JetBlue Airways Corp (JBLU) 2004 Q4 法說會逐字稿

Good morning, everybody, and welcome to Jet Blue's fourth quarter and year-end 2004 earnings conference call.

We have on the call today David Neeleman, Jet Blue's Chief Executive Officer, and John Owen, the Company's Chief Financial Officer.

As a reminder, this call contains statements of a forward-looking nature, which represents management's beliefs and assumptions concerning future events.

Forward-looking statements involve risks, uncertainties, and assumptions and are based on information currently available.

Actual results may differ materially from those expressed in the forward-looking statements due to many factors including without limitation - the extremely competitive industry, the Company's ability to implement its growth strategy, including the integration of the Embraer E190 aircraft into its operations, the Company's significant fixed obligations and its reliance on high daily aircraft utilization, increases in maintenance costs, fuel prices and interest rates, the Company's dependence on the New York market, seasonal fluctuations in its operating results, its reliance on sole suppliers, government regulation, the loss of key personnel and potential problems with its workforce, the potential liability associated with the handling of the Company's customer data, and future acts of terrorism or the threat of such acts or escalation of U.S. military involvement overseas.

Additional 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 2003 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this call.

At this time I'd like to turn the call over to David Neeleman for opening remarks.

Okay.

Thank you very much.

Welcome, everyone, to our fourth quarter conference call for year 2004, which was obviously quite an interesting year in our industry.

We're obviously very pleased with the results.

Not happy with the results, but given the industry backdrop we are visibly - we're to able to report our 16th consecutive quarterly profit.

I will say that we had a tough start to the quarter with the aftermath of the hurricanes and the hangover.

And we were kind of playing from behind from the beginning because we had a significant loss in the month of October.

You'll see the tremendous efforts of our crewmembers and our leadership here.

We kind of all got together and said let's really focus on making a quarter, a profit in the quarter.

Let's see what we can do to keep expenses at a minimum and keep taking care of those customers.

And do some extra advertising and get some of these folks back on the airplane, some of our good customers and get them back.

And we finished really strong for the year.

Had a really good December over what we thought we were going to do.

Made a profit in both November and December and we were able to close that gap and record a profit.

So we're happy with that.

It was a big, important thing to us as a Company.

And crewmembers really did a great job in making sure that they delivered the Jet Blue experience.

In just a couple of years we're going to have, celebrate our second year anniversary, and if we, second year, fifth year anniversary.

What am I saying?

And so as we reflect back, we've grown to about 75 hundred crewmembers, we've got 70 aircraft serving 30 destinations.

We've become a major airline, which I don't know if that's good or bad, but we're the fastest of any other airline in the history U.S. aviation, we believe.

We're the ninth largest U.S. airline in terms of RPMs.

And most important I think we've laid a foundation for continued growth.

We will have a significant number of, amount of growth in the next 2 years, the next 5 years really.

And we have had to really do a lot of work to get ready for that growth.

And we've got some good infrastructure and things that are going on with some new hangers and some new training facility, a new training facility that we're having built now.

And so we're prepared for 2005 and we're looking forward to another good operating year.

And we'll talk more about our guidance later in the call.

Let me just talk a little bit about, more about the fourth quarter before we move on to kind of the competitive environment.

Our fuel costs were obviously high, like everyone else's.

We're up 47%.

On a fuel neutral basis our CASM was actually down 3.2%, which we're very pleased with as we continue to focus on costs.

And I'll talk a little bit about, a little bit more about that in a minute.

Fourth quarter yield was obviously down about RASM was down 7.1%.

One of the things, and a lot of that obviously had to do with what happened in October, kind of the post-hurricane hangover.

We were very pleased to see that the West, our trans-con business, improved year-over-year.

I think maybe we've turned the corner there.

We were actually up in RASM for the months of November and December in the trans-con.

And that's when we saw it kind of dip last year.

Just, we want to, I'll talk a little bit more about the good news in the trans-con market and then I'll address the Song announcement of yesterday.

We've seen some really good capacity shifts that have come out of the West, of course, America West exiting Dulles LAX and JFK SFO and Boston SFO.

They also reduced one run shift in the JFK LAX market and the Boston LAX.

They've reduced that capacity as well.

We went Long Beach.

Of course, America pulled out of Long Beach and they also pulled out of Orange County earlier in the summer.

Earlier this month, America reduced service from Boston to LAX from 5 to 4 and also from Ft. Lauderdale LAX from 4 to 2.

America also reduced its JFK San Diego from 3 to 2.

And the really good news is Delta decided to exit the JFK San Diego market on January 31.

And then, as you look at their average fares in that market you can see why.

Also, Delta announced that they were going to be getting out of the JFK Denver market, which is also good news and probably related to their low fares in that market as well.

I think a big thing that happened was United's announcement of their PS service in the New York from New to York to LAX and San Francisco where they took seats out of flights and reduced the number of coach seats available.

You'll also read that, there's a lot of stuff here, but there was also -- United reduced their JFK LAX to 6 times a day.

And they were at 7.

And they also reduced their Boston LAX from 3 to 2.

So it just goes on and on.

When we kind of put all that in and said, okay, how is that going to affect trans-con?

We also, by the way, cut a flight or two from some of the stuff we were doing into Long Beach and Oakland.

We were down about 15% in each of those two markets.

And so we were, we looked at all that and we said well, it looks like trans-con is going to be down about 13% over where it was last summer.

Now, then Song announced yesterday that they were going to increase their trans-con business with Song where they were basically going to replace Delta and add Song to go from 5 flights a day in LAX to 7.

And then in SFO they were going to from 3 to 5, plus with a larger number of seats on their aircraft.

Which, Delta's capacity increase would be 55% in LAX and 91% in the Bay area, which obviously helped increases for them.

Even when you take in the, into account the increased Song capacity into the market, we expect, just by our calculations, that the trans-con business will still be down about 4% as we head into the summer.

So, I guess that's a long winter way of saying we think things are going to continue to improve in that market.

Obviously we don't know exactly what the reaction to Song's 7 flights a day to LAX will be.

America could react in a stronger fashion and maybe add some capacity or do some things.

But right now we're looking at 4% down year-over-year.

And I think one of the advantages that we have, a couple of things.

Number one is that we're more geographically isolated than just being in LAX.

Obviously for those that live in the Southern California area know that the south of LAX business, which we now have 100% of the nonstop business, is quite a trek to get up to LAX.

And so we have that business.

And the same goes for the East Bay of San Francisco.

We're the only carrier in the East Bay to New York.

So that's good.

Now if you take our Long Beach and Oakland business as a percentage of all of our trans-con markets, it's only 27%, about.

So a little more than a fourth of our business that could potentially be affected if there was a tough response, a greater response by America to what Song is doing.

And if you add in Ontario and San Jose, then it's only 35%.

So we have a lot of service out of Boston.

And we have a lot of service out of Dulles.

And so we have, we're - and that's the second thing I guess I was going to say we have going for us.

