JetBlue Q1 Earnings Conference Call: Full Transcript

Operator:

Good morning. My name is Joyce and I would like to welcome everyone to the JetBlue Airways First Quarter 2016 Earnings Conference Call. As a reminder, today’s call is being recorded. At this time, all participants are in a listen -only mode. I would now like to turn the call over to JetBlue’s Director of Investor Relations, Kevin Crissey. Please go ahead.

Kevin Crissey:Director Investor Relations:

Thanks, Joyce. Good morning everyone and thanks for joining us for our first quarter 2016 earnings call. Joining us here in New York to discuss our results are Robin Hayes, our President and CEO; Marty St. George, EVP Commercial & Planning; and Mark Powers, our CFO.

This morning’s call includes forward-looking statements about future events. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore, investors should not place undue reliance on these statements. For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to our press release, 10-Q and other reports filed with the SEC.

Also during the course of our call, we may discuss several non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website.

And now, I’d like to turn the call over to Robin Hayes, JetBlue’s President and CEO.

Robin Hayes:President and Chief Executive Officer:

Thanks Kevin and good morning everyone and thank you for joining us. Earlier today we posted record first quarter results with higher margins and greater margin expansion than most of our competitors. In the quarter, net income was $199 million or $0.59 per diluted share. This represents year-over-year net income growth of $62 million or 46%.

These incredible achievements were made possible thanks to the fabulous efforts of our 18,000 crew members who continue to go above and beyond everyday exceeding our customers’ expectations.

I truly believe our unique culture drive our outstanding crew members’ engagement and this drives these great results. Total revenues grew 6% year-over-year on 14% capacity growth. Demand was solid as our load factor held stable, but lower closing yields pressurize unit revenue -- pressured unit revenue particularly in the Latin region.

Our cost performance was excellent this quarter. The lower fuel price environment certainly helped with our realized average fuel price down 43% year-over-year, but our controllable cost performance was also strong CASM excluding fuel and profit-sharing year-over-year was down 3.6%. Third quarter operating margin improved by 5 percentage point to 21.6% ranking as first of all the US airlines for the reported earnings this quarter.

So, while we feel some yield pressure which is closely monitored monthly RASM our bottom line results continue to improve. Our network time is producing higher than industry average profit margins while we continue to grow faster than our competitors. All six of our focus Cities are solidly profitable with double-digit profit margins over the last 12 months.

In Boston, we were really pleased with the performance of our business travel market. Our business travel market this quarter. In Fort Lauderdale/Hollywood, we continue to be pleased with our results as evidenced by continued strong customer reforms to a double-digit capacity growth. It is clear our service, our brand and our network are an excellent fit for the South Florida market.

Over the next few years we plan to grow this focus city to a 140 daily flights, or about 75% above our current levels.

We recognize the economic back drop combined with JetBlue and we recognize the economic backdrop combined with JetBlue and industry capacity growth has pressurized the unit revenue environment. As a result we’ve made minor capacity adjustments for the second half of this year these adjustments are really the normal course a business for us as we aim to maximize returns. We believe our disciplined long term strategic growth time growth plan is working and we expect it to remain unchanged as long as we are delivering high margins in a disciplined way we will continue to course.

Now turning to Mint. The customer response to Mint continue to exceed all of our expectations. If you think back to JetBlue before Mint, our margins between New York and Los Angeles and San Francisco were well below the system average. We will faced with a choice of even significantly reducing capacity in these markets or even pulling up unless we fixed these results.

Where Mint evaluated the situation we saw an opportunity to bring a better product to customers at a low price. Our strategy which JetBlue was founded. Today with Mint service on the same route we see margins improve dramatically now to well above system average.

Additionally in the last 12 months both New York the Los Angeles and San Francisco produced double-digit unique revenue growth every single month. Mint success in New York supported by our believe customers that grown really of the high priced premium offerings of other airlines creates a better experience. We expanded Mint to Boston in March with daily service to San Francisco and Saturday seasonally to Barbados. Results have being extremely encouraging so far.

With this back drop and customer facing fewer choices on the West Coast, we’ve recently announced clients to offer Mint on a number of new from Boston, New York and for the first time Fort Lauderdale/Hollywood. Between now and early 2018 we plan to expand Mint to include the following; Year on service between New York and Los Angeles, San Francisco, Los Vegas, San Diego and Seattle and to Barbados on Saturdays. Seasonally, Mint service from you on Saturday to Aruba, Saint Lucia and Saint Martin. In Boston, Mint service year around to Los Angeles, San Francisco, San Diego and Seattle seasonal Mint service from Boston will be offered on Saturday’s to Aruba and Barbados.

In Fort Lauderdale-Hollywood we planned to fly Mint year round to Los Angeles and San Francisco.

Let me now highlight our operating performance. On time performance measured by systems arrivals within 14 minutes of scheduled time or A14 improved 1.5% to 73.2% in what is our traditionally almost challenging operating quarter. ---- did helped our completion factor which improved 1.8 percentage point to 97.9%, driving asset and cost efficient available seat miles.

We continue to execute on the number of ROIC accretive initiatives. In March we launched our new co-branded credit card with Barclaycard on the MasterCard network. Marty will provide more details on that very shortly. We are excited about the benefit these card will bring to customers and to our bottom line.

Looking ahead we are anticipating the launch of our -- installing program in July with our first delivery of an Airbus A321 in a new 200 seat configuration. Retrofitted of our -- car A321s are expected to be complete by the end of this year and our Airbus A323 is scheduled to be restyled starting in 2017. As we have communicated previously we expected this program to add a $100 million of incremental annual operating income upon the completion.

Before I wrap up, I would like to discuss our interest in Virgin America. As widely reported we did consider acquiring Virgin America as a way to more quickly build a larger West Coast presence.

