Kevin Crissey - Director of IR Robin Hayes - President Mark Powers - CFO

Michael Linenberg - Deutsche Bank Julie Yates - Credit Suisse Dan McKenzie - Buckingham Research Jamie Baker - JPMorgan Duane Pfennigwerth - Evercore ISI Savi Syth - Raymond James Hunter Keay - Wolfe Research David Fintzen - Barclays Glenn Engel - Bank of America Joe DeNardi - Stifel Tom Kim - Goldman Sachs Helane Becker - Cowen & Company

Good morning. My name is Felecia and I would like to welcome everyone to the JetBlue Airways Fourth Quarter and Full Year 2014 Earnings conference call. As a reminder, today’s call is being recorded. At this time, all participants are in a listen-only mode. I would now like to turn the call over to JetBlue’s Director of Investor Relations, Kevin Crissey. Please go ahead sir.

Thanks Felecia. Good morning everyone and thanks for joining us for our fourth quarter 2014 earnings call. Joining us here in New York to discuss our results are Robin Hayes, our President, and Mark Powers, our CFO. 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 our press release, 10-K, and other reports filed with the SEC. Also during the course of our call, we may discuss several non-GAAP financial measures. For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website. And now, I’d like to turn the call over to Robin Hayes, JetBlue’s President.

Thank you, Felecia, thank you Kevin. Good morning everyone and thank you for joining us. Earlier today we reported our results for the fourth quarter and full year 2014. In the fourth quarter net income excluding special items was 87 million or $0.26 per diluted share. For the full year excluding the gain from the sale of LiveTV we increased net income to $232 million or $0.70 per diluted share. This represents a year-over-year net income growth of over 38%. As always, I’d really like to thank all of our incredible crew members for their hard work, they put into achieve this result. I truly believe we’ve the most committed and caring crew members in the industry. In 2014 total revenues grew 7% year-over-year driven by improved yield and high margin ancillary revenues. Fuel prices fall sharply late in the year and our realized fuel price average $2.99 for the year, down 4.7% versus 2013. Full year operating margin improve by 1 percentage point to 8.9%. Our return on invested capital increased by 1 point in 2014 to 6.3%, although this is consistent with our plan for steady improvement we recognize we have much more work to do. As we outlined in our Investor Day November, our three year goal is to improve ROIC to greater than 10%, we’re not counting on lower fuel prices that get us there. As we also discussed at our Investor Day, we have specific initiatives well underway which we anticipate will enable us to generate over $400 million in incremental annual operating income by 2017. Let me provide a quick update on the couple of these initiatives. We plan to launch fare families in the second quarter and as a reminder fare families will provide our customers the choice between three branded fare bundles with the first design for customers who do not plan to check a bag. While, we are not legally permitted to provide pricing details before filing our fares, we continue to expect at least $65 million in incremental operating income in 2015 and more than 200 million annually by year end 2017. In terms of implementation led by our IT team our partners Datalex, IBM and Sabre among many others have already begun testing and our front line crew members are schedule to begin training later in the first quarter. Another initiative I’d like to highlight is Even More, in 2014 Even More revenue totaled just over 200 million. This 60% increase versus 2013 is well above our capacity growth rate and better than our prior guidance driven primarily by pricing optimization of the Even More space product. We are now pricing by seat and flight. Another ongoing initiative is Mint our premium Transcom product offering launched in June 2014. We are delighted to report that Mint is exceeding our expectations. Customers love the product as reflected in both increased NPS score and more importantly our bottomline. In the fourth quarter operating margin on Mint routes improved twice as much as our other Transcom markets which were a sum of our best performing route on a year-over-year basis. We have a number of corporate real estate initiatives which we expect will improve the customer experience to pull our growth and reduce costs. T5i our international arrivals terminal at New York’s JFK International Airport is a great example. T5i opened in November and has already reduced our operating costs whilst providing an excellent facility for our international customers. In Boston with the assistance of mass port, we are working on major enhancements to Terminal C at Logan Airport including a new inline baggage system, expanded gate areas and a streamlined checking experience. With a terrific support of Broward County Aviation Department and on the heels of opening a fabulous new a 1,000 foot runway major enhancements to Terminal 3 in Fort Lauderdale, Hollywood International Airport are underway. I'd like now to turn briefly to operational performance. Clearly there is a strong link between efficient on-time operations and improved financial performance. Our operational performance improved throughout 2014 and by most measures surpassed 2013. On-time departures or D0 improved 2.7 points year-on-year to 63.5% while our systems arrival performance or A14 improved 2.5 points to 77.1%. We have particularly strong operations in the fourth quarter. D0 and A14 each improved roughly 4 percentage points year-on-year driven by strong operational performance in New York. These results were testament to the hard work of our 16,000 crew members who deliver exceptional service to our customers every day. We look forward to recognizing their contribution to our financial and operational achievements in 2014 with a profit sharing payout of $25 million later this quarter. In addition I’m always astounded by the difference our crew members make in the communities that they live. In 2014 JetBlue crew members volunteered over 100,000 hours to a wide array of non-profit organizations. In closing we are pleased by the progress made in -- JetBlue made in 2014. As we look ahead we aim to improve our financial return and we have a plan in place to do just that. Lower fuel prices though always welcome do not change our strategy. Our growth plan is based on an assessment of network demand overtime and we have no plan to change our capacity guidance based on short term swings in the price of fuel. Finally, I would like to recognize Dave Barger for his over 16 years of leadership at JetBlue. Dave’s impact on our company and the lives of all of our crew members, customers and partners and friends is just simply immeasurable. Dave, a big thank you. And with that I would like to turn the call over to Mark for a more detailed review of our financial results.

