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- [00:00]
Indiana University Narrator
Indiana University strengthens tomorrow's workforce with practical, real world experience. IU grads make a difference in your community, serving as teachers, nurses and engineers who rise to tomorrow's challenges and meet them. Learn more at iu.edu impact,
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Interviewer (Bloomberg Host)
Bloomberg Audio Studios Podcasts Radio News. We're here in Rio de Janeiro and I am here with the CEO of JetBlue, Joanna Garrity, here live at the annual IADA. Joanna, great to see you. Thank you so much.
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Joanna Geraghty
I think we were last in our lounge together.
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Interviewer (Bloomberg Host)
I know, and that's a big part of the whole story. I want to start with demand for the lounge, but more broadly from customers. Whether you've seen it really hang in there. The way that we've heard from some of the other airlines, despite some of the concerns and the higher costs that we're seeing.
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Joanna Geraghty
Yeah, I mean, we're very pleased with the demand environment. Customers are still flying. I think it speaks to the importance of air travel and particularly going into the summertime, customers still want to have that vacation. And so we're very pleased with that. Obviously the fuel environment is very challenging. We're passing on about 40% of the cost of fuel right now within the ticket price, which isn't great. Obviously you want customers to really see affordable air travel, but. But we're seeing demand strong. We're hoping it keeps up through the summer into the end of the year.
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Interviewer (Bloomberg Host)
With the 40% increase to customers, are you seeing any pushback or are people pretty okay with it? And does demand kind of hang in there?
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Joanna Geraghty
I think everybody understands, given the current environment where fuel prices are, that airfares are going to be a bit higher since 2019. Before the fuel crisis, airfares really hadn't kept up with the cost of inflation. And so there's a little bit of catch up happening. And then you add the increased fuel price on top of things and, you know, I think we've got to make sure that we' covering our costs. Spirit is a great example of an airline that just couldn't cover its costs. Everybody loves $29 fares, but when your costs input costs are a lot more than $29 a customer, you know, it makes it, it makes it challenging at this point.
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Interviewer (Bloomberg Host)
It is, it's sustainable with 40% passed on to customers if the prices of oil stay where they are currently or even inflect higher for a prolonged period of time.
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Joanna Geraghty
We need to continue to see prices stay where they are so that we can ensure that the full, that the full cost of the incremental fuel costs are being passed on as we think about this year. I mean, it's close dollar incremental expense to JetBlue fuel. So we're really focused on how do we make sure that we're driving great value for customers in the product offering and the service we provide, but also making sure that we recapture those fuel costs.
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Interviewer (Bloomberg Host)
You talked about Spirit. Have you seen any pickup in business that you've taken on from Spirit as a result of the bankruptcy?
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Joanna Geraghty
We're definitely seeing some positive trends in Fort Lauderdale. It's one of the opportunities for JetBlue. Spirit obviously had a big footprint down there. We're the largest carrier down there now, and we look forward to continuing to serve South Florida. We're adding flights this summer, will be up to 1 and 30 flights in Fort Lauderdale this summer, hopefully growing 250 through the peak next year. And customers are responding very well to our product, to our service down there. And we look forward to continuing to serve that market.
- [02:50]
Interviewer (Bloomberg Host)
A lot of people said it was a mistake, retroactively, post facto, it was a mistake that the antitrust officials did not sign off on the merger between JetBlue and Spirit. I'm sure this is like a dagger through your heart. You don't want to revisit this in any way. That was incredibly painful. There is a feeling, though, that there would be a more kind of openness to consolidation in the sector going forward. Would you want to try again with something or are you just like. Absolutely not. Putting that aside, we're a publicly traded
- [03:18]
Joanna Geraghty
company, so we're always going to do what's in the best interest of our shareholders. You know, with that said, companies need to focus on their organic plan. And when we think about all the time we spent with Spirit trying to get that transaction done, we have a great plan. Our Jet Forward plan is working. We're looking forward to bringing first class on by the end of the year across our domestic domestic fleet. We've got our lounges opening up. We've got our great partnership with Blue sky, so you can obviously never say never as a publicly traded company, but we really need to be focused on getting JetBlue healthy again. And all the moves we're making are working in the right direction. Now we just need the macro environment to cooperate with us.
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Interviewer (Bloomberg Host)
You talk about the upgrades to some of your offerings, in particular some of your premium, your lounge, for example, which I attended with you. I'm curious about how much you've been able to meet that demand for upgrades. With supply of, say, Airbus planes coming in, we've heard just some rumblings about delays. Has that been a problem for you?
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Joanna Geraghty
Yeah, there's definitely delays out there. Obviously supply chain is still challenged, even following Covid across. Whether it's engines or aircraft, you know, we've got the right fleet that we're operating now. We're going to be adding a first class seat on through the end of the year. That's, you know, that's on track. That's largely on track. And so we'll be able to meet that desire for a premium seat that customers have today as we introduce that product. And then our lounges, we bring Boston on at the, at the end of the summer. Looking forward to delivering that. Our goal is to have no lines in our lounges. We all walk by an airport lounge and there's a line and people have, you know, buzzers like the old restaurants and whatnot. You know, the only line we've seen in our lounge are lines to sign up for the Premier card so that they get into the lounge. So, you know, I'm excited about the new product offerings. We're going to have to deliver that experience to customers.
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Interviewer (Bloomberg Host)
So none of the Airbus delays have really affected.
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Joanna Geraghty
We're all seeing modest delays, but we're managing through it.
