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| 8-K - JPM CONFERENCE 15MAR2017 8-K - JETBLUE AIRWAYS CORP | jpminvestor15mar20178-k.htm |
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JP Morgan Aviation, Transportation and
Industrials Conference
MARCH 15, 2017
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SAFE HARBOR
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, which represent our management's beliefs and assumptions concerning future events. When used in this document and in
documents incorporated herein by reference, the words “expects,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,”
“may,” “will,” “should,” “seeks,” “targets” and similar expressions are intended to identify forward-looking statements. Forward-looking statements
involve risks, uncertainties and assumptions, and are based on information currently available to us. Actual results may differ materially from
those expressed in the forward-looking statements due to many factors, including, without limitation, our extremely competitive industry; volatility
in financial and credit markets which could affect our ability to obtain debt and/or financing or to raise funds through debt or equity issuances;
volatility in fuel prices, maintenance costs and interest rates; our ability to implement our growth strategy; our significant fixed obligations and
substantial indebtedness; our ability to attract and retain qualified personnel and maintain our culture as we grow; our reliance on high daily
aircraft utilization; our dependence on the New York and Boston metropolitan markets and the Northeast Corridor of the United States and the
effect of increased congestion in these markets; our reliance on automated systems and technology; our being subject to potential unionization,
work stoppages, slowdowns and/or increased labor costs; our reliance on a limited number of suppliers; our presence in some international
emerging markets that may experience political or economic instability or may subject us to legal risk; reputational and business risk from
information security breaches or cyber-attacks; changes in or additional government regulation; changes in our industry due to other airlines'
financial condition; acts of war or terrorism; global economic conditions or an economic downturn leading to a continuing or accelerated decrease
in demand for air travel; the spread of infectious diseases; adverse weather conditions or natural disasters; and external geopolitical events and
conditions. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it
should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change prior to the
end of each quarter or year and you should not place undue reliance on these statements. Further information concerning these and other factors
is contained in the Company's Securities and Exchange Commission filings, including but not limited to, the Company's 2016 Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q. In light of these risks and uncertainties, the forward-looking events discussed in this
presentation might not occur. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may
arise after the date of this presentation.
The following presentation also includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of
1934. We refer you to the reconciliations made available in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K (available on
our website at jetblue.com and at sec.gov) and in our December 2016 fourth quarter earnings call, which reconcile the non-GAAP financial
measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with
U.S. GAAP.
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JetBlue: Driving shareholder value
• Prioritizing margin commitment
• New leaders to drive change
• Implementing structural cost initiatives
• Improving operational performance
• Revenue management initiatives
• Unique business model
• 2016 margins show impact of commercial
initiatives launched in 2014
• Six profitable focus cities
• Strong balance sheet
2017: IMPLEMENTING STRATEGIES TO IMPROVE MARGINS AND ROIC
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JetBlue: Committed to shareholder value
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Targeting value-accretive growth opportunities3
Generating shareholder value through revenue initiatives
Structural costs & restyle to drive medium-term earnings improvement
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Actions to address RASM performance
New
Transcon (ex Mint)
Puerto Rico /
Latin America /
Caribbean
Newark / Cuba /
West Coast /
Other New Mkts
Holiday
placement
Expected RASM shift to next quarter equal to +2 pts for
JetBlue
2Q17
Capacity
Adjustments
Slowed 2017 growth by 1 point April 2017
Reduction to schedules in off-peak days and weeks April 2017
Reduce redeye flying April 2017
Tactical adjustments in growth markets Ongoing
Revenue
Initiatives
Launched ancillary initiatives in early February Ongoing
Emphasizing yield via inventory pricing tactics Ongoing
Further revenue management of Fare Options Bundles Ongoing
Review of revenue management tools and processes Ongoing