However, as we exploited this piece of possibility surprised to reach the level where become clear our strategic time for organic growth offered a based to value creation. Growing our West Coast presence has been and remains part of our long term growth plan. Acquiring Virgin America would have simply accelerated that plan. We are one of the fastest growing US airlines enabled by years of focusing on the -- and strengthening our balance sheet.

Our confidence now expansion plans made this still and nice to have rather than in most cost. We plan to continue with our organic growth strategy which includes the Mint expansion we have already announced that I just discussed as well as other West Coast opportunities. One of these is the potential for new federal inspection service facility in long beach which would enable international service out of that airport.

In closing, we are very happy with our first quarter results and gently we have never been in a stronger position. We remained focused on executing our tern accretive initiatives and our strategic growth plan.

And with that I would like to turn the call over to Marty.

Marty St. George:Executive Vice President - Commercial & Planning:

Thank you, Robin. Good morning everybody and thanks for joining us. Top-line revenue growth in the first quarter of 65% was better than most of our competitors in the industry.

Despite a softly yield environment and very changing year-over-year comparisons. Unit revenue or PRASM decreased 7% on capacity growth of 14.1% growth factor was essentially flat. At each region had the strongest unit revenue growth of any vision this quarter.

Boston business markets in Eastern region will particularly strong with the majority posting positive unit revenue growth in the quarter. PRASM -- also perform very well, with Mint unit revenue growth in quarter up in the mid teens. The continued strong customer demand from Mint, led to a $25 to $75 increase in mid fares earlier this month in New York to both Los Angeles and San Francisco.

Florida and Latin markets was softer. As an example, unit revenue contraction and Colombia and in the first quarter hurt system RASM by about 1 percentage point. There were number of factors contributing to the weaker RASM environment including additional capacity by JetBlue and competitors a better completion factors due to fuel winter storms and one weather in the Northeast which we believe also reduced demand for leisure’s and destinations. We also had the most difficult of RASM comparison in the industry as our performance in the first quarter 2015, was about 5 points better than the rest of the industry.

As Robin mentioned we have made some adjustments to our scheduled. For example, capacity to -- has been reduced by $0.25 for the summer. In addition some -- want summer capacity has been reallocated to domestic markets. Finally we have reduced our overall fault truck -- capacity by approximately 1%.

These changes are more surgical then --. Our strategic growth has been driving excellent bottom line results with expanding margins.

We believe that our plan is working and we remain committed to it. As always none of these results would have been possible without the outstanding customer service provided by all of our group members. Other revenue grew 20% this quarter. We were happy with this result considering our exist from the cargo business and royalty marketing revenue being down due to our credit cards transition from American Express.

Options were the strong contributor, and we believe remains on track to produce more than $200 million and operating income in 2016. We have recently started to price their options dynamically in selected markets. While we can discuss future pricing we are currently evaluating customer behavior and we will continue to view opportunities to expand dynamic pricing to additional markets in the future. In the month of March we want our new domestic core brand credit card for the pattern as hopefully you seen that advertisement and hopefully signed up for card.

This was a multiyear undertaking as it included switching existing cardholders from American Express and create a new cards with unique industry leading benefits.

We are now marketing three different JetBlue core branded credit cards. The base JetBlue card is our no annual fee card which is offering a limited time 10,000 point to bonus. The JetBlue plus card is our premium card with a $99 annual fee and a 30,000 point to be bonus. This card also include a free check bag when using the card purchase JetBlue flights and the ability to earn more triple points on JetBlue purchases.

Finally our third card is a JetBlue business card which is similar to the plus card but design for businesses with bonus points on purchases and several business oriented categories. All the cards provide customers with significantly hedge benefits compared to our prior core branded cards the new cards offer more points per dollar on JetBlue purchases, accelerated which increased earned on spend categories like grocery stores, office stores or restaurants. Finally all JetBlue cards are free of any foreign transaction fees. At steady state we continue expand annual incremental operating income benefit from new card agreement at approximately $60 million.

The conversion of American Express in with all card members not converted and nearly of exited in the very early days in terms of new card member acquisition but so far Direct Mail and JetBlue channels are producing above expectations.

With that I’ll turn the call over to Mark, to provide further detail on our results.

Mark Powers:Chief Financial Officer:

Thank you, Marty and Robin. Good morning everyone and thanks for joining us. This morning we reported first quarter operating income of $349 million. This represents 38% growth.

Pretax income for the quarter was $323 million. Pretax margin was 20% and improvement of 5.4 percentage points. As Robin mentioned, among the US airlines that have released their first quarter results, our operating margin ranks first. Our pretax margin is in the top three.

In addition, our year-on-year operating and pretax margin improvements ranked second.
Total revenue grew 6.1% in the quarter, on capacity growth of 14.1%. Yield decreased 8% while growth factor was down 0.1 percentage points.

With respective costs, the first quarter was another period of strong cost control. Excluding fuel and profit sharing year-over-year unit cost decreased 3.6%. That is significantly better than our January guidance range of flat to down 2%. We capitalized on Mild winter weather is an expected with good cost control and great operational execution.

Main drivers behind the driven between our result and guidance came from -- events been forecast, lower salaries, wages and benefits going to anticipated and the timing of some advertising which will move through future course.

Turning to fuel, fuel prices remain a positive story year-on-year. We had no fuel hedges in place in the first quarter, including taxes our fuel price in the quarter was $1.17, down from last year’s per gallon price of $2.6 or 43%. Looking ahead, we had no fuel hedges in placed for the second quarter of ‘16. Based on the full accretive as of April, 15th we expect our second quarter fuel price per gallon including the impact of taxes could be approximately $1.33. For the second half of the year we’ve hedged approximately 20% of our expected fuel consumption using swaps.

We have also added modest hedges in 2017 with about 5% of consumption hedged. For more specific details regarding our hedge position please refer on our investor update which was filed with the SEC and made available on the Investor Relations section of our website prior to the start of today’s call.

