JetBlue Airways Corporation Q1 2010 Earnings Call Transcript

JetBlue Airways Corporation Q1 2010 Earnings Call Transcript
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JetBlue Airways Corporation (JBLU)

Q1 2010 Earnings Call

April 28, 2010 10:00 am ET

Executives

David Barger – Chief Executive Officer

Edward Barnes – Chief Financial Officer

Analysts

William Greene - Morgan Stanley

Will Randow - Citigroup

Gary Chase - Barclays Capital

Jamie Baker - J.P. Morgan

Kevin Crissey - UBS

Daniel Mckenzie - Hudson Securities

Justine Fisher – Goldman Sachs

Hunter Keay - Stifel Nicolaus & Co. Inc.

Helane Becker - Jesup & Lamont Securities Corportation

Duane Pfenningworth - Raymond James

Jim Parker for Duane Pfenningworth – Raymond James

Stephen O'Hara - Sidoti & Company LLC

Bill Masters - Broadpoint

Presentation

Operator

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Good morning ladies and gentlemen, and welcome to the JetBlue Airways first quarter 2010 earnings conference call. Today’s call is being recorded. We have on the call today Dave Barger, JetBlue’s CEO and Ed Barnes, JetBlue’s CFO.

As a reminder, this morning’s call includes forward-looking statements about future events. Actual results may differ materially from those expressed in the forward-looking statements due to many factors and, therefore, investors should not place undue reliance on these statements. For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to the company’s annual and periodic reports filed with the Securities and Exchange Commission.

At this time I would now like to turn the call over to Dave Barger. Please go ahead sir.

David Barger

Thank you John and good morning everyone. Thank you all for joining us today. The first quarter presented many challenges including rising fuel prices and several winter storms in the Northeast, which severely limited operations at JFK, our home base, for extended periods of time.

In addition, we successfully implemented significant phases of Sabre, our new customer service and reservations system. Despite record first quarter revenues, these factors contributed to a net loss of $1 million or $0.01 per diluted share.

Throughout the quarter, JetBlue’s 12,500 crew members continued to run a great airline and deliver exceptional service to our customers. While we’re disappointed to report a loss, after four consecutive quarters of profitability, we remain focused on long-term sustainable growth, which drives a focus on controlling costs, maximizing revenues and managing capital expenditures.

We continue to focus on building and maintaining our financial strength. Even after paying down $155 million of convertible debt, we ended the quarter with over $1 billion in unrestricted cash and short term investments or 30% of trailing 12 months revenue, among the best liquidity positions in the industry.

The revenue environment has certainly been improving and we are encouraged by recent trends. Passenger unit revenues for the quarter were up approximately 5% versus last year, driven by a 4% increase in yield. We had an average one way fare of $142, our second highest quarterly average fare ever, reflecting the progress of several key initiatives aimed at attracting higher yielding customers in addition to the effects of an improving economic environment.

During the quarter as I mentioned, we successfully transitioned to a new customer service and reservations system, Sabre, a company wide effort that we began working on in early 2009. In conjunction with this change, we also integrated new revenue management, revenue accounting, and customer loyalty systems. As many of you are aware, these large scale transitions typically don’t go smoothly. The extensive preparation and investment we made up front to support customers and crew members during this cutover, including a Verizon back up call center to assist with customer calls, cap load factors and a reduced flight schedule during the cutover period, were key drivers of our success. Using many of the practices we learned during the successful opening of our JFK terminal in New York, our team worked hard to make the transition as seamless as possible for our customers with the understanding that a limited level of disruption was unavoidable.

While customers have experienced a longer than usual call hold times for certain transactions, we’re working diligently to complete the key remaining customer touching phases of Sabre, including the enhancements to our website made last week. We’re excited about the revenue opportunities Sabre presents, both in the near and long-term. In fact, we’ve already seen some of the benefits of this more robust system. Using our prior system for example, we restricted filing fare increases and a launch in sales during our regular operations. With Sabre, we recently were able to match an industry wide fare increase during a severe weather event, a seemingly modest accomplishment but a sharp contrast to prior capabilities.

We’re also starting to see the benefits of real time, GDS connectivity, resulting in higher yielding traffic. We plan to add more functionality to the Sabre platform as we move into the second half of this year. When fully implemented, the Sabre system will provide an important engine for JetBlue’s future revenue growth. It will provide pricing flexibility that we believe will enable us to attract more business customers and broaden ancillary revenue and partnership opportunities, all core JetBlue initiatives.

With respect to airline partnerships, Sabre’s e-ticketing platform will help us to better leverage our growing presence in Boston, and our unique position as JFK’s largest domestic carrier and New York’s true hometown airline. JFK is arguably the most important gateway in the world, served by more than 70 international carriers. With the Sabre platform, our new terminal, strong network, superior product, low cost and valuable JFK slot portfolio, we believe we are very well positioned to serve global carriers. To that end, we recently announced an exciting partnership with American Airlines, to essentially feed their key international routes at JFK and Boston. Specifically, JetBlue customers will have new access to 12 international routes on American, while American customers will have new access to 18 of JetBlue’s domestic routes. We believe this partnership is an innovative and cost effective way of generating additional revenue by leveraging the network strengths of both carriers, and bolstering each airline’s New York and Boston’s presence.

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