JetBlue Airways Corp (JBLU) 2005 Q2 法說會逐字稿

[OPERATOR INSTRUCTIONS] Good morning, everybody and welcome to JetBlue's second quarter 2005 earnings conference call.

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

This conference call contains statements of a forward-looking nature, which represent management's beliefs and assumptions concerning future events.

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

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, its ability to maintain its culture, its reliance on the high daily aircraft utilization, increases in maintenance costs, fuel prices, insurance costs and interest rates, the Company's dependence on the New York market, its reliance on automated systems and technology, its reliance on sole suppliers, additional government regulation and future acts of terrorism, or the threat of such acts or escalation of the U.S. military involvement overseas.

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 2004 Annual Report on Form 10-K A 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 day of this call.

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

Thank you, Carly.

Thank you, everyone, for joining us today.

We're pleased to announce that we had our 18th consecutive quarter profitability in the second quarter, with an operating margin of 9.1%, resulting in $0.11 of earnings per diluted share.

It was -- this -- these results were slightly ahead of our forecast, despite an average fuel price of -- of $1.50 which was -- which was higher than the -- obviously the guidance that we gave on the last quarterly call.

Our fuel neutral basis, had we had the fuel prices that we had a year ago, our operating margin would have been 16.9%, instead of the 9.1% that we had.

It's worth noting that our -- that our CASM in the second quarter was lower than our CASM in the first quarter, despite a $0.19 increase in average fuel costs per gallon.

So, we're -- we're pleased with our -- our cost performance relative on the -- and John will go into a little more detail on the nonfuel CASM in his remarks.

Our crew members, as usual, did an outstanding job in a very tough environment.

I'll talk a little bit more about that later in the call, but it's not easy to grow as fast as we're growing, given the degree of the difficulty that we have in this part of the country.

We have 58 more flights this year than we did at this time last year.

We're operating 17 more aircraft.

And we're flying close to 14 hours a day, average utilization per airplane with a load factor that's approaching 90%, which was 88%.

And we do all this and, at the same time, take care of our -- our crew members, and taking care of our customers, and it's really amazing the tremendous sacrifice that our crew members give every day for our customers, which obviously breeds the loyalty that we see from our customers.

Our RASM improvement obviously was what really drove this quarter and helped offset some of the higher fuel prices.

Our RASM was up 7.1% on low factor increase of 3.2%.

Yield was up 2.4.

This was achieved despite a 26% increase in ASMs and our average stage length was up 2.9%.

We put through several fare increases in the quarter to help offset some of the -- the rising fuel prices.

We're obviously very careful and cautious not to raise prices too far.

We are a low fare carrier and we want to be the low fare leader in our markets, and so we need to be competitive at all times.

So, we have to keep that in mind.

We don't want to -- the model of JetBlue obviously is stimulating traffic, and we'll -- we'll continue to do that.

We didn't see much improvement in April year over year but, however, Easter was in March this year instead of April.

But we did see significant improvements in our yields in May and June, and we estimate obviously that more than half of our yield increase came with a better improvement of -- of -- of mix of -- of fares.

I think we've worked really hard on our -- our yield management department, and we've increased our expertise and our -- our -- our personnel there, and they're doing a fantastic job of -- of -- of improving the mix and doing yield managing where -- doing just a much better job.

As we move through the term, we would expect fare increases to have more of an impact on some of those -- on some of those increases that we took for late May and June because we obviously -- we took those increases late in the summer and so as you go forward to July and August, we'll have a -- a better impact on those.

Not surprisingly, most of our -- our -- our improvement has come in Transcon markets.

They're significantly better than they were last year.

In the second quarter, 56% of our ASMs were in the west markets, the east to west markets.

In the third quarter, that -- that number rises to 61%.

Our -- the capacity in the Bay Area is down 18%, and in the LA Basin is down 7%.

And that includes even our entry into Burbank with the four flights we're flying today between JFK and Burbank.

Just a couple of notes on the Transcon business.

First of all, I mentioned Burbank.

It's off to a - a - a great start.

Customers are thrilled to be flying out of that airport and we're -- expect that we will continue to grow that market.

We have actually more markets in the west that are -- that are exclusive markets just to JetBlue, markets like Portland and San Jose, Burbank, Long Beach, Ontario, Sacramento, and Oakland, than we do ones where we have competition.