Is that we're becoming more diverse and spread out.

We're not so concentrated just in New York to the Bay area and then New York to the Southern California area.

We have a lot of other service.

And we're pleased with the way those numbers look today and we think that we'll do a lot better this year than we did last year, which will obviously help us.

That's what we're seeing so far.

Want to talk a little bit about Song in particular.

I know this is a subject that comes up from time to time.

We just got some third quarter numbers out and it's interesting that our RASM premiums have continued, we've continued to have the RASM premium to Song.

Ft. Lauderdale we have a RASM premium of about 22%, in Orlando 17%, West Palm Beach at 32.

Ft. Myers, which is a market that they just entered, they, our RASM premium is 46% and in Tampa, 20%.

Now, these RASM premiums have come down a little bit but the average fare spread between our average fare and their average fare hasn't gone down.

Now what's amazing about that is if you take the base year when they started, they've had virtually no growth from New York to Florida.

Haven't grown at all.

And so actually they're load factors will have gone up a little bit over that period of time.

But if you take that base year of '02 where we were then to where we are here in the first quarter, our business has basically doubled.

We're up from 26 flights a day to 51 flights a day.

So we've been able to maintain the RASM premium as our business has doubled and as they've stayed flat.

They've made a few adjustments.

They've entered Ft. Myers, obviously, and they've pulled out some New York flying.

But overall their business is flat.

RASM premiums are still good and we've doubled our business.

So that, I think that bodes well for us.

I think we're competing well against them.

And we're, obviously keeping a close eye on what they're going to be doing on the trans-con market, but it's obviously replacement service with some additional seats.

We are pleased that they chose to get out of San Diego and Denver.

And certainly think that the benefit of both, that that will benefit us disproportionately better than perhaps what it will cost us in those other 2 markets where they stepped up capacity.

Wanted to talk just a little bit about, before we move onto the guidance for the first quarter and for the year, which is probably all of what you're on the phone for in the first place.

But talked a little bit about the Simply Fare, their fare simplification and how we expect it to affect us or not affect us.

And how more importantly it may affect what we're planning on the 190 operation.

First of all, as you know, our highest fare today is 299.

Their highest fare is 499.

Don't, we aren't selling a lot of 299 fares.

If we were selling a lot of those fares than obviously our profit margins would be much higher than they are today.

And so even with that gap obviously between 299 and 499 it's a long ways.

And so don't really see the Simply Fare having an affect on our operations.

Now obviously where we compete and where we fly we've always been subject to very aggressive price competition and really haven't seen anything even close to the 299, let alone the 499.

So don't expect any very negligible effect on us and since it's been announced we haven't seen any effect.

So I think we're somewhat isolated from the effects of that.

Maybe opposed to some other carriers who have been able to keep on some very high fares in the face of all this low fare competition.

And I guess some have conjectured that's why Delta did it.

Is because they were so, they had so much low fare competition in their markets they didn't really give us that much, as much as maybe someone else would have like a Northwest or another carrier.

Now let's talk for a minute about how it will affect the 190s.

As you know, the 190s will start coming this year.

We're going to have 7 by the end of this year, about 25 by the end of '06 and 43 by the end of '07.

So we're, we couldn't be more excited about those airplanes there.

They're on schedule.

They're looking great.

We have update meetings on a monthly basis and we're very excited to start receiving those airplanes.

Obviously the impact on '05 revenues and profits will be negligible because we don't really start flying with those airplanes until October at the earliest.

And so I wouldn't expect a huge impact in '05.

But certainly we'll start to see that in '06.

Just remind everyone, this is an airplane with 100 seats, with a seat pitch with 32 or 33-inch pitch with of course the live TV and the XM radio and kind of all of the wonderfulness of the Jet Blue experience but with a trip cost, which is obviously significantly lower than we have on the A320s.

And we're really looking forward to, we have so many markets we want to fly them in we can't - we're having a hard time deciding exactly where to begin because there's so many great alternatives for us.

We're discussing those options now.

The Simply Fare thing is interesting because I think the 499's gotten a lot of play and the people have talked about trans-con 499, great fare.

We did a little research and to try and to see how proportional that fare was as the stage lengths started to get shorter.

For example, we looked at New York City to Oklahoma City and were a little surprised to see that a stage length of 1,345 miles the capped Simply Fare fare was just, you guessed it, 499.

So, you basically kept half the distance off the flight and still had the same exact fare.

Then we came in a little closer and said how about Knoxville?

That's a distance of only 749 miles and the Simply Fare was 419.

So you have basically gone from 2,600 miles to 700 and you're only taking $80 off the fare.

And then we came all the way in to Baltimore, which was only 184 miles away.

And the fare was $349.

So obviously there's not a amount of proportionality.

It's not a mileage-based fare.

The reason we did that, obviously, is to see the effects that they would have on the 190s.

Cause the 190s are going to be flying shorter distances.

We'll be flying in kind of the Knoxville range and the Oklahoma City range.

And also in the BWI type range.

Those aren't cities we're flying to.

We just use those as examples.

We could fly to those cities, too.

But you can see that obviously those are not going to have an effect, that pricing is not going to have an effect on what we're going to be charging.

Our prices will be 50 to 70% lower than those as our highest fare, obviously.

And we need those fares to be able to stimulate traffic.

And that's why we got the airplane in the first place.

So don't see an effect there at all from what's going to happen, Simply Fares on the 190s.

So makes us all the more excited to get a hold of those 190s.

Okay, now let's - I'm going to talk a little bit about, before I move on to the guidance.

We're very, I mentioned to you that we're, our costs were down fuel neutral.

We continue to focus on our costs.

We know it's very, very important to us.

We just worked through our budget process for the year.

And our officers and our directors and our leadership really are focusing on ways that we can become more efficient.

We want to become the most efficient airline in the country, obviously.

And I think we are with our CASM.

But we're doing some things in kiosks where just under 30% of our total customers now check in with kiosks.

We're really doing a push.

Online check-in, where you can check your bags actually online and then just come and drop them off.

That will help our efficiency at the airport and our customer experience.

We also making some changes and improvements to jetblue.com, where today about 25% of all of our changes are done online.

So that's taking, that helps our efficiency and our home reservation agents.

And so they can be selling tickets instead of making changes.

And it makes our customers happier because they get a little discount if they change online.

We also are looking at other ways just to become more efficient and we've got a lot of ideas there.

We also, I think, have not done - have not really done a lot on other revenue.

I think we have a lot of possibilities to increase our revenue other than just customer revenue.

Just from flight revenue.

We've got the AmEx membership awards program, which was launched in December and that's been a really big success.

We've had a lot of customers cashing in their membership award points for and obviously that's a revenue source for us.

We're going to be launching our dynamic packaging division this year.

Got a director hired and we're busy working on that.

Where people will be able to do - buy hotels and rental cars, which will be the high margin business.

And we think we'll do well there.

We also are in the final throws of the setting our co-branded credit card partner.

