Good morning. My name is Joanna, and I would like to welcome everyone to the JetBlue Airways Fourth Quarter 2022 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 conference over to JetBlue's Director Assistant Treasurer and Fuel, Joe Caiado. Please go ahead.

Thanks, Joanna. Good morning, everyone, and thanks for joining us for our fourth quarter 2022 earnings call. This morning, we issued our earnings release and a presentation that we'll reference during this call. All of those documents are available on our website at investor.jetblue.com and have been filed with the SEC. In New York to discuss our results are Robin Hayes, our Chief Executive Officer; Joanna Geraghty, our President and Chief Operating Officer; and Ursula Hurley, our Chief Financial Officer. Also joining us for Q&A are Dave Clark, Head of Revenue and Planning; and Andres Barry, President of JetBlue Travel Products. This morning's call includes forward-looking statements about future events. All such forward-looking statements are subject to certain risks and uncertainties, and actual results may differ materially from these statements. Please refer to our most recent earnings release and our most recent Form 10-Q or 10-K for a more detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from those contained in our forward-looking statements, including, among others, the COVID-19 pandemic, fuel availability and pricing, the outcome of the lawsuit filed by the DOJ related to our Northeast Alliance and the various risks and uncertainties related to JetBlue's acquisition of Spirit Airlines. The statements made during this call are made only as of the date of the call, and we undertake no obligation to update the information. Investors should not place undue reliance on these forward-looking statements. Also during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation and 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 CEO.

Thanks, Joe. Good morning, everyone. Greetings here from New York City, and we appreciate you joining us today. I'll start, as always, with a huge thanks and shout-out to our 24,000 crew members. We overcame many challenges together throughout this past year, and we made tremendous progress in restoring the business coming out of the pandemic. And we're set up to further build on that success here in 2023, with a disciplined plan to continue strengthening our foundations, both operationally and financially. While we face economic uncertainty, we remain focused on what we can control, and we are leveraging our unique value proposition of offering both great service and low fares enabled by our low-cost structure. This will result in margin expansion and robust earnings growth. Turning now to slide 4 of our new deck template. We closed the year with significant cost and revenue momentum, resulting in an adjusted pre-tax income of $69 million for the quarter and earnings per share of $0.22. Reflecting back on the full year 2022, we made important progress in positioning JetBlue for longer term success. We hit a new record annual revenue result, a phenomenal achievement by our team, given we were only two years removed from the depths of the worst crisis in aviation history. We continue to see incredible demand for JetBlue's differentiated product of low fares and great service, which was recently recognized by The Points Guy with an Editor's Choice Award for Best Economy Class in the world. We launched a new structural cost program targeting $150 million to $200 million of cost savings by the end of 2024. This program is designed to ensure that we are offsetting some of the inflationary increases in our cost structure and help us maintain a low-cost platform, allowing us to continue to offer even more lower fares. We strengthened our network and built even more relevance for our customers, by adding more service to more destinations, including significant growth out of New York, enabled by our Northeast Alliance with American Airlines, as well as building out our transatlantic service between the Northeast and London with additional frequency. We also moved into state-of-the-art wonderful new terminals at LaGuardia and Orlando and recently secured our third slot pair at London Heathrow. Our ESG efforts continue to lead the industry. Last quarter, we announced our most aggressive emissions reduction target yet, with a plan that would effectively reduce our per seat emissions in half by 2035 compared with 2019 levels as part of our recently announced science-based target. JetBlue is the only US carrier today to be flying regular domestic flights with fuel supply by both currently available SAF producers, while supporting a portfolio of emerging suppliers with significant forward commitments. We also made great progress on our diversity, equity and inclusion goals. Our external customer research shows that JetBlue ranks number one for diversity and inclusion in accommodating travelers in our focus cities. And our Gateway Direct program open to our crew members aspiring to become pilots, people of color represent 82% of our classes. As we look ahead to 2023, we are capitalizing on the strength of our trusted travel brand to drive record customer engagement and continued revenue momentum. We are making steady underlying progress on our long-term initiatives to structurally improve our profitability and enhance our long-term earnings power, with a low fare offering that appeals to a wide range of customers, supported by our growing traction on our cost program. This gives me great confidence that we can restore margins towards 2019 levels, as we move throughout this year. Beyond 2023, we look forward to transformational long-term value creation for all of our stakeholders with the acquisition of Spirit, which will allow us to create a truly national customer-centric, low-fare challenger to the Big Four airlines. This will enable us to bring more of our unique value proposition to more customers across more destinations. As we said before, we continue to expect this transaction to close no later than the first half of 2024. Moving now to slide five. For the first quarter, which is a seasonally tough travel period, we projected an adjusted loss of between $0.35 and $0.45 per share. We expect continued revenue strength and execution on cost reduction efforts throughout the year, with a margin trajectory approaching pre-pandemic levels as we exit 2023, despite significantly higher labor cost and fuel prices. As a result, for the full year 2023, we expect to generate between $0.70 to $1 in adjusted earnings per share, which is inclusive of a new pilot deal that we hope will be ratified very soon. This full year EPS guidance reflects the improvement that we expect throughout the year and highlight the run rate earnings profile of the stand-alone business into 2024, as we execute on new and existing initiatives across the business. The contribution from our Northeast Alliance will continue to ramp in 2023. We are so encouraged by the improvement in economic growth in New York as measured by GDP after lagging the rest of the country last year. At the same time, both JetBlue and industry capacity in the region recovered more quickly than the rest of the US in 2022, which provides a sequential tailwind in 2023 as that growth matures. We continue to see incredible momentum in our loyalty program, which continues to not only exceed our expectation but also hit new records. We recently announced the evolution of our TrueBlue loyalty program, which Joanna will elaborate on shortly. With respect to our network, we are planning to take delivery of four A321LR aircraft this year to support our continued transatlantic network expansion. We are very excited to launch service to Paris this summer, marking our second transatlantic destination and our first in Continental Europe as we build customer relevance from our key focus cities. Our JetBlue Travel Products subsidiary took another fantastic step forward last year with 59% revenue growth versus 2021 and 136% revenue growth versus 2019. This progress is a result of continued product innovation across JetBlue Vacations, travel insurance and our new Paisly platform, coupled with increased customer awareness. When we started JetBlue Travel Products, we set a target of $100 million run rate EBIT by 2022 compared to $15 million of EBIT in 2019. I am so pleased to share that we are near the $100 million, with consistent $20 million to $25 million of quarterly earnings with growing momentum into 2023. We continue to be optimistic about the growth potential of this business and aim now to roughly double our current run rate EBIT in the next three years. Finally, we continue to make strides to transform our cost footprint. We remain on track to deliver $250 million of total cost savings through 2024 with execution on our structural cost program and our fleet modernization efforts, which Ursula will touch on here very shortly with more detail. In closing, I would again like to thank our crew members for your dedication and all of your incredible hard work in 2022. I am so optimistic about how we are positioning the business for long-term success and so proud of the role that all of you have played in that. We have a strong foundation in place to execute on our plan to structurally enhance our long-term earnings power and create value for our shareholders. With that, Joanna, over to you.