Moving to the balance sheet, we ended the quarter with $1.3 billion in cash and short term investments. During the first quarter we made scheduled debt and capital lease payments of $51 million. Looking ahead we expect to pay regularly scheduled debt payment in the remainder of 2016 of $403 million, including a second quarter payment of $36 million. Given the debt maturity schedule for 2016 including the final maturity of a double EPC in November, we plan to continue to focus on cash deployment on balance sheet improvement this year.

We assess opportunities for additional capital returns thereafter and update you on our plans towards the end of this year.

With respect to ROIC, our traveling 12 after-tax return on invested capital was 14.5%. This is up year-on-year by more than 5.5 percentage points and well in access of our cost to capital. We believe our growth plans continue to create economic value and reduce risks through diversification. We are looking aggressively on initiatives including structural programs such as our cabin reselling that we expect we will drive ROIC even higher.

With respect to CapEx and fleet, JetBlue end of the quarter was 217 aircraft including a 130 A320s, 60 E190s and 27 A321s.

We purchased two A321 aircraft in first quarter with cash. In 2016 we expect to take delivery of ten A321s including two in the second quarter. Given the strength of our cash from operations the current presumption continues to be will continue to pay cash for all deliveries in ‘16. At the end of the quarter over 30% of our fleet was unencumbered.

In support of our incremental mid expansion which includes growth from New York, Boston and Fort Lauderdale-Hollywood we have converted nine of our 10 A321 deliveries scheduled since 2017 to the Mint configuration. These are not incremental aircraft and simply represents adjustments to configurations specification of aircraft already on order. Given the changes of that we have announced let me quickly summarize our order book through 2017. In 2016 we’ll take delivery of 10 A321 aircraft, four have already been delivered including two this month.

Our latest delivery will out of production out of production line in Mobile Alabama this week and this in first airbus, aircraft ever manufactured in the United States. Of the remaining six aircrafts, three will be in the Mint configuration and three will be in the all core configuration.

In 2017 we expect delivery of 10 A321 the first rising in all core configuration and remaining nine configured for Mint. In terms of CapEx in the second quarter ‘16 we project total CapEx between $170 million and $180 million of which approximately $125 million relates to aircraft. For full year 2016 we continue to expect non-aircraft CapEx of $150 million to $200 million and total capital expenditures of approximately $820 million to $920 million. See the investor update for more details on these point.

Turning to capacity. We expect capacity growth of 9.5% to 11.5% in the second quarter of 2016, and 8.5% to 10.5% for the full year. Turning to revenue outlook. April RASM is expected to decrease roughly 12.5% year-over-year to put this in its proper perspective April, RASM is hurt by Easter falling in March this year and by a later Passover and related school vacation period.

The Sunday, return flight after Passover fall on May 1, this year versus April last year. For a greater context to Sunday after Passover was the seventh best revenue day for us in 2015. We estimate the Easter and Passover timing moved about 3 percentage points of RASM from April to March and May. With this that we only have about half of May and not quite 3rd of June booked to this point.

We expect our year-over-year RASM in the second quarter to be broadly in line with our first quarter’s negative 7%.

Beyond the second quarter we expect capacity growth to the acceleration to provide a RASM tailwind based on selling scheduled our ASM’s are projected to grow approximately 6.5% in the second half of the year. This is a deceleration of growth in more than five points compared to the first half of the year.

Moving to costs. In the second quarter we expect the year-over-year change in CASM excluding fuel and profit sharing to be negative 0.5% to positive 1.5%. Looking full year 2016 we’re lowering the top of our CASM guidance excluding fuel and profit sharing by half a point to growth between zero and one 1.5%. We of course continue to work aggressively to come in at lower end of that range.

In closing we are very-very pleased with our first quarter results our crew members continue to be highly engaged and provide outstanding customer service we’re excited to keep executing on our long-term strategy and with that Robin, Marty and I are happy to take questions.

Robin Hayes:

Criss we are now ready for Q&A with the analyst can you go ahead with instructions please.

Question & Answer

Operator:

Thank you. We will now begin the question-and-answer session for investors and analysts. We like to ask everyone to please limit themselves to one or two question with a brief follow up so that we can accommodate as many as possible. If you have a question please press star then the one on your touch tone phone.

If you wished to remove from the queue please press the pound sign or the hash key sign. If you are using a speaker phone you may need to pick up the handset first before pressing the numbers. Once again if there are any questions press star then one on your touch tone phone. And we will pause for just a moment.

Your first question comes from Joseph DeNardi from Stifel.

Joseph DeNardi:Stifel:

Mark I want if you can flush out the 2Q RASM guide may be talk about why you guys feel comfortable guiding to it now compared to not doing that in the past and may be specifically what’s the shift I think you mentioned what the shift from April onto those margin and May was but if you could break that down between March and May?

Mark Powers:

Good morning how are you its Mark. Let me actually ask Marty perhaps to comment on that.

Marty St. George:

Yes thanks Mark and good morning Joe Thanks and glad to have the question. I think in general we’ve given more guidance than we generally have in this call obviously the only month we truly guide was April but I think it’s we’re very comfortable to saying that sequentially of the three months in the quarter April is absolutely the worst month and if you think about the two pictures we gave it’s more than exercising anything else you can try to make your own judgment as far as how May and June go because we generally don’t guide that’s far, and the one thing I will say is the move of what was normally peak April demand into both March and May as we said the script is worth about 3 points and we do get about a point or point and a half of that benefit actually because is going to be in May so the normal shape of the April, May, June RASM curve is going to be a little bit different in 2016.