And we'll have that announced, hopefully, within the next quarter.

And we think that there's a tremendous amount of revenue there.

As well as just using the power of the Jet Blue brand with other companies.

We'll be very judicious in that area, but we think we can improve our revenues by leveraging our great brand that we've been able to create through the dedicated work of our crewmembers.

Okay, let's talk about the outlook.

Going on to in 2005.

Obviously 2005, we're seeing a lot of the same issues that we finished up 2004 with, mainly high fuel prices and yield pressure.

But as I mentioned, though, we are feeling pretty good about the trans-con business and obviously the South business is still a little weak and not to the levels it was last year.

But we had some good fare sells after Christmas and got some good bookings.

And so, in fact January was looking, is - was looking, is looking very strong.

Obviously the snowstorm of this last weekend took a bite out of our revenues a little bit.

We think somewhere between a million and $2 million we lost on that storm.

Not to mention a lot of overtime and a lot of effort that we went through.

Our crewmembers just did a Herculean job of getting the airline back, going again after we had record snowfalls in New York and Boston.

We had to cancel 238 flights, which is something we don't like to do.

By the way, we ran the whole month of December and didn't cancel a single flight.

So we were quite proud of that and then this snowstorm kind of wrecked that a little bit for us.

But even with all that we were feeling really good about January.

And if you take off a million or two it still looks good compared to what we had maybe thought was going to happen in January.

So with all that, and we're looking into February.

It looks pretty good.

Bookings are coming in.

Bookings are strong.

We're projecting for the first quarter an operating margin that is - we always give it a 2-point range.

So we're saying between 4% and 6% profit in the first quarter.

And that's a fuel price, using a fuel price of about $1.23 out of hedges.

So John will give you more detail on that when I turn the time over to him.

And then for the full year, as we've kind of looked at our full year and looked at the second quarter and the third quarter and all of the factors that come into it, we have determined that our margin guidance for the year will be 7 to 9%.

And that's using a fuel price of $1.17 for the year or $1.15 for the last 3 quarters of the year.

Obviously you can adjust your models for whatever you think the fuel price is going to be.

It's anyone guess, obviously.

And that would be net of the hedges that we have in place.

And so I guess just in conclusion before I turn the time over to John, another tough year but Jet Blue was built for the really bad times.

I think companies that were built for the good times are losing money during bad times.

We expect to be profitable in all 4 quarters in 2005.

I think we've got a great foundation.

We've got the great costs.

And we're still focused on those costs and we will continue to be.

We have the best product in the industry, we believe, and that's a great combination, when you have low cost structure that we have and the best product in the industry.

So when we have a strong capital base and access to capital markets.

We can raise the capital we need, and of course, that would suit me.

We still believe that we will be profitable in each and every quarter of this year.

So with that, a little long-winded here, but I'll turn the time (ph) over to John Owen, who'll give you more details, and then we'll open it up for questions.

Thank you David.

Good morning everyone.

As you know, from the press release, we reported a 3.7 percent operating margin for the quarter.

Revenues were up 27 percent, to 334 million on a 36 percent increase in revenue passenger miles.

And total passenger revenue was 320 million, up 27 percent year over year.

And those figures do reflect an adjustment of $3.5 million in passenger revenue, as we made a minor change the way we account for expiring credits that our customers held with us.

The credits expire after twelve months, but due to the lack of historical data, and the way we accommodate customers, we sometimes make passenger accommodations even after the credit has already expired.

We were previously recording those credits at 15 months, even though they technically expired at 12.

Effective October 1, we made that change, and recognized that revenue at the twelve months because we were seeing very little usage of those credits after the twelve month time period.

So onetime effect, $3.5 million there.

That was partially offset in the quarter by several nonrecurring operating expenses that aggregated about $2 million, so taken together, the effects of the revenue side and the expense side, it method to about $800,000 or $0.01 per share after taxes and profit-sharing were taken into account.

Capacity in the fourth quarter increased 36 percent, 5.1 billion ASMs.

Aircraft utilization was up slightly; 13.2 hours compared to 12.8 the year before.

We recorded a load factor of 82.9 percent, just down slightly 2/10 of a point from 2003, on a 33.7 percent increase in revenue passengers carried.

So significant growth and maintained a load factors.

Capacity for the fourth quarter was allocated 52.4 percent East-West, 36.2 North-South, 7.1 percent to the Caribbean, which is the to Puerto Rico destinations, the two DR destinations and Nassau in the Bahamas, 2.7 percent in the Northeast short haul, and 1.6 percent in the West short haul.

For a comparison year over year, last year in the fourth quarter we had 59 percent East-West, so you see over a 6 percentage point drop in the Trans-con side of things.

We were 31.6 percent North-South last year, so we're up about almost 5 points there. 4.2 percent was for the Caribbean, last year 2.9 in the Northeast short haul, and 2.4 percent in the West short haul.

Fourth quarter yield was 758.

That was down 7.1 percent your over year on a 1.7 percent increase in length of haul.

Fourth quarter RASM was 656, which was down 6.7 percent over 2003 fourth quarter.

Average stage length was essentially flat.

Excluding the effect of new markets, using our sort of same-store sales approach, our RASM was down 4.4 percent in same-store sales markets, and ASMs in those markets were up 3 percent year over year.

Now, some of that of course is from the hurricane hangover that David was talking about in October, where our North-South markets were still suffering, even though the hurricanes had passed because everyone I think was a little reluctant to go vacation to what they perceived may have been a disaster area.

To take a little more detailed look on a same-store sales basis, as David said, RASM in the West markets was actually up your over year in both November and December, which we think is an encouraging sign, as capacity is getting rationalized in the Trans-con markets.

Other revenue was up 48.2 percent, mostly due to increased change fees, but also due to third party revenue from live TV and an increasing concession revenue at terminal six of JFK.

During the quarter, we placed 6 new aircraft into service.

All were financed with escrow funds from the EETC transaction, which we priced back in March of last year.

So that finished out that EETC transaction.

At the end of the quarter we had 69 Airbus A320 aircraft, 44 owned, 25 leased, average age roughly 2.2 years.

On the costs side, excluding fuel, we're very pleased with cost performance.

It was very good.

Operating expenses for the quarter were 321.8 million, up 41.2 percent.

That's a CASM of 632, which is up 3.7 percent year over year.

That year over year increase in CASM is principally attributable to fuel costs, which was $1.24 a gallon in the fourth quarter this year, which is up 47.4 percent over the $0.84 we had in fourth quarter of '03.

Fuel hedge gains realized in the fuel expense line of the P&L were 13.1 million for the fourth quarter, and 37 million for the full year.

On a fuel mutual basis, CASM was actually down a little over 3 percent, so we're pretty pleased with the general cost control across the company there.

There were no categories across that were particularly out of line for the quarter.

Our crew members did a great job in reducing fuel burn for block hour.

We've had a big focus on that, with the increase in the price of fuel, and we actually reduced that over 2 percent.

