JBLU

JetBlue Airways Corporation (JBLU)

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JetBlue Airways Corporation (JBLU)

Deutsche Bank 2012 Aviation and Transportation Conference

September 6, 2012, 10:20 a.m. ET

Executives

Mark Powers – CFO

Robin Hayes – EVP, CCO

Analysts

Unidentified Analyst

Presentation

Unidentified Representative

Mark joined JetBlue in 2006 as Vice President of Finance and Treasurer. And after several promotions in the finance department, he became the company CFO in April, 2012. Mark is no stranger to the aviation industry having held a number of positions in both the finance and legal departments of Continental, Northwest, and General Electric's jet engine unit before joining up with Team Blue.

Here today with Mark to give us an update on the JetBlue story is Robin Hayes, Chief Commercial Officer. And with that, I'd like to turn it over to Mark.

Mark Powers

Thank you, it's great to be here. Welcome everybody here and for those on the webcast, welcome as well. I'll try to be mindful that this is webcast as we try to flip through the pages and get you back on time.

This is a really, really big week for New York parents. Any New York parents in the room here? It's a really big week because kids are back in school. Now it's not so good a week for CFO's of airlines based in New York City because we like those kids to fly. But in any event, it's a big week. School is back.

Today I'll try to be brief. I know that many of you have already seen some of our earnings material.

Let me start by trying to set some content for the remarks. JetBlue is about 12 years in it's' growth from our first flight with many, many years to go. Rule of thumb, if you're going to start an airline, make sure your first flight is not in the middle of a snowstorm, which was the – unfortunately, we got that. But in any event, we're 12 years old. We have about 175 airplanes, 14,000 crew members, highly engaged non-union workforce. It's a terrific place to work. Everything they say about the culture is true and then some. It's about as close to GE as I've even seen in terms of strength of that culture. He obviously talked of my background, so you sort of know the other places I'm comparing that to.

It's an interesting airline in that it chose to base its' operations in I think the most competitive marketplace in the world, at least the United States, northeast Florida and Northeast. It's very, very competitive. Again, I think it's important particularly in the context of growth if you keep in mind that while we have this huge presence in New York and therefore sort of a big media presence if you will, we are really fully [inaudible] in the domestic market share.

The company itself as you can see from the bottom here has sort of gone through a growth phase where we built a brand, built a network presence, and I think probably faster than we ever thought we would probably get to. We slowed the growth to transition to among other metrics, pre-cash flow, which is a very, very effective way to measure our growth. Obviously, we have always maintained healthy liquidity.

And now we have entertained, actually starting with the last year's analyst day this crazy metric called ROIC, which is probably a metric that we haven't heard in the airline business for a long, long time. And we have absolutely embraced this return metric.

Finally, we are fiercely in it. We do believe that the long term interest of our owners is best serviced by JetBlue remaining a standalone organically growing sustainable carrier.

So quick summary of some of the results that you may have seen. Nine consecutive quarters of profitability. We finished the second quarter more than doubling last year's net income to $52 million. Operating profit margins improved by 2.7 points. We continue to outpace the domestic A4A results while at the same time growing at a reasonable clip in very targeted areas. And we'll talk a little bit more about where we do grow and why.

We also ended the quarter as we have in prior quarters with a strong liquidity position of 25% of 2012 revenues. I should note, this does not include the benefit of two revolver facilities that we have totally about $225 million. But why do you have so much cash? For sure, we're not getting great returns to anybody's getting great returns after the session. So we're not getting great returns, so that certainly is a big of friction against generating great returns. The ROIC, but cash because it still remains from a fuel perspective a very volatile uncertain market. And it's also nice as I think you can attest, Robin, on that it's nice to have cash as a flexibility to pursue organic growth opportunities. Notably, that would include things like the slot transaction that we did earlier this year where we picked up some very, very valuable [inaudible] in LaGuardia and DCA. So that's sort of why we maintain the cash.

Having said that as we'll talk about in a minute, it's also been a very, very interesting way to manage our debt. Again, the context here is that not only are we managing our debt balances, but we're also trying to manage our debt balances and preserve what I think is a pretty favorable weight of that, which cost of debt, which I think at last week, it was about 4.5%. And so as we look at new opportunities to grow and fund ourselves, we're looking at pre-payment options. Maintaining that 4.5% is absolutely critical.

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