Good morning. My name is Sylvie, and I would like to welcome everyone to the JetBlue Airways First Quarter 2023 Earnings Conference Call. As a reminder, today’s call is being recorded. And at this time all participant lines are in a listen-only mode. I would now like to turn the call over to JetBlue’s Director Assistant Treasurer and Fuel, Joe Caiado. Please go ahead, sir.

Thank you, Sylvie. Good morning everyone and thanks for joining us for our first quarter 2023 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, our 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 10-K and other filings 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 outcomes of the lawsuits filed related to our Northeast Alliance and our merger with Spirit Airlines, and various other risks and uncertainties related to JetBlue’s acquisition of Spirit. The statements made during this call are made only as of the date of this 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, and thanks to you for continuing to do double duty in two different jobs. Good morning, everyone, and thank you for joining us today. Our thoughts are with those affected by the recent storm and flooding in South Florida. I’d like to start by thanking our 25,000 crewmembers, particularly those down in Fort Lauderdale as well as all of the employees of Broward County Aviation Department, for supporting our customers and each other while prioritizing safety above all through a very challenging event. I’d like to thank Mark Gale for his leadership down at the airport and also all county, state and federal agencies with incredible work to get the airport reopen again. We stay true to our mission to inspire humanity now for 23 years and counting. We recently celebrated our birthday in February. And as I reflect on our progress, I could not be more proud of the exceptional brand and experience we’ve cultivated that continues to disrupt the border industry. With JetBlue, customers simply do not have to choose between low fares and great service. Before going to our quarterly results, I’d like to provide a quick update on our combination with Spirit. We are fully committed and forging ahead with our planned acquisition. In fact, we are more convinced than ever of the strategic logic of the combination. We firmly believe that creating a stronger JetBlue is the best solution to transform the industry creating more competition and loosening the dominance of theBig 4. Over the past several months, support for our combination and recognition of its pro-consumer benefits have continued to grow, including from the State of Florida, who declined to join the Department of Justice lawsuit and instead views this as an opportunity to grow high-quality and low-fare air service. Indeed, the State of Florida has helped promote the combination which is expected to result in the biggest transformation in air travel that Florida has ever experienced, including at our Orlando and Fort Lauderdale focused cities, and additionally entails strong job creation across multiple airports in the State of Florida. It’s disappointing, though not surprising, that the Department of Justice is trying to block this transaction and by doing so, protect the status quo and enabling the largest airlines to continue operating unfettered in setting high fares and limiting competition. However, these actions do not change our conviction in the merits of this transaction. JetBlue is one of a kind. There’s no other airline that disrupts the market like us. A fact the Department of Justice is recognized and applauded and combining with Spirit, this will give us the scale to keep the Big 4 on their toes in even more markets and with all travelers. As you’ll hear, we all feel good about the process – about the progress, I should say, we are making on our organic plan. But as we said at the outset, our combination with Spirit will turbocharge our plan, enabling us to serve more customers at lower fares and great service while delivering increased value for our stakeholders over the long-term as an even better JetBlue brings even more competition to the industry. We are confident in the pro-competitive merits of the transaction, and we look forward to demonstrating that in court this fall. Now let’s turn to Slide 4 and our organic business and our first quarter results. For the first quarter, we reported a GAAP loss per share of $0.58 and adjusted loss per share of $0.34, above the better end of our guidance. Throughout the quarter, our team delivered excellent operational performance against a very challenging ATC backdrop. The FAA starting shortcoming, years in the making has brought over, especially in New York, and they require for 10% voluntary reductions by carriers creates a significant headwind for the American travelers flying this summer. While we cannot control the ATC staffing issues nor what happens in the economy, we are focused on successfully managing everything we can control. We’ve made significant progress in building resiliency into our schedule, buffering our operations and continuing to make strategic investments in improving operability. By aligning all of our efforts and minimizing operational challenges, we’re able to generate more revenue, better control of our costs and importantly deliver for our customers. Looking ahead, we expect to carry this momentum forward with strong sequential pre-tax margin improvement into the second quarter. We remain well on track in executing our comprehensive plan to enhance long-term profitability and restore our historical earnings power. In 2023, we’re poised to deliver another year of record revenue performance as we continue to expand our product reach and value proposition to more customers across more destinations. These efforts combined with the success of our structural cost program, gives me great confidence in our full year’s earnings outlook. Having said that, looking 2023, we recognize that we have more work to do to return our margins back to pre-pandemic levels. Moving now to Slide 5. Looking ahead, there are four key margin builders that are critical to the JetBlue investment case: The Northeast Alliance, our ongoing evolution of our TrueBlue Loyalty program, JetBlue Travel Products and our structural cost program. Joanna will provide some additional color on the progress we are making with the NEA and TrueBlue, and Ursula will provide an update on our structural cost program. I’d like now to take a minute to talk about the success of JetBlue Travel Products. Since 2019, Travel Products has achieved profit growth seven-fold. JetBlue Travel Products continues to provide a platform for profitable growth, while deepening our relationship with customers. Recently, we announced a very important milestone opening access to Paisley, our homegrown travel booking website to all travelers, not just those who have a JetBlue flight, greatly expanding our addressable market. We have already seen a meaningful step change in Paisley bookings in the first few weeks. As we continue to grow as well as to our planned acquisition of Spirit, these traveler offerings beyond flights will become increasingly relevant even more customers and will fuel profitable growth for JetBlue. Turning to the second quarter, we do expect strong revenue growth to continue as demand remains robust. And our multiyear structural cost program continues to deliver as we remain on track to hit our full year CASMx target, giving us confidence to reaffirm our EPS guidance of $0.70 to $1 for the full year 2023. Finally, we continue to solidify our sustainability commitments and demonstrate our leadership in aviation decarbonization. Last quarter, we announced a leading agreement with Shell Aviation for delivery of ten million gallons of blended sustainable aviation fuel, or SAF at LAX over the next two years, starting this quarter, and option to purchase more. The deal with Shell is a strong signal of the growing engagement of the oil and gas majors in SAF production and something that we welcome. I’d like to close by thanking our crewmembers once again for delivering solid first quarter results. Our collective hard work has positioned us well for long-term success. Despite an uncertain economic outlook and a challenged ATC environment, I am optimistic about our future. We’ve built a solid foundation to succeed based on the unique JetBlue combination of low fares and great service. With that, over to you, Joanna.