Joseph DeNardi:

Okay and then Robin I just wondering if you can talk about just given the commentary around trim capacity in 4Q can you just talk about what you’re managing the business to is to maximize earnings I mean I guess I understand why you are looking to trim capacity but why not do more it’s kind it feels like we’re in a little bit middle ground so maybe just talk about how what you’re managing the business right now

Robin Hayes:

Sure Joe, good morning I appreciate the question and congratulations on getting in first. I think if I wind the clock back few years where we would very heavily criticized for managing to growth and we were taking a very long-term view I think some of the investments we made back then are now really paying off. We move to well we are managing to margin we are managing to ROIC the capacity that Marty talked about trimming was capacity that we took out because it was negative to margin negative to ROIC but we are running the company to those metrics and I think, had we taken more capacity out there not would how that direct impact on margin and we give you an example although a one point of capacity, two point capacity adjustments in the first quarter, if we have reduced it then it would have been 10 million hit to our income. So, we are managing to margin, we are managing to maximizing income, we are managing to maximizing ROIC.

Back to your very-very relevant question, of why did we change what we guide. Well we have not - that, we know there is lot of focus at the moment on unit revenue and investors are looking for an inflection point. So we wanted to give as much kind of and transparencies we could to say that with the as May and June progresses as we see it now and then as we move into the second half of the year what we have the significant amount of capacity slowdown compared to the first half. We believe all of those things are pointing to unit revenues moving in the right direction, but I also want to be very transparent we are running this company to maximize margins, maximize income and ROIC.

Joseph DeNardi:

Very helpful. Thanks Robin.

Operator:

Thank you. Our next question comes from Savanthi Syth with Raymond James.

Savanthi Syth:Raymond James & Associates, Inc.:

Good morning. Just I would like to talk little bit more about Mint, Robin as you mentioned I think when you first rolled is doubt. You are really was about getting those transform markets to at least kind of perform in line with the system and you point today that is above and if I look at your fleet plan and looking into 2017 segment the 11% of your fleet going to be, Mint aircraft and maybe a little bit more on a seat basis. So, how should we think about these Mint browse and are they is expectation that they perform in line with system or they feel good as may be these -- actually performed better than systems because as this opportunity that your unlocking.

Robin Hayes:

Thanks Savi I appreciate your question. Good morning I am going to ask good friend Marty and the leader behind Mint to answer that question.

Marty St. George:

Thanks Robin and thanks Savi for the question. As far as how we should look at Mint I think if you go back when we first announce this as I think a lot people this call recognize there is lot of skepticism. But we fundamentally start something in the market place that we saw create an opportunity.

If we go back to the original business plan at JetBlue what the founder saw in the late 90’s was economy cross market in the US that had high pairs in that service and that’s a same thing we saw premium market 3, 4 years ago when we started working on Mint. We saw market was very high fairs. We cleanly seeing fair to the mid $2000 range and service frankly we thought it was not committed with that price. So we saw the opportunity to going there with a much better product and I think you are not aware where you look this is sort of unanimously rated as the best premium Tras Con market in the US and also had significant lower fares even of the live of the fair increase that we have done.

So if you look at the growth that we put in it’s because of the results we are seeing. We said we -- lot of detail on the P&L we gave some guidance in the script about the revenue for Mint and how long Mint revenue is growing and I also mentioned that we also did say in the original script was that we our current Mint margins are well above system average. So on the Mint roots we are doing extremely well we are very happy for it. The roots that we are expanding into everyone of the roots that we announced few weeks ago I would there currently being flown by all core A320s and we put the Mint airplanes and we put the mid Aero planes on them specifically because, we see a great opportunity to improve P&L everyone of those routes.

I will also say that, we are very open minded as far as we can put Mint in the future, I think these routes are beginning but that absolutely not end. But at the same time we see a lot of value in all core A321 so every time you make decision we have to make that individual trade off of the all core airplanes versus the Mint airplanes. But this is a as a as they say internally a good problem to have, we got two very good choices.

Savanthi Syth:

That’s very helpful color. Thanks Marty and may be if I can ask another question on the you mentioned connect Columbia Puerto Rico the weakness you are seeing. It wasn’t clear if the over the past was it was on those routes where you are seeing just maybe too much capacity or is the economic weakness in the destination market having an impact as well. I would think that most of your point of sale is US but just wanted to clarify that?

Robin Hayes:

Let me take separately. Specifically on Colombia, there is just some structure economic challenges in the country and certainly in we do book the majority of our revenue in point to sale. We pull that capacity in to less extent we pull down some seeds in we did not pull down seeds in is generally a US port market that actually holding up relatively well.

So it’s really a challenges in South American economy. With respect to Puerto Rico, first of all what coming out for great base in Puerto Rico I think you look at how we trended in Latin America revenue Puerto Rico is a very important part of market and a big chunk ASM. We had competitive challenges probably 12 and 13, 14, 15 I think those were the. We seen little bit competitive capacity come in 2016 and I think in response to that we pulled a little bit of capacity on our self but honestly this is telemarket that’s got chunk profitability we’re very happy with our results down there.

But we’ve other places to put capacity in the peak summer. So, I don’t look at this as a long term see change in Puerto Rico I see this is being very tactical, the sort of taking advantage of dynamics at the time. We’re stabilizes carrier and the of Puerto Rico we’ve been largest carrier in Puerto Rico forever and we are very happy with our results.

Savanthi Syth:

Very helpful. Thank you.

Operator:

Thank you. Our next question comes from Duane Pfennigwerth - Evercore ISI.

Duane Pfennigwerth:Evercore ISI:

Thanks. Good morning.

Robin Hayes:

Good morning

Duane Pfennigwerth:

On the full quarter guidance which is appreciated and maybe I missed this in your prepared remarks. But it looks like it implies down about 4% to 5% for May and June. Can you put a finer point on that like does that sound reasonable for both months?

Robin Hayes:

Hey Duane, good morning, it’s Robin. I’ll answer that I give you full marks for not being satisfied with the increase guidance we provide and trying to get a little bit more. No, we won’t I think we wanted to just give you a sense of how the quarter was looking because particularly with the fall of our business March and April all is very choppy. So, I know you’re excellent mathematician and I am sure you can work capital about mean for the rest of the quarter and I obviously our visibility on May is greater than our visibility into June as well.