Thanks Robin. Good morning everyone and thank you for joining us. This morning we reported record quarterly and annual operating income of 169 million and 515 million respectively. This represents 47% growth in the fourth quarter and 20% for the full year. I’d like to join Robin in acknowledging the efforts of our crew members who delivered a very, very good quarter. With respect to revenue, demand in the fourth quarter was solid with holiday travel periods booking very nicely. Passenger unit revenue or PRASM was essentially flat on capacity growth of 7%. Looking at our performance on a regional basis, domestic markets continue to outperform markets in Latin America and in Caribbean. All of our six focus cities continue to be profitable and experience year-over-year margin improvement in the quarter. Ancillary revenue which of course tends to be high margin revenue grew 11% in 2014 and totaled 745 million for the year. Total ancillary revenue in the fourth quarter was about $25 per customer, that’s up 3% year-on-year. As mentioned by Robin, our Even More offering continued to exceed expectations generating just over 200 million in 2014 as compared to 150 million of revenue just two years ago. With respect to cost, we’re pleased with our cost performance in the fourth quarter and in the full year, not simply because of lower fuel prices. Excluding fuel and profit sharing year-over-year fourth quarter unit cost decreased by 0.9%, that’s better than our prior guidance of 1% to 3%. In the quarter, year-over-year unit cost pressure came from maintenance materials and repairs, depreciation and benefits, at the same time we saw unit cost decline in sales and marketing and aircraft rent and the impact of higher than assumed completion factors. Turning to fuel, obviously the dramatic drop in fuel price has positive implications for our fuel expense line, in the fourth quarter 26% of our fuel consumption was hedged using jet fuel swaps and caps and we entered into fixed forward price agreements or FFPs covering another 7% of consumption. Including the impact of fuel hedging FFPs and taxes, our fuel price in the fourth quarter was $2.70 down from last year’s per gallon price of $3.10 or 13%. Looking ahead, we hedged about 17% of our expected full year 2015 fuel consumption, based on the forward curve as of January 16, we expect our first quarter jet fuel price per gallon including taxes and hedges to be approximately $1.97. Given the obvious volatility in fuel prices we’re not providing an annual fuel price estimate but to help you forecast, assuming in the January 16 forward curve, on a full year basis our all in fuel price would be slightly less than $2 per gallon. More specific details regarding our hedge positions are included in our investor update. This was filed with the SEC and available on the Investor Relations section of our website and was filed in fact prior to the start of this call. Although we provided an estimated fuel price based upon the forward curve we’re not running our business based upon that assumption. Our business plan assumes much higher prices with Brent at about the $90 per barrel range. We haven’t and will not reshape our business strategy based upon a drop in fuel prices which after all could prove to be very short term. Moving to the balance sheet, during fourth quarter we made debt and capital lease payments of approximately 130 million, bringing our full year payments to 778 million, this includes the debt prepayment of approximately $300 million from the proceeds of sale of LiveTV. As a reminder, the LiveTV sale was closed in the second quarter of ’14 produced a number of financial benefits for JetBlue including 374 million in net cash proceeds, a $241 million gain and lowering ongoing CASM and a reduction in future CapEx. At year-end 2014, our adjusted net to cap ratio was approximately 53%, a 6.5% improvement compared to year end 2013. At year end, cash and short term investments as a percentage of trailing 12 month revenue was 12%. Strengthening the balance sheet remains an ongoing priority, to the extent fuel prices stay low thereby increasing your cash from operations we’d expect even faster balance sheet improvement by making opportunistic debt prepayments. With respect to CapEx