Thank you, Robin. I would also like to thank our team for the hard work day-in and day-out and for the incredible job in closing out the year strong. You've persevered and navigated through many challenges this past year from severe weather events to ATC outages, all against a backdrop of historic demand for air travel. We also made great strides this year to improve our operational reliability. Following our operational reset last spring, we made investments and embraced a more cautious operating planning philosophy, which has served us well as evidenced by our execution in the back half of the year. And I'm very pleased to report that our completion factor for the month of December was north of 98%, which puts us at the top of the industry, an incredible achievement. Turning to slide 7. For the fourth quarter of 2022, capacity grew 2.4% year over three, in line with our initial expectations and despite severe weather across our system. Looking ahead, we continue to see results from our operational investments with strong completion factor trends as we continue to operate in a challenging ATC environment. We expect capacity to be up 5.5% to 8.5% year-over-year, both for the first quarter and for the full year 2023. Our capacity growth this year will largely come from increased utilization, which should also drive improved productivity. As always, we will remain nimble with capacity as the year progresses and take decisive action through the lens of margins. Given the continued fragility of the aviation ecosystem, we continue to plan our operation with a level of conservatism for the foreseeable future, including scheduled buffers as well as increased crew reserve levels. Last year, our network focus was primarily centered on ramping our Northeast Alliance and delivering on its promise, bringing low fares and great service to more communities and boosting competition in the region. Growth from the NEA far outpaced overall domestic industry capacity growth, bringing enormous consumer benefits in the process as we have successfully created a true third alternative for customers in the region. And during the fourth quarter, we announced exciting news with plans to add more destinations and choice out of the Northeast as we strengthen our footprint. Looking ahead to 2023, we also plan to add service across other non-slotted focus cities where we see meaningful margin opportunities. We expect to continue restoring our Boston network and increase capacity in Florida and in San Juan. We are also building on the success of our Mint franchise with further expansion at Los Angeles, as well as the launch of service this summer to our latest transatlantic destination and Europe's most visited city, Paris. In the fourth quarter, revenue per available seat mile was up 16.1% year over three, slightly better than our mid-December investor update, fueled by strong close-in demand to close out the year. The robust underlying demand trends, combined with the solid execution of our commercial initiatives, drove the highest full year revenue results in our history despite operational challenges in the first half of the year. As we kick off 2023, we are pleased to see the demand environment remains strong into a seasonally trough period. For the first quarter, we are forecasting revenue to increase between 28% to 32% year-over-year. Looking further ahead, we are excited to continue building on last year's record performance as we expect another strong year of revenue growth ahead of us, underpinned by robust leisure demand and multiple network and commercial initiatives. I am pleased with the early performance of our transatlantic service, which remains ahead of our expectations. Meanwhile, our Mint cabin remains a bright spot with Mint RASM continuing to outperform core, as you would expect, and all of our A321neo deliveries this year are in the Mint configuration. We are also pleased with the early performance of the NEA. Last year, we more than tripled our number of daily flights at LaGuardia compared with pre-pandemic levels, a tremendous amount of growth in a very short period of time. And these new markets will continue to ramp throughout 2023. We expect the earnings contribution from the NEA to increase over the coming years as this service matures. Turning to loyalty. This part of the business is performing exceptionally well and is on a very encouraging long-term trajectory. We saw yet another record in co-brand spend last month and we continue to meet our strong growth targets. Active customer engagement with our TrueBlue program is also at historic highs, reflected in the number of active cardholders and program activity. We achieved our best year ever in program enrollment, which was up 50% year-over-year while co-brand sign-ups were up 40% year-over-year. In December, we also announced the exciting new iteration of TrueBlue, which is launching later this year. Our new program is designed to appeal to a wide variety of customers, whether you are a Mosaic member or travel just once a year. It is a truly differentiated approach to loyalty, as we give more opportunities to all customers to earn rewards faster, drive utility through more options and choice and increase their engagement with the program in TrueBlue. The evolution of our TrueBlue program, including the launch of other airline redemptions and a new credit card portfolio, also supports our evolution to a travel brand, as our customers can earn points and qualify for Mosaic when booking travel beyond just flights. This is an important driver of our multi-year journey to grow this revenue stream as a percentage of our total revenue base and close the gap to best-in-class loyalty performance. I'll close with another huge thanks to our crew members for going above and beyond every day no matter the circumstances. The investments we have made position us well to reliably deliver the JetBlue experience, and this year is all about execution from planning our operation, to delivering our day of performance and to executing numerous revenue initiatives. And in doing so, we will build a better and stronger JetBlue for all stakeholders. Ursula, I'll now turn the call over to you.