So, I think as we look forward and say, what's the strength of Transcon, are you going to be able to withstand another downturn like we had last year in that business, I think it helps that we have these seven markets that -- where we have exclusive traffic, and these are markets where people love to fly into.

They love their little exclusive airports, and particularly in the California markets, and so it's very popular with our customers.

Other markets, obviously, where we do have competition, we're doing very well in places like Las Vegas, San Diego, Seattle and Phoenix.

We're obviously having tremendously high load factors in those markets.

We also see that there's a lot of growth there, too, where with the high load factors that we have, there's a lot of homes for a lot of A320s, not only in the west, but other places as well, given our high load factors.

The day before yesterday, we launched our -- our fall clearance sale.

Kudos to our marketing team that came up with that tag line.

Fall clearance sale, everyone must go.

And I think everyone is trying to go, because we've had record booking days.

The day before yesterday we had a record booking day, which was -- not day before yesterday, but yesterday -- no, day before yesterday, I'm sorry.

We're 26% higher than any other day in the history of JetBlue.

Yesterday also would have been a record day, slightly below what we did the day before, but strong, strong bookings for our fall clearance sale, and great demand for the JetBlue product.

And so we're very pleased with that.

The -- all these things are happening together, but I think it was yesterday, I guess, we officially launched our partnership with American Express, where we started signing up customers, which will allow our card holders to earn True Blue points, and we've got a lot of promotions planned, a lot of advertising, and so we're very excited about that.

It should really accelerate the growth of our True Blue Program, and will give us addit -- a source of additional revenue in the future.

And our crew members did a great job of putting that together.

We're just exactly one month from the time we announced until we rolled it out is got to be some kind of record.

It's a tremendous accomplishment.

I think a good harbinger for -- a good indicator of how well this -- this program is going to do is when we joined membership rewards, we had made projections on what we thought the conversion rate would be and it -- it's far exceeding that.

I think it's a combination of a great brand, American Express, and the JetBlue brand is really driving people really to us, and we expect a lot of people to get those cards, so we're excited about it.

In addition, to the American Express program, we've made kind of a commitment this year that we will explore other revenue opportunities, and in that same light, by quarter's end, we expect to roll out a get aways feature on our web site, which will allow our customers to create and purchase customized travel packages on JetBlue.com.

It will really make JetBlue.com a one stop shopping resource for our customers that want hotels, and obviously, that's a much higher margin business when we do our sales, and so our team that's in charge of JetBlue get aways has done a great job, not only procuring the properties, but also getting the technology ready to go.

We didn't want to do it unless we had the technology that could -- that could dynamically package those things, so we're excited about that, and it should start slow but over time we hope that it will give us a -- a good revenue boost.

The second quarter was also busy from other things as well.

We opened two hangers, one in JFK and one in Orlando.

The one in Orlando for our LiveTV company down there for their installations.

We also opened a training center in -- in Orlando, and we also opened a series of gates in Boston's Logan Airport.

We're very pleased with our new space there and it's -- it's doing very well.

I should just mention that Boston is -- we've been now over a year in Boston and we're looking at really significant RASM increases year-over-year.

Folks in Boston have really taken to JetBlue and we're very pleased with that.

From Boston, we also began service to San Jose and to Las Vegas, and then we started the Dulles to San Diego service.

From JFK, we launched new service to [Ponce].

We're the only airline in [Ponce].

That service is doing well.

We also added additional -- an additional frequency to [Aguadia], which is another great market for us.

Portland, Oregon, we started.

I mentioned Burbank already, so we're doing well.

Just -- I guess a few days before everything -- before the clearance sale, we announced that we are going into Newark, and that, you know, many of you may have read or heard that I spend a lot of time on airplanes talking to customers, and I try and make little notes on napkins to -- to answer their questions and -- and take a tabulation of what people are asking, and -- and by far and away the largest question that I -- the most asked question is, when are you going to fly to Newark, and so we obviously took a look into our database and saw that we had a -- a pretty significant number of people that were coming from -- from that side of the river, and areas from the north, and obviously from the west, and thought that a way to be able to grow our -- our business to Florida would be -- and take some of the pressure off of what we're doing at JFK, would be to start some service out of Newark and provide that opportunity for people that are already coming over, which may already -- may fill 20 to 30% of the airplanes just if they transferred over and went -- went out of Newark.