fleet JetBlue ended 2014 with 203 aircraft including 130 A320s, 60 E190s and 13 A321s. With expected to take delivery of 12 A321s in 2015 with two deliveries coming in the first quarter. Again on the strength of fuel driven strong cash flow from operations, our presumption is that we will pay cash for all of our 2015 deliveries. In November we announced the deferral of 18 aircraft deliveries from 2016 through 2018 to 2022 and 2023. In the near term this of course lowers our capital commitments by over 900 million and benefits free cash flow. Because the net deferrals also offset the capacity growth resulting from our planned initiative to reconfigure our A321 fleet with additional seats. Over the past few years we're making significant infrastructure investments such as the construction of T5i at JFK, IT infrastructure to support revenue initiatives and swap purchases. We expect our non-aircraft CapEx to be lower going forward. For the full year 2015 we are forecasting non-aircraft CapEx of between 150 million and 200 million compared with 320 in 2014. We expect total capital expenditures in 2015 of approximately 810 million to 860 million. Turning to capacity, winter storm Juno caused the cancelation of nearly 1,000 flights this week on our system. We have not yet determined the financial impact of the storm. We note that the storm was most severe on Tuesday in JFK and Wednesday in Boston, which are of course relatively lighter travel days of the week. Unless noted otherwise all of the guidance provided on this call and in the investor update issued today excludes the impact of Juno. Of course winter happens every year, recall severe winter last year caused the cancellation of about 4,100 flights in the first quarter of 2014, that’s increasing our year-over-year forecasted capacity growth by about 4% in the first quarter of 2015 and 1% for the full year 2015 again before the impact of Juno. We expect capacity growth of 11% to 13% in the first quarter and 7% to 9% for the year. This is in line with the guidance we provide at Investor Day. To be clear we will not alter our 2015 capacity guidance based upon the recent drop in the price of fuel. Looking at our capacity plans geographically we continue to expect the highest growth rate in Transcon market driven by frequency increases in New York to both Los Angeles and San Francisco. As Robin mentioned the results of Mint on these routes have been well above expectations. It certainly wouldn’t have been possible without the dedication of customer focus of our crew members especially our in-flight crew. Evidencing our geographic diversity in balance based on published schedules for 2015 we expect approximately 28% of our capacity will be in Transcon markets, 30 in the Caribbean and Latin America and approximately 29% in Florida with respect to revenue. Our revenue comparisons in the first quarter were impacted again by severe winter storms last year. Setting these aside year-over-year domestic demand remains solid and Latin America RASM was improving as capacity growth in the region slows. Prior to winter storm Juno, January PRASM was trending towards flat year-over-year while we are still working through the final impact we would expect PRASM in January to be modestly positive as a result of this recent storm. Moving on to costs, as highlighted again at Investor Day we faced pressure on maintenance expense in 2015. Compared to 2014 we expect more heavy maintenance visits and landing gear overhauls. Other line items with more modest unit cost pressure in 2015 include depreciation and landing fees. At the same time we expect lower unit cost to salaries and wages, aircraft rent and airport rent thanks in part to the benefit of T5i and JFK. In the first quarter we expect CASM, excluding fuel and profit sharing to decrease between negative 1.5% and negative 3.5% year over year. Looking at full year 2015 we expect CASM excluding fuel and profit sharing to only increase between 0% and 2%. In closing we’re very pleased with our fourth quarter and full year performance with the continued support and engagement from all of our crew members we look forward to delivering on our plans in 2015. And with that Robin and I are happy to take your questions. Thank you. Operator?