Thank you, Joanna, and good morning, everyone. Thank you for joining us. I'd also like to add my thanks to our dedicated crew members for all of their hard work in closing out the year on a strong note. We achieved another quarter of profitability as our teams delivered for our customers. At the same time, we've been focused on building a 2023 plan to create a stronger JetBlue for all of our stakeholders. Turning to Slide 9. Our return to profitability in the second half of 2022 was an important milestone in our recovery. We effectively navigated a very challenging year, having set ourselves up for success back in the spring with an operational reset. And we've seen vastly improved operational performance and reliability since then. While we are expecting a net loss in the seasonally weaker first quarter, we're very confident that we're on a path to materially improve our financial performance through the remainder of 2023 and deliver a full year adjusted profit. We remain laser-focused on executing the commercial and operational initiatives Joanna outlined plus our ongoing cost discipline. We're pleased to have reached a tentative agreement with ALPA to extend our collective bargaining agreement for two years, which our pilots are currently voting to ratify. This gives us planning certainty, and we believe this deal will ensure JetBlue remains competitive, while facilitating a smooth transition to eventual joint CBA negotiations following our acquisition of Spirit. Our 2023 outlook for CASM ex-fuel and earnings per share assumes the estimated impact of this pilot deal, which is worth approximately one point to CASM ex-fuel in the first quarter and approximately three points for the full year. For the first quarter of 2023, we are forecasting CASM ex-fuel to increase 2% to 4% year-over-year. Our non-fuel unit costs would be up 1% to 3% year-over-year when excluding the impact from the CBA. Importantly, we are still on track to deliver on our prior goal to flat CASM ex-fuel this year when adjusting for the three-point impact of the ALPA deal. Last year, we launched a new structural cost program to help mitigate other cost headwinds and set an optimal cost foundation to support long-term margin expansion. These cost pressures are primarily related to maintenance and rents and landing fees, which are collectively worth a two-point headwind to CASM ex-fuel in 2023 on a year-over-year basis. The structural cost program is well on track to deliver roughly $70 million in cost savings this year and $150 million to $200 million of cost savings through 2024. Our work has already delivered roughly $30 million since launch, and we expect savings to accelerate throughout 2023. Some of the most meaningful drivers of this year's cost savings include improved productivity, optimized maintenance work scopes and enhanced productivity across work groups through our enterprise planning function. We also expect over $40 million of savings through 2023 and $75 million through 2024 from our accelerated transition from E190s to A220s. Combined, this brings total cost savings to $250 million through 2024. In addition to the higher labor costs, we're working hard to offset cost pressures from higher rents and landing fees tied to operating and growing in high-cost terminals across our high-value geography as well as elevated maintenance activity, given the age of our fleet. Turning to liquidity and the balance sheet on slide 10. Recall that we ended the third quarter of 2022 with $2.3 billion in liquidity. And in the fourth quarter, we paid down $114 million of debt, funded $324 million in capital expenditures and made a $272 million prepayment to Spirit's shareholders. We also signed an agreement to become a minority investor in the new JFK Terminal 6, which closed in November. As a result, we ended the year with liquidity of $1.6 billion or 17% of trailing 12-month revenue, excluding our undrawn $600 million revolver. For 2023, we expect cash outflows related to the monthly Spirit shareholder prepayment to total approximately $130 million for the full year. We're forecasting full year 2023 CapEx to be approximately $1.3 billion, consisting mainly of aircraft CapEx as we continue to modernize our fleet. This forecast assumes 19 aircraft deliveries this year. It's worth noting that much of our capacity growth this year will actually come in the form of restoring utilization. So if we do experience further aircraft delivery delays, we don't expect such delays to drive meaningful changes to our full year capacity guidance. We remain very focused on maintaining a healthy liquidity balance. Given continued economic uncertainty and fuel price volatility, we intend to finance a portion of our aircraft deliveries this year rather than using cash. That said, our long-term balance sheet priorities remain unchanged. We plan to generate solid earnings and operating cash flow this year. And following the close of the Spirit transaction, we expect the strong pro forma cash flow profile to support a quick deleveraging of the balance sheet from what we still expect to be a very manageable level at closing. Turning to slide 11 for a recap of our financial outlook for the first quarter and full year 2023. We have discussed most of these guidance ranges already, but I want to touch briefly on fuel, where we continue to see significant volatility in both oil and crack spreads. Last quarter, we executed some fuel hedges to protect against a spike in oil prices. As of today, we have hedged roughly 9% of our planned consumption for the first quarter of 2023 and will continue to be opportunistic going forward to help mitigate our financial risk. Given the volatility in the futures and regional markets, such as New York Harbor Jet fuel, we have decided to provide a range for our fuel price guidance moving forward. To conclude, I'd like to thank our team once again for all of your efforts to position us for long-term success. We're driving continued momentum from the back half of 2022, as we move into a stable and more normalized backdrop this year. I could not be more excited about the path we've laid out. We expect to generate our first full year of profit since the pandemic with an EPS in the range of $0.70 to $1. This guidance implies significant momentum in earnings, as our initiatives ramp and we deliver margins close to 2019 levels later this year. And we believe, our quarterly EPS run rate this year beyond Q1 is a better indication of our normalized earnings power into next year. The strong underlying revenue environment, combined with our continued execution on optimizing costs, gives me great confidence that we are on a path to generating strong margins and enhancing our earnings power. And we will work diligently to prepare for the acquisition of Spirit, which will only build on the strong foundations that we are laying today. I truly believe we are extremely well positioned for significant long-term value creation for our owners and all of our stakeholders. With that, we will now take your questions.