And that's a result of several different initiatives; planning improvements in the way we optimize the estimated amount of fuel on board an airplane, so you're not carrying excess weight, using ground power when planes are at the gates rather than running the auxiliary power units in the airplanes, and single-engine taxiing.

So a big pat on the back for the efforts there, to our crew members in particular, system operations, our pilots, our technical operations team, and our customer service team at the airport, because it's a lot of people involved in making a lot of those changes, but they've done a very good job.

Taking a closer look at some of the line items in the P&L from an expense standpoint, salaries, wages, and benefits decreased by 10 percent on a unit cost basis year over year, principally because the lower profit-sharing accrual.

Sales and marketing expense was basically flat in the quarter on a year over year unit cost basis.

We booked 74 percent -- excuse me, 74.7 percent of our reservations through jetblue.com, which is flat year over year and basically flat compared to the prior quarter.

So I think we've kind of maxed out or come very close to maxing out the percentage of sales we're going to get through jetblue.com.

We are very pleased that the online booking rate has remained constant, pretty much, even though we eliminated the $3.00 web discount.

Our flight gratitude program, True Blue, continues to grow.

We now have over two million and rolled members, and our online corporate booking tool, called Company Blue, has grown nicely since we launched it last June.

It has over 900 companies now registered to use that in terms of corporate travel managers, who have signed up.

Maintenance, materials, and repairs was up only 6 percent on a unit cost basis, which was under our earlier projections and our budget due to the fact that we performed fewer other component repairs at lower costs during the quarter than we had anticipated.

The fourth quarters saw a total of 12 airframe checks, seven engine repairs, compared to 11 airframe checks and three engine repairs in the fourth quarter of 03.

The tax provision for the fourth quarter looks a bit odd, as we had a negative provision for taxes, essentially a tax benefit that resulted in net income being higher than pretax income.

So I think an explanation of that is in order.

This occurred because our full year combined federal state and local rate declined from a projected 40.7 percent, what was our best guess that the end of the third quarter, to 32.-- or 38.2 percent at the end of the year.

Most all of this declined just about 80 percent of it, was driven by $2.1 million in tax credits related to hiring crew members in enterprise zones in the state of California that were certified by the state in the fourth quarter.

Once those were certified, we recognized them, it flows instantly through tax provision.

So when we calculated the provision for the full year, you take that rate declined and you combined it with a relatively meager amount of pretax income in the fourth quarter, and it caused us to have to reverse some previously accrued tax liability, and hence the tax benefit that you see in the fourth quarter.

Turning to the balance sheet, we end of the year with 449 million in cash and short-term investments, and over $756 million in shareholder's equity.

From an operating performance perspective, crew members did a great quarter, again.

We had 99.9 percent completion factor for the quarter.

On-time performance was solid at 80.1 percent.

Mishandled bags were 3.2 per thousand, and customer complaints were very low, at 0.19 per hundred thousand customers.

For the full year performance in those areas, was also very strong. 81.6 on-time percentage, 99.4 completion, mishandled bags rate of 2.97, customer complaints ratio of 0.27.

And I would note that for the full year, that completion factor was backed down significantly by the four hurricanes that we experienced in the third quarter.

Looking now for guidance for the first quarter, and the full year, as David said, the trends are looking good in the quarter so far, we've had a good response to the fare sale that we launched right after Christmas.

We expect load factor for January to be a year over year, but at a lower yields.

And I would remind people that Easter this year is in March, unlike last year, where Easter was in April.

So consider that when you're thinking in terms of seasonality and behavior of the first and second quarters.

From ASMs perspective, we expect capacity to grow 27 to 29 percent for the full year.

For first quarter, that is an increase of 25 to 27 percent.

For second quarter, 26 to 28 percent.

For third quarter, 28 to 30 percent, and for fourth quarter, 27 to 29 percent.

All those are based on our aircraft delivery schedule, which I'll give you in a moment.

Average stage length is projected to be just under 1300 miles in the first quarter, and just over 1300 miles for the full year.

And we expect aircraft utilization to remain essentially flat to slightly up in both the first quarter and the full year.

From an aircraft standpoint, our A320 delivery schedule is two aircraft in each of the months of March, June, July and November, one aircraft in every other month of the year, except for December where we don't take any.

So a total of 15 A320's in 2005.

Starting in August, we will get the first delivery of the Embraer E190, 100 seats aircraft that David mentioned earlier.

We'll take seven in total in the second half of the year.

That's 3 in the third quarter, and 4 in the fourth quarter.

We do not plan to operate any of these aircraft in revenue service until October, when we're done with various certification work with the FAA.

I also thought it would be useful to give you some numbers for those of you wanting to model the impact of the Embraer90 this year.

At the end of 05, while we'll have seven aircraft in service because they're all placed into service very late in the year, it's only going to represent about one-half of one percent in total ASMs, so it's a very small impact overall in our business in 2005.

From an operating margin perspective, as David said earlier, we're looking at 4 to 6 percent operating margin range for the first quarter at an assumed fuel prize net of hedges of $1.23.

And operating margin for the full year, again, of 7 to 9 percent, based on an assumed all in fuel price net of hedges for the year of $1.17.

Looking out through 2005, we expect the second quarter at this point to be our strongest in terms of operating margin.

Second strongest would be the fourth quarter, then third, and we're forecasting that our first quarter will actually be our weakest margin.

Again, a little difficult to do year over year comparisons with us because of the shifting capacity allocations in our system, but we do expect based on our forecast to be profitable in all four quarters of the year.

From a CASM perspective, for the first quarter we expect CASM to be out roughly 7 to 8 percent year over year at an assumed all in fuel price, as I said, of $1.23 net of hedges compared to an all in $0.92 number in the first quarter last year.

And for the full year, we're expecting CASM to be out 4 to 5 percent, again, at an all in fuel price in that forecast of $1.17 compared to $1.06 for 2004.

We are roughly 20 percent hedged on our fuel burn for the full year 2005.

That's in the form of swaps of crude oil, at just under $30 per barrel.

From a CapEx perspective, we're expecting roughly $800 million for aircraft capital expenditures, including pre-delivery deposits, and as a reminder, all of the A320 aircraft delivering in 2005 will be financed through the second EETC (ph) transaction that we did in 2004 that priced in November.

We have commitments to finance the first 30 190 aircraft through sale-leasebacks with GE capital.

As a reminder, with that (audio break) EETC transaction that we did in November, we will have a negative carry that will show up in interest expense, related to the differential between interest rate paid on the EETCs and interest rate earned on the money, as its reinvested as cash until those aircraft deliver.

We do expect our full year 2005 interest expense total just under $100 million.

Other capital expenditures including live TV, spare parts, construction projects and so on, is expected to be about $200 million.

Our ongoing discussions with the Port Authority of New York and New Jersey have been quite productive, and we're pleased to say we're making solid progress toward a definitive agreement for a new terminal at JFK.

