JBLU

JetBlue Airways Corporation (JBLU)

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JetBlue Airways Corporation (JBLU)

2013 Analyst Day

March 20, 2013 9:00 am ET

Executives

Lisa Studness-Reifer

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

Robin Hayes - Chief Commercial Officer and Executive Vice President

Martin St. George - Senior Vice President of Marketing & Commercial Strategy

Dennis Corrigan - Vice President of Revenue Management

Scott Laurence - Vice President of Network Planning

Robert Maruster - Chief Operating Officer and Executive Vice President

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

Joanna L. Geraghty - Chief People Officer and Executive Vice President

James E. Leddy - Senior Vice President and Treasurer

Eash Sundaram - Chief Information Officer and Executive Vice President

Analysts

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

Michael Linenberg - Deutsche Bank AG, Research Division

Daniel McKenzie - The Buckingham Research Group Incorporated

Hunter K. Keay - Wolfe Trahan & Co.

Helane R. Becker - Cowen Securities LLC, Research Division

John D. Godyn - Morgan Stanley, Research Division

David E. Fintzen - Barclays Capital, Research Division

Savanthi Syth - Raymond James & Associates, Inc., Research Division

Kevin Crissey - UBS Investment Bank, Research Division

Mark Streeter - JP Morgan Chase & Co, Research Division

Michael W. Derchin - CRT Capital Group LLC, Research Division

Presentation

Lisa Studness-Reifer

Good morning, and welcome to JetBlue's 2013 Analyst Day. I'm Lisa Reifer, Director of Investor Relations for JetBlue. Thank you all for coming. We really got a great day planned for you today. Before we get started, I just want to go over a couple of housekeeping items. Similar to last year, we're going to have Q&A following each presentation. And so if you have a question, we just ask that you wait for the microphone to be brought to you so those listening on the webcast can hear your question. And then if you can say your name and where you're from before asking your question, that would be great. We're also going to have lunch served following the presentations in the drum [ph] behind you. And this year, we have actually a drawing for a couple of great prices. So if you haven't done so already, please put your business card in the JetBlue bag that we have in the back. We're about to get started.

Just before we get started, I just want to draw your attention to the Safe Harbor statement. We're going to be making some forward-looking statements today, so I please ask you to refer to our SEC filings for information about the risk factors that may affect our business. And with that, I'd like to turn it over to Dave Barger, JetBlue's President and Chief Executive Officer.

David Barger

Great. Lisa, thank you very much. Thanks. Appreciate it. Thank you. Appreciate it. Thank you. Good morning. Really, thank you so much for joining us here at our Analyst Day today. We really appreciate it. Lisa, in advance, I'd like to say thank you to you, Bob Mitchell [ph] of the Investor Relations team for pulling this together. Certainly, it takes a lot of effort, so thank you. Great turnout as well here at NASDAQ. And if I may, it's really nice to be here in Times Square, nice to be at NASDAQ. We were here last year as well. I think that we certainly can be called New York's hometown carrier. So thank you for joining us here in the room today. If you're listening on the webcast or at some point in the future, we've got an awful lot of play on the webcast as well with our own crew members as well, that's always nice. So thank you, again, for the support and the turnout today. And by the way, over the course of the day, we're clearly telling the JetBlue story on behalf of 15,000 JetBlue crew members who are making it happen day in and day out. And it's just a great team. And so really, I want to say thank you to the JetBlue team delivering that experience day in and day out. And also, just to introduce you to my executive team. We have a large turnout of JetBlue here today, and you'll hear from many of them, access to the group as well. Listen, at the end of the day, we talk about the business plan, but also the team that makes it happen day in and day out. So if you can just please stand as I call your name. Mark Powers, we'll hear a lot from Mark, our Chief Financial Officer. Thanks, Mark, appreciate that. Robin Hayes, our Chief Commercial Officer. Robin has a large module today. Rob Maruster, Chief Operating Officer, making it happen day in and day out. Joanna Geraghty. Joanna Geraghty is our Chief People Officer. Thanks, Joanna. Jim Hnat, he runs our General Counsel and also Executive Vice President of Corporate Affairs; Ethan Durham [ph], our Chief Information Officer as well. And thanks so much, lady and gentlemen, as well for the support. Probably some new faces as well that you'll hear from. Jim Leddy, could you stand? Senior Vice President and Treasurer who has significant modules. We talk about the balance sheet and what's happening behind the scenes. Rob Land, Senior Vice President down in Washington D.C. He's been busy lately with government affairs. Marty St. George. Marty, if you could please stand, Senior Vice President with Commercial and Marketing; and Jeff Martin. Where are you, Jeff? Great to have you. Senior Vice President, Operations. Thanks, Jeff. Joining us after a rather distinguished career down in another carrier down in Dallas, Texas. Great to have you as well, Jeff. And also, if you're an officer with the company or with JetBlue, please raise your hand. A lot of support that's here today, so thanks so much for what you do, day in and day out. Great, again, to have the turnout here at Analyst Day here in Times Square.