Thanks, everyone. Joanna, we're now ready for the question-and-answer session. Please go ahead with the instructions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Michael Linenberg at Deutsche Bank. Please go ahead.

Hey good morning everyone. I guess two questions here, Joanna, just first to you. You talked about the NEA and you said you're expecting another year of ramp. I think, Robin, you sort of echoed that as well. Any sort of financial details or anything that you can provide around that to give us a sense of baseline or maybe where it's going? And if you're loath to give us financials, anything maybe like number of passengers who connect per day between the two carriers or maybe one or two or three load factor points on your planes are tied to their American customers, et cetera. Just anything that we can sort of assess how it's ramping? Thanks.

Thanks, Michael. Yeah, we're not going to go into the financials. It's obviously still in ramp-up, and we're very in a very good place, given where we are in the trajectory. Maybe a couple of things worth calling out, JFK will be at combined NEA flights 290. In April, we'll be operating 190 of those. LaGuardia will be at a combined 190. We will 52 of those, which triples our daily departures compared to 2019. And then growth, obviously, in Boston as well, will be at 220 in April from a flight departures perspective with JetBlue approaching 150. So we're seeing the NEA very much on the correct trajectory, a strong number of connecting passengers. We can go offline with you on specifics regarding that, but we're very pleased with the performance of the NEA and the acceleration that's given, frankly, to our New York markets and their recovery.

Okay, great. And then just second question to Robin. Just on sustainable aviation fuel, it does seem like that you guys have done -- you've been actually pretty aggressive in going out and sourcing future needs. And I suspect that as we move forward, some of these benchmarks that the administration is pointing various industries toward will become mandates. And it does feel like that we can get to a point where there is very much a real shortage of SAF availability. Where are you on what you need to get to? I think it's 10%, I think a lot of -- is what the industry is aiming toward in 2030. How much of sort of where you are? And what are your thoughts on that about potentially leading to a shortage where carriers will have to rethink about their growth plans and this may be only a few years away?

Hi, Mike, good morning. Great question, and thanks for asking it. Yeah, so to set the baseline, you're right. The industry target in the US is 10% of SAF by 2030. It is going to require a lot of ramp up from where we are today to get there. I think that -- I don't believe that a mandate is on the horizon all required because airlines are very willing to buy this fuel. They're very willing to make commitments. And also in the last year or two, we've seen a lot of willingness from corporate customers as well to participate in some of the additional cost of buying SAF, which is again, making it easier for the airlines to commit and corporate to also continue traveling. So that, together with some of the federal incentives that we saw roll out last year. So I think everything moving in the right direction but there's a lot more that needs to be done. As you would expect, we are in conversations with all the major producers frequently and we're very active in acquiring SAF when we're able to do that.

Okay. Very good. Thank you.

Thank you. Next question comes from Savi Syth at Raymond James. Please go ahead. Savi, your line is open. You can proceed with your question.

Hey good morning everyone. Thank you. Sorry, I had mute on. Just on the comments around increasing utilization to grow capacity and that should help productivity. Could you provide a little bit more color on how this still compares to 2019, given that it sounds like you still have a lot of conservatism here and what we could expect throughout the year? Does that get better as we head into 2024, or is this kind of a new normal?

Yes. Thanks, Savi. Thanks for the question. So, you will see utilization improving relative to 2022 levels, but we will still be operating at a lower utilization level than 2019. We're very cognizant of the overarching operational environment and the need to ensure that we are protecting the operation. And that includes both aircraft time but also investments we're making around pilots that we made in 2022 that will continue into 2023. I will say, though, those are improving from a productivity standpoint. So we are peeling away some of those investments, but we will not return to 2019 levels from a utilization perspective or from a, for example, pilot resources or some of the buffering in the padding that we're putting in.

Joanna, like do you think as you get to the end of 2023, is that what you expect to be kind of the new normal, or are you hoping that just things will ease as the next few years as well with ATC hiring and things like that?