That's -- that's potentially as high as that number could be.

And then obviously, the fares there are -- were much higher than what we have experienced over out -- out of JFK and even out of LaGuardia.

Just to give you an example, if you took the Ft. Myers fare out of Newark, down to -- down to Florida, it was $158 and I think our fare was $102 out of JFK, so a lot of people were coming over to take advantage of that.

Average fares in all of Florida were $102 from the New York side of the river, versus $133 from Newark.

So, there is some obviously much higher fares.

Now obviously, our -- our competitor has added some service and -- and lowered the fares, which will certainly stimulate some new traffic, and we believe, based on the new fares and the new frequencies, that there's going to be plenty of business for both of us, and we're going to be able to do well out of Newark, and we're very pleased to be there and with that, we will have obviously the most frequencies per day from the New York area to -- to Florida.

I think at the peak we'll have 77 flights a day from the New York area to Florida, and I think there is a lot of power in having service out of all three when we have such a dominant market share.

We're -- we're number one airline in four out of the five markets that we serve, and overall number one so we're -- it's a very important part of our business.

And I think obviously, yields in that -- those markets have been a little weaker than -- than they were last year, but I think to the extent you have market presence and market dominance, then that helps in the future as you build that franchise.

Just of note, [Song] has -- our average fares over [Song] are actually higher.

The difference between our fare and their fare has actually increased year- over- year.

I think there's probably been a little bit of an effort on their part to increase their load factor a little bit, and their load factors are up, but our average fares are -- the gap has actually widened, so I think it shows that that's the strength of having frequency.

And obviously, the limitation they have is they have a much larger -- larger airplane than we do and we can add a lot more frequency, which our -- our customers prefer.

I think our product's better obviously, and our crew members do a fantastic job.

Our buildup in Newark obviously shouldn't be -- isn't a massive buildup.

There are a limited number of gates there, and so we -- our plans to add service in the future will be limited by the resources that are there, but I think it's a great compliment and we have good frequency to the market, so we think we'll do well.

Moving through the 190, obviously in the third quarter, we're going to be busy certificating that airplane and getting it ready to go.

I think just to be prudent and make sure that we do everything right, we've kind of delayed the startup to November 1st.

I think we had said previously we're going to start sometime in October, but just -- move it to October 1st.

We have really three certifications going on with that airplane.

We are certificating the airplane itself, well, we aren't but Embraer is and they're doing a great job.

We're also certificating a new LiveTV system on -- onboard the aircraft, which requires a new antenna and new parts to that.

As well as we're putting in the airplane a dual headsup display system, which is a tremendous advancement for our pilots and so we have to certify that, so we're just being prudent and starting out on November 1st.

We're going to take delivery of the first airplane sometime in late August.

For now, it's on time and scheduled, and then we'll spend the months of September and October doing our proving runs, and certificating the airplane with the FAA to be ready for a November 1 start.

It will be after we receive delivery of the airplane, and once it's here and we'll fly it around, that we'll make the announcements as to the routes it will fly with that airplane.

And we'll have eight of those by year's end and seven will be in the schedule, so we'll always keep an operational spare, and I think that's also a very smart thing to do with a new aircraft type.

But again, very excited about the 190 and the possibilities there.

We keep saying it's a recall, but we are now in the final stages of our lease agreement with the Port Authority on a new terminal in Terminal Five.

The construction fence is up and we're doing some above ground remediation of some of the asbestos, and -- and should -- looking forward to within the coming days if not weeks -- weeks if not days to start demolition of that property and construction, and would expect about a three year time to be in that new 26 gait facility.

And we're very excited about that.

Taking a look at our operating performance this quarter, obviously we're not -- 76% on time isn't something that we're accustomed to here at JetBlue, but we certainly have a degree of difficulty where the bar's been raised.

We have obviously more congestion, more people out flying around.

It's interesting to note that in June, of the 30 days of the month -- in the month of June, 15 days we were on ground delay programs in either Boston, Washington or New York, so half of all the dates.

And then so far in the month of July, we only have seven days in the whole month of July so far that we have been without ground delay programs, so that certainly is affecting our on-time percentage.

We are pleased that we completed 99.7% of our flights.

We'd like to complete 100% of them and we have done that in quarters before, but it's our goal to get every customer on to their destination when they book it on the day they do it, or at least after midnight on the day they do it, and sometimes that -- that hurts on-time percentage.

