JBLU

JetBlue Airways Corporation (JBLU)

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JetBlue Airways Corporation (JBLU)

JPMorgan Aviation, Transportation and Defense Conference

March 04, 2013 8:00 am ET

Executives

David Barger - Chief Executive officer, President, Director and Member of Airline Safety Committee

Mark D. Powers - Chief Financial Officer and Executive Vice President

Analysts

Jamie N. Baker - JP Morgan Chase & Co, Research Division

Mark Streeter - JP Morgan Chase & Co, Research Division

Presentation

Jamie N. Baker - JP Morgan Chase & Co, Research Division

All right, let's get started, busy day ahead of us. Good morning, everybody, my name is Jamie Baker. It's a pleasure to welcome you to the 2013 JPMorgan Aviation, Transportation & Defense Conference.

When we first stood here several years ago and opined that things were going to turn out to be different this time for the airline industry, and we meant better by the way, one of the things that I didn't quite fully grasp at that time.

[Audio Gap]

first speaker, Dave Barger, the Chief Executive Officer, President and Director of JetBlue. Dave's been with the company for well over a decade now has a background at Continental Airlines as well, and more importantly, with JetBlue. Specifically, there's 2 things I always like to mention is number one, they share my birthday, so they just turned 13, I just turned something -- well, more than 13. And most importantly, despite being based in New York, they are also the sponsor of the Boston Red Sox. They have a Red Sox plane. They sponsor Red Sox spring training, the facility down there. They even sponsored the equipment truck to move the equipment down to spring training, they're all over Fenway Park. So I applaud JetBlue on their good taste in baseball decorum. So let me turn it over to Dave.

David Barger

That's great. Good morning. Mark, belated happy birthday. And as for the Red Sox, yes, we are the official airline. They were beat by the Yankees yesterday. I just want you to know that, right down at the JetBlue park. Yes, I just thought I'd let you know that, just have a little fun this morning.

Good morning. Delighted to be here on behalf of the JetBlue team at the JPMorgan Aviation, Transportation & Defense Conference. It's -- I'm joined by my colleague, Mark Powers. Mark is our CFO. Also, Jim Leddy, Senior Vice President who joined us recently. Thanks, Jim, treasure joining us and our Investor Relations team, Lisa Reifer and Rob Mitchell.

It's always nice to have the kickoff here at this 3-day conference. And, Jamie, thank you so much for the invitation. Mark, again for the opening comments as well, as we share a bit about what's happening with the JetBlue story. And it's interesting too because it's a, if I may, those of you here in the room, of course, those listening on the webcast or the archived webcast and I always like to call out our crewmembers who listen to this as well, whether it's live or whether it's on a version into the future, but it's always a nice opportunity to talk a lot about what we're doing. If I may, Jamie, I actually wanted to pull some of your most recent research. And it was after we closed the year and with our earnings report for the year, it was January 29 when you put the research out. And this first slide, which is also posted on Investor Relations within jetblue.com, it's interesting. Because let me just read a quote from JPMorgan that came forward. It said, "the JetBlue story is admittedly more difficult to frame. It isn't an operational turnaround. It isn't about consolidation and synergies. It isn't about thinking outside of the box in terms of oil refineries and dividends. While lacking some of the aforementioned glamour, we happily settle for straightforward and comparatively low risk with a gradual long-term grind to higher return on invested capital or ROIC." And I think you really captured quite well with how we're thinking about our firm. And this has been incredibly changing landscape, tectonic really over the last decade but certainly over the last several years. And I know since 2007, we've been heads down to say, "Hey listen, calm the growth". And as we started to talk about free cash flow, we started to mature into an organization, a young organization focused on return on invested capital. That's what our plan is. Even though the industry around us is really, really going through some rather glamorous changes that are happening, and some of them pretty tough, to say the least, and we're feeling quite good with how we closed 2012 and how we're looking at 2013 and beyond.

I think, as well, when we talk about improving return on invested capital, we're talking about doing that while growing, which is a tough thing to do when we start talking about expanding our margins and certainly improving our balance sheet. We've had some considerable success in that regard over the last several years, but certainly closed in, in 2012.

Now, so how are we going to continue to do that? And it's no secret that at our Analyst Day that we have last year, we talked about improving our return on invested capital metric by 1 point per year on average over the next several years. And we certainly, we're pleased with performance last year. We did have an impact with Superstorm or Hurricane Sandy in our backyard. And we'll talk more about this at our upcoming Analyst Day on March 20 that's being held right here at NASDAQ. But I think it's a -- when we look at how we're going to be doing this, it's the same way that we've been doing it in the past and it's this it's differentiated product and we think that the product is, when we talk about an award-winning product, and I'll highlight that here in just a moment, that is foundational. It's sitting on a competitive cost structure. It's fair to say that we're not the lowest cost model that's out in the industry. When you think about the super discounters. And we're certainly not the network carrier cost model either. We think that we're in somewhat of a sweet spot when we think about the cost structure for us as well. And I think what's really important for us to focus upon is this geography. And I think here in New York you certainly know that we're large in the New York Metropolitan area, but the geography here -- I mean, at the end of the day, when you think about high-value customers, whether it's leisure customers or what's happening with the business customers as well, our geography is second to none and we'll certainly talk about that here in a bit of detail on a future slide.

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