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Interviewer (Bloomberg Host)
Meanwhile, the United Partnership has been deepening and I'm wondering, is it expected to deepen even further? Are some of the regulators okay with that, with this partnership really increasing?
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Joanna Geraghty
Yeah, we're still very much in the sort of mid innings of actually implementing the existing partnership, so we're focused on that. And we introduced reciprocal earn and burn with our loyalty program at the end of last year. We just started selling interline flights on each other's websites. We're also in the process of integrating Paisley, which is our vacation and ancillary platform, into united.com so that they can sell all their ancillaries on Paisley. And, and that's where our focus is right now, is really focusing on how do we continue to bring that partnership to life. So we still got quite a bit of Runway to go with the existing partnership.
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Interviewer (Bloomberg Host)
You know, there's a lot of existential discussion around the model for low cost airlines. This idea of catering to people with affordable air travel is getting somewhat difficult for people just because the margins are so narrow. At a time of crisis, it becomes really difficult. How do you convince people that it's a viable model given all the turmoil?
- [05:57]
Joanna Geraghty
Yeah, I mean, at the end of the day we've got to make sure we're covering our costs and that's an important component of this. If you look at what happened with Spirit, there were many things that went. Went sideways for them. You know, they had an engine issue. So at one point, you know, a third of their fleet was grounded. The product that they offer, the basic economy product, was matched by other carriers. We've matched that as well. So their product offering didn't keep up. You know, then you look at the regulatory landscape and being a smaller airline. So what we're really focused on is how can we leverage our partnership with United to build scale. We've got to make sure our costs stay in check, and we've got to make sure, as we think about that premier customer is willing to pay a little more for a better experience, that we really redouble our efforts there. But also the customer that flies in coach, the customer that flies in economy, they're equally important. So we've got to make sure that we don't tinker too much with the premier experience, that we really compromise that customer who needs affordable air travel. But affordability, it's relative. If you look at, you know, customers that take a taxi from, say, Midtown Manhattan to JFK, it's $150 in an Uber to take a. Take an Uber. Nobody complains about that. But when an airfare is $150 from JFK to Fort Lauderdale, you know, you got a lot of folks saying air travel is very expensive. And, you know, I would submit air travel actually remains highly affordable. Yes, it's a bit more expensive because of the cost of fuel, but we have a lot of input costs, and they've only gone up since COVID Well,
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Interviewer (Bloomberg Host)
this is the issue, and I think that this is where people are struggling, that there is a lot of hangover debt. JetBlue has a bunch of debt to service that debt. To invest in premier experience to keep up with some of the major. The big three that have these deep pockets is incredibly challenging. What's the pathway to do that? To pay down debt, to free yourself up, while also tackling some of these other areas of growth.
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Joanna Geraghty
I mean, the focus is. Is generating an operating profit to begin with, and we're not there yet. So first step is generating an operating profit, which we were on track to do this year until the war. And so that's a bit of a step back, obviously, given, you know, the cost of fuel. And so much money is just being directed towards that. The hope is that that moderates and that comes to an end and fuel comes down over time, and then we'll be back to focusing on generating an offering, operating profit. That's the first step. The second step is then free cash flow and you start paying off your debt debt. But we need to be very mindful of that. We do have a pretty heavy debt burden, but we also have a lot of liquidity. We also have a lot of unencumbered assets. So you know, as I think about JetBlue, the debt is, is a challenge, but we are focused on doing all the right things in terms of investing in that premium customer so that we can drive an improved revenue environment for the company.
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Interviewer (Bloomberg Host)
Where do oil prices have to go to get a profitable once again?
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Joanna Geraghty
Yeah, I mean I'm not going to put a number out there. They need to go down. That's, that's our focus is they need to go down and moderate. We're not planning, even if the war were to end, we're not planning for oil prices to snap back overnight. We think it's going to be a longer, protracted sort of unwind of the escalated fuel prices, you know, and at the end of the day, you know, our focus needs to be, I'm really not losing sight of our plan. We see it working. When you strip out all of the macro noise, we do see that jet forward, which is our turnaround plan is working. We just need the macro environment to cooperate with us and that's been challenging. The fuel environment shutdowns, you know, it's kind of hit the customer, hit the airline industry, I think in a disproportionate way to some other industries.
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Interviewer (Bloomberg Host)
I just want to finish by asking, are there any new routes coming up that you want to talk about?
- [09:09]
Joanna Geraghty
It's all about Fort Lauderdale. So I'd say keep, keep your eyes focused there and we're actually building a connecting operation there. So if you have a need to go to the Caribbean, to Latin America, you know, Fort Lauderdale is going to be a great way to get there, even if you're not originating there. We're known for point to point. We're building a bit of a different model down there and excited to see how that brings value to customers and really helps drive our profitability.
- [09:29]
Interviewer (Bloomberg Host)
Joanna, thank you so much for being with us. Thanks. Joanna Garrity, here with us at the AIETA General Conference in Rio de Janeiro.
- [09:37]
Indiana University Narrator
Preparing for tomorrow's careers requires forward thinking education. Indiana University graduates are degrees above the competition, building on strong foundations to create new possibilities that make a difference where you live. From teachers and nurses strengthening communities to engineers advancing microchip research, Indiana University is investing in tomorrow's workforce. Through career ready training. Learn how IU is driving economic growth at iu. Edu Impact Dog Grooming Genius Here most
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Joanna Geraghty
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- [10:12]
Interviewer (Bloomberg Host)
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Joanna Geraghty
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Interviewer (Bloomberg Host)
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