Yes. We're not expecting things are going to ease. I think frankly, two weeks ago was proof positive of some of the challenges that we are experiencing overall in the airspace that we fly into. JetBlue has significantly higher amount of exposure in that -- in the Northeast corridor, where nearly two-thirds of the ATC delays are present. Absent a step change from the FAA in terms of technology or the ability to handle the ATC throughput, we're planning for a more conservative approach. We are very connected with the FAA. They've been great from a transparency perspective and a communication perspective. But at the end of the day, we need to ensure that our operation is protected. So you will see us continue things such as incrementally more reserves, a higher percentage of out back flights that enables a cleaner cancel if we need to when we are in a disruptive situation, trying to base more flying out of crew bases. And then JetBlue is investing in some system improvements as well and have been for quite some time and then obviously, Spirit and diversifying our network. So bottom line for the foreseeable future, you should expect that some of these costs that we laid in, in 2022 will carry through into 2023 and beyond, although they are easing a bit as we return to a new normal, but it will not return to 2019 levels.

That's helpful. And if I might -- just you talked about the TrueBlue revamp as well and it was kind of somewhat unique. I was kind of curious, what's the goal around some of the changes that you made. And how do you expect that to kind of flow through kind of either purchasing behavior or travel behavior?

Sure. One of the things that we've been focused on is how do we really reward and incentivize all different types of customers, not just the customers who fly us frequently and who are Mosaic but also the customers who are infrequent and try to engage them. So, customers will have the ability to pick the perks that they like, and that includes customers who fly infrequently. We also are providing additional layers of Mosaic levels, which we think will incentivize some of our most loyal customers. But at the end of the day, this is a holistic approach to our loyalty program by bringing benefits to customers who fly JetBlue. And then customers also use the co-brand card, which is such an incremental -- an important part of our loyalty program. If you think of loyalty overall in co-brand, it represented 10% of our total revenue. We continue to see that increase quarter-over-quarter. We're very excited with the positive momentum that we have from co-brand and TrueBlue. The new TrueBlue program will only amplify that momentum that we are seeing.

Okay, Helpful. Thank you.

Thank you. Next question comes from Jamie Baker at JPMorgan. Please go ahead.

Hey, good morning everybody. So I was impressed that on United's call. Scott gave your operations a shout-out. Just wondering what's really driving the improvement in operational integrity. I know in American's case, paying pilots double time for Thanksgiving and Christmas obviously helped them. I don't recall JetBlue doing that. So was it really just the more cautious scheduling that Joanna mentioned in her prepared remarks, or is there a labor component to the improvement in operations?

Yes. Maybe to give you some visibility, Jamie, thanks for the question. There's a few things going on. I think, first, from a planning perspective, we are trying to plan more conservatively, recognizing that we are disproportionately impacted with delays, given the geography that we fly into. So that's kind of the first thing. And that includes everything from increased level of reserves. So when things start to run late, our crew doesn't time out and we can replace crew to protect the operation or, in some cases, double crew if you need to, to some of our one-a-day markets in the Caribbean. A higher percentage of out back flights. That's a really important part of how we plan the schedule, particularly with the airspace we fly into so that if we do get into trouble, we can cleanly cancel a flight. And then as I mentioned to Savi, increasing the number of flying out of places where we have crew bases, which makes it easier to recover and get additional resources when we need to. The other piece that we've been on a multi-year journey around is modernizing the systems that we had in our operations center. I'll use an example. Last year, we introduced a new crew solver, which enables us to repair canceled flights and broken pattering crew pairings more quickly, which ultimately means that we can recover faster and take advantage of the resources that we do have without having those resources time out or lose track of them. So our focus has been on the Blue Sky days. We need to be great. And on the IROP days, the regular operation days where we have, frankly, more than most, we need to better manage how we plan for those days, how we execute day-of and then how we recover. Over the holidays, you saw a very clear focus on driving for completion factor, but also recognizing that when you start seeing lengthy delays, you've got to take quick action and address those lengthy delays so that they don't bleed into the following day and the day after. So it's multi-pronged planning, day of operational execution and then ensuring that our crew members understand and know the plan and are prepared to execute to it.

Thanks for all that cadence. And second quick question. American and United both clear that their 2023 forecasts do assume that revenue and GDP recouple to pre-pandemic levels. As a younger growth year airline, I've never really framed JetBlue against this particular measure, but I do wonder if it's something you look at internally when coming up with your forecast for the year?

Good morning, Jamie, this is Dave. I'll take that one. GDP is an important component in our revenue forecasting so we certainly use it. And for 2023, we have a pretty cautious forecast along with the consensus estimates back there, where we actually have a recession, a mild one for the consensus in the first half of the year and relatively slow growth throughout. But we have not -- we're still looking at a year-over-year basis. We have not pegged our revenue forecast to relinking what we saw pre-COVID. And if we did, there'd be quite a -- or if we see that, there would be quite a bit of upside on revenue. So what you're seeing from JetBlue is just year-over-year GDP combined with the JetBlue-specific revenue initiatives, continued contribution from the NEA, ramp-up of loyalty around JetBlue Travel Products. Those alone get us to our -- the forecast and guidance.

Okay. That's very helpful. I'm glad I asked. Thanks.

Thank you. Next question comes from Catherine O'Brien at Goldman Sachs. Please, go ahead. Catherine O'Brien: Hey, good morning, everyone. Thanks very much for the time. So slightly altering what I wanted to ask, based off your latest response to Jamie, Dave. So you just mentioned that part of what's driving that revenue outlook is improvement in NEA, JetBlue Travel, loyalty, et cetera. Can you just give us how many points of tailwind you think that might be into 2023?