And we will certainly take a hit to on-time percentage to protect cancelling our flights and disappointing our customers.

Mishandled bag rate -- mishandled bag rate was 3.8 per 1,000, and the customer complaints was .24 per 100,000.

Outlook for the quarter, we're seeing strong bookings in the month of July and -- and we're very pleased with that, particularly in the west.

We continue to see close-in strength across the system.

We expect August will be similar to July, and even with the typically strong Labor Day weekend falls entirely in the month of September, so that may cause a little weakness in the end of August, but hopefully that will be more than offset by some strengths in September, which is -- which is a difficult month for this industry and obviously we're not -- we don't have high expectations for September.

We never do, but we're -- the Fall fare sale, the Fall fare clearance sale, everyone must go, I just want to get that tag line in there again, is certainly going to help build some of the traffic in the fall with the demand that we're seeing.

Moving to guidance, we have updated our assumed fuel price for the remainder of the year, to reflect what we're currently seeing in the forward curve net of our hedge position.

The forward curve dictates a net fuel cost per gallon of $1.59 for the third and fourth quarters of this year, which reflects a $59 price per barrel of oil, with a $12.50 crack spread.

Crack spread is becoming more and more important, obviously.

The $59 price is below that of what it's currently trading in this month, but obviously, we're in what they call contained [inaudible], so, if you look at the forward curve, it's pretty reflective of that.

We obviously have hopes that the price will come down a little bit from that level, but we're plugging in that $1.59 price.

So, based on that high fuel price, we're now expecting operating margin between 3 and 5% for the third, and expect a range of 5 to 7% for the full year.

John will go into some additional detail on the guidance, but I think it's important to note that had we had -- we had previously guided for the year 5 to 7%, and that was on a cost -- cost per gallon of $1.45 instead of the $1.59.

If we had run that fuel cost back through the forecast, we would have upped our guidance to 6 to 8% for the full year.

So absent of fuel, our outlook for the year has improved compared to our last call in April, and then that's a result obviously of our better revenue performance, which is -- which I've gone into in quite detail.

So, with that, I'd like to turn the time over to John, our -- John Owen, our CFO, and then after he gets through, we'll -- we'll take some questions.

Thanks, David.

Good morning, everyone.

As we reported, there was a 9% operating margin for the first quarter, which was above the margin guidance that we had given.

Costs were basically right on target, but we exceeded the guidance due to stronger than expected revenues.

Operating revenues for the quarter rose almost 35% to 430.1 million.

That was a 30% increase in revenue passenger miles, and passenger revenue of 412 was up 33% year-over-year.

Capacity in the second quarter increased almost 26% year-over-year to 5.8 billion ASMs.

It was slightly lower than our forecast, which called for an increase of roughly 27%.

Aircraft utilization was essentially flat, with last year's figure of 13.7 hours per day.

We reported a very strong quarterly load factor of 87.7.

That is our highest ever second quarter load factor, and up 3.2 points from year ago second quarter.

We also saw a 27% increase in revenue passengers carried.

Capacity for the second quarter was allocated 56% east-west.

That was down one point year-over-year. 34% north-south, which was up one point year-over-year, 6% to the Caribbean, which was up one point year-over-year, and 4% in our short haul markets on the East and West Coasts, which was down one point year-over-year.

Second quarter yield was 804 up 2.4% year-over-year on a 2.9% increase in length of haul, and as David mentioned earlier, we think about half of our improvement that we saw in RASM and yield for the quarter had to do with revenue management side of things, which implies that the other half had to do with the various fare increases that we put through during the course of the quarter.

For the quarter, RASM was $7.36, up 7.1% over 2004, on an average day's length that was essentially flat.

May and June were really responsible for that improvement.

Both months saw double digit percentage gains in RASM growth.

They offset April, which was pretty much flat with April of last year, principle reason being that this year, Easter fell in late March.

Last year it was in April.

We had this big gap between Easter in late March, and Passover in late April, and so the -- we had a little trough in early April, which accounted for the kind of flatness in April, but then things really kicked into gear in late April and continued in May and June.

For the quarter, RASM was up approximately 6%.

That would be passenger RASM, as opposed to total RASM, and excluding the effects of new markets, that is our usual same store sales approach to things.

Passenger RASM was up 6.5% in the same store markets, while ASMs in those markets were up 12%.

