity,ifyouwill,thatwe'llbeabletosortofseeitinasignificantwayonthe
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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P&L.
RobinHayes (President):
IthinkwhatIwouldsayiswearetryingtobeverythoughtfulabouthowwelayerinthecostandthenseetherevenuebenefitsandsoonehastotradethatwithoperationalcomplexitybutwedowanttomakesurethatwearethoughtfulabouthowweaddcosttothingslikeflightattendantsandwhenweseetherevenuebenefits.
SaviSyth (Analyst-RaymondJames&Associates,Inc.):
Okay.That'shelpful.
Thanksandthenjuston2016,andIknowyou'renotprovidingguidance,butIthinkyouprovidedalittlebitofitbutjustmaybesomeoftheheadwindsandtailwindsaswekindofthinkabout2016Ithinkyouhaveupdatingthathelps.Maybehigherlaborcostsaregoingagainstitbutwonderifyoucanjustprovidealittlebitmorecolor,justinitialcolor,on2016.
RobinHayes (President):
Sure.Iwouldappreciatethequestionandgoodmorning.
IthinkreallygoingbacktotheplanwelaidoutatourInvestorDayin2014,Ithinkwearestillveryfocusedonfareoptions,asMartysaid,we'rereallyinthefirstinningsofthatandwehaven'ttalked,eventalkedabout,someofthedynamicpricingcapabilitiesthatfareoptionswillgiveuslongerterm,onceweunderstanditabitbetter.
We'vegotthecreditcardMartytalkedabout,veryexciting,weareveryclosetobeabletolaunchthatearlynextyearandtheinvestmentinthe320cabinswhichIknowthefocusisonthedensificationbutit'sactuallyabetterproduct.
It'sanewseat,anewlightTVsystemandaswe'reseeingona321,weactuallythinkitwillleadtoanincreaseinourcustomersatisfactionlevels.Goingfrom3to4flightattendantsisalsogoingto,youknow,allowformorepersonalizedserviceonboardsoIthinkwehaveallofthat.
Wecontinuetoseethebenefitsofupgaugingasthe321scomeonlineand,notwithstandingmycommentsaboutcostpressures,weoutlinedthecommitmentattheNovember2014InvestorDayofmakingsureourexfuelCASMincreasesstayedunderthe2%.Weareoncoursetomovingthatthisyearandweremaincommittedtothatnextyearaswell.
SaviSyth (Analyst-RaymondJames&Associates,Inc.):
Allright.That'sveryhelpful.Robin,thankyou.
Operator :
OurnextquestionscomesfromthelineofDanMcKenzieofBuckinghamResearch.
DanielMcKenzie (Analyst-BuckinghamResearchGroup):
Twoquickfollow-upquestionsandthenjustageneralquestion.Ontheoutlookfor2016,whatpercentofthecapacitynextyearissimplytheannualizationofflyingintroducedthisyearversusactualnewASMsbeingintroducednextyear?
MartySt.George (EVP-CommercialandPlanning):
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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Idon'tthinkwe'veguidedanythingmorethanwhatwesaidaboutthehighsingle-digitnumber.
MarkPowers (CFO):
It'srunninglow.That'sallwe'vesaid.
MartySt.George (EVP-CommercialandPlanning):
Ithinkthat'sall,that'stheonlyguidanceIcangive.
DanielMcKenzie (Analyst-BuckinghamResearchGroup):
Isee.Okay.Andthenjustanotherquickhouse-cleaningquestionhereonfarefamilies.
TowhatextentdoyouguyshavetheflexibilitytovariablypricethebagfeeandwhatI'mgettingatisthatI'mseeingthesame$15feefortransconflyingasIamonshorterhaulflightsbutI'mguessingthecostisprobablynotthesameandI'mjustwonderingifthere's,ifthat'ssomethingyoucanjusttalkaboutintermsofITcapability.
RobinHayes (President):
Thanks,Dan.I'lltakethat.Goodmorning,it'sRobin.Goodday.IgavethatanswertoSavibutImentionedveryquicklyandglossedoveritsoweappreciateyougivinganopportunitytoelaborate.