Thank you, Robin. I would also like to add my thanks to our crewmembers for all that you do to ensure we deliver for our customers. I’m pleased with the success that we are seeing as a result of the efforts from our teams, as well as the operational investments and enhanced planning that we’ve implemented. Despite the highly congested airspace that we operate in, we achieved our operational goals for the quarter and ranked third in the industry in the first quarter for completion factor. Turning to Slide 7. For the first quarter of 2023, capacity grew 9% year-over-year, above the high end of our initial expectations, driven in part by fewer-than-expected weather events. However, we do continue to experience ATC-related challenges across our system. As widely reported, the FAA has announced that their New York Air Traffic Control staffing is at 54% of their 2014 target, far short of where it needs to be to avoid significant disruptions and accommodate the industry’s growth. I’d like to thank the FAA for acknowledging the issues and for their close collaboration to ensure the industry minimizes the impact to customers. In line with FAA’s slot waiver incentive to carriers, we are fine-tuning our summer capacity plans to help mitigate delays we can control and provide a better customer experience. Even with the slight cutbacks, we still expect challenges in the operating environment this summer. The FAA has said that delays are expected to vastly increase year-over-year. With our large footprint in the Northeast, JetBlue is disproportionately exposed to these challenges. So we are focused on what we can control, like protecting scheduled over maintenance time so the fleet can lunch on time. We also continue to invest in technology to aid recovery during irregular operations. And we’re enforcing our schedule and network planning processes to support operational success. We continue to plan the operation with conservatism, with schedule buffers and elevated crew reserve levels. We expect capacity to be up 4.5% to 7.5% year-over-year in the second quarter. And for the full year 2023, we are reiterating our expectations for capacity to be up 5.5% to 8.5%. As we’ve demonstrated in the past few years, we will maintain a nimble approach with capacity should conditions change. We have many exciting opportunities across our network, and we are focused on restoring targeted capacity across our non-slotted focus cities. Later this quarter, we expect to launch service to Paris from New York. We are also thrilled to announce this morning that tickets to our third transatlantic Blue City, Amsterdam, are now for sale, with service beginning in August as we continue strengthening our relevance in our largest focus city and building on our successful Mint platform. And over the longer term, we are delighted to have announced our growth plans in Florida, enabled by our combination with Spirit, including reaching 200 daily flights at Orlando and more than 250 daily flights at Fort Lauderdale as we bring more low fares, more choice, more high-quality service and more jobs to Florida. Turning to revenue, in the first quarter, we grew revenue by 34% year-over-year, driven by leisure and VFR demand strength across our network, with load factors increasing throughout the quarter. For the second quarter, we are forecasting revenue to increase between 4.5% to 8.5% over year – year-over-year. This includes 0.5 point impact from the recent closure Fort Lauderdale Airport due to flooding and the immediate aftermath. That said, demand trends remained very robust into the second quarter, particularly during peak periods. And our Latin franchise continues to drive very strong revenue generation with higher year-over-year loads and yields. Our revenue guide is based on a continuation of current trends. We are seeing a strong domestic demand environment throughout the U.S. and are particularly pleased with the continued improvement in our New York City performance. We’ve also seen a steady recovery in business travel, which was roughly 80% recovered in the first quarter with sequential improvement expected into the second quarter. While we did see a brief drop in demand immediately following the banking sector scare, it is now recovered. We continue to manage the business to margin and have great confidence in our full year earnings outlook on the back of our better than expected performance in the first quarter. Our revenue outlook for the remainder of the year is bolstered by strong revenue streams from the NEA, our TrueBlue Loyalty program and JetBlue Travel products. Starting with the NEA, which is already a meaningful revenue generator for JetBlue as we’ve grown daily flight offerings in New York City by over 25% versus pre-pandemic levels generating significant benefits for consumers in the process. We expect a year-over-year margin tailwind in New York as the NEA markets continue to mature. Recall, for example, that we roughly tripled our service at LaGuardia in 2022 compared to pre-pandemic levels. We’re already seeing meaningful margin improvement as our service matures. Our TrueBlue Loyalty program also continues to show exceptional growth. Co-brand card spend and active membership increased by over 20% in the first quarter, and we forecast continued strength as we launch our newly redesigned TrueBlue program later this quarter. We’re expanding the ability to earn and redeem points, the addition of benefits for less frequent travelers and increased value for our most loyal customers. Through these value enhancements, we expect engagement with the loyalty program to continue reaching all-time highs this year and beyond. In addition, as Robin mentioned, we recently enabled travelers to earn TrueBlue points when booking travel beyond just flights through Paisly. Paisly is fully integrated into JetBlue, TrueBlue, and customers who book travel on Paisly will earn points and achieve TrueBlue perks. These enhancements are all part of our multi-year journey in evolving our TrueBlue program, helping us close the gap to our peers. I’ll close with another thank you to our crew members for delivering for our customers. While we do expect a challenging summer ahead, I’m very excited about the incredible path we’ve paved to set us up for success. Together, we’re focused on executing our plan to generate solid revenue growth and deliver on our cost goals, building a better JetBlue for all stakeholders. Ursula, I’ll now turn the call over to you.