As you may be aware, that plan calls for construction of a 26 gate terminal to be located behind the historic Saarinen building, also known as T5, there at JFK.

That building will be preserved, and connected into the new terminal.

We hope to be in construction later this year, and again, hope to be completed by 2008.

In the interim, we are opening one additional gate within T6, and we hope to, and have plans to try to add an additional 14th gate to that terminal later this year.

That should allow us to operate about 125 daily departures at JFK.

Later this year, again, we plan to incorporate a temporary structure adjacent to terminal 6, located actually on the leasehold space of terminal 5, which would house, we hope, 6 to 7 additional gate, as a temporary facility, to help us continue to grow at JFK and transition to the new terminal 5 that would open in 2008.

Speaking of JFK, we have a maintenance hanger there, which we expect to open in May.

That's under construction now, and we plan to open our new Orlando hanger and our new Orlando training center for JetBlue University during the year timeframe as well.

We've had a lot of infrastructure project, as David alluded to earlier, that has been going on, and I'd like to recognize you know the excellent efforts of our corporate real estate team, our financing legal teams, and the folks who are going to be occupying those buildings who helped in the design process from JetBlue, you, and technical operations, and live TV for all the work they put into you know several major projects going on at this company.

All of our debt, by the way, is floating rate, with the exception of $175 million of convertible notes.

And obviously, all of their cash investments float.

Average debt rate at the end of the fourth quarter was 4.1 percent.

Average investment return at the time was 2.4 percent.

From a shares outstanding perspective, are estimated shares outstanding for Q1 05 and for the full year are based on the following assumptions: again, no additional shares assumed to be issued from option exercise. 18 million options outstanding at a 15.81 average strike price, 20 percent market appreciation through 2005.

Based on those assumptions, we get 109.4 million weighted average shares for Q1, and 111.5 weighted average shares for full year.

One final know, effective July 1, we do plan to begin recognizing our employee stock option expense based on fair value under FAS 123R.

We've evaluated the impact of that, and we expect to incur an additional $11 million net of taxes and profit-sharing, total bottom-line affect in the second half of the year.

We also expect that that will result in a higher tax rate.

We're forecasting something close to 47 percent for the full year because that stock option expense is a non-cash charge for accounting purposes, and is a permanent difference when calculating the tax provision.

And that's baked into the guidance that we have you there.

So with that, I think David and I are done with our prepared remarks, and we're ready to take questions.

So Melissa (ph), we're ready.

Thank you.

[Operator Instructions].

Our first question is coming from Mike Linenberg of Merrill Lynch.

Yes, hi.

Just a couple of questions.

John, on the interest expense, you said for the year you estimated that it would 100 million.

Is that a net interest expense number or is that purely interest expense?

That is interest expense, that is not net of interest income.

Okay.

And then on the $2 million non-recurring items that you highlighted, John, and that were also in the press release, is that all above the operating line or does some of that fall down into the non-op area?

I realize it's several items.

It was all in the operating line.

There was a one-time change in the way we do PTO for our pilots; we made a change in our pilot contract.

PTO, by the way, stands for paid time off.

It's our bucket that covers sick time, holiday time and vacation time.

So we had a one-time adjustment there and we also had some estimate adjustments on some -- principally engine repairs on the maintenance side and the 2 of those are the majority of those 2 items.

Okay.

And my last question, I guess to David.

It was this last quarter that you did start the -- or actually I guess it was the September quarter, but you recently started the new service out of LaGuardia, and I was just curious how that was ramping up and would you be interested in, if the opportunities were to present themselves, to get additional slots and gates?

Are there opportunities at LaGuardia for JetBlue?

I think the answer to that is yes, Michael.

We were quite surprised at how quickly it ramped up.

I guess we weren't surprised, but adding the number of flights from one day to the next, 7 departures, is quite a bit to chew.

But we've got similar load factors and similar average fares.

Kennedy books a little bit further out better, and LaGuardia books a little better closer in, which you probably expect.

But other than that, they're kind of tracking together with each other and I think the combined number of flights we have between the 2 is over 25 today.

So it's a tremendous amount of capacity we have going down there.

But we're pleased with the way it's going.

And we would -- there's a couple of other markets, particularly -- I think what our philosophy is, is that we want to be kind of New York to Florida's airline and I think if there's some people that chose not to fly with us because we weren't out of LaGuardia, we are seeing a lot of new customers, seeing LaGuardia work.

And they get on the airplanes and as they check in we're reminding them that we have a lot of service just 8 miles down the road.

And so I think that's helped in our business as well, just gives a lot more awareness to it to maybe a group of people that wouldn't have considered going out to Kennedy.

So that's good.

And so we think we could add service not only to LaGuardia, but to West Palm and Ft. Myers and Orlando and Tampa, out of there if we were able to get some more slots.

Thank you.

Our next question is coming from William Greene of Morgan Stanley.

Good morning, guys.

Can I just ask something about the guidance?

So if the CASM goes up 4 to 5% this year but the margins stay the same, obviously you're assuming the RASM is up a couple of percent, right?

Just stating the obvious, but that must be implicit in there.

I would say that's a safe assumption.

Right, okay.

And then, so, David, when you look at trans-con, is the RASM, in effect, going to be up because you feel like the capacity is restrained enough in that market or is it Florida?

I'm not quite sure where the RASM strength would come from.

Well, obviously it's not a lot of strength, but it is some strength.

Yes, it would be from the reduction of capacity and the fact that we're not so concentrated in the markets.

We have a lot more diversity now using other markets and other city pairs that will help us than just being so focused just on LAX, like we were when America West started their service and kind of that whole structure came down.

You know this is the Sacramento's and the Phoenix's and the Vegas's and what we're doing Dulles, San Diego, there's just a lot of factors where we're not as concentrated.

Okay, so the markets that you see...

And the capacity (inaudible).

I mean you look at Denver, the fact that Delta got cancelled to 2 flights to Denver and they're -- San Diego, last year there were 8 non-stops from the New York area.

This year there's going to be 5.

So basically 3 non-stops are gone and it's a big percentage.

And we're going to have 3 and American's going to have 2 and Delta's not going to have any.

So stuff like that.

And American being gone out of Long Beach.

We think it's looking better now and we don't see any reason why -- it's better now than it was last year and so that's part of our calculation.

Okay.

And, John, when we look at your non-fuel CASM, my guess is given that stage length seems like it's just about topping out -- we're going to start to add the Embraers -- probably just under this 5 cents, sort of about 4.6, 4.7 cents.

That's probably the low.

Is that a safe assumption, do you think?

Or is there a lot more to go on cost savings non-fuel?

That's a good question.

I don't think we really know the answer to that one, Bill.

So if there were more savings, where's the fat?

There's not any fat at this company.

Exactly.

The key is trying to be more efficient in the way we do things, things like David alluded to earlier with the online changes so that you aren't tying up our reservation agents making changes, trying to get people to do more kiosk check-in at the airport so that our crewmembers can process a lot more people with the same quantity of crewmembers, things of that nature.