Other revenue increased 70%.

That was primarily due to increased change fees, as well as increased True Blue points and LiveTV third party revenues.

During the quarter, we put four new aircraft into service, all of which were financed with escrowed funds from our double ECT transaction from last November.

At the end of the second quarter, the operating fleet was 77 A320s, 52 owned, 25 leased under operating leases, and the average age of the fleet was right around two and a half years.

Turning to the balance sheet, we ended the quarter with 562 million in cash and investment securities.

Related to that, we have spent a lot of money on simulators and facilities.

David talked about the two hangers and the training center, and the six simulators that go with the training center, so we've come out of pocket with a lot of cash on facilities issues, and we have a number of financings in the works.

One of those is an increase in an extension of the progress payment financing facility that we have for progress payments on our aircraft.

Another one is financing of the simulators in Orlando, which it's debt financing through export development of Canada that we expect to close during the quarter, and of course, we've always planned to try to do a tax exempt offering at some time in Orlando related to the hanger and the training center, assuming that the market rates were appropriate.

So, we'll continue to monitor that situation and if we see rates that we like, you might see us do an offering and if not, you might not see us do an offering.

On the cost side, excluding fuel, the cost performance continues to be good.

Operating expenses for the quarter were 391 million, up 42% year-over-year.

CASM was 669, up 13% year-over-year.

That year-over-year increase in CASM is obviously, principally attributed to the fact that fuel costs per gallon increased 55% to $1.50 per gallon net of hedges this year, versus $0.97 net of hedges in the second quarter last year.

Significantly though, our crew members continued to do a great job on the fuel economy situation.

In second quarter, we saw fuel burn per block hour down 1.7%, compared to second quarter last year, and that's despite the higher load factor that we were running, and normally higher load factors contribute to higher fuel burn.

So, great job all around by our -- our crew members on the fuel conservation efforts.

On a fuel neutral basis, had we had the same $0.97 fuel price that we saw in the second quarter of '04, we would have reported a CASM of 612, which is up 3.7% year-over-year, and as David said, our operating margin would have been 16.9, which would actually have been an improvement over the 14.1% operating margin in the second quarter of last year.

Taking a closer look at some of the line items, sales and marketing expense decreased by 12% on a unit cost basis, due mostly to lower ad spending.

We booked 77.4% of our reservations through JetBlue.com.

That's up 2.2 points year-over-year, and early indications are we've had some days where we've actually hit 80%, because of the sale in the last couple of days because of our fall fare sale.

We now have over 2.6 million members enrolled in the True Blue Program, and are obviously anticipating we'll see a lot more enrollments in that, as a result of the co-branded card rollout with American Express that was announced yesterday.

And our online corporate booking tool, Company Blue, continues to grow and we now have over 1300 companies' travel departments registered to use that product.

Depreciation and amortization was up 27% on a unit cost basis, due to a greater number of aircraft financed through debt.

Just basically a change in mix between leased and owned, as all the new aircraft coming in have been owned.

We also placed into service our new hangers at JFK and Orlando, and the training centers and simulators -- the fact that all those went into service during the second quarter, also helped contribute to the depreciation and amortization number increasing.

Now that will be offset somewhat in the future by a reduction in rental expense, as we will no longer be renting the hanger we have been renting at JFK.

LiveTV will no longer be renting the hanger they had been renting in Orlando.

We will no longer be renting simulator time from Airbus in their training center in Miami.

So, you should you see some offsets in the rental line, as we make that transition on all of those items.

Maintenance material and repairs was up 29% on a unit cost basis year-over-year.

We performed 19 aircraft checks this quarter, of which four were the heavy C4 checks.

And we had eight engine removals.

This compares with 11 C checks in the second quarter last year, of which only two were C4s, and a total of six engine repairs in the quarter last year.

Significantly, as many of you probably already know, we have executed a 10-year agreement with MTU in Germany, one of the IAE engine partners, and their shop there in Hanover, Germany will be handling our engine repair work going forward.

That agreement is a flight hour agreement, where we pay a fixed amount per flight hour and transfer all of the risk associated with engine overhaul and repair to MTU.

So, what this will do is make our maintenance line much more predictable.

We won't have swings up and down, depending upon how many engine removals occur in a given quarter.