Thanks. Felicia, we’re ready to take questions.

Thank you. We will now begin the question and answer session for our investors and analysts. [Operator Instructions] Our first question comes from the line of Michael Linenberg with Deutsche Bank.

I guess two questions here, Mark, you did a good job on prepaying debt, can you talk about some of the opportunities in 2015 and what I’m getting to is, do you run into a situation where maybe some of your debt has make hole provisions where maybe there is a bit less that you can prepay, what are the opportunities maybe just give me a sense of the magnitude.

Yes, we clearly have to your point in the past the debt that we’ve been prepaying has been fairly low hanging fruit and so now we’re getting a little bit more selective and for sure we do have some of the prepayment and make hole provisions to think about. I mean, the other thing we’re also looking at by the way anticipating the long anticipated rise in interest rates is taking a hard look at wide spread floating rate debt. So there is a fair amount of step that we can look there.

Great. And then my second question and maybe this is more to Robin when I sort of think about where your unit revenue performance was for the fourth quarter and what you’re guiding for January, can you talk about some of the new markets I mean obviously there was good commentary on Mint but what about the much larger position that you have in DCA, how have some of those markets ramped up? Are you getting a much better business mix? And then along those lines, just the competitive capacity situation in some of your core markets what you’re seeing?

Good morning Michael and thanks for the question. I think, the revenue environment that we saw at the end of last year and we’re seeing at the beginning of this quarter I would describe as stable and I think we’ve been very pleased with the way giving some of the headwinds we had due to Latin America capacity last year. We’ve been very pleased as to, how some of that has been improving, really delighted. mean the fastest growth market that we have seen at the backend of last year was Fort Lauderdale/Hollywood, it’s also been the market that has been the highest year-on-year improvement and so we think really really good performance from our newer markets and DCA is -- we have some mature routes, the DCA they’re doing very well and we have newer routes that are still in that maturation phase but they will follow the curve that we always see from those types of market, so feeling really good about the way the network is shaping. I've got to tell you, it's really good sitting here and having all of our six focus cities it is solidly profitable.

Listen Robin, when you said highest improvement in Fort Lauderdale, were you referring to margin or were you referring to a gain in PRASM?

Margin, year-on-year margin improvement.

Our next question comes from Julie Yates of Credit Suisse.

Good morning, thanks for taking my question. Thank you for the color on PRASM in January, can you help frame how this might progress through the quarter given the comps are challenging in January and February and then ease significantly in March?

Hi Julie, good morning it’s Robin and I think we get this call every quarter. We of course only guide for the quarter, in January and I will use the word stable though to refer to the revenue line as we see it looking past January as well, I’ve seen very good visibility in January, good visibility of February and then after that slightly that’s on the books.

If I may Julie, just this time last year actually we established a policy of actually providing quarterly PRASM guidance only during the third month of the quarter and to our cadence has been with respect to the first two months of a quarter to provide the limited guidance that you've seen stay but the full quarter guidance won’t occur until the third quarter but we will in February then be providing the next month -- the February guidance during our traffic release when that happens.