But on the margin, I would say there's not a lot of tremendous opportunities there.

We're going to keep trying to push every opportunity we can, but I think as we've grown, we've probably taken care of most of the what you might consider low hanging fruit of ways to improve and optimize and be more efficient.

I think what we're focused on, Bill, and I think this is -- I think if we could just maintain this level, I think we'd be thrilled because we do have some increasing maintenance costs and, as you mentioned, the 190s are coming on.

And so we're really focusing on maintaining at this point in time and if we can do that, we're going to be very successful.

And one of the things that John didn't mention is that as we get the 190s and we continue to add capacity, connecting the dots, we get better utilization out of our cities, like San Diego where we only had 2 flights in the winter and we'll have 4 flights this summer, and other places where we lack capacity, where we shoot the gaps where we have people and gates already in place.

And that will help productivity as well.

Okay.

John, just 1 last question.

Do you have an estimate for debt to total capital at year-end, including off balance sheet?

Not handy at this point, no.

But we can follow up with that.

Thank you.

Our next question is coming from Tony Cristello of BB&T Capital Markets.

Thank you.

Good morning.

I guess, John, you said that the tax rate in the second half of the year was going to be 47%.

What is your estimated tax rate for the full year or what should we be looking at for the first half of the year?

Sorry about that.

The way you do a tax provision is you estimate a full-year estimated rate and you use that as you close each quarter.

And you make revisions based on facts that change and adjust that rate, but you always use a full-year estimated rate.

So we're using a 47%, roughly, full-year estimated rate.

If you looked at it as a first and second half of the year, you could argue that your first half tax rate is lower than that and your second half tax rate is higher than that, which I think is where you're coming from...

That's right.

...really not the way it's done from an accounting perspective.

Okay, fair enough.

And in terms of what you saw for the credit, did you say in the fourth quarter that was a 2.1 million tax essentially credit that you received?

Yes, we were -- we earned through a certification from the State of California just over $2.1 million of tax credits that relate to the fact that both of our airports, Oakland and Long Beach, are in enterprise zones and if you hire certain people who meet the right kind of qualifications, that you can get tax credits for hiring people in those enterprise zones.

And so we had had a consultant help us do some extensive evaluation of a lot of hires to see who qualified and that sort of thing, submitted all the data.

We didn't know when the State was going to act; the State did act during the quarter and that's what triggered the credits that then again get immediately recognized in the provision.

Okay.

And then with other revenue, it was pretty good in this quarter and should we expect sort of that as a run rate or will we continue to see a little bit of a flattening out there or sequentially will we see it continue to build?

I think you can continue to see some really good numbers on the other revenue.

Certainly the change fees, which were a big component of other revenue, tends to grow fairly proportionately with the way ASMs grow.

But as we continue to have live TV, get more installed base at other customers, especially during the course of this year, the bigger ones will be WestJet and Frontier and, to a lesser extent, the folks at AirTran with the XM radio, you'll see more live TV revenue.

We're certainly also continuing to see growth in concession revenue at JFK, which should be relatively proportional with the rest of the growth of our business at JFK.

And then finally, the Amex Membership Rewards that David alluded to earlier, that's going to appear in other revenue.

So as people cash in Amex Membership Rewards, it's kind of a complex way in the way that revenue is accounted for.

There's a lot of deferral of that, you don't recognize it immediately when people cash it in and things like that.

But we will be seeing that in '05 that we saw only a little bit of in December of '04 because we launched Amex Membership Rewards on December 8th.

Okay.

And 1 last question.

With your CompanyBlue program, how much of your bookings or revenue can be associated with that or is it even a material enough number to quantify?

At this point it's relatively low because again, we only started the business in June and this is something focused at travel managers.

So a travel manager can sit and register on our site because they've been badly wanting to take advantage of the great service and low fares at JetBlue.

But then you get into bureaucracies within companies of changing travel policies and rolling it out and making it available to all of your people and then getting folks educated.

So there's a lag time between when people register and start using.

As an example, we have over 900 companies registered, but we've actually only had bookings from 300 and some odd of those companies so far.

So, we expect to see a lot more of that going forward than we have so far in the 6 months that we've had the program out there.

Thank you.

Our next question is coming from Jamie Baker of JP Morgan.

Hey, good morning, everybody.

John, a question on cash here.

Your year-end cash was down about 160 million from last year's fourth quarter.

You were free cash flow positive during the year and I think you tapped the EETC market a couple of times.

How should we be thinking about where cash goes from here as you balance additional capital raising needs against where you are with aircraft deposits and what have you?

From a cash perspective, you're right; we did draw down cash some during the course of the year.

But we've done some forecasts and we don't see any real appreciable -- no real appreciable difference in cash.

It's not going to go up tremendously or down tremendously based on our forecasts for the year.

Jamie, I think -- this is David.

Part of the reason it obviously was down this year, we raised some extra money in the convert deal we did earlier in the year because we knew we were going to be building hangars -- in '03, I guess, late in '03, because we knew during '04 we were going to be paying for 2 hangars and our training center down in -- our JetBlue U campus down in Orlando.

So we've basically been funding all of that out of our cash flow.

We haven't financed any of those buildings.

So that was by design.

Okay, that's helpful.

And, John, just a clarification on the cost guidance, whether inclusive or exclusive of fuel, could you give us a little flavor as to how the year-on-year change will look quarter by quarter?

Not a precise level, but just one would expect, just given your growth, a fairly linear projection if viewed sequentially, but I'm thinking with the 190s ramping up in the second half.

But those will be the quarters where the gains are the largest.

Is that the right way to look at it?

Well, Jamie, we don't normally give individual quarter-by-quarter CASM guidance for the full year.

We just give CASM guidance 1 quarter...

Yes, I'm not looking for any precise number, just sort of directionally any additional color would be appreciated.

Okay.

Directionally with respect to the -- are you saying directionally in general or with respect to the 190s?

In general.

In general, okay.

Let's see, what's the easiest way to say this?

I would say we're looking at our highest CASM quarter in the first quarter, our lowest CASM quarter in the second quarter, and then a gradual increase from there for 3 and 4.

Perfect, very helpful.

Thanks a lot.

Thank you.

Our next question is coming from Gary Chase of Lehman Brothers.

Just a quick question for you.

In November, if I'm not mistaken, the FAA allowed an extension in the C-check intervals on the A320.

I guess number 1, do I have the right interpretation and what's the impact both in the fourth quarter and as we look forward into the first and second of next year?

You are correct that the FAA came out and permitted Airbus's maintenance program to be adjusted to extend the intervals between C-checks.

But just because the FAA said that with respect to Airbus's program, we still have to demonstrate to the FAA with respect to our program that we can take advantage of that.

So I know we have been preparing the statistical evidence to be able to go to the FAA and say that we would like to extend that.

I do not know where we stand on that process at this point in terms of whether we've submitted that to the FAA, whether extensions have been approved yet.

So I would have to check on that and find out.