Good morning, Katie, and thanks for the question. I don't have the exact, in front of me, points of tailwind. We're certainly talking low single digits, so just to give you a general idea of it. The NEA has become measurably margin positive over the past half year, which is terrific. It was more of an investment in the first early days, but it was measurably positive back half of last year and we expect that to continue to accelerate. Probably less than 1 point, but certainly measurable on that front. And then the other piece I just talked about as well is the other big input into the GDP -- excuse me, into the revenue forecast is competitive capacity. And as we think about how competitive capacity ramps up throughout the country as we recover, keep in mind that over half of JetBlue's flying is in slotted airports. And that capacity all came back last year, when they used a rule -- use or lose rules came back into effect. So in those slotted airports, which are half of our flying, there's capacity limitation that might have a disproportionate impact on the competitive capacity we see this year versus the industry at large. Catherine O'Brien: That's great. And maybe just a related follow-up on the Northeast Alliance. So I might be oversimplifying this, but American just called out on their call, they don't expect any further recovery from contractual corporate travel over this year. And to my understanding, Northeast Alliance is mainly aimed at better serving corporate clients out of Boston and New York. Can you just walk us through where the upside from the Alliance comes to JetBlue if contractual corporate revenue is expected to stay at current levels? Thanks so much for the time.

Sure. Thanks, Katie. And overall, we have a relatively small part of our total revenue coming out of contracted corporate shares, so this is a smaller pool for us than the industry at large. We are seeing measurably in our internal data, as well as in the public data that's out there that JetBlue is taking share from, in the Northeast as a benefit of this. So we're seeing it in our new accounts. We're seeing a higher share from our existing accounts, and it's a bit visible in the public data, which is, of course, delayed versus what we have proprietarily. So as we continue to see the Northeast ramp back up, we expect to see a bigger pie in general and then with JetBlue's added share, that will certainly help us grow in these geographies a bit more than the industry overall.

I'll also add from JetBlue's perspective, this isn't just about growing business. It's also about growing leisure for JetBlue. If you look at the route announcement we've made, we are collectively growing business, but also leisure and VFR routes. So in all scenarios, we would be better off with the NEA than without the NEA. And there's flexibility within that. So you've seen a number of new route announcements out of LaGuardia that are beginning later this spring. That's reflecting a pivot to some more leisure destinations. So at the end of the day, this is for JetBlue and think about our network footprint in JFK specifically and, to a lesser degree, in LaGuardia, this is about both business, but also very importantly, leisure. Catherine O'Brien: Very helpful. Thank you.

Thank you. Next question comes from Dan McKenzie at Seaport Global. Please go ahead.

Hi. Good morning. Thanks. So a couple of questions here. The last comment in the script regarding earnings momentum later this year, leading to, I think you said, normalized earnings power next year or something to that extent. Are you using 2019 as a proxy for what normalized margins could look like? And, I guess, the reason I ask is, they range from basically 10% to 20% in the last cycle. So I'm just wondering if 2019 is a fair proxy or perhaps something a little better than that.

Hi, Dan. Thanks for the question. So I was referencing, as we continue to build momentum throughout 2023 and the back half of this year, our intent is to build our margins close, very close to 2019 levels. So that's the first benchmark, right, coming out of COVID is achieving a margin level equivalent to pre-COVID, with the intent beyond 2023 continuing to grow margins over the long-term. So we have a lot of conviction in our top-line forecast and the JetBlue-specific revenue initiatives as well as delivering on the structural cost to get back up to those 2019 margin levels in the back half of this year.

Okay. And then, I guess, following up on Jamie's question, the embedded in the outlook this year is continued contributions from the NEA. I know you expect to win the case and based on how it played out in court, my sense is JetBlue will probably win as well. But if there is an adverse decision, what's built into the full year capacity and revenue guide? And should we expect it to change based on a potential adverse decision?

Hi, Dan, it's Robin. I'll take that. Look, we felt good about the case that we put forward. I don't really want to speculate on the downside because one, we felt we put a very case forward -- a good case forward. I think everyone in Boston and New York is enjoying more JetBlue flying as a result of the NEA. They've seen more routes. And back to the question earlier, it's largely leisure because they were all -- there were some leisure markets out of New York that we never had the ability to serve before without taking away from something else, and we can do that now. So, so many people have enjoyed the lower fares and the more choice. So it's hard to foresee a negative outcome. It is possible, clearly. It's going to be down to the judge and he's going to make a decision. And I think that if that comes to pass, we'll look at it. There's a number of options and we'll deal with it. But we're focused right now on hoping for a positive outcome and continuing the momentum behind the NEA because it will so much more competition and so much more benefits to everyone in the New York and Boston catchment areas.

Yes. Understood. Thanks for the time, guys.

Thank you. Next question comes from Duane Pfennigwerth at Evercore. Please go ahead.

Hi. Thanks. I appreciate the questions. Just on fuel, which I guess was marked on the 13th of January, how do you calculate the jet crack spread? And if you calculated that today or yesterday or something before you were in the crush of earnings, where would you estimate that to be in a more recent time frame? And is there any hedge benefit embedded in the fuel guidance?

Good morning, Duane. So you're correct. We marked fuel on January 13 and this is consistent the same day that we historically marked fuel for our Q4 earnings call. If we were to mark as of this past Friday on the 20th, we would have about a $0.15 higher impact in the first quarter. So that's just about over one point of margin in the first quarter. On a full year basis, we're obviously still within the upper end of our range, even marking to last Friday, the 20th. How we mark fuel, so the prompt 12 weeks are off of the forward curve. And then beyond those 12 weeks, we actually use Bloomberg consensus. And the latter part of your question, there is a small hedge benefit vetted into the first quarter due to the 9% hedges that we have in place.