Okay, and then on the hedging strategy, have you changed it all given where fuel is and are you starting to layer on any upside protection at these levels?

The hedging strategy is like, it seems to be working really, really well for us. I mean we continue to think of it as a tool kit. It’s a great way to manage risk and it still remains a short term form of insurance. You’ll see that in the investor update today we’re reporting on the next layer of hedges that we've not included in the prior investor update and as we move forward it will always be in the toolkit and when we look at the possibility of adding more hedges, we do two things, number one is we look at the overall fuel market environment and then we kind of look at what the competition is doing. I would note as you can hear from the other calls apparently some of our competitors have actually did underlining a lot of the things that they've put on, we haven’t done so but then again that’s where we are.

Your next question comes from the line of Dan McKenzie of Buckingham Research.

Hey, good morning guys. Just one housekeeping question here, I’m wondering if you can provide the cash flow statement items, cash flow from ops, investing, financing them, wondering if you can share that at this point.

Probably not to the -- they’re not included in the exhibit of course our 10-K will have that in great detail.

Okay, understood and then I’m wondering if you can provide a status update on Fly-Fi. I guess first where we’re at with respect to equipping the fleet and I think the goal was 100% at the end of ’14 and then secondly where are you guys at with respect to monetizing Fly-Fi and how should we think about that looking ahead?

Thanks, good morning Dan, it’s Robin, I’ll take that. I think in terms of where we are with the fleet of the 320 fleet of which we’ve 130 we are just slightly over 100 now so we’re in the back stretch, the 321 as we take delivery of 321s they are coming fitted out with Wi-Fi or I should say Fly-Fi they already have it and our 190 equipments will begin later in 2015 so still on track in terms of where we expect it to be. Very pleased with the product and as Marty mentioned at Investor Day, we have in terms of the first tranche of monetization build been able to cover the bandwidth cost for the coming year and the team continued to work on new deals as they come up and look forward to sharing those in due course but really, really great when we see flight with 80 or 100 customers connected on Wi-Fi that’s really, really I think game changer for us over the course of time.

Our next question comes from the line of Jamie Baker of JPMorgan.

Good morning Robin, you and Mark both stated you wouldn’t revise capacity based on short term declines in fuel, I’m curious therefore what sort of return metric or duration of fuel declines might cause you to rethink capacity. Is it 12 months of low fuel, is it a specific ROIC target? Is it just a function of what the competition does? We know that every airline has downside thresholds that we need to cut capacity. Do you care to share with us what would cause you to grow? I mean grow above the current plan I should say.

No, thanks Jamie, I appreciate the question and I think, look, if we would look at a root case within six months or short term timeline at this fuel price clearly you can make a case adding capacity but that’s not how we choose to look at it. We look at it, as we come on to new market we’re looking over sort of a three to five year horizon in terms of the business case and the returns, not going to share what our sort of hurdles we use internally but currently we don’t want to model the fuel price today as something that’s going to be around for a few years. So I think for the rest of this year we’re going to continue to focus on the time and as Mark said run our business as if we have gas at $90 a barrel.

Got it. And the follow up to Mark’s comment on Juno, you canceled a 1,000 flights this week. I guess all that really matters is what you’re budgeting for the entirety of the quarter. I mean is the Q1 [indiscernible] budget closer to last year’s 4,000 or is it something higher, lower I mean help us frame those 1,000 because as Mark pointed out you obviously had something in the budget already.

I think two -- the big [indiscernible] we had last year which was Hercules, two very important differences, first of all Hercules was a bigger event in terms of numbers of flight cancelled and secondly there is a very different profile of revenue that first return week in January versus the Tuesday and Wednesday in the middle of January, so we feel working through the numbers. I mean today is really our first full return to service but I’m anticipating that Juno will be a significantly small event than Hercules.

Our next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Good morning. First I wanted to congratulate you Robin on making oil go down 50% as you take over the range of this company, nice work.