Thank you, Joanna. I’d like to add my thanks to our crew members, through their tremendous efforts and discipline we’re well on our way to delivering on our comprehensive plan to create value for our stakeholders this year and beyond. We continue to anticipate closing our acquisition of Spirit in the first half of 2024 with a dedicated team running our integration management office. We’re ensuring that we are thoughtfully and appropriately prioritizing our efforts to ultimately create significant long-term value for our owners and all of our stakeholders. Turning to Slide 9, as Robin mentioned, our first quarter results were ahead of our initial expectations with strong improvement in revenue and non-fuel unit costs throughout the quarter, somewhat offset by fuel prices. I’m especially pleased with our team’s continued cost execution as this quarter marked the fifth consecutive quarter where we met or beat our quarterly cost guidance. First quarter CASM ex-fuel performance was also aided by one point from higher capacity, given fewer than expected weather events and roughly half a point from operational efficiencies. Through better operational planning going into the quarter, we were able to deliver a better outcome by controlling for factors such as labor premiums and disruption related costs. We have been successfully implementing our structural cost program, which is supporting our efforts to mitigate cost pressures related to maintenance and rents and landing fees. To-date, we have already achieved roughly $35 million since launch, putting us well on track to drive approximately $70 million in cost reduction this year, and $150 million to $200 million in cumulative cost savings through 2024. In addition, we continue to expect our fleet modernization program to generate over $40 million of savings this year and $75 million through 2024 as we replace our E190 fleet with the margin accretive A220. We’ve already achieved over $30 million in savings with 12 E190s retired to-date, including 10 currently parked in the desert, and two that we’ve sold. For the second quarter, we’re expecting to generate earnings per share between $0.35 and $0.45, driven by strong revenue and continued execution on cost. For the second quarter, we’re forecasting CASM ex-fuel to increase 1.5% to 3.5% year-over-year, which includes a point of impact from our reduced summer schedule tied to ATC constraints and half a point impact from the closure of Fort Lauderdale Airport. We remain on track to meet our full year CASM ex-fuel target of up 1.5% to 4.5%. This does imply a step up in CASM ex in the back half of the year, which is primarily driven by two factors. An additional step up tied to our pilot agreement, which is about four points total year-over-year in both the third and fourth quarter, and the timing of maintenance events, which is about two points year-over-year in the fourth quarter. Turning to liquidity and balance sheet on Slide 10, we closed the first quarter with $2.3 billion in liquidity, including our $600 million revolving credit facility, which remains undrawn. We continue to take a conservative approach to managing our liquidity, especially in light of the step up in aircraft CapEx this year, and our ongoing shareholder – our ongoing Spirit shareholder prepayments. To that end, we’ve previously shared our intention to finance a portion of our aircraft deliveries this year and we’ve raised $116 million in aircraft financings year-to-date. We will continue to evaluate a variety of different products and structures for our financing needs, including leases, bank debt, and capital markets transactions. Before closing, I’d like to touch on fuel. Volatility in New York Harbor Jet fuel prices impacted our weighted average fuel price in the first quarter by approximately $0.26. That said, New York Harbor pricing has since eased, and we expect the impact in the second quarter to be approximately $0.16. Importantly, we continue to look at hedging opportunities to protect our earnings outlook. As a reminder, our approach to fuel hedging is to enter into hedges on a discretionary basis to mitigate the risk from significant volatility and price spikes, and we actively monitor the market to take advantage of opportunities when conditions are favorable. As of today, we have hedged approximately 23% of our expected fuel consumption for the full year. In closing, I want to thank our crew members for helping to build a stronger JetBlue as we significantly improve our financial performance. Coming out of the first quarter, I’m excited about the trajectory of the business in the coming quarters and years. Based on everything we see today, we have confidence in our full year earnings outlook of $0.70 to $1, which implies margins approaching 2019 levels as we move through the year. We are well-positioned to continue navigating uncertainty around the economic backdrop later in the year, as well as ongoing ATC challenges. We also look forward to closing the Spirit transaction to turbocharge our organic plan and create even more long-term value for our stakeholders. And with that, we will now take your questions.

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

Thank you. [Operator Instructions] And your first question will be from Savi Syth at Raymond James. Please go ahead.

Good morning, everybody. This is Matt on for Savi. My first question, when I look at the implied margin guide for 2Q, you’re still laying 2019 levels by several points, so maybe could you provide some color on any specific cost lines that might have moved structurally higher and how you think those items could be improved to close the margin gap versus peers?