Great. And then maybe one for Robin. As you work down the path of the Spirit merger and learn more along the way, both about the process and about Spirit, any change in thinking about how complex this is going to be? I guess a different way to ask it, anything you learned that you wish you knew at the beginning of the process?

Thanks, Duane. No, I mean, I think as you know, these are incredibly complicated affairs. I think the good news is that there are a lot who have gone before us. And we're always able to -- when you're following somebody else, you're always able to learn from what worked and what didn't work. We already have our integrated management team in place. There's a number of work streams going on. We have a team appointed. And I couldn't be more delighted with some of the work that's already underway to prepare for this. We are working on an assumption of regulatory close in 2024. We also have to go through a single operating certificate process. In recent mergers, that's been a 12 to 18-month time line after close, but you can start preparing for it now, which we have started to do. And we've got a pretty good understanding of the sequencing of decisions and what decisions we need to take, when to make this process as efficient as we can. So, overall, it's early. There's a lot of wood to chop, but I couldn't be more pleased with the start that we've made. And the partnership between the JetBlue and Spirit teams has just been excellent.

Okay. Thank you, very much.

Thank you. Next question comes from Conor Cunningham at Melius Research. Please go ahead.

Hi everyone. Thank you for the time. Just on Duane's question on fuel. I'm just curious, 40% of your fuel, I think, has historically been sourced in New York and that market's been particularly volatile recently. And I think there may be some more volatility coming up. There's a refinery going offline. I'm just curious, if you've thought about how you may source fuel differently in the future. Or is that -- is it just a function of where you're flying out of mostly in [indiscernible]?

Yes. Thanks for the question, Conor. You're extremely correct in terms of the volatility has been pretty significant. Historically, New York Harbor has ranged anywhere from $0.07 to $0.08. And just here, last year, the average was about $0.48, and in January, we're sitting at about $0.53. So we actually go through an annual tender process, whereby which we determine which markets and which lines and indexes to purchase fuel on. So there is a potential opportunity for us to shift, if it's cost effective, some of our purchasing off of New York Harbor, just given that it continues to be extremely volatile. So we do go through an annual process and we'll evaluate that mid-year.

Okay. Hopefully, it didn't add too much work for Joe. Just on the cost cadence throughout the year. When we think about -- I'm just trying to figure out if there's any lumpiness in maybe your maintenance schedules or anything like that. Like does it -- is it pretty smooth throughout the year? And then is there an offset from the structural cost program that kind of matches up with a lot of that, so it's, again, like a smooth CASM ex profile? And then just thinking about the exit rate there. Like why -- I mean, assuming that not taking account of your pilot deal, but just like assuming how that would trend throughout the year as you think about it into the fourth quarter. I realize there's a lot there, but if you could just provide some context on it. Thank you.

I think that was about five different questions, Conor.

Right.

In regards to CASM ex in 2023, 1H versus 2H, there's about a one point step-up in the second half of the year. And that's driven by two factors. Number one, we do have a pilot CBA pay rate step-up in the fourth quarter. And we also have some lumpiness in regards to the timing of our maintenance spend, which is typical, right? So those are two items that are the main drivers in the one point increase between 1H and 2H. The structural cost program builds pretty consistently throughout the year. So by the end of the year, our intent is to achieve the $70 million in run rate savings. And there's really not much lumpiness to that. Like I said, it's pretty consistent between 1H and 2H.

Hey, I guess just to give -- because I think all the questions on cost are very -- have been very well put. And I know Joanna touched on this earlier and it's come up with other airlines. But just to kind of help people understand the sort of the investment going into some of the benefits around reducing operational risk. So Joanna talked about the ability to have more pilot reserves and starting up pilot. So approximately every 5% of additional pilots that you're hiring to fly the same schedule you had before, that's going to be just over one point of CASM in the year. Every time you take utilization down two points what you had before, that's about one point of CASM in terms of the impact. So these investments are quite meaningful, and that's why you're seeing them in the underlying CASM. And we do have optionality over time to dial some of those back, and Joanna alluded to some of that being dialed back this year. But I'm not sure that we can run certainly this airline like we did in 2019. And so we're going to have to be very measured and very thoughtful, and frankly find other opportunities in the cost structure to allow us continuing to make these investments. We have seen the benefit. Now you do see other benefits with these investments. So if you have higher completion factor, you have more on-time performance, that's going to help your operating cost. You'll protect more revenue because you'll be able -- have less in vouchers or refunds or travel credit. So the benefits are there, but it's going to, I think, mean a different revenue and cost profile in terms of where you spend, how you spend and where you see the revenue benefit to perhaps what we used to pre-2019. So there are opportunities over time to bring those costs back down, but we're going to have to tread into it very carefully to make sure that we're not, sort of, going back to some of the challenges that we saw and others saw earlier in 2022.

Appreciate the context.

Thank you. Next question comes from Helane Becker at Cowen. Please, go ahead. Helane, your line is open. You may proceed with your question.

Right. Thanks very much operator. Robin, on the Spirit, I get a lot of questions from arbs who don't understand why you are planning for a first quarter or first half 2024 close, when it seems perfectly obvious to me that it would be in the second half -- first half of next year versus second half of this year. So maybe you could go through some of the hurdles that you have to go through before you can get the approval.