Thanks Duane. I appreciate that.

So just regarding your improvement year-to-year in New York in operational performance, can you talk just practically what you’re doing differently, how much of this is just due to improved weather, we’d love to get some more detail behind how you’re actually driving that improvement.

Thanks Duane, happy to take the question. I think it’s been a real focus of our leadership team, our operational issue team, all of our operational crew members. A lot of that individual piece is coming together. I'll mention a few now, just creating a operating philosophy, a real strong focus on our fleet launch, looking at our schedule patterns, really looking at where we sort of base spares in our network, looking at our maintenance procedures. I mean there is a lot of things that the team have been attacking in the last year and it’s certainly the weather this December was kind to us, but over the peak of December we operated 12 consecutive days with 100% completion factor. And it’s more than just good weather that enables you to do that. So we’re not complacent. We still feel we have a lot of improvement to go and we’re focused on that, but very pleased with the initial results at the back end of last year and really a special shout out to our crew members who have made this happen one flight at a time.

Thanks for that. And then any update on your fleet densification program adding seats to the A320s. I know you talked about second half '15 but I thought like maybe you hinted there was some chance it could be accelerated, any update there?

No, Duane, still on course for the timeline that we provided the investor on 19th of November. But thanks for the follow up.

Our next question comes from Savi Syth of Raymond James.

Good morning. Just a bit more of a strategic question in regarding growth and then one of the concerns that some have had in the past is can JetBlue’s good clip of capacity growth despite lower, relatively lower margins and returns. Now I know that the kind of the case for it has been that you need to get to a defensible size, and the argument is clearly based on what you’re seeing happening in Seattle, but what I was wondering is have you gotten to the sensible size or is there more growth that is necessary and to see kind of consolidation that you’ve seen among the top four carriers change what size you need to be and then also if you get to that size by organic growth or if kind of a merger or an acquisition makes sense.

Thanks Savi, good morning. I’ll take that. In terms of strategy as an airline still very committed to our own organic growth plan and I think as we come into our 15th year anniversary of operating here into February we’re very proud of what we built and what we’re going to continue to build. So no change in our focus on building this company one airplane at a time. In terms of growth I think we laid out the case at Investor Day that we think growth is an important part of our airline, we’ve got six focus cities and we talked before about once you get past that initial growth phase then the maturation you see very quick returns so we look at Boston, investment in the past probably profitable. Fort Lauderdale I mentioned earlier we are growing that more quickly than any other our focus cities. We’re also seeing big improvements in return. So our plan is to continue to grow. I think we provided some guidance on that this year. I think with the changes we’re making to the 320 and [indiscernible] that we announced at Investor Day we found a more capital efficient way of growing but we’re also committed to growing the returns, growing the ROIC to the degree that we laid out at our Investor Day. So, we’re going to continue to do both.

Got it and then if I just may ask on the fuel consumption side for 2015 I would have expected a bit more of an improvement in fuel efficiencies, is that just due to the timing of the A321? Are the ones earlier on still related to Mint and the larger gauge ones really coming in the back half?

This scattered actually throughout the rest of the year, keep in mind moving forward we will finally have the full impact of the 13 aircrafts we’ve already taken delivery of.

Our next question comes from Hunter Keay of Wolfe Research.

Just a little bit more on the capacity, we’re just looking through some OAG data and looks like what I’m seeing in OAG doesn’t match up with the ASM guidance, so can you just help us understand the ASM growth by month? At least without getting into PRASM for the quarter, how we should think about January in relation to February and March?

Sure, quarter one is very tricky, just because the amount of flight that we cancelled last year. If we actually look actual-to-actual then January is -- and again these are not Juno adjusted so they will change a little bit because we cancelled about 1,000 flights with Juno which is just sort of over one day of equivalent capacity in January so, pre-Juno about 17% growth in January, about 11% growth in February and about 6% in March.

