Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We're here in Rio
Speaker 1: di Jinnaro, and I am here with the CEO of
Speaker 1: Jet Blue, Joanna Garrity. Here alive at the annual IADA Meeting. Joanna,
Speaker 1: great to see you. Thank you so much for being
Speaker 1: make this. I think we were last in our lounge together,
Speaker 1: I know, and that's a big part of the whole story.
Speaker 1: I want to start with demand for the lounge, but
Speaker 1: more broadly from customers. Whether you've seen it really hang
Speaker 1: in there the way that we've heard from some of
Speaker 1: the other airlines, despite some of the concerns and the
Speaker 1: higher costs that we're seeing.
Speaker 2: Yeah, I mean, we're very pleased with the demand environment.
Speaker 2: Customers are still flying. I think it speaks to the
Speaker 2: importance of air travel and particularly going to the summertime.
Speaker 3: Customers still want to have.
Speaker 2: That vacation and so we're very pleased with that. Obviously,
Speaker 2: the fuel environment is very challenging. We're passing on about
Speaker 2: forty percent of the cost of fuel right now within
Speaker 2: the chicket price, which isn't great. Obviously, you want customers
Speaker 2: to really see affordable air travel, but we're seeing demand strong.
Speaker 2: We're hoping it keeps up through the summer into the
Speaker 2: end of.
Speaker 1: The year with the forty percent increase to customers, Are
Speaker 1: you seeing any pushback or people pretty okay with it?
Speaker 1: Kind of hang in there.
Speaker 2: I think everybody understands given the current environment where fuel
Speaker 2: prices are, that airfares are going.
Speaker 3: To be a bit higher.
Speaker 2: Since twenty nineteen, before the fuel crisis, airfares, you know,
Speaker 2: really hadn't kept up with the cost of inflation, and
Speaker 2: so there's a little bit of catchup happening, and then
Speaker 2: you add the increased fuel price on top of things,
Speaker 2: and you know, I think we've got to make sure
Speaker 2: that we're covering our cost. Spirit is a great example
Speaker 2: of an airline that just couldn't cover its cost. Everybody
Speaker 2: loves twenty nine dollars fares, but when your costs and
Speaker 2: put cost are a lot more than twenty nine dollars
Speaker 2: a customer, you know, it makes it makes it challenging.
Speaker 1: At this point, it is it's sustainable with forty percent
Speaker 1: passed on to customers.
Speaker 3: If the prices of oil stay.
Speaker 1: Where they are current lar or even inflect higher for
Speaker 1: a prolonged period of time.
Speaker 2: We need to continue to see prices stay where they are,
Speaker 2: so that we can ensure that the full of at
Speaker 2: the full cost of the incremental fuel costs are being
Speaker 2: passed on. As we think about this year, I mean
Speaker 2: it's it's close to a billion dollar incremental expensive.
Speaker 3: Jet Blue fuel.
Speaker 2: So we're really focused on how do we make sure
Speaker 2: that we're driving great value for customers and the product
Speaker 2: offering and the surface we provide, but also making sure
Speaker 2: that we recapture those fuel costs.
Speaker 3: You talked about Spirit.
Speaker 1: Have you seen any pick up in business that you've
Speaker 1: taken on from Spirit as a result of the bankruptcy.
Speaker 2: We're definitely seeing some positive trends in Fort Lauderdale. It's
Speaker 2: one of the opportunities for Jet Blue. Spirit obviously had
Speaker 2: a big footprint down there. We're the largest carrier down there.
Speaker 2: Now we look forward to continuing to serve South Florida.
Speaker 2: We're adding flights this summer. We'll be up to one
Speaker 2: hundred and thirty flights in Fort Lauterlo the summer, hopefully
Speaker 2: growing tw one hundred and fifty through the peak next year.
Speaker 2: And customers are responding very well to our product, to
Speaker 2: our service down there, and we look forward to continuing
Speaker 2: to serve that market.
Speaker 1: A lot of people said it was a mistake retroactively
Speaker 1: post factough it was a mistake that the anti trust
Speaker 1: officials did not sign off on the merger between Jet
Speaker 1: Blue a Spirit. I'm sure this is like a dagger
Speaker 1: through your heart. You don't want to revisit this in anyway.
Speaker 1: It was incredibly painful. There is a feeling though that
Speaker 1: there would be a more kind of openness to consolidation
Speaker 1: in the sector going forward. Would you want to try
Speaker 1: again with something or are you just like absolutely not
Speaker 1: by putting that aside.
Speaker 2: Where public try company, So we're always going to do
Speaker 2: with in the best interests of our shareholders, you know.