Yes, thanks for the question, Matt. So the – so our objective is to get the business back to consistent profitability while approaching 2019 levels of profitability. Our Q2 guide is the first step in that process. I’m actually significantly pleased with the CASM ex-fuel guide for the quarter, so it’s up 1.5 to 3.5, and we essentially called out 0.5 of headwinds. A point is associated with the investment that we’re making in pulling down capacity driven by ATC constraints in New York, and the other half point of CASM ex-fuel is driven by the Fort Lauderdale airport closure. So net-net, if you back out that 1.5 points I’m pleased and with our controllable cost guide and essentially, we would beat I think what the consensus is out there on the cost side of the equation. So we’re confident in the $0.35 to $0.45 EPS for the quarter, and it puts us on a path to more closely come in line with 2019 profitability levels as we navigate through the year.

Okay. Thanks for the additional color there. Now also in the presentation you’ve referenced the return to seasonality, so maybe could you provide some additional color on the impact you think that’ll have on 2Q and any additional color on how 2Q is trending in terms of booking rates to date and/or materialization rates changing or increases – increasing, like we’ve heard on other calls? Thank you very much.

Hi, good morning, Matt. This is Dave. I’ll take that one. Overall, we feel really good about the demand we’re seeing out there. Very strong internationally, strong domestically as well. The peaks remain very strong driven by this leisure demand, so whether it was holidays at the end of the year or spring break we’ve seen very strong demand in the peaks and we expect the same for this coming summer including June at the end of this quarter. So very strong April with the peak stronger – strong June at the peak, May will be – it’s a bit of a shoulder period, so it’ll probably be a bit lower, but that’s what we experience just about every year. And in general, the seasonality is returning towards normalcy with just the peaks a bit higher, and then the troughs obviously have a bit of a headwind from the corporate travel, which is as mentioned before about 80% recover. So it’s creating a bit more of a peak to trough ratio than we saw before, but in general, feeling really good about demand throughout the network.

Okay. Thanks for that. And quickly, could you touch on how much in 2Q has been booked to date or changes in materialization rates in that quarter as well?

Sure. We’re about two-thirds booked to date for the second quarter. That’s normal for us. We have seen the booking curve elongate somewhat over the past couple of quarters, but still roughly two-thirds.

Okay. Thank you.

Thank you. Next question will be from Andrew Didora at Bank of America. Please go ahead.

Hi, good morning, everyone. Thanks for the questions. I guess just in terms of kind of the change in New York capacity, given the ATC issues in the market, how should we think about your potential being able to reallocate some of that flying and yes, I guess in terms of how much of the cut capacity in New York do you think you can backfill into other markets?

Hey, Andrew, this is Joanna. Thanks for the question. Maybe I’ll provide sort of a broader answer and then get specifically into your capacity redeployment question. So we’re obviously very concerned about New York City for the summer. The FAA continues to be significantly understaffed, as we said in the prepared remarks. This is a continuing issue. And frankly, I’m only getting worse this summer. So we do appreciate the FAA’s transparency around their staffing challenges. It’s obviously a concern across the NEA but more acute in the New York region. And while we are pleased that the FAA has given carrier’s relief on the slots, this is obviously something that’s not good for customers and it’s not good for JetBlue coming with a pretty significant financial impact into Q2 and potentially into Q3. So while this is the right decision for us given the need to protect the operation, this is going to be a most challenging summer ahead. We are not going to be redeploying the capacity that we pulled. If you look at our network footprint, because we are so concentrated in New York and the Northeast, and because there are staffing challenges across the entire NEA. Our decision is to reinvest those crews in higher reserves and reinvest that aircraft in additional aircraft time to help mitigate the delays that we expect that we’re going to see this summer. This is definitely a challenging environment. We’re frustrated. Our customers are frustrated. We do appreciate the fact that the FAA is working with us and being transparent. But this is something that needs to get fixed, and unfortunately, there is not a short-term fix to it. So that’s the decision we’ve made for the summer. And we’ll navigate as best we can as these challenges arise.

That’s really helpful. Thank you. And then just a second question, Robin, when I think about kind of strategically over the longer term. Just in terms of the fleet, given everything going on with the OEMs and whatnot. Just in the event, the Spirit deal does not go through, how do you think your long-term growth profile changes given kind of your order book shrinks a little bit starting in 2024 and 2025?

Thanks for the question, Andrew. And of course, I’m going to start by giving you the straight bad answer saying, we’re confident in our case and the Spirit transaction closing, because it’s great for consumers. But if it doesn’t, then I think clearly, we still have an order book. We are challenged by delays as other airlines are, and we would have to look at opportunities both short to medium term in the leasing market and then longer term to layer in sort of additional positions. But I think everything we’ve got is focused on the Spirit transaction. I think, when I look at the government challenges in keeping FAA staff, which is a problem years in the making, and as Joanna said, has just been getting worse. I think it just adds the importance of JetBlue expanding its national footprint. And we want to do that not by pulling down New York, because New York is home, where the hometown airline in New York, we’re proud to be based here in New York City, but by building a more national presence and Spirit is going to help us do that much quicker than we would be able to do ourselves and bring those benefits to consumers and the employees both airlines, our crew members and their team members more quickly.

Great. Thank you, everyone.