Duane Pfennigwerth:

I appreciate that, and not sure agree with all those comments but I appreciate that. Can you help us understand the and the timing of the contribution in the ramp on the new credit card agreement.

Robin Hayes:

Hi, Duane its Robin thanks for the question. So we are very excited about what’s happening with the credit card agreement and we are reaffirming the guidance that we gave as far as the run rate benefit of the credit card going forward. It’s a little bit early for us to make any projections as far as where that money may actually going but we are very happy what we are seeing so far. You know we have to point now where six weeks under the credit card program we already this -- back up is generally a drop off when you basically send people to a new credit card and say by the way this credit card you have -- is changing sort of way you need a new one you have to call me up and activate it are the generally drop off for that for what we are came from Barclay card we’ve had much less drop off than they see another conversion and six weekend we are already at more credit card accounts than we had with American Express.

So we are very happy with what we are seeing. I think it’s a little bit early and make prediction on how things going ramp in differently our competitors back to the guidance that we have given originally about the benefit to fair option where we the number we originally gave back in investor day and the first or second call after fair option. We had seen things trending but is little bit towards the call but we will revise the guidance if we do see any change in it. But we are very conformable of the number we are seeing right now it is the -- going to say.

Duane Pfennigwerth:

And just as a follow up there can you quantify the I guess the headwinds during this transition in the first quarter.

Robin Hayes:

I mean the biggest challenge we had in the first quarter was we had a one to refer over three months period where we were not acquiring any new credit card accounts. This is transition period when the old account holders who had freezes the portfolio because they are in the process of negotiated the sale of it and they basically want to static base towards growth. So and I don’t know to exact date I believe it within but definitely in the fourth quarter like in October, November we start to seeing new credit cards and we’re growing in line with new growing geography. We will always adding credit cards.

So we took a pretty big period where we won’t adding additional credit cards. Also if the time period where the normal course of business marketing activities that you would normally see from American Express won’t happening because there is one from dominated benefit from and they are basically investing in a long-term that was going too accrued to new partners. So that’s really what happened during the period and again because we transaction at the end of the quarter that really that was situation the majority of the quarter.

Duane Pfennigwerth:

Thanks very much

Operator:

Thank you. Our next question comes from Michael Linenberg with Deutsche Bank.

Michael Linenberg:Deutsche Bank Securities, Inc.:

Marty, I have question for you just back on Mint. You talked about the new markets and how you expect to see margin improvement and I appreciate that but when I think about the markets that Mints mentioned today those are markets where there is clearly significant demand for that higher end products and I am just curious as you look at some of these other Mint markets it does feel like that there could be some diminishing returns here and so look at preplan next year and you have 9 of our 10 going into the Mint rather than the core. What has kind of evolved here because I would think that lots of conversations and dialogue even over the last year so there was sort of a lot of back and forth about whether or not there were that many more markets that you could put the Mint product in and so I guess the math comes down to that the margin improvement that you see in these markets that convert to Mint more than offset potential opportunities to deploy A321 core aircraft at least in the near term. Can you just went through some of thinking there because it does feel like it’s a bit of sea change.

Robin Hayes:

Sure Michael. Good morning and thanks for question. I think you are actually making a very important point that I don’t want to rush over and I think the overall change summary that I would say is Mint has been a pleasant surprise for us from the very beginning. When we originally announce that we had a business case we have way number of the business case.

We have recently launched services that was the market that I think in lot of ways fits some of the carrier of twist that you described not as premium the demand not quite as clear what the value preposition could be also market that’s been a very good to price very quickly I mean the first I don’t think I have seen a load factor that didn’t fell of the nine and that work from day one I mean it’s been extremely lucrative. I will give you a quick anecdote which you will appreciate. When we originally were floating the idea of Mint with some of the large corporate accounts in talking of some corporate in New York we don’t have that many as that point of time we didn’t have many big corporates in New York and we talk them what Mint we talk about pricing they said yes, we are in, we love it, we told we want to do it. We’ll definitely support you and this is 3 years ago 4 years ago we have the same competition in Boston and in Boston we have a very large corporate account.

We went through corporate accounts we have got good shares with 40% market share and said the same thing to them I mean it’s not interested. We don’t our premium when our truths going to work looks a great product but it was not for us.

We also said like by the way there are times in the mid fares lower than the core fare on American -- United are you sure and said yes than I am interest. In a two years later they’re saying we pay that Mint service we kind of watch that that’s how good it was. But not effective these all markets that we are very confident of the ability to get customers into this caving enough think about the people that we talked about originally, smaller medium businesses high end leisure en light corporate. All three have been very strong contributors and I think if you look at the market we other then we’re comfortable we are going to get that exact same demand in those markets.

Michael Linenberg:

Okay very good and then just the second one Marty I guess this one is to you as well. You known just with New York potentially becoming somewhat less constrained later this year for the new sort of DOT FA rules. I think you have about a dozen flight today or so in New York and I know that’s the function of your current slot position. But I do think that you have access to may be three gates so it seem that you could do if you wanted to probably schedule a bit more service then what you are currently offering.

Is there an opportunity there for you or is it more just focused on the --.

Robin Hayes:

Hi Michael, it’s Robin. I am going to take that because I love talking about connected hyper airports. We are again good morning and thanks for question. Look actually we have over 2o flight today now on average out of New York so we have done a good job over the years getting the out slot here and there.

Great news about the airport sort of moving to a level two unslotted airport obviously gates and other facilities do act as a former constrained but we are very happy about the news and no announcements today but we are looking very closely at New York and we definitely see an opportunity for expansion there as well. We do extremely a New York is sort of airport we do extremely well whether as a constrained airport with a incumbent that charge a very high fares and we can go in and offer a better product at a lower price and do very well so rest is base on Europe.