Okay, but presumably that's not in any of the numbers that you put out in terms of guidance, John, right?

There's a little bit of that assumed that we would benefit some during the course of 2005 based into our budget.

Towards the end of the year.

Yes, but I just don't recall exactly when we expected it to phase in during the year.

Okay.

And, David, could you just comment, clearly, when you launch service in the Embraer 190, there are going to be a number of new destinations that you announce.

I'm thinking, though, more in terms of just thinking about the growth, not just adding the Embraer 190s, but also you've got a lot of A320s coming.

When should we expect to see, even if it's just a loose timeframe, another focus-type city?

I'm thinking like a Boston, an Oakland, a Long Beach.

And is there any way for us to think about the timing and can you give us any color on where you are on that front?

I think it depends a lot on the competitive situation.

You keep hearing the rumors of demise here and demise there and you don't know and that obviously changes your plans.

But kind of absent any changes in existing carriers that are currently flying -- I think we're looking at 1 city this year that would have, call it more than 10 departures, that would be a new city, and then maybe 1 redeye city.

But we still have a lot of capacity.

John talked about the additional gates that we're going to be building here at Kennedy.

We've got a lot of capacity up in Boston based on our previous agreement up there.

And so -- that we have with Massport.

So we're -- we have capacity of growing our existing cities and so we're not in desperate need of a new city.

But if something happens, though, maybe an airline goes out of business, then we'd have to move up those plans.

Okay.

And just 1 last one for you, David.

You did mention other revenue something that -- if you look at JetBlue, it's not much different than, say, a Southwest.

You're running at about 3 to 4% of your passenger revenue in that line item.

Some of the majors are running 10, 11.

Obviously you probably won't get there, but any sense of what you think the long term potential for other revenue generation is?

Higher than what it is today, that's for sure.

And that could have a really good impact on our bottom line.

So I've outlined a few things that we're doing and it certainly will be somewhere between where we are today and where they are.

So I can't say exactly, but certainly it will be something that's a positive for us.

Certainly on that score, the 2 things that we intend to do this year that should help that line in terms of new initiatives, the co-branded credit card is one and the dynamic packaging program is another.

So we have some potential there.

I think the 1 thing that you won't see for us compared to other people is the magnitude of freight and mail.

Just by the nature of our system and where we fly and how we utilize the airplane, we just don't have the capability to do anything near the quantity of freight and mail activity that a lot other carriers do.

Maybe as we get a larger network in 50, 60 cities, we can do kind of the light express stuff at some point in time in the future, which is higher yield stuff anyways.

But that would be a difference with them to us.

Thank you.

Our next question is coming from Ray Neidl, Calyon Securities.

Congratulations on keeping your consistent profitability up by quarter.

And there were stories that when ATA was going into bankruptcy that JetBlue was interested in Midway.

I was just wondering if you still might have interest in Midway if opportunities develop there, maybe with fewer gates.

And DFW is out aggressively marketing the old Delta gates.

I was just wondering if you were interested in that, especially in light of the fact that Love Field may liberalize the Wright Amendment.

I think, Ray, those are 2 big cities obviously and to say that we'll never fly to either Chicago or Dallas would be kind of folly for us.

I think it all has to do with timing, what's going to happen with the ATA/Southwest relationship and how long will that go on for.

And for us it's all a matter of priorities and where we can make the most amount of money and how it contributes to our whole company.

And I think what we're really focused on now is getting the 190s in, having them benefit what we're doing here at Kennedy and at Boston.

Those are 2 big focus items for us.

I think we have limited number of resources in airplanes and so we want to be able to benefit what we're doing now before we maybe run off and do something else in a major way, say in either Chicago or Dallas.

Not to say that we wouldn't have flights from some of our focus cities to there, but certainly those cities aren't top on our list.

But I'm sure we'll be there someday.

Okay.

And, David, what do you think of the Southwest/ATA code share type of thing?

Is it something you might be interested in or are you going to just wait and see what happens with Southwest?

Well, I think it's pretty smart on Southwest's part.

I'd love to be able to sit down with our largest competitor city and say, "You fly here and we'll fly there" and get the Justice Department's blessing for that.

That would be wonderful.

I think Gary Kelly, it's a genius stroke on his part and I think they're going to benefit a lot more than the money they had to pay to do it.

So, yes, you've got to applaud them for that.

Okay, so something JetBlue might consider in the future?

If you could sit down with 1 of your competitors and tell them which markets to fly to, with Justice Department approval?

That seems like that would be -- is this an IQ test, Ray?

And 1 last thing since we're talking about an IQ test.

What's your opinion on Independence Air?

Where are we going there?

Well, I was sitting there looking -- yesterday they launched this fare sale where you can fly from Washington Dulles to Vegas, $44 -- and that seems to be below their cost by my calculation -- or any connecting city for 64.

It seems like that's a very difficult situation that they find themselves in down there and I'm not sure it's going to get any better really.

And I think the fuel prices really hurt them disproportionately.

And when they disappear, that's going to open up a big opportunity for JetBlue, I assume.

Well, I don't like to predict the demise of our competitors really.

But certainly Dulles is 1 of our focus cities.

We do well out of there, we've done well and it would certainly maybe hasten our plans for that city if there was 1 less carrier in that market.

Thank you.

Our next question is coming from David Strine of Bear Stearns.

Good morning.

Thanks.

David, you sound incrementally more positive about RASM on the trans-con, actually RASM just generally.

And I have to ask you;

I was popped into the call from hold just as you were saying you thought trans-con was going to be down 4%.

Do you remember making that statement?

What were you referring to in terms of the metric and over what duration?

Trans-con capacity in...

In your markets.

Yes, where we serve.

It was going to be down obviously a lot more before the Song announcement yesterday.

It was going to be down 13% and now it's going to be down 4% for the period by this summer.

By this summer, that's what the difference will be over last summer.

Okay.

And, John...

...in markets like San Diego and Denver, that percentage is much greater than that.

And perhaps, John, this one for you.

Looking at just a couple of specific line items on cost, with respect to maintenance and depreciation, although they have been going up and although they were up in '04 on a unit basis, the rate of that increase declined year-over-year from what it was in '03.

Do you anticipate the same level of increase in those 2 line items in '05 as you saw in '04?

With respect to depreciation, you always have to watch out on that line and read it on our P&L in concert with the aircraft rent line because depreciation is skewed tremendously by whether or not we own or lease a given airplane, whether the cost of that airplane is flowing through depreciation or flowing through aircraft rent.

So you have to watch that.

Given that we anticipate that -- not anticipate, that we have done a double ATC transaction for debt financing, which means we will own all of our A320s during the course -- that are purchased during the course of 2005, what you should see is depreciation actually going up a little bit disproportionately, but aircraft rent coming down on a disproportionate basis because of the change in the percentage mix of owned versus leased in the fleet.