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

Hey, good morning, everybody. Actually, I was thinking what you should do for your earnings deck in the future is feature analyst photos taken from JetBlue flights. I mean, Ursula’s picture is great, but it would be a lot of fun to – try to give her a run for the money. So Ursula, the second quarter question that was asked before about the margin deficit relative to 2019, obviously something that jumped out to us as well. But I think I’ve missed something at the end of your prepared remarks, you said margins for the year would be approaching those of 2019. I mean, did you mean moving in the right direction?

Correct.

Or actually starting to rival those margins? I’m just trying to square what I think I might have misunderstood against the $0.70 to $1 EPS guide.

Thanks for the question, Jamie. And I’ve been telling everyone that it’s fair game. Anyone can submit pictures to get on the cover of our earnings presentation. So thanks for the question. I think as we navigate through the year, we’re making progress towards achieving 2019 margin levels. I feel good about the momentum that the business has heading into the second quarter. The revenue and demand environment continue to be really strong. As we navigate in the back half of this year, we actually are in a position where unit revenue could be slightly down year-over-year as we cycle against some very strong comps. And that seems reasonable and achievable, especially in light of the revenue initiatives that we have. We’ve got the NEA and New York continues to recover. We’re pleased with the progress that we’ve been seeing, but it continues to be a tailwind. As we roll out our TrueBlue Loyalty program, we’ll continue to make progress and as well as JetBlue travel products. And I’m extremely pleased with the cost execution and the progress of the structural cost program. So that’s what gives us confidence in the full year EPS number. And as I mentioned, the first milestone is making progress towards 2019 margin levels.

Got it, got it. Okay. That’s really helpful. And then just on fuel, the hedging program is obviously still in its infancy, but by the looks of things, you might already be underwater, I can’t say for certain, but just looking at the 350 all in during the first quarter and how New York Harbor has settled down. I mean at the forward curve, do you assume you lose money on your hedges this year?

We do at the moment, but there it’s immaterial.

Okay. All right. Helpful. Okay. Thank you everybody.

And Jamie, a very happy birthday. I don’t want you thinking that we have forgotten you.

Well, you never do. Thank you, Robin. I appreciate that. Thank you very much.

Thank you. Next question will be from Mike Linenberg at Deutsche Bank. Please go ahead.

Yes. Hey good morning, everyone. Hey Joanna, I want to go back to the point that you made about, no short-term fix with the airspace issues specifically in New York. And the FAA is, I guess, what you said, 54% staffed of the levels that they need to be. What’s the risk that we get to September and I realize mid-September on things slow a bit. But given 54% and no short-term fix, are you going to have to go back to the FAA? Or are they going to come back to you and say, can you guys continue to run an abbreviated schedule?

Yes, just to be clear, it’s 54% of 2014 staffing levels. So, I don’t know who manages the 2014 and the year 2023, but it’s a 2014 staffing level. So that’s an important point. The second piece is we don’t expect a problem this fall. Obviously, it’s a trough. This has been an ongoing issue for years. It’s gotten worse. So we manage through the challenges. We have built an operation around trying to mitigate a regular operation. So it’s something given our footprint that we’ve gotten quite good at. But we don’t expect the fall itself to be a problem. But this is a multiyear kind of path of FAAs down to try to remedy its staffing shortages and it’s not going to get fixed in the near time. Where it significantly presents itself is in convective weather activity and when there are peak periods and there’s just a lot of travel.

Okay. Great. And then just my second question, I guess, maybe this is to Dave. Just within the context of demand trends remaining robust, I mean, we’re hearing that from other carriers. I think one other carrier did call out some softness to Heathrow. I think it’s more just a function of everybody being forced to utilize slots right now under the use or lose it rule. I’m not sure if you’re seeing that. I mean, you’re a relatively small player. Maybe you’re not seeing it tuned from Heathrow to Boston and New York. And then I think there’s been some comment about maybe transcons and pricing. Any markets in particular where maybe you are seeing some softness, again, within the context that overall demand is actually quite good in the majority of your markets? Thank you.

Sure. Good morning, Mike, and thanks for the question. And no, I’d say there’s no parts of our network where I would say we’re seeing any softness. At the highest levels, those markets that did have a very high business mix before COVID have seen the biggest traffic reduction, but we’ve appropriately scaled capacity in those to account for that. So we feel pretty good. Our European markets continue to ramp well. We’re pleased to be at five flights to London a day from New York and Boston, combined and to have that second Heathrow from New York flight in there on a daily basis. So no concerns for us as we look ahead to the summer, for Europe, seeing very strong early demand trends. So feeling quite good about the continued progress and ramp of our European franchise.

Great. Thank you.

Thank you. Next question will be from Duane Pfennigwerth at Evercore ISI. Please go ahead.

Hey, thanks. I wanted to ask you about your hotel inventory on JetBlue Travel Products. Where are you getting your hotel inventory from? And are you working to create direct relationships with hotels in this business? And I guess, just broadly, do you have anecdotes as to why the value proposition is more compelling to a customer than booking separately or maybe through an OTA?

Hi Duane, and thank you for the question. A couple of pieces. We do have direct relationships with hotels. And we do see that, that helps a lot on the servicing side and to create a compelling value proposition for customers. We do also supplement that with other third parties that we source. But the vast majority of our bookings are the hotels we have direct relationships with. And then in terms of the value proposition, I mean it’s taking what made JetBlue the airline special, which is not having to pick between good price and good service and taking that to broader travel. And I think that’s what customers are appreciating.