Whenwebuiltthetool,webuiltitwiththeflexibilityandtheplan,theabilitytodynamicallypriceandsowehavesomethingthatisveryflexibleandIdon'twanttotalkaboutsortofourintentinthearenaofpricingbutwebuiltatool,Ithinkwehad,we'vehadgreatsuccessovertheyearswithevenmoredynamicallypricingandIdothinkaswethinkaboutthefareoptionsgoingforward,thenthatdynamicpricingisabsolutelysomethingwebuilttheproducttobeabletodo.
DanielMcKenzie (Analyst-BuckinghamResearchGroup):
Understood.
Andthen,justonegeneralquestionhere,justonbusinesstravel,I'mwonderingwhatyou'reseeingontheMintmarketsversusthenon-Mintmarkets,eitherinlast-minutebookingsorhoweveryoumeasureit,butI'mjustwonderingwhatyoucancommentonintermsofwithwhatyou'reseeingingeneralandbasicallyhowisthatchangedrelativetothis,tolastyear?
MartySt.George (EVP-CommercialandPlanning):
Thanksforthequestion,DanImeanI'dsaytwothings.Firstis,obviouslywiththose16seatsatthefrontoftheMintcabin,itisadifferentcustomerbase.Manyofthecustomer,differentcustomerbase,thanwe'veseenhistorically.
WhatweareseeinginMintisahigherpercentageofrepeatcustomersthanwehaveacrossthesystem.Andalsoamuchstrongerclosed-endbookingcurve.SoIthinkbothofthosearehighlyindicativeofthefactthatwe'redoingagoodjobofpenetratingthebusinesscustomerbase.Icanspeakfortherevenuemanagementteamandthesalesteam.
Wearehavingconversationswithcorporatetravelmanagerswhowe'venevertalkedtobeforeaboutwhetheritmakessenseforthemtogetMintintotheircorporatetravelprogramwhichweareveryexcitedabout.
Iwouldsayontheyear-over-yearbasis,there'sreallybeennosignificantchangeinwhatwe'reseeingasfarasclosed-endbookings.Theonethingthathaschangediswehavetakentwo,Ithinksinceyearover
CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
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year,wetakentwoadditionalfareincreasesinthosemarketsversuswhatwe'veseenhistorically.WhatwehadlastyearandIthinkit'sbecauseofthatclosed-endstrength.Aswetalkedtoourcustomers,oneofthepiecesoffeedbackthatIthinkthemost--afterpeoplelovingtheserviceandtalkingabouthowgreatourin-flightcrewmembersare,thenextpieceoffeedbackis:IkeeptryingtobuyitandIcannotgetonbecauseit'ssoldout.
Wehavemultipleflights,certainflightsanddaysoftheweek,wherethreeorfourdaysoutwearesoldoutandthat'ssomethingwe'rehopingwillbeabletoamelioratewiththeadditionalcapacitythatweaddedearlierthismonthbecausewereallyseeanopportunitytheretoservemorecustomerswithagreatproduct.
DanielMcKenzie (Analyst-BuckinghamResearchGroup):
Great.Iappreciatethat.JustapercentofbusinessrevenuethatbusinesstravelspendmayaccountforJetBlue'snetwork,istheresomekindof,canyouhelpsizewherewe'reattoday?
MartySt.George (EVP-CommercialandPlanning):
Wedon'treportitandoneofthereasonswedon'treportitisbecausetherearealotofdifferentwaystodefineitandIthinkifweweretogiveyouanumberwe'dhavetospendthenextfiveminutesexplainingtoyouthethreedifferentwaysyoucouldlookatitandwhywehaveitbutit'snotanumberwereportpublicly.
DanielMcKenzie (Analyst-BuckinghamResearchGroup):
Isee.Okay.Thanksforthetimeyouguys.
Operator :
Atthistimetherearenofurtherquestions.
KevinCrissey(Director-IR):
Terrific.Thankyou.Thanks,everybodyforjoiningourthird-quarterconferencecall.Welookforwardtotalkingtoyousoon.Haveagreatday.
Operator :
And,again,thatwillconcludetoday'sconference.
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CompanyName:JetBlueAirwaysCorpCompanyTicker:JBLUSector:ServicesIndustry:T ransportat ion
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.86BPriceasofEventDate:25.36
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