We ran a very competitive bid process and believe, over the life of the contract, that this will represent some significant savings to us, and have just an excellent team project within JetBlue.

People from a lot of different departments contributed to running the competitive bid.

We're pleased that the entity that we wound up entering into this contract with not only won first place from a lowest cost perspective, but they -- of the different competitors that we ranked, they also were the ones that our team ranked highest for basically reputation for quality and everything else, so we think we got best of both worlds with that contract.

And we're very pleased with that.

Tax provision for the second quarter was 46%, and I think that needs some explanation.

We are currently forecasting a full-year tax rate of 44.5%, and this is significantly higher than the 41% rate that we had estimated we would incur when we gave guidance at the first quarter earnings call.

The reason for this is that, due to higher forecast aircraft fuel costs, we have done a new forecast for earnings for the full year, and our estimate of our own earnings for the year has come down from the previous estimate, based on those higher fuel prices.

When you bring down your estimate in earnings, but the permanent items that go through the provision, permanent differences between book and tax, stay the same, permanent items get larger relative to the revised lower estimate of total income, that drives up your full-year tax rate, and since we accrued at a lower rate in the first quarter on a different expectation of earnings, we had to book enough in the second quarter to cumulatively catch up for the fact that the first quarter was now lower than the assumed rate for the year.

So that's what's going on there.

And so finally, that brings us to guidance.

David's stolen my thunder and given you the margin guidance already, but I'll give you a bit more detail as we go here.

As David said, booking trends in the third quarter looked good.

Strong demand in July.

August looking good.

We are hopeful we'll see continued close-in booking strength in July, August and September the way we have seen very strong close-in booking strength in the last couple of months.

Available seat miles continue to expect capacity to grow between 26 and 28% for the full year.

Third quarter, that range would be 28 to 30%, fourth quarter would be 28 to 30%.

Average stage length projected to be around 1,450 in the third quarter, and roughly 1,350 for the full year 2005.

We do expect utilization to remain essentially flat to slightly up, in both the third quarter and for the full year.

For aircraft, we've got two slight changes to our delivery schedule.

We have agreed with Airbus to accelerate one A320 delivery, scheduled for January 2006, into December of 2005.

So, that would bring our total in 2005 to 16 deliveries, up from 15.

But, not a net change in deliveries.

We're just moving it, and it happens to move from one year to another, so we wanted to point it out.

Additionally, we'll take one extra Embraer 190 in 2005, bringing us to a total of eight in 2005.

We previously had spoken about seven.

And our four more to book with Embraer now at 101, up from 100.

Current A320 deliveries are two aircraft in the months of July and November, two each in those two months, and one aircraft in every other month of the remainder of 2005.

So, again that would bring us a total 685 A320s, delivered by year end 2005.

As David mentioned, Embraer 190s, we plan to place into revenue service on November 1, but remember we're still only looking for a very small portion of total system capacity, roughly only a half of one percent of ASMs for the year will be made up by Embraer 190 flying.

On an operating margin basis, as David said, we're looking at 3 to 5% as our guidance range for the third quarter of 2005, based on that assumed fuel price per gallon of $1.59 net of hedges that David mentioned earlier.

And we do derive that off the forward curve.

We don't know whether it's right.

We don't know whether it's wrong.

It's what the curve says, and it's a guidepost so that all of you that keep models out there, you can put your own fuel assumptions in if you disagree with the one that we've used as the underlying assumption there.

And again, we still expect full-year operating margin to be between 5 and 7%.

For the third quarter, we expect CASM to increase about 12% year-over-year.

Again, at that assumed fuel price of $1.59 net of hedges, compared to 608 CASM in the third quarter of last year when fuel was at $1.08.

Currently, expect CASM for the full year to be up between 10 and 12%.

And that's on an assumed fuel price for the full year looking at actuals for the first half, and $1.59 for the second half of 151 for the year, net of hedges, compared to 106 last year.

With respect to fuel, about 20% of our fuel burn is hedged for the remainder of '05, in the form of swaps at just under $30 a barrel.

No hedges in place for 2006.

We've also purchased some caps recently, for the third quarter, that we look at as really catastrophic insurance, nothing more.

So, in addition to what I just mentioned in the way of swaps, with caps we have, in July, an incremental 30% of our fuel burn hedged at just over $55 a barrel with -- and for August, an additional 20% capped at $65.45, and September, an additional cap of 15% at $66 and change.