Some of what we'll tease out today, so we're now in our 14th year, right? So as we started flying back in the year 2000, right, February 11, and now, we're into our 14th year. So the teenage years and -- which is always an interesting timeframe for a company, and but we're very excited to be well into our second decade. And what we'll share with you today is really these attributes and why we think that they're so different. It really differentiates the space that we live in, in this airline industry in the United States, which is really more considerably over the last just couple of years, let alone 5 years, let alone since we've been flying back in the year 2000. And when we think about the competitive advantages that we have, the differentiated product, I think you'll hear a lot from Robin and the team regarding not just the product today, but also how we're looking at the product in the future. By the way, the product, the hard scape [ph], certainly important but again, the crew members making it happen day in and day out in our model. As we talk about our cost structure as well, that's very competitive, and again, creating the spot in which we live, Mark will go deeper in terms of the cost structure as well, how we're looking at it today, how we're looking at it in the future, how we're bending that cost curve as we're maturing as a company. And certainly, when you add the third piece of it, the high-value geography, and I think that's really important. When you start to think about the high-value geography, you put these 3 components together and we call it the sweet spot that we live in. It's the ability for us to take these 3 very significant attributes and compete against -- well, the hyper low-cost carriers or the discounters, and you know who they are, the type of product that they have and their geography, we know their cost structure. By the way, when we started the company, we know that just starting in New York, we were always going to have a cost challenge from the standpoint of flying in this geography and along those lines. So these 3 attributes allow us to compete effectively versus the discounters, the super low-cost guys. And then when you start to take a look at the network carriers, interesting what the term -- we're a network, too. So the legacy carriers, the network carriers. We think that when you combine, again, this product and how it's morphing over time, our cost structure, the relative advantage that we have versus the network carriers, and certainly, we know there's a disadvantage versus the discounters and you combine it with the geography, well, this allows us to live in really the sweet spot. And the theme that we've always said we're starting to crystallize around, how we continue to serve the underserved, which is really important because the discounters, well, that can be perceived as maybe the service product, it could be the pattern of service and we certainly get an awful lot of trials from those who are flying on the discount carriers. But also, the ability to really serve those who are underserved in our geography, the new network carriers. And again, the network carriers, when you get inside of this, it looks like this. And of course, Lisa, Rob and the team prepared a book for all of you. And again, if you're on the webcast, this is presented on the website as well on Page 5. When you start to get inside of the sweet spot, and again, as you look in your book and online, as we start to take a look at CASM, and of course, we're stage-length adjusted as we're comparing this, these are 2012 numbers, and we're also looking at the revenue side of the equation as well, we know where these carriers, right, the true network -- we know where they live. And by the way, we know that they're a product almost exclusively of bankruptcies, and certainly, M&A activity that's ongoing as well. We know that. We know that they live in the alliance world. We know that they can carry you from almost any place in the world to another spot in the world. We know that. And by the way, there are some outliers, other newer models, and again, they're depicted here from the standpoint of again, off of the horizontal, the vertical access when you look at costs, and you also look at revenue margins, if you will, in 2012. We know where these carriers live. We also know in our geography, this special geography, you can be a 5% player against a combination that's 20-plus percent. And again, that's 3 carriers out there, and again, one of those transactions is still in the process of going through review. We know that living in New York, in Boston, in places across Florida, the Caribbean, all the way in Southern California, the transcon, you'll hear more about that today as well, we know that we can compete against these carriers from the standpoint those who are underserved. And we also know as we're living in this space, there's other carriers that live in the space as well when you start to think of maybe their cost structure and their revenue model, but we'd argue not necessarily the product. And this is what is so different in terms of trial on our company. Once you trial, once you try JetBlue from the standpoint of it being sticky, it is sticky with repeat performance. And we're seeing that in Boston in a major way. Robin will take you deep inside Boston over the course of Analyst Day today. We know that as we compete against these carriers, right, the discounters, the low-cost carriers -- and by the way, as we look at our cost structure, we're pleased with our cost structure. We've had to put an awful lot of effort into also bending this cost curve, slowing the growth down. We know there's maturing aircraft, we know that we've got a population of crew members that are maturing as well, but the product also allows us to serve those who are underserved in these models. And so our goal as a leadership management team as we're moving forward, very focused on return on invested capital, driving those financials forward, is how we continue to move the sweet spot where we sit in between these 2 models, there is a space for a third model. How do we continue to move it north, minding our cost structure, but at the same time, really starting to see the revenue premium that we believe and we know that we see when we make the investment in a market or in markets over time.