The other thing that you will see, too, on depreciation is you should see a jump as the year goes by because we do have all of the real estate projects we talked about earlier, a pair of hangars and the training center for JetBlue U, that will all come online during the course of the year.

And right now, since they haven't been placed in service, there's no depreciation on the spending associated with those.

But once we get a Certificate of Occupancy and move into those, you'll start seeing the depreciation on those buildings start to appear as well.

With respect to maintenance, we anticipate that maintenance will continue to go up, as it inevitably has to do for this company, as the fleet ages.

Maintenance actually came in below where we expected it to be for this year and I don't think you can reasonably expect that to continue.

I think you have to expect that as we get more and more airframe checks and heavier checks and start moving into more heavier engine checks, that you will see continued increase in the maintenance line.

Thank you.

Our next question is coming from Robert Ashcroft with UBS.

Good morning.

One of the things that US Airways gained in 1 of its recent pilot deals was the ability to outsource Embraer 190s.

In the event that US Airways survives, raises the prospect of legacy major airlines getting to outsourcing of the 100-seat aircraft size at regional costs, perhaps a little earlier than we may have expected.

Does the prospect of -- that prospect give you pause, give you concern?

No.

I think one of the things that the 190s, we have so many markets we can fly to.

Some of them overlap with US Airways; some of them overlap with other carriers.

We're going to fly those airplanes where we're going to be able to make the most amount of money.

I mean it's clearly not a near-term issue, but...

No, and I think -- I guess I'm a little confused to the 190 comment.

I know obviously they have some 170s.

They actually got the ability to shift 170 orders to 190s in one of their more recent pilot deals.

Yes.

I don't know if there's a quantity associated...

Yes, there sure is.

There's a maximum of 60, I believe.

Yes, so they have -- there's a quantity issue and then there's a lot of markets.

I think there's a lot of sand in the desert for those folks, I think, before they can get to that, as you would say.

Thank you.

Our next question is coming from Helene Becker of Benchmark.

Thank you very much, operator.

Hi, gentlemen.

Just a real quick question and you may have discussed this.

If you did, I'm sorry.

Training costs on the 190s and the aircraft that are coming in, could you just discuss a little bit about the mismatch between maybe people on the payroll and when they start producing revenue -- when the aircraft they'll fly start producing revenue?

I think, and John can comment on this and we've put it into our budget, but it's really not a meaningful number when you look at the size and scope of what we have going this year.

It's in the guidance obviously that we've given you and we are going to have to.

Obviously our first officers that are flying, or any pilot at JetBlue will be able to bid for the 190.

And there'll be a certain class or group of those pilots that come off and will have to be trained over a little bit shorter time than the initial training, I think it's going to be about 4 weeks, and then they'll be back flying again.

So, if you take the salaries for those pilots during that period of time, it's not a meaningful number.

A couple million bucks, I guess, is what we're calculating that it would be.

But that's obviously not a meaningful number on the size of our budget.

Okay.

Thank you very much.

There'll be other things like the proving runs and all that, so you could add it all together and it would be maybe 5 million or something, $5 million.

But again, it's a little bump in the road.

Thank you.

Our next question is a follow up coming form Jamie Baker of JP Morgan.

Thanks for that.

David, based on your own experience in the industry at other carriers and based on how you view your JetBlue infrastructure, what would you hazard is the most number of aircraft you'd ever be able to put into service during a six-month period?

Well, I think this year we've got 22 and next year I think the number is like 34...

It's 35.

...35.

That's pretty aggressive, 17 airplanes over that period of time.

Now, if the opportunity presented itself and we could -- I think as you get a bigger and bigger base, I think that number will increase -- could increase.

And that's why I think -- we've kind of said this before and it seems kind of odd for us to be saying it, I think some of our high efficiency airline colleagues agree and think the same way -- but we hope US Airways sticks around for a couple of more years because we're not really, at this point in time, maybe not ready that we could take all the advantage of the markets.

And so I think a year or 2 from now we may be able to push that up a little bit.

But right now I think we're doing good with what we have coming.

I guess it was that obvious as to why I was asking.

Thank you, David.

I appreciate it.

Thank you.

And our final question is coming from Dan McKenzie of Smith Barney.

Thanks, operator.

Good morning.

John, regarding the 900 CompanyBlue members, I'm wondering if you can provide some color about what the profile of the typical company might look like, are these Fortune 500 companies, are these smaller companies?

I guess I'm just trying to get a sense of the razz of muscle these accounts might be able to provide at some point down the road.

It's a mix of large and small, but I don't have any good detail for you on that one.

We could do some checking with our marketing folks and follow up, but I don't have any good detail to offer.

To your point, Dan, I think the more frequency we get in the market as we move up, for example, if we have a lot of corporate travel upstate, as we go from 7 to 8 flights a day to Buffalo, as we're able to maybe add to 190 and fill in some of those gaps, add Boston in frequency to other places, that's what drives corporate travel is when you have the ability to fly on a more frequent basis.

We also see a lot to the Bay area and obviously to Long Beach.

To the South, obviously it's primarily a leisure destination.

So I think as we move with the 190s, we'll be able to attract a lot more corporate business.

One other thing to elaborate there.

Again, I haven't checked the listing, but my gut would tell me that it tends to be larger companies if only because smaller companies don't tend to have corporate travel management department bureaucracies.

They tend to be all bigger companies.

And that's what CompanyBlue is designed to do is to supply the necessary data to get travel managers willing to save money by flying JetBlue.

Okay.

And I know that you talked a little bit earlier about the stats regarding CompanyBlue members, but are there -- wondering if you can provide just some general corporate travel stats, the full fare mix for the quarter, business fares as a percent of total revenues, and how this trended year-over-year and sequentially?

It's very hard in our business to say (inaudible - audio interference) sit there and say you can draw an inference as to who's a business traveler and who's not.

Particularly given some of the rampant fare sale activity where you can have somebody buying at a deep discounted fare not that many days prior to departure who could very well be a business traveler and you don't know.

So the ability to figure out who's business and who's not is damn difficult anymore.

Other than surveys of your customers to ask them, it's very hard to tell.

Thank you.

I will now turn the call back over to Mr. David Neeleman for closing comments.

Well, I guess this concludes our fourth quarter conference call.

I look forward to hearing -- not hearing from you, but being on the call here at the end of the first quarter.

And as we look to 2005, 1 thing we know for sure at JetBlue, if we continue to manage our costs and take great care of our crewmembers and take great care of our customers that they'll keep coming back and flying.

We certainly don't have a lack of people flying us today, it's just trying to make sure that those fuel costs are managed and maybe we can get a couple more bucks on an average fare.

And so we're hopeful for 2005.

And what we know from this fourth quarter, that even given a lot of difficult things that could happen to us in the quarter and still make a profit, that this company was really built for some really difficult times.

So we're going to be around for a long time to come thanks to the great efforts of our crewmembers.

So again, thank you very much and look forward to talking to you next quarter.

Thank you.

This does conclude this morning's teleconference.

You may disconnect your lines and enjoy your day.