Well that’s a really strong PRASM guide, if that’s the case so but I don’t go there so let’s talk about Mint instead, when you guys first conceptualized Mint, was there any consideration given to maybe some pending changes in the United and Delta frequent flier programs and then sort of part two of that question, who you’ve been taking share from and if you don’t want to name the airline maybe you can talk about it in terms of where your shares coming from, the share gains are coming from in the context of -- are they individuals, are they corporate contracts, are you seeing more stimulated point of sale and say like the bay area or is it more New York based, any kind of color you could give us around where the share growth is coming from because you’re pulling that stimulating demand with that type of product.

Thanks Hunter, appreciate your question. Yes, look, very pleased with Mint. I mean we’ve been planning Mint for a long time so obviously we had no knowledge of any other competitive changes that frequent flight programs do, they were announced so there wasn’t a fact to at all, we looked at a market that historically was constrained by very high fares and in our opinion people were getting a pretty crummy product with very high price and so we wanted to change that and so we created what we think is a best in class product at a price point that is significantly lower than anything that was available and as is true in many of the new markets that JetBlue flies, we have an overall positive impact because we bring down the fares not just on our planes but the home market as well. So, in terms of where we’re getting from there has been a stimulation factor because when you go from $2,000 fare to a three digit fare you do stimulate additional demand, so we've definitely seen the market grow but in addition in terms of where we’re stealing share and this is in a compound I’d say we’re getting a bit of everything. I mean when we built the business case, I mean we didn’t assume a lot of large corporate contracts. We really were focusing on the mid products on individuals and small-medium size companies who didn’t have access to the sort of discounts that large corporates had but we were very pleasantly surprise that we’ve been getting some of that corporate business as well but we really look at that as the icing on the cake, it's not something that Mint was designed to go after.

Our next question comes from David Fintzen of Barclays.

Hey, good morning everyone. Just going back I forget if it was Robin or Mark, probably Robin who said this but domestic still continues being better than international, just curious how that tracks through the first quarter and when should we start to see international look more like domestics for ’15?

Yes, I think what we’re seeing in international and I haven’t pretty promptly in the quarter as we start cycling against a lot lower ASM growth in the market so Latin America will definitely see some pick up in the quarter and I think domestic is more of a strong trend that we already seen.

Okay, and then within of international are you seeing any -- you mentioned overall demand stable and good demand commentary but within international you’ve seen any diversions between things maybe more Northern, South America versus Caribbean, is there any sort of economic read through in demand you’re seeing in international markets?

One of the things we were commenting on is that we've prepared for this call is how whether it’s leisure travel, vacation travel, visiting friends and family, business travel that they all seem to be performing at a stable level and so not really seeing any segment sort of outperform or underperform and other right now.

Okay, that’s helpful. And then quick one just following up a little bit on Jamie’s question Mark, what was the Hercules cost impact just for us to kind of size -- I don’t know if you -- I can't remember if you disclosed it.

You stumped me on that, but I will get back to you on that one.

Okay.

Thank you, you bring me that great memory.

Our next question comes from Glenn Engel of Bank of America.

A couple of questions, one on seasonality, Easter is a little bit earlier this year. Is there going to be any shift of revenues from April to March?

Its a little bit earlier, if there will be a little bit shift from April to March.

Two, when I looked at the first quarter numbers depreciation and surged versus the third quarter more than I was expected, is there any one time write-offs in there and rent and landing fees dropped significantly, is there any one-time credits there?

Sure. Just quickly with respect to depreciation, keep in mind not only did we have full year know of T5i which just opened but we have a number of other IT projects included in the CapEx number in addition of course to the airplanes and those IT projects as I mentioned were projects that really are focused on enabling a lot of the revenue initiatives that we outlined at Investor Day. With respect to your second question on rent and landing fees, again back to T5i, the good thing about T5i is we're no longer paying really, really, really high rents at T4 JFK and then we had a couple of one-time every year rent true ups at some our focus cities. So it’s hard to predict every year what airport and/or how much it will but it happens every year and that’s always in the fourth quarter

And that was a good guide this year?