I appreciate that. And then maybe just a little modeling one, just for my follow-up. On hedges, can you comment on the – if the values in your hedge disclosure represent floors? And it seems like they’d be sort of modestly out of the money today. Thanks for taking the questions.

Yes. Thanks for the question, Duane. So just as a reminder, we view hedging as a way to mitigate risk and volatility in the market. So we’re always monitoring the market. We found a period after the banking crisis where pricing made sense for us to reenter the hedging market in a meaningful way. So that’s when we layered on most of these hedges. So, we feel okay, but then we get to participate in downside – in the downside, obviously, the way that these are structured in terms of when prices fall. And I can confirm that they’re slightly out of the money at the moment.

Okay. Thank you.

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

Hey good morning. Thanks guys. Going back to the script on planning the operation conservatively and buffering operations in New York City. You touched on the cost hit in the script. I’m wondering what the revenue hit is from that lost flying. And I guess where I’m going, there’s a pretty big profit impact in what I believe is 50% of the flying that should go away at some point. And it’d be great if you could just kind of give a sense for what that might look like and whether it’s going to take a fully staffed ATC to get back to that historical $3 EPS target?

Good morning, Dan. Thanks for the question. This is Dave. As we pulled down our New York City flying, we did it pretty surgically to ensure that we’re hitting shorter-haul routes, smaller gauge flights and routes that generally we felt would have the least impact of the loss to frequency. So based on that, both the capacity impact of the pull as well as any revenue impact is quite a bit less than the departure pull. So we pulled about 10% of departures out but capacity is much, much smaller than that. And the revenue is really to be determined. We have initial estimates, but we’ll see as we go through the quarter, how things come in. So it’s tough to size it at the moment.

Dan, if I could just add, I mean, we’re very prepared for this summer. Most airlines are unfortunately, the FAA is not. And so these are obviously steps that we’ve had to take. But last summer, we made a number of investments to try to insulate the operation from air traffic control challenges, some of which were transient in nature, some of which have stayed with us, things like investing in more people and crew services and planning the network in a way that allows us to more easily manage days where there are -- where there is convective activity, so higher percent of out and back flights that enable you to kind of cleanly cut those flights and contain it to a specific route. We’ve also made a number of investments in technology, a new solver that enables us to more quickly repair flights. So, as we think about JetBlue’s footprint in the Northeast, we are making operational decisions, planning decisions, and investments to enable us to operate in this airspace. Because this is something that’s not going to change in the very near term. We obviously have more reserves as most carriers do. The capacity pool the summer in New York has enabled us to kind of redistribute those reserves a couple of points into our operational plans. So that we’re more resilient for the summer. But we’re fully prepared for the summer timeframe. We’re fully prepared for the next few years of challenges that we expect will present themselves because of this ATC staffing shortage, we need the FAA to continue to focus on a longer-term fix because this is coming at a cost to JetBlue and frankly, a cost to customers. Customers deserve and should get more out of out of the FAA in terms of the services that they provide.

Yes. Very good. Second question here. As we think about the 2023 revenue outlook, I’m just wondering, we can flesh that out a little bit more. And I’m wondering if you can speak to the revenue recovery in the capacity constrained airports in 2022 and to what extent JetBlue’s RASM hit at those airports leg the industry? And how last year’s trends are inflecting and contributing to the outlook this year? So, the RASM hit, what the RASM hit was from over capacity last year in the constrained airports? And how the trends this summer are aiding those airports this year?

Thanks, Dan. This is Dave. I’ll take that one. Clearly in 2022, we had a headwind in our slotted airports as use or lose came back into effect in us and the rest of the industry needed to fly those slots which ramped up capacity, but faster than demand was ramping up. We also, in addition to that, our strong growth in New York City enabled by the Northeast Alliance led to a lot of capacity that was relatively new, and that capacity always goes through ramp. We’re now seeing that the flip side, those headwinds last year have turned into a tailwind this year, which is great. And I think maybe the easiest way to size it is if you look at the first quarter, which just completed, our New York City year-over-year RASM was 10 points better than the rest of our system. So we’re seeing the catch up happening. It’s still behind. It’s not caught up to where it was relative to the system before COVID. But a 10-point improvement last quarter on a year-over-year basis obviously shows the rate at which it’s starting to catch up.

Yes. Thanks so much you guys.

Thank you. Next question will be from Catherine O’Brien at Goldman Sachs. Please go ahead. Catherine O’Brien: Hi. Good morning, everyone. Thanks for your time. So maybe just on the maintenance cost, you called out that maintenance expense will be a headwind in the second half and gave us some good information on the 4Q impact specifically. Can you just help us think about is like the magnitude of the timing impact this year? I know maintenance is always going to be lumpy around events. But is 2023 a good comp for a normal maintenance year or a maintenance event still elevated from a pandemic recovery perspective? Thanks.