So again, that's catastrophic coverage.

Those are not swaps.

Total aircraft capital expenditures expected to be roughly 300 and -- or 530 million, including predelivery deposits for the balance of the year.

A reminder, all of the A320s are financed, with the exception of that acceleration from January to December, every one of our remaining A320s for the year is prefinanced through the double ECT transaction, and on the Embraer 190s, with the exception of that one additional order that we made, every one of our deliveries from Embraer will be a sale/lease pack transaction with GE Capital, for the balance of this year.

Other capital spending, including LiveTV spare parts, is expected to total about 150 million for the full year.

All our debt, with the exception of 425 million in convertible notes, and all of our cash investments are on floating interest rates.

Average debt rate at the end of the second quarter was 4.7%.

Average investment return was 3.2%.

Continue to expect full-year 2005 interest expense to total just in the vicinity of $100 million.

For shares outstanding, we'll give you some estimates for outstanding shares for Q3 2005 and full year, they're based on no additional shares assumed from option exercises, and an assumption that our convertible debt.

Both offerings will still be antidiluted.

We expect there will be 19.3 million options outstanding at an average strike price of $16.08.

We've assumed 10% market appreciation in the stock by year-end 2005.

That drives us to Q3 '05 estimate of 111.6 million weighted average shares outstanding, and full year '05 of 111.2 million weighted shares outstanding.

So, that's the conclusion of the prepared remarks from David and me, and Carly, we'd be glad to open things up to questions now.

Yes.

Hi, good morning.

I guess a couple questions here.

Regarding the fare initiative that you just launched, it looks similar to last year's million seat sale, and I was curious if you'd be willing to throw out the number of seats -- is it a similar size, a million seats this year?

It also looks like the fares are a little bit higher, but the advanced book looks a little bit more aggressive.

I think last year maybe you were 14 day.

Now maybe you're more like 7 day.

What -- Can you maybe give us some -- some additional insight into -- is it -- is it competitive or sponsor maybe in reference to your point, David, that I think you made about how you're seeing closer in bookings than even what you were seeing a year ago.

I think as far as the [inaudible], Mike, it's irrelevant if the seats aren't available close in.

What that allows us to do obviously, is to fill in little gaps here and there if we need them, but as you pointed out, the fares are higher than they were last year, and they should be because fuel prices are higher.

But it's a typical fall sale.

We do -- if you look at our revenue projections from August to September, you scratch your head and say, how could it be that much lower from one month to the next?

But it is, and people go back to school.

It's just September is a really bad month, and then October gets a little better, and then we get back into the holidays and get back.

So it's just a way to kind of fill those gaps and it's going extremely well, but on higher fares, I wouldn't focus too much on the advanced purchase, because the -- the -- the sale period is further out than either 14 or 7 days.

It's probably irrelevant.

Okay.

My second question -- when you -- when you look at your cap structure and you look at your debt to cap ratio, and I think this question is more for John.

That number has moved up of late.

John, what -- what sort of debt to cap ratio do you -- do you target over the long term, and as you look at your deliveries out over the coming years, at what point do you have to come back to the markets?

If you could give us your thoughts on that?

Sure.

We've been quite open over the years of saying that our target that we would like to stay at or near is a 75% debt to total cap ratio, taking into account capitalization of off balance sheet aircraft operating leases.

And you can crunch the numbers, you can run your own estimates.

You can see that we're kind of at the place that we're pretty near the max of what we want to be.

And we've also made it clear over the years that if we're not adding enough equity the good old-fashioned way through earnings, retained earnings, to keep that number under control, that we will consider from time to time follow on equity offerings.

We've already done one since the IPO, and if the board determines that we need to do another one in order to keep our ratios in line, then we would be prepared to do so.

Okay.

Thank you.

Thank you.

Your next question is coming from Sam Panella from Raymond James.

Okay.

Good morning.

Good morning, Sam.

How much revenue do you think you could get from the American Express card, and what type of profit margin could this garner?

I would consider the answers to both of those questions to be proprietary and confidential, Sam.

Nice try.

Had to try, right?

But obviously, it's something that we're -- we're obviously excited about or we wouldn't have done the deal and if you do -- how this works, obviously, is if somebody has one of our cards out there and they're spending, buying groceries and gas and other things with it, they get JetBlue points, and we're obviously compensated for those points and then we put them -- the redemption is on flights that we would expect to get lower -- lower yields so we see it as a net positive for us, and so we're -- We're excited about it.