Michael Linenberg:

Okay and thank you.

Operator:

Thank you. Your next question comes from Hunter Keay with Wolfe Research.

Hunter Keay:Wolfe Research:

Thank you. Good morning.

Robin Hayes:

Good morning, Hunter. How are you?

Hunter Keay:

Hi, good. Thanks. Marty can you educate us little bit on the -- market and how Miami international compete against Hollywood for some of the local traffic and, wondering was there any key distinctions that we should be aware of between those two airports that makes them maybe a little bit less comparative with each other and just the simple geography we suggest because obviously there is going to be a lot of growth in that market not just from you guys over the next couple of years but some other airlines as well feel so. How are you guys thinking about that was two airports in the context sort of fighting over local growth, local share.

Mark Powers:

Hi, good morning, and thanks for question. We’ll talking about a lot of that. We think it’s a very important market for us and it’s had a lot of growth in last couple years for JetBlue and as Robin said earlier and what come. We look at the -- versus Miami and --we look at those the balance between three airports from a different vendors and it’s finally, JetBlue, we’re so low cost airlines the number one ones we look at is cost.

Airport fees put in payment at -- are a fraction of what it cost is fired in Miami and we think that gives us a great opportunity right after that because we can offer more fairs and for lot of the we could offer in Miami which we think is a great opportunity in pricing front.

Second issue on the demand front, what we think is a great for -- it has its own catch, that’s a very, very -- area. Miami obviously is a big city, a great city and great -- area they certainly to compete against each other. We most people at JetBlue done that drive many times this is reaching us to airport is not as far. If you look at how we penetrate the market obviously broader economy is by filing most important origination point for customers and some down from Beach County from we do penetrate that market well.

And I think I want to stress more than anything is, we think we do I think one of the reasons we do so well and for Florida is that we have a fantastic guide proposition. If you look at the other two airlines that have the big top line space in South Florida, American or spirit, we clearly have a differentiated value preposition and differentiated product. So I think they believe to have the best product in South Florida and also always have low affaire in South Florida than in Miami, we think it is a great opportunity for growth.

Hunter Keay:

Okay. Thanks Marty and then Robin getting back to Joes question earlier in the call with that how you are running this business. I think you talked about long about these are basically maximizing even dollars and maximizing profits, but is there any difference you said you are not told us earlier and ask about guiding did you I think that is great comment, I appreciate that but, is it there difference between managing your business for shareholder wealth creation and managing your business for profit maximization and I think at this point the sure of wealth creation think is particularly sensitive. When stocks later down day after day and exact same guidance point, well up point is the focused shift to maximizing shareholder wealth and -- which is the only pretty painful performing the orders as a your owners as a positive maximizing profits.

Robin Hayes:

I mean, I also did mentioned our ROIC I mean we continue to make great strives on improving our ROIC metrics and we are continue to focused on doing that. Look personally I think the stock provides a great value right now. I mean if you look at where we are in the space with a sort of a positive revenue unit revenue trend towards the -- this year. I tied hand alone cost so I mean I delivering a top of cost margin in the first quarter when I think about that order that and also really in terms of some of the revenue initiatives we are feeling the early stages of things like the credit card and the cabin - I think all of those go together to drive shareholder wealth creation and for an airlines like JetBlue where we have to be very conscious of delivering here now but also on our long-term plans.

I think, we are executing well, but the comments that they made about unit revenue I do understand and that’s why we kind of changed, how we kind of describe the quarter because we did want to be sympathetic to that. But the end of the day we are drive, improving our margins, improving our net income driving a strong our likely performance. We think in the medium to long-term and that’s what delivers the most value to shareholders.

Hunter Keay:

Okay, Thank you guys.

Operator:

Thank you. Your next question comes from David Fintzen of Barclays.

David Fintzen:Barclays Capital, Inc.:

Good morning everyone. I guess question for Marty when I think that I guess is November 14, when you guys rolled out all the initiatives in the cabin restyle a $100 million incremental EBIT contribution. There was obviously a very different pricing environment. When you look at the world today, how do you feel about that $100 million are there little more dilution in the revenue environment we need to take into account or kind of what’s changed between here and late ‘14.

Robin Hayes:

Hi, David good morning thanks for the question. We absolutely full agree with guidance we gave originally a $100 million in cabin restyling. Obviously something that moved since we originally -- upfront I will also mentioned that we did throw intent additional fleets on the A321 are costly which we actually going to start seeing this summer. So to the extent that we’ve look at that overall package.

We still feel very comfortable with what that’s going to produce for our owners. We’re not fully rolls out and honestly if you look at overall industry dynamics price is coming goal demand comes in goals I think it’s a it is the much longer trend line here I don’t with current demand environment and the pricing environment is demand so this is going to be new normal

David Fintzen:

Okay. That’s I appreciate that and then coming back to Lauderdale. How do you think about Mint setting into Lauderdale at some point I mean obviously you’re doing some of the Trans Cons. Does that further differentiate your franchise in Lauderdale particularly down into number

Robin Hayes:

Interesting question about the future Mint on different types of markets. I think if you look at how Mint has progressed what we’ve shown is we’re not afraid to take Mint on potential prices. I think price is like a -- Barbados I think good example of some pretty significant changes versus where the US industry has flowing at premium transparent markets. I give you look at things like the under round we’re find the this year Saint Martin much sure to all going to -- like the Barbados also places where we think it’s very strong premium demand with respect to full Lauderdale, the market we do very well we’ve growing lot we are very profitable.

We do see the opportunities for strong premium demand in the West Coast so we’re excited about the additions that we added for Lauderdale. As we’ve talked about things like 321 airlines if you wanted to longer distance not necessary for Lauderdale but necessary in the system. We thinking a Mint like product would be very important to that. So I think the fact that we have proven first of all that our - was can’t deliver a premium product and that can deliver better than anybody else and second that customers is well responded -- premium products by shifting share and I think there is a lot of run way ahead the growth in Mint.