Catie, thanks for the question. Good morning. I mean maintenance, it is always going to be somewhat volatile. It’s really just driven by the number of events within the quarter. And it just happens to be that in the fourth quarter this year it’s somewhat heavier than what we saw last year. So there’s going to be volatility, we’ll try to be as transparent as possible as we navigate. I think the important thing here is that our full year CASM ex-fuel guide were reiterating, and this was expected. We knew that we were going to have a meaningful step up in the fourth quarter of this year. Catherine O’Brien: Got it. And then maybe just on your European service, you’ve always hinted that it would be London and a couple of other cities where you had gaps for your New York City and Boston flyers. Does Amsterdam round out that list or could there be more, should we still think about Europe as a couple percentage points of total capacity fully ramped or has anything changed based on the initial performance of these routes? Thanks.

Sure. Thanks, Catie. This is Dave. I think the easiest way to look at it is with our fleet plan which has about 26 transatlantic capable aircraft in it, both the Airbus 321LR and XLR. Looking at what we’ve now announced between London, Paris, and Amsterdam, as those ramp up it will be about 10 flights per day and take about the first 11 of those 26 airplane. So there’s certainly more trans-Atlantic capable aircraft coming. It’ll take sort of a year or two to get to them through the order book. But we expect based on our initial results to continue growing, we now have the big three markets which really adds relevance for us in the North Atlantic. After that, I think you can see us be a bit more sort of creative and spread over where we want to go and use some of the features of our aircraft that are unique and fit some markets really well. So more to come, but for most of next year you’ll see us ramping up these markets we’ve already announced. Catherine O’Brien: Thank you.

Thank you. Next question will be from Helane Becker at TD Cowen. Please go ahead.

Thanks very much, operator. Hi, team. Thanks for the time. So on the Fort Lauderdale issues that you had with the weather, I’m wondering if there are any read-throughs that you can take for how the team handled it into handling other disruptions elsewhere in the network when they occur?

Hey, Helane, thanks. I’ll start with a sort of every time there’s an event, we do a post action review. And in this case, the team, whether it’s Broward County Aviation Department, and Mark and his team or the JetBlue team, there’s always learnings, but overall, the team did an exceptionally good job. Not only do we have to restart the operation, one the operation down and restart the operation. But we also have to support the crew members who are impacting the local communities because they’ve been personally hit losing cars and things of that nature. And so, given that we have a footprint in the Northeast and we see a lot of these types of events, we’ve gotten pretty good at managing regular operations. Obviously, there’s nuances to each one of them, but this one, I think the team did an exceptionally good job in taking care of the safety of our customers and our crew members and then restarting the operation when it was safe to do so. But yes, we do an after action report on all of these. So that we can take learnings and incorporate them into the next event.

Okay. That’s really helpful. Thank you. And then my follow-up question is just on kind of going from first half breakeven, which is, it looks like on an adjusted earnings basis is where you’ll be, to profit of $0.70 to $1 in, I guess in the second half, right? So how are you about the third and fourth quarter? The third should normally be a very strong quarter and fourth maybe not so good. Then I’m wondering how we should think about bridging that breakeven to somewhere between $0.70 and $1. Thank you.

Good morning, Helane. Obviously, in the first quarter of this year, it’s typically always the seasonally weakest. So then the year tends to ramp from there. What you have to believe for us to achieve the $0.70 to $1 is that we continue to see a strong demand and revenue environment. I mentioned earlier, our full year guidance allows for unit revenue to be slightly down year-over-year. And we are cycling through, obviously strong comps year-over-year, but that seems reasonable given the JetBlue initiatives that we have in place, right? The continued recovery in New York, JetBlue loyalty program launching, and then as well as JetBlue Travel Products. So on a top line perspective that’s what you need to believe. On the cost execution side, I’m very pleased that for five quarters in a row, we’ve either met or beat our controllable cost guidance. And so the continued execution of the structural cost program in the second half of the year, I feel really confident in, and so those are the things that we feel good about and very strong that we can deliver the $0.70 to $1.

That’s very helpful. Thank you.

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

Everyone thank you. You had a couple of questions on RASM. So maybe ask it a different way. When, I mean you’re outperforming pretty nicely in the second quarter relative to what we’ve heard from some other carriers. So is the way of thinking basically whatever the domestic market does, JetBlue is ultimately going to outperform this year just given the tailwinds from the NEA and some of the other revenue initiatives that you’ve put in place?

Good morning, Conor. This is Dave. Thanks for the question. And yes, I think that’s a good way to think about it. I think given our exposure to the slotted markets and the recovery that they’ve had and as mentioned that headwind last year turning to a tailwind this year, I think we’re well positioned in the domestic market compared to the industry as a whole. And then just also, we’re about 30% to 33% international, too. So we’re certainly getting some benefit from the improvements there as well.

Okay. And then maybe a longer-term question; 1Q is obviously your seasonally weakest quarter, but you typically add capacity from fourth quarter to first quarter. There’s been obviously a lot of changes in how people are booking and what that may look like going forward. But just long-term, why wouldn’t JetBlue somewhat reshape their capacity to drive long-term profits? Some of your competitors are talking about looking at first quarter and how they make it a little better. I’m just curious if that’s a thought process for you guys as well? Thank you.

Yes. And I’d say absolutely. Every time we complete a season, we immediately scrub it and learn from it as we plan the capacity for the next year. And we certainly saw some different trends this winter that will factor in. So of course, we don’t want to react to any one season and look for larger trends over time. But we’ll continue to update our capacity plan as we see customer behavior in terms of all.

Thank you.

Thank you. Next question will be from Chris Stathoulopoulos at Susquehanna International Group. Please go ahead.