Speaker 3: With that said, companies need to focus on the organic plan.
Speaker 2: And when we think about all the time we spent
Speaker 2: with Spirit trying to get that transaction done, we have
Speaker 2: a great plan. Our Jet four plan is working. We're
Speaker 2: looking forward to bringing first class on by the end
Speaker 2: of the year across our domestic domestic fleet. We've got
Speaker 2: our lounges opening up, We've got our great partnership with
Speaker 2: Blue Sky. So you can obviously never say never as
Speaker 2: a publicly traded company, but we really need to be
Speaker 2: focused on getting Jet Blue healthy again, and all the
Speaker 2: moves we're making are working in the right direction. Now
Speaker 2: we just need the macro environment to cooperate with us.
Speaker 1: You talk about the upgrades to some of your offerings,
Speaker 1: in particular some of your premium your lounge for example,
Speaker 1: which I had tended with you. I'm curious about how
Speaker 1: much you've been able to meet that demand for upgrades
Speaker 1: with supply of say Airbus planes coming in. We've heard
Speaker 1: just some rumblings about delays. Has that been a problem
Speaker 1: for you.
Speaker 2: Yeah, there's definitely delays out there. Obviously, the supply chain
Speaker 2: is still challenged even following COVID across whether it's engines
Speaker 2: or aircraft. You know, we've got the right fleet that
Speaker 2: we're operating now. We're going to be adding a first
Speaker 2: class seat on through the end of the year. That's
Speaker 2: you know, that's on track. That's largely on track, and
Speaker 2: so we'll be able to meet that desire for a
Speaker 2: premium seat that customers have today as we introduce that
Speaker 2: product and then our loungees we bring Boston on at
Speaker 2: the at the end of the summer, looking forward to
Speaker 2: delivering that. Our goal is to have no lines in
Speaker 2: our lounges we all walk by an airport lounge and
Speaker 2: there's a line and people have you know, buzzers like
Speaker 2: the old restaurants and whatnot. You know, the only line
Speaker 2: we've seen in our lounge or lines to sign up
Speaker 2: for the Premier card so that you can get into
Speaker 2: the lounge. So, you know, I'm excited about the new
Speaker 2: product offerings. We're going to have to deliver that experience
Speaker 2: to customers.
Speaker 1: So none of the airbus delays have really affected.
Speaker 2: We're all seeing modest delays, but we're managing through it.
Speaker 1: Meanwhile, the United partnership has been deepening, and I'm wondering
Speaker 1: is it expected to deep it even further or some
Speaker 1: of the regulators okay with that.
Speaker 2: With this partnership really increasing, Yeah, we're still very much
Speaker 2: in the sort of mid innings of actually implementing the
Speaker 2: existing partnership. So we're focused on that. We introduce forcimplcal
Speaker 2: Earn and Burn with our loyalty program. At the end
Speaker 2: of last year, we just started selling interline flights on
Speaker 2: each other's websites. We're also in the process of integrating Paisley,
Speaker 2: which is our vacation and ancillary platform, into United dot
Speaker 2: Com so that they can sell all their ancillaries on Paisley,
Speaker 2: and that's where our focus is right now, is really
Speaker 2: focusing on how do we continue to bring that partnership
Speaker 2: to life. So we still got quite a bit of
Speaker 2: runway to go with the existing partnership.
Speaker 1: You know, there's a lot of existential discussion around the
Speaker 1: model for low cost airlines. This idea of catering to
Speaker 1: people with affordable air travel is getting somewhat difficult for
Speaker 1: people just because the margins are so snarrow at a
Speaker 1: time of crisis, it becomes really difficult. How do you
Speaker 1: convince people that it's a viable model given all the turmoil.
Speaker 2: Yeah, I mean, at the end of the day, we've
Speaker 2: got to make sure we're covering our costs, and that's
Speaker 2: an important component of this. If you look at what
Speaker 2: happened with Spirit, there were many things that went went
Speaker 2: sideways for them. You know, they had an engine issue,
Speaker 2: so at one point, you know, a third of their
Speaker 2: fleet was grounded. The product that they offered, the basic
Speaker 2: economy product was matched by other carriers. We've matched that
Speaker 2: as well, so their product offering didn't keep up.
Speaker 3: You know.
Speaker 2: Then you look at the regulatory landscape and being a
Speaker 2: smaller airline. So what we're really focused on is how
Speaker 2: can we leverage our partnership United to build scale. We've
Speaker 2: got to make sure our cost day in check, and
Speaker 2: we've got to make sure as we think about that
Speaker 2: premier customers willing to pay a little more for a
Speaker 2: better experience, that we really redouble our efforts there. But
Speaker 2: also the customer that flies and coach, the customer that
Speaker 2: flies an economy, they're equally important. So we've got to
Speaker 2: make sure that we don't tinker too much with the
Speaker 2: premier experience, that we really compromise that customer who needs
Speaker 2: affordable air travel.