David Fintzen:

Okay. Appreciate all that cover thanks.

Operator:

Thank you. Our next question comes from Dan McKenzie of Buckingham.

Dan McKenzie:Buckingham Research:

Thanks, good morning guy’s. With respect to the revenue I look for the second quarter I understand the holiday shift but stripping this out I am wondering if you can help us some color around some of these buckets. Latin America walk affairs say versus growth markets are capacity. Given the number strength that you signed in the business and the general seen from its domestically. I guess I am just trying to understand where you might be seeing deterioration here.

Marty St. George:

-- the question can you just restate that one more time because I am just I feel like the first half of the question second half of the question is different. I just want to make sure answer exactly what you are trying to get in.

Dan McKenzie:

Yes. I am just trying to if you can add some color around the key revenue buckets as I think about those Latin America versus walkup pricing what those trends are doing versus perhaps the growth buckets and we are seeing some domestically it seems pretty good from the other airlines that have reported and you guys have been talking about a lot of positive things that are going on in your system. I am just wondering I am just trying to separate out where we might be seen any sequential deterioration.

Marty St. George:

Okay. That’s very helpful. Thank you for that.

Well first of all let me give you a high level view of how we are see the competitive environment shaking out for the rest of the year and actually it’s a lot its essentially not the JetBlue story. One thing we didn’t trace in the script and that we should have is that if you look our ASM growth for the rest of the year I think we made a sort of glancing comments to it, but I think it’s what stressing a little bit more we annualized a lot of our growth as we had third quarter and fourth quarter. So for example right now our schedule growth for same quarters like 11% in ASM. Third quarter it down to 7 and fourth quarter it’s in the five.

Our comps get a lot better from that perspective so we think that’s actually offset for us. With respect to what was seeing in the demand environment, I think we are as we said in the script we are seeing good demand in the business markets and very happy we had a good mix of business in Asia and really I think I don’t think what we are saying is all the different than what our competitors say and in Latin America is been a challenge for us but again as the very strong franchise it still extremely profitable and I don’t think when you look at there is any sort of license.

Dan McKenzie:

Understood, okay and then I guess just going back to the corporate leisure mix can you share what that mix is today how would you compare the year-over-year trends in those and I guess if you could just perhaps also point on my prior question perhaps talk about up pricing and maybe how those trends might be affecting the revenue outlook.

Robin Hayes:

Hi David thanks while first of all I get very talking about pricing in general but I feel pretty good talking about what’s happening in corporate market. What was seeing in our corporate is that their total demand for air travel among all airlines is flat, flat to slightly down what we are seeing JetBlue is actually increasing our share in the overall corporate markets space and I think there are couple of things that causing that first as we do continue to add an incremental routes I’ll give a quick shadow we started there are Clevan had a very good on the gate not just that but that’s the classic business market and it’s done very well for us with our corporate accounts. So we get big help and the second thing is I think as corporate travel accounts get stressed and I think it we are seeing corporate travel are looking to get more value out of the box that’s the purpose opportunity to take look at JetBlue and we are seeing in our numbers. Now, that tend to be a very good time for us.

Dan McKenzie:

Very good. Thanks Marty, appreciate it.

Operator:

Thank you. Our next question comes from Jamie Baker with JP Morgan.

Jamie Baker:JP Morgan:

Hey good morning gentlemen.

Robin Hayes:

Hey Jamie.

Jamie Baker:

So, couple of interesting things have happened recently. One and you address this you think you have been with to take on a merger but you opted to walk away and keep your that’s fine. The second issue is that the DOT tentatively approved no regions US flights. So, I am basically wondering if either of these events have any impact and how you feel about wide body and or trends Atlantic flying or if any eventual decision on that front is simply, I don’t know mutually exclusive from before you mentioned issues.

Because, no region definitely seems to biting punch, and you clearly have additional bandwidth to take on more than what you are doing otherwise you wouldn’t have been sitting across the table from Virgin America few weeks do you have any thoughts?

Marty St. George:

No, thanks Jamie, and good morning to you, and I think I’ll address the sort of forward-looking intent behind your question. I mean, we’re very focused on delivering our comp plan but I’d like to say when I think you the question at may at your yesterday, we do when we look at our success in Mint and flying into markets, high premium markets with high fares then we do things that presents a longer term opportunity for JetBlue. Now, I think one of the things that we put a lot of value on is the simplicity and so as the thing I said the 321 is something we’re looking very seriously as because we think that the incremental amount of complexity, that provides is very manageable, I think I step up to -- is a much bigger deal.

I think it’s something that one can never say never, it’s something potentially further out, right now we are focused on the current plan and we continue to evaluate the 321.

Jamie Baker:

Got it. And second question still trying to get a better hand on revenue performance in March I realize that’s kind of old news now but for a portion of the quarter the advantage phase in the big three had gone away but then they also started bringing them back Latin American considering doing the same and now they have returned. If anything I would have thought the absence of advantage fares would have helped you earlier in the quarter and then hurt you in March but that’s not for RASM played out, were there any changes in the industries fares structure as the quarter rolled on that had an impact on you or did your revenue performance just down in March to its own drum during the quarter.

Robin Hayes:

Marty would you.

Marty St. George:

Yes thanks, thanks Jamie and thanks Robin. You know first of all. Again is trying about pricing but I’ll do my best to try to answer and without going to jail.

Jamie Baker:

Yes of course.

Marty St. George:

One thing I would say is that with special of advantage pricing. We thought really play in the markets to advantage pricing as big. We said this publicly and I would like to remind everybody, we generally don’t carry what attracting customer domestically.