Good morning everyone. Thanks for taking my question. So Rob and Joan, I’m curious the capacity guide for this year, 5.5% to 8.5% to 3 points, you have your – you have the ATC issues you spoke to. There’s always weather. There’s always additional slippage with deliveries. And certainly there’s increasingly macro and consumer risk in the second half. So obvious, why shouldn’t we look at the closer to the lower end of that guide as a kind of a more realistic starting point for the full year?

Yes. I mean, I’ll add and then Robin, feel free to jump in. We’re confident where we sit today that that’s the right – that’s the right capacity guide for the year. But you are correct. I mean this summer, if ATC presents itself as far worse than anybody has anticipated, even in the face of the capacity pulls we’ve made, that could obviously impact completion factor going forward. And obviously, if there’s a significant change in the macroeconomic environment that could also impact our capacity guide because we want to stay nimble with capacity and adjust as conditions warrant. So based upon what we know now, we think that is the right capacity guide for the year. But we are mindful of the order environment that we operate in, and we will plan the business accordingly.

Yes. The only thing I’d say to add to that is that the idea of putting the flights out is to make the summer more operable. That should mean that we are able to complete more flights. I mean I think our team do a really, really good job trying to complete flights even in very challenging circumstances. I mean it’s – we talked about Fort Lauderdale earlier, that was the beginning of a very tough five days because we have the – as we had the Fort Lauderdale closure, that bled into weather into the New York area and ATC delays on Saturday night. And then it led into weather and thunderstorms in Florida on Sunday. So it was a very challenging event. And yet, I think our team did a really good job trying to get as many people home that they could. So those are things obviously [ph] completion back will help us operate the capacity that we are sort of publishing. But again, there’s always been puts and takes in it. Right now, we feel good about the guide that we are laying out.

Okay. Thank you. And Ursula, I just want to – I think you might have said for the second half, the potential for unit revenue down, but just on the math here on the full year revenue guide, the capacity guide implies around – I think it’s around two points of acceleration in the RASM from the second quarter to the second half. So, I just want to make sure I understood your prepared comments and if the math is correct here, how are you anticipating growing RASM in the second half, while most peers are guiding for deceleration? I know you have the NEA, you have Travel Products and some other initiatives going on here, but I want to understand sort of the thought process here. Thank you.

Hi, Chris, this is Dave. I’ll take that one, and we can loop offline afterwards if you’d like with the team, but we do not need to see positive RASM in the second half of the year. Given our Q1 performance, given our guidance for Q2, we can then be slightly negative RASM for Q3 and Q4 and still achieve the revenue and EPS numbers.

Okay. Thank you.

Yes. By the way, I would also add, I think, again, with the capacity changes that you’re seeing in the New York region this summer, which are quite significant, not just from JetBlue but from other airlines, it is possible some of that demand spills into the fall. We don’t know that yet. We did see some of that last year. And so I think whilst that’s not in our – we’re not assuming that today, I think that right everyone focused on the economic uncertainty that’s out there, we’re all very watchful about that. We’re thinking about that. But there’s some, I think, some revenue tailwinds here linked to just continued New York recovery spilling demand at the peak into the fall and some of the JetBlue and the initiatives that we’ve already outlined.

Thank you.

Thank you. Next question will be from Stephen Trent at Citi. Please go ahead.

Good morning and thanks very much for taking my questions. Just two quick ones for you here. First, I’m wondering if it’s possible that you guys can expand your sustainable aviation fuel purchases beyond Los Angeles? And two, any high-level view as to where you guys expect to get your pilots over the next five years? If you’re partnering with a flight school or something like that. Would just love to hear that. Thank you.

Thanks for the question. On sustainable aviation fuel then, that’s something our team is extremely focused on. It’s become the gold rush of the airline industry. So, I’m not going to be too specific about what we’re thinking about. But it’s clearly something that we’re committed to. And the 10% target by 2030 is something that we are working towards every day. On the pilot issue, I mean, it’s something that I’m incredibly proud of is several years ago, JetBlue created some internal – some gateway programs to take pilots and train – take people who want to become pilots and train them. Called that gateway programs. We have, I think, now close to 1,000 pilots who have either been through one of those programs or in one of those programs or due to come in to one of those programs this year. The retention from these pilots is extremely high. And more recently, we’ve opened up programs internally to our crewmembers. So if you want to come to work at JetBlue – if you work at JetBlue, then after two years, you want to become a pilot, we’ll train you. And then also that applies to family members as well. So really, removing a lot of the economic and practical challenges that come with learning to fly. So, I think we couldn’t be more pleased about that, and we’re going to continue to work that in partnership with others in the industry. So again, we are not having any issue right now hiring, attracting pilots. We are seeing heightened levels of attrition. And again, that is another thing that drives the cost headwind that we’re having to navigate, but we feel good about our ability to attract and train pilots. And our gateway programs have just been so transforming for so many people over the years. Transformative, I should say.

Appreciate that Robin. Thank you.

Thank you. At this time, we have no other questions registered. I will turn it back to our speakers for closing remarks.

Great. Well, thank you very much. That will conclude our first quarter 2023 conference call. Thank you all for joining us. Have a great day.

Thank you. And again, this will conclude today’s conference. Thank you for your participation, and we do ask that you please disconnect your lines.