Well, yes, so I mean, there's really two outcomes. We're able to reach an agreement with the Department of Justice. And if we do that, it's possible that could happen sooner, but the time line is down to the Department of Justice, and we certainly want to be respectful of that. The second scenario is that we don't get an agreement with the Department of Justice and they decide to sue us, and we go to court as we did in the NEA. And that process can take several months to go through. And so, I think, for both of those reasons, an assumption on closing this transaction in the first part of 2024 is the right one to make.

Yes. That makes sense. Thank you. And then, as we think about the balance sheet, this one's probably for Ursula, is there an opportunity to accelerate debt paydown, or is that not something you would consider?

Good morning, Helane. We have a significant CapEx commitment this year. We have $1.3 billion. We also have approximately $130 million associated with the Spirit prepayment. And then in addition to that, we have regular scheduled debt payments. So it's actually a pretty meaningful cash outflow this year. And given that, we're pivoting our strategy to go from purchasing aircraft with cash to financing. So the intent is to fund the business, but also build a healthy cushion to help support the purchase and the integration of Spirit as well. So at this point in time, we're not looking at potential debt paydowns. I would also note, our weighted average cost of debt is extremely competitive. And given where rates are today, we're actually probably in a more beneficial place than paying down low-cost debt. So the answer to your question is no, we're going to fund the business this year and prepare for the integration.

That’s helpful. Thanks, Ursula.

Thank you. And the last question comes from Chris Stathoulopoulos at Susquehanna International Group. Please, go ahead.

Good morning, everyone. So, Joanna or Ursula, on the capacity guide for 2023, could you break out the moving pieces there, so departure, stage engage? I know you spoke about utilization driving a big piece of that. And then it also sounds like, again, I think you said this on the -- or you suggested this on your last call, but clearly calling it out this time is that, it sounds like the ASM guide for this year is essentially derisked as it relates to delays in aircraft. So am I interpreting that correctly?

Sure, so maybe I'll start. So the full year guide is 5.5% to 8.5% so midpoint of 7%. The majority of this, as I noted in my script, is driven by utilization. So utilization is going to be up compared to 2022 as well as 2019. As Joanna highlighted, utilization will not yet get back to 2019 levels, given we are planning conservatively. In relation to the aircraft deliveries that we're taking this year, the planning assumption is 19. I'll note, they're very back weighted, so we take five in the first half of this year and then the remainder in the second half of this year. So my commentary in the script is even if some of those deliveries in the back half of this year end up slipping, we don't view our full year capacity guidance at any risk. So that's generally how to think about the full year guide. In terms of gauge and stage, stage is coming down slightly on a full year basis year-over-year, and gauge is going up slightly on a year-over-year basis. So all-in-all, we feel extremely confident in the full year guide.

Okay. Thank you. And then on my follow-up, again, Ursula or Joanna. So the planning more conservatively with respect to the scheduling, and you talked about flying out of points there, emphasizing where their crew base is and to drive operational stability integrity. So is this part of what the transition plan, if you will, for this year, or is this the new go-forward operating plan? And if so, and I think Robin was implying to this in the comment from two questions ago, contemplated with how you're thinking about your long-term RASM and CASM ex-assumptions? Thank you.

Yes, so I'll take it and then I'll flip it to Dave on the RASM assumption. So this is contemplated in our longer-term planning view. Unless there is a step change in capabilities that we see within the airspace that we fly. Two-thirds of the delays in the US, in the national aerospace in the US are largely in JetBlue's network. And so these planning assumptions contemplate that it stays relatively the same with like modest improvements, but nothing substantial because we just don't see a step change in capabilities coming in the next few years. Dave, on the RASM?

Sure. And just to go a bit deeper, Chris, I mean, some of the things we're doing around scheduling more out of crew bases has just been swapping of aircraft type. For example, we've largely moved our E190 flying out of Florida as we soon will no longer have E190 crew bases there, whereas we used to fly a lot from non-base locations in Florida before then. So that's one example. Also working very closely across departments to plan further ahead, years ahead. So when we think about big infrastructure that we'll need, we're planning it earlier with both the revenue in mind as well as the operating team. So I think it's just good additional robustness we're doing. I don't expect material RASM impact from any of this, but I do expect better, sort of, cost and just general efficiency as we have more robust cross-functional planning even further ahead than today.

And I think if you look at the holiday period, that very much played out in terms of the strong completion factor performance we had and our ability to deliver on the revenue plan that we had. And so to Robin's point, this is the new normal for the foreseeable future, and we're going to plan this way. And there are benefits that we will see play out in completing the schedule and not incurring many of the costs that you would otherwise incur if you're running late and/or having to cancel flights and the revenue cost.

I mean, I'll give you a real life example. Let's talk about last night. So we had weather come into the Northeast. We were in ground delay programs and ground stops at all the New York airports. The ground delay program at JFK reached over 3.5 hours, which means every domestic flight coming into JFK last night had an average of 3.5 hours of delay. There were 749 cancellations in and out of the US yesterday. JetBlue was three of those. So our ability to kind of complete that schedule because we have planned more resiliently, executed whether on night, clearly drives the benefit of having not to refund those tickets, not at the expense of rebooking those customers. And I think the operational -- a more conservative operational philosophy change is just not how we have to think about operational costs, but over time, will drive some benefit on the commercial side as well.

Great. Thank you.

Great. Well, thanks, everyone. That concludes our fourth quarter 2022 conference call. Thanks for joining us. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.