Internationally, we have a high percentage but percentage on the system levels was in the teens. So this, the impact of the -- tend to Los Angeles customer going over four different gate ways and it’s interesting it’s really not that big in the efforts. We do carry people at some point who want to those -- but we not play like games. Second thing I’d say is if you look at what we saw in our overall bookings over the first quarter, we clearly saw a I feel that sort of second half of March going forward and we really start working solidify and to the extent that we are receiving challenging yield in time up in till then we really see things sort of the that was flattened out because it depends high to metrics but in general I think we certainly see our bookings that’s what of not one before Easter until, until now I think it’s been much strong it’s definitely stable versus what we seen before.

Jamie Baker:

Okay I appreciated very much thanks guys.

Operator:

Thank you, your next question comes from Helane Becker of Cowen & Company.

Helan Becker:Cowen & Company:

Hi guys thank you so much for getting me in towards the end here. Most of my other question have been answered but I know I heard you comments earlier about Puerto Rico and I knew there in your airport operator who is making sense pretty big investments in the airport and I am just kind of wondering if you could just discuss how that will benefit your service in it, once make sense to grow that market.

Marty St. George:

Hi Helan, its Marty, thanks for the question and good morning. We have been working with that new operator for a while and I think one of the thing that’s enabled our growth in Puerto Rico today and we have grown a good bit of last four five years. In the relationship we have had with the common -- with the last administration the currency administration we are in terminal A and we have been in terminal A for several years because we want to be efficiently grow.

We were very excited about the new operator we working them already in Cancun so we have experience with them and we are very optimistic. We are very hopeful that the economic situation putting in Puerto Rico results for but I will say the they ask for a to Florida had actually worked out for us I’d like to in a position where people are moving back and forth rather than moving in one direction but having Puerto Rico community in what to US we think is a very good thing for JetBlue.

Helan Becker:

And then that brings me to my follow-up question. Does Cuba represent a similar opportunity given your South Florida presence?

Robin Hayes:

I’d say we represented very similar opportunity Cuba is a very, very big market. A great deal of market and for those who have been there I would tell you it will be great leisure market when it opens up. So we’re very excited about it we’re looking forward to seeing where the DOT comes out and their decisions with respect to who is going to get what authorities the one advertise for JetBlue is we’re going in reducing fares in similar market so I think the market like this that strong our demand we’re exactly the right carrier to get everything we asked for

Marty St. George:

And Helan if I could just built on those point Cuba today has about 60% of the number of international visitors that the Dominic and public has which is the largest market in the Caribbean and hopefully it does that without significant access to the US market I am talking vacation this year. So it wouldn’t be hard to conclude that once there is sort of schedule I said that numbers will grow and clearly it’s going to take some time for the infrastructure to catch up but once it does then Cuba has the potential I think to be the largest in Mount Caribbean market.

Helan Becker:

okay thank you and then have you ever quantified the impact of densification on your unit revenue performance later in the year I guess it’s going to be a drag until the whole fleet is done so have you ever to try quantify that for us.

Robin Hayes:

Yes I think just speak very quickly the impact this year is very small because we are just talking about the additional 10 seats on I think the 14 or 15 all core A321 once we start getting into next year 2017 and beyond then the 320 fleet get’s done we will talk to later out in a little bit more detail.

Marty St. George:

But in the investor update we do have that schedule of the reselling program by fleet.

Helan Becker:

Oh great. Thank you so much.

Operator:

Thank you and our next question comes from Darryl Genovesi with UBS.

Analyst:

Hi everyone this is Dave stepping in for Darryl only one question here. Can you talk about how much of an opportunity you have to build out LA in San Francisco organically.

Marty St. George:

Hi Dave it’s Marty. Thanks for question and good morning. Let me take at an higher level and go more micro.

We have a challenge in the West Coast with facility it certainly one of the things you find attractive of Virgin America we have been working with the -- in both airports trying to get additional gate access and we are still up in this we will get there at some point. Nothing it’s one of the reasons why we haven’t focus on trying to grow on long beach of a quite a while I think it’s a greater airport for Southern California with respect to Northern California we are some constrained now we actually don’t have our own gate in today and we’re always looking for opportunities to go and mark

Robin Hayes:

Yes, I didn’t I think both of those markets remain markets for us to say we seen a lot of success with our Mint expansion and we do believe that there is need access for airlines like JetBlue to come in and offer more choice and lower fairs and we are going to be working extremely hard to make sure that happened those in LAX and San Francisco.

Analyst:

Okay great. Thank you.

Operator:

Thank you and our final question comes from Rajeev Lalwani with Morgan Stanley.

Rajeev Lalwani:Morgan Stanley & Co. LL

Hi guy’s, thanks for squeezing me and just two questions one just going back to Fort Lauderdale just adding on that capacity and growing that market how does that impact your line of exposure -- on the sending it pushes it up a fair amount I am just wondering if you are comfortable with that given some of the pressures you are saying and then the other question is on the capital return side or capital allocation as you get to this year and you finished paying down debt repaid a numbers that you know earlier should we just assume that going forward it seem to be all capital returns buybacks dividends etcetera.

Marty St. George:

Hi, Rajeev let me take the first question first. We expect Fort Lauderdale growth we have a pretty strong Latin portfolio out of Fort Lauderdale now and I say the last few weeks we -- from Lauderdale have included domestic approach and we just like a natural what’s that’s beginning May San Diego which starts in June and we are not -- but is small so we see growth both domestically and internationally and we have got a great international presence here right now. So I don’t think we look at this as a Mint change in our overall Latin exposure.

Robin Hayes:

And with respect to your second question I will simply repeat our statement in the prepared markets is that we will assess additional capital return options and update here in the about our plans towards the end of the year.

Mark Powers:

Well thanks for the questions everybody and joining us this morning and back to Kevin.

Kevin Crissey:

That’s it. Everybody that concludes our first quarter call. Thanks for joining us and -- if you have any follow-up questions please give miss call thanks.