JetBlue Airways (JBLU)

Q4 2011 Earnings Call

January 26, 2012 9:30 am ET


Mark D. Powers - Chief Financial Officer, Senior Vice President and Treasurer

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

Robin Hayes - Chief Commercial Officer and Executive Vice President


William J. Greene - Morgan Stanley, Research Division

Garrett L. Chase - Barclays Capital, Research Division

Unknown Analyst

Duane Pfennigwerth - Evercore Partners Inc., Research Division

Richa Talwar - Deutsche Bank AG, Research Division

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

Glenn D. Engel - BofA Merrill Lynch, Research Division

Daniel McKenzie - Rodman & Renshaw, LLC, Research Division



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Good morning, ladies and gentlemen, and welcome to JetBlue Airways Fourth Quarter and Full Year 2011 Earnings Conference Call. Today's call is being recorded. We have on the call today, Dave Barger, JetBlue's CEO; and Mark Powers, JetBlue's CFO. Also on the call for Q&A is Robin Hayes, JetBlue's Chief Commercial Officer.

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 like to turn the call over to Dave Barger. Please go ahead, sir.

David Barger

Thank you very much, Sandra. Good morning, everyone, and thank you, all for joining us today. We're pleased to announce another profitable quarter for JetBlue. This morning we reported a fourth quarter profit of $23 million, an improvement of $15 million compared to the fourth quarter of 2010 and our highest fourth quarter profit in our history. Despite higher fuel expense of more than $500 million for the full year 2011, we reported net income of $86 million or $0.28 per diluted share.

Looking back at 2011, it was a very good year for JetBlue. In addition to running a solid operation, we executed on our network strategy and key markets such as Boston and the Caribbean, while maintaining our cost advantage. These actions resulted in record revenues and one of the most profitable years in our company's history. At the same time, a continued focus on disciplined capital spending helped drive our third consecutive year of positive free cash flow, an important goal for JetBlue.

We also maintained strong liquidity throughout 2011 ending the year with approximately $1.2 billion in unrestricted cash and short-term investments or 27% of trailing 12 months revenue. These results of course, would not have been possible without the hard work and dedication of JetBlue's 14,000 crew members, who bring the JetBlue brand a life everyday in delivering the JetBlue experience to our customers, an experience that is unrivaled in the industry and well-deserving of our seventh consecutive J.D. Power Award for Service Excellence. I'd like to take this opportunity to thank our crew members for achieving these strong results and we are pleased to reward our crew members for their contribution to our financial success. Our 2011 results include a $31 million profit-sharing payout to be paid to our crew members in March.

Despite an uncertain economic environment, we generated record revenues of approximately $4.5 billion in 2011, up 19% year-over-year. PRASM for the full year was up 11.6% year-over-year, driven primarily by a 10.2% increase in yields. We believe our 2011 PRASM results are among the best in the industry. In fact, our monthly domestic PRASM results outperformed the A for A domestic industry average in 3 quarters of 2011. We are particularly pleased with our industry-leading PRASM performance in chiller months, such as May and September, reflecting the success of our network strategy to reduce the seasonality of our business, a key driver of sustainable, profitable growth.

Ancillary revenues continued to be an ongoing focus for JetBlue throughout 2011 and helped drive our record revenue performance. Recall, ancillary revenue is measured as the combination of ancillary revenue reported in passenger revenue and other revenue. Total ancillary revenue in the fourth quarter was about $21 per passenger and grew roughly $80 million or 18% during the full year 2011 as compared to 2010. This increase was driven in large part by strong customer response to our Even More offering as we continue to make this product more attractive to business and leisure customers with enhancements such as expedited security.

We recently opened expedited security lanes at 9 new airports, bringing our total to 24 airports system-wide. We plan to add additional locations later this year.

Our Even More offering generated over $120 million of revenue in 2011. We also saw a significant year-over-year improvement in other ancillary revenue streams including our getaway vacation package business and TrueBlue frequent-flier program.

Throughout the year, we continued to make important changes to strengthen our network and diversify our revenue mix, again, particularly in Boston and the Caribbean. We opened 5 new destinations from Boston and continue to make scheduled and frequency adjustments to better accommodate business customers. In addition, we partnered with Massport to consolidate the security checkpoints in Boston to improve customer flow and the overall travel experience for our customers. As a result of these actions, we have increased our percentage of higher yielding business traffic in Boston. We now estimate nearly 30% of our customers in Boston are traveling on business compared to roughly 20% of our customers in the rest of our network.

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