Calendar
Q1 RASM IMPACT vs OTHER AIRLINES GUIDANCE
*Chart based on most
recent February traffic
disclosures
RASM: April, adjusted for Easter, up more than March; 2Q, adjusted for Easter, up more than 1Q
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Revenue and cost initiatives to drive margins, ROIC
and shareholder value
REVENUE INITIATIVES
2014 and beyond
• Fare options
• Co-brand credit cards
• Cabin restyling
• Mint
• Targeted growth
COST INITIATIVES
2017 and beyond
• Structural cost initiatives
• Improving on-time performance
JetBlue’s product and cost combination can produce solid margins and returns
Delivering on revenue initiatives and implementing cost control initiatives
Targeted growth in profitable markets
Sustain above-industry average margins
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2014 revenue initiatives delivering on expectations
Fare options
Cabin restyling
Mint
Credit cards and
partnerships
• ~$60m incremental annual earnings benefit by mid 2019
• Successful implementation
• Improving economics and improved customer experience
• Full A321 fleet completed; A320s begin in 2017
• Best-in-class cabin driving margins
• Improving performance on existing routes
• Growing as a proportion of the network
TOOLKIT INITIATIVES
Diverse
network
Profitable
Focus Cities
Product and
People
Ample Growth
Potential
• Effective platform for customer segmentation
• Dynamic pricing and bundles
• Standardized fees in international markets
OVERVIEW
Achieving $450 million 2014 commitment
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JetBlue: Committed to shareholder value
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Targeting value-accretive growth opportunities3
Generating shareholder value through revenue initiatives
Structural costs & restyle to drive medium-term earnings improvement
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$250-$300m in structural cost savings by 2020
Maintenance
Planning
Crew
Resourcing Model
Parts
Optimization
Crew Resourcing
Model
Corporate
Automation
Customer
Self-Service
Capex
Governance
Tech Ops
Airports
Corporate
TOTAL
Distribution Channel Strategy Digital Offering
COST CATEGORY
EXPECTED 2020
RUN-RATE SAVINGS KEY LEVERS DRIVING SAVINGS
$100-$125m
$55-$65m
$75-$90m
~$20m
$250-$300m
Strategic
Sourcing
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Structural cost program helps mitigate cost escalation
in labor and contracts
2017 CASM EX-FUEL HEADWINDS AND TAILWINDS
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Stage Length Salaries,
Wages &
Benefits,
MM&R and
Profit Sharing
All Other 2017
(Midpoint of
Guidance)
Unit cost short-term pressures:
• Labor
• Maintenance
• IT agreements
CASM ex-fuel CAGR flat to 1%
(through 2020)
~1.5pt
~1.0pt
~0.0pt
~2.5%
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Operational performance initiatives will help lower
costs
Metric
YoY Variance (% pts)
From A Yr Ago
On-time Departures (D0) +7.6
On-Time Arrivals (A0) +7.3
On-Time DOT Arrivals (A14) +3.7
Turn +7.9
Improvements on performance metrics
• Reduce overtime expenses
• Reduce interrupted trip costs
• Reduce voucher compensation
ACHIEVING VISIBLE YEAR-OVER-YEAR IMPROVEMENTS ON METRICS
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JetBlue: Committed to shareholder value
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Targeting value-accretive growth opportunities3
Generating shareholder value through revenue initiatives
Structural costs & restyle to drive medium-term earnings improvement
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41%
32%
25%
NYC Ft. Lauderdale Boston
Focused on ROIC-accretive network investments
Growth targeted on 3 focus cities
• Over last 5 years, over 98% of our growth has
been in three of our six focus cities
Focused on high-return opportunities
• Mint: High ROIC tool that broadens our
customer reach
• NYC: Using A321s to better leverage high
value geography
• Boston: Targeted growth plan paying
dividends
• Ft. Lauderdale: Strong potential for profitable
growth
INCREMENTAL ASMs, 2011-2016
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RASM (top 3 carriers)
Source: US DOT OD1B, T100, Form 41 for YE2Q16
Fort Lauderdale: Strong revenue premium with
local focus
PERCENT LOCAL TRAFFIC (top 3 carriers)
5.00
7.00
9.00
11.00
13.00
B6 WN NKJBLU LUV SAVE
Note: Stage adjusted. Unshaded area reflects estimated ancillary revenue
REVENUE PREMIUMS SHOW THAT OUR PRODUCT HAS HIGH POTENTIAL
• Revenue premiums vs. competition
• Room for growth in the market
• More than an inbound leisure market
• VFR, leisure, business
• Adding Mint service to West Coast flights
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JetBlue: Driving shareholder value
2017: IMPLEMENTING STRATEGIES TO IMPROVE MARGINS AND ROIC
• Prioritizing margin commitment
• New leaders to drive change
• Implementing structural cost initiatives
• Improving operational performance
• Revenue management initiatives
• Unique business model
• 2016 margins show impact of commercial
initiatives launched in 2014
• Six profitable focus cities
• Strong balance sheet