By the way, last year, Joanna teased out Net Promoter Score, things like engagement. It matters. We have a direct relationship with our crew members, right? And so as we spend time -- and that's not code, we don't have third-party representation in our company. The engagement, are you going to go the extra mile? Truly, how long are you looking for this to be a career for you? This engagement, which drives Net Promoter Score, would you recommend JetBlue? All the way up in Boston going to Florida, VFR traffic, leisure, business, transcon, domestic, international, short, medium, long-haul, we'll take you inside of that in terms of we make decisions. And we believe that as we are now into our 14th year -- pre-verified air, by the way, on the backside of what's happened since 1978 when this industry deregulated, and also with the changes that have taken place over the last couple of years in this consolidating industry, that we can continue to drive the sweet spot further north, a very responsible cost structure and a product that's second to none. In fact, that's a -- I don't let our team use the word coach. We talk about the core product. And yes, okay, there is a -- this is our product, but it's very sticky from the standpoint of driving this model north. Listen, I'll close with this. It's a -- as we talk about, again, today, Robin, Mark, Jim, bringing you inside of whether it's the network's partnerships who want to provide more visibility in terms of this partnership model with what's working, by the way, as we're mainly harvesting that over JFK airport. Getting inside of customer enhancements, what's next? And we've teased a lot of that out. There's a lot of excitement that's happening in our company. And whether that's the WiFi model, whether that's Sharklets or some of the other type of the 321s coming, there's a lot of excitement that's happening across our company. There's other ancillary revenue opportunities as well. And so how do we continue to move that sweet spot, that RASM, core PRASM and RASM bubble further north, and at the same time, getting inside of cost control, right? And certainly, as we take a look at a maturing organization, responsible growth from the standpoint of not just x fuel CASM, also think all-in CASM. I always kind of like just chuckle, we're so focused on x fuel CASM, what about all-in CASM? Let's get inside of oil, let's get inside of fuel. Let's talk about fuel efficiency. Let's talk about single-engine taxing. Let's talk about things like utilizing NextGen. Of course, we'll talk about a hedging policy and what have you, but getting inside of that cost structure as well. And certainly, Mark and the team will bring you inside of that. And I think here, just an awful lot of, as we talk about just the financial viability, the sustainability of the company and getting inside of our capital structure and the hard work that has taken place over the last 5 years, but certainly, just even just last year. I mean it's nice to have aircraft that are free and clear in our portfolio literally as a 14 -year-old company. And when we look at cash from operations -- by the way, free cash flow is still very important as a metric for this company, and we'll take you inside of that. We didn't all of a sudden just migrate over to return on invested capital. Free cash flow is certainly a very, very important metric to the company as well. But at the end of the day, the lens that we're looking through is how do we keep improving this return on invested capital. We know you've got questions about it. You've been asking questions over the years, right, how do we make those decisions. And certainly, over the course of the day, we plan to bring you inside a great deal of detail, how we continue to drive this metric, a point plus per year for the foreseeable future. And I think that we've had a good track record of the work on that not just last year, let's put the storm to the side, but as we're looking at this year and beyond, right? This is the lens that we're looking through, this is the performance management metrics as well. So with that, listen, on behalf of the leadership team, on behalf of our 15,000 crew members, thanks for spending time with us today here at NASDAQ. Thanks for showing up at the Analyst Day, online as well. And with that, I'd like to turn the floor over to Robin Hayes, our Chief Commercial Officer. Robin?

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