Yes, very good guide.

And the depreciation of 86 million, is that might steady state number going forward and growing?

It will grow obviously because we’re taking airplanes.

Okay. Thanks.

Our next question comes from Joe DeNardi of Stifel.

Mark, can you just walk us through kind of what the priorities for the free cash flow are this year just given the cash benefit you actually see from lower fuels?

The priorities right now are obviously debt free payment and Jim leading his team the Treasury Group are making a lot of good progress on that. We are, I should note also we will continue our share buyback program that relates obviously to crew member type of equity. So, that we’re not diluting you with respect to crew based compensation. And then of course the 12 A320 happening this year.

Okay. So I guess the incremental cash from the lower fuel is probably going towards the debt as opposed to maybe accelerating the share repurchase.

It’s actually, it’s interesting. There is actually very little choosing to talk about, we're going to do all three.

Okay. And then the sales and marketing expense line in the quarter was down pretty sharply, what was driving that?

A couple of things I should note; number one is a series of programs in the year that in the fourth quarter came in better than we had anticipated prior to guidance.

Our next question comes from Tom Kim of Goldman Sachs.

Good morning. I had a couple of questions here, just with regard to your percentage point of sales on your international bookings from the U.S. in particular LatAm, could you give us a little bit of color there?

All right Tom, it was a question, how does the point of sales breakdown between U.S. and international?

Yes, specifically for your international, your point of sales on your international bookings that are generally in the U.S. versus those that are originating from overseas.

I got you, I just want to clarify the question, I’m going to disappoint you because that’s not something we disclose publically.

Okay. And then can you give us a little bit color with regard to your FX exposure?

That would be zero.

All right, okay, great. And then just lastly, can you give us an update on your pilot negotiations?

Sure. Very early on in the process.

Okay, all right. Thank you.

We have one more question from Helane Becker of Cowen & Company.

Thanks very much operator. Hi, guys thank you very much for the time. Just a couple of questions; one, I’m surprised a little bit that MRO was up so much in the fourth quarter, is that just a function of the changes you’re making to the fleet timing business or is that something we should consider the run rate going forward?

I think as we said in the past and I think Jeff Martin explained at -- you’re talking about maintenance right?

Yes.

We’re doing a diligent amount of work trying to get most of our ongoing maintenance covered under predictable types of flight hour agreements. This year of course there are some heavy checks and some landing gear checks that you don’t have the luxury of timing and doesn’t make any sense to cover those under flight hour agreement so I think the nature as we move forward of MRO candidly is slightly lumpy but less lumpy than it would have been but for the entering of a later significant flight hour agreements. And this year is one of those lumpy years or crunchy peanut butter years.

Okay, and then just my other question is following up on something Hunter hinted out, your PRASM seems to be fairly strong given the capacity increase so is that -- so I’m trying to figure out, if that's just because how much of that is related to the capacity increase versus the 4%, would have been a 4% increase or is that better pricing on that you’re seeing versus where you were a year ago is something going on. I guess I’m asking this this badly but was something going on last year that had pricing down versus where you’re at this year?

No, I think it’s always one of the challenges in months where you have a big disconnect between what you schedule and what you actually fly is that you can get a lot of distortion very quickly. So, we are pleased with a flat PRASM performance in January but without guiding for the quarter I don’t want -- it would be wrong to look at it the sort of the way the capacity pulls away and assume that so there is a big increase in PRASM. We’ve knew the word stable for the quarter, we set it flat for January, when you have those big disconnects in the way because of storms kind of weird things happen to unit revenue. So, I’m not going to [take that next set of guide] [ph] for the quarter but I guess I’m trying to do a bit of expectation management around the capacity.

Thanks everyone. That concludes our fourth quarter 2014 conference call. We look forward to talking to you soon. Thanks.

And again that will conclude today’s conference. Thank you all for your participation.