Speaker 3: But affordability it's relative. If you look.
Speaker 2: At you know, customers that take a taxi from say
Speaker 2: midtown Manhattan to JFK, it's one hundred and fifty dollars
Speaker 2: in an uber to take an uber.
Speaker 3: Nobody complains about that.
Speaker 2: But when an airfare is one hundred and fifty dollars
Speaker 2: from JFK to Fort Lauderdale, you know, you got a
Speaker 2: lot of folks saying air travel is very expensive, and
Speaker 2: you know, I would submit air travel actually remains highly affordable. Yes,
Speaker 2: it's a bit more expensive because of the cost of fuel,
Speaker 2: but we have a lot of input costs and they've
Speaker 2: only gone up since COVID.
Speaker 1: Well, this is the issue, and I think that this
Speaker 1: is where people are struggling. That there's a lot of
Speaker 1: hangover debt. Jet Blue has a bunch of debt. To
Speaker 1: service that debt, to invest in premiere experience to keep
Speaker 1: up with some of the major the big three that
Speaker 1: have these deep pockets is incredibly challenging. What's the pathway
Speaker 1: to do that, to pay down debt, to free yourself
Speaker 1: up while also tackling some of these other areas of growth.
Speaker 2: Yeah, I mean the focus is generating an operating profit
Speaker 2: to begin with, and we're not there yet. So first
Speaker 2: step is generating an operating profit, which we were on
Speaker 2: track to do this year until the war, and so
Speaker 2: that's a bit of a step back obviously, given you
Speaker 2: know the cost of fuel and so much money is
Speaker 2: just being directed towards that. The hope is that that
Speaker 2: moderates and that comes to an end and fuel comes
Speaker 2: down over time, and then we'll be back to focusing on.
Speaker 3: Gendering and offer and operating profit. That's the first step.
Speaker 2: The second step is then free cash flow and you
Speaker 2: start paying off your debt, but we need to be
Speaker 2: very mindful of that. We do have a pretty heavy
Speaker 2: debt burden, but we also have a lot of liquidity.
Speaker 2: We also have a lot of unencumbered assets. So you know,
Speaker 2: as I think about Jet Blue, the debt is a challenge,
Speaker 2: but we are focused on doing all the right things
Speaker 2: in terms of investing in that premium customer so that
Speaker 2: we can drive and improve revenue environment for the company.
Speaker 1: Where do oil prices have to go to get it
Speaker 1: profitable once again.
Speaker 2: Yeah, I mean I'm not going to put a number
Speaker 2: out there. They need to go down. That's our focus
Speaker 2: is they need to go down and moderate. We're not
Speaker 2: planning even if the war were to end. We're not
Speaker 2: planning for oil prices to snap back overnight. We think
Speaker 2: it's going to be a longer protracted sort of unwind
Speaker 2: of the escalated fuel prices.
Speaker 3: You know, and at the end of the day, you know, our.
Speaker 2: Focus needs to be I'm really not losing sight of
Speaker 2: our plan. We see it working when you strip out
Speaker 2: all of the macro noise. We do see that Jet Forward,
Speaker 2: which is our turnaround plan, is working. We just need
Speaker 2: the macro environment to cooperate with us and that's been
Speaker 2: challenging the fuel environment.
Speaker 3: Shut downs.
Speaker 2: You know, it's kind of hit the customer, hit the
Speaker 2: airline industry, I think in a disproportionate way to some
Speaker 2: other industries.
Speaker 1: I just want to finish by asking.
Speaker 3: Are there any new routes coming up that you want.
Speaker 1: To talk about.
Speaker 2: It's all about Fort Lauderdale, so I'd say keep your
Speaker 2: eyes focused there, and we're actually building a connecting operation there,
Speaker 2: so if you have a need to go to the
Speaker 2: Caribbean into Latin America for lauderd it's me a great
Speaker 2: way to get there, even if you're not originating there.
Speaker 3: And we're known for point to point. We're building a bit.
Speaker 2: Of a different model down there and excited to see
Speaker 2: how that brings value to customers and really helps drive
Speaker 2: our profitability.
Speaker 1: Joanna, thank you so much for being with us. Thank
Speaker 1: thanks so much atuay here with us at the ADA
Speaker 1: General Conference in Rio Dejaneira.