I think, as I mentioned in my remarks, given the strength of the membership rewards, I think it's a good indicator of how well we're going to do with that.

Okay.

And can you comment a little bit more on the fare environment?

It appears that Transcon has improved, but fares down to Florida remain weak.

Can you comment a little bit more on what you're saying?

I think that's a good characterization.

They're weaker.

We have a very strong -- I think it's important to note the -- some of the -- a lot of the capacity increases that may be caused from the weak fares are caused by us.

So, we've looked in the mirror and the problem is us, and I think it's just building of our franchise.

And I think when you have more market share in the market, you have more control over -- over the fares and the growth.

And right now, we're in a build mode still in those markets and we're going to continue to do so.

And for the foreseeable future, and I think that maybe short term -- a little short term pain for a long term gain, so that's kind of our strategy.

Okay.

And lastly, given that Newark is a more congested airport, are you -- do you have any concerns in terms of that impacting your utilization, and have you seen any improvements at Fort Lauderdale Airport?

Yes, I think the first question about Newark, I think, yes, I mean, we are concerned about it, and we are concerned about obviously our on-time percentages.

That's obviously not where we don't want to be, and now we're going to Newark.

But, I think a couple of things that we've done to be able to mitigate that, and I don't think it's going to affect utilization, because we've pretty well isolated those airplanes over there to the extent that they get into a ground delay situation and usually it happens in the afternoons.

You already know that our President and Chief Operating Officer ran Newark for Continental Airlines, so we're very -- he's very familiar with the operation over there.

But, to the extent that we get some afternoon stuff, we'll just run late and get the planes back in position to operate on time the next morning.

So, it shouldn't affect our -- our utilization, but it may affect our on-time percentage.

But it's a small percentage of our total flying obviously.

In Fort Lauderdale, we're pleased with the FAA and the position they've taken down there, and they basically have reiterated that they've got the runways down there.

They're going to use the runways like they have in the past, and we think that that's going to significantly improve the situation in Fort Lauderdale.

We've done a couple things ourselves in acquiring some -- an additional gate and right now tentatively either in December or January, looking at even putting a spare plane down there to help.

With the presence we have going in and out of Florida, for delays and mechanicals to be able to have some -- a spare plane there to complement the two spares we have in JFK and the one spare we have out in Long Beach, really keeps our operational integrity intact, so we're really hopeful that things in Fort Lauderdale will be better this year than they were last year.

Okay, great.

Thank you.

Thank you.

Your next question is coming from Ray Neidl from Calyon Securities.

Yes, David, with you now going into Newark Airport, you did say probably because of gate constraints, the routes that you're going to be operating out of there are limited.

I'm just wondering by putting some resources into Newark, is that going to slow down your JFK growth?

I think that's kind of our goal, Ray, a little bit because I think there's a -- we have a time here.

We have 13 gates at Kennedy.

We've announced that we're going to be adding seven new gates on a temporary facility that will be connected to our existing facilities, with a walkway between the two -- covered walkway, and that facility will not be ready, we believe, until President's Day, and so we're a little tied at Kennedy until we get those additional seven gates.

And being able to take the customers that are now coming to Kennedy that would prefer to go out of Newark, and taking that pressure off of Kennedy I think is a good and prudent thing to do.

And spread ourselves around the New York area, and give our customers more options from more airports.

And then when we get those seven gates, we're going to be able to kick it up again, and then the 190s will fill in that and some additional frequencies we have, to not only Florida, but to the West Coast as well.

Yes.

That was very good how you did it so secretly at Newark.

I never even heard rumors that you guys were going in there until the night before it happened.

Well, you must've been the only guy that didn't hear it.

Oh, really?

With the 190 coming on board, I know you have a lot of bugs to work out of that to get that going, but is there a possibility that with you using the 190, you could kind of use derivative Embraer products, such as the 170 or the 195.

Would that fit into your future plans?

I don't think so.

We think that every series of aircraft has a sweet spot.

We think the A320 is a sweet spot and we haven't -- we haven't made any decisions to go with the 19 or the 21.

We think the 190 is the sweet spot in the -- in this family of airplanes and don't see any reason to go higher.

I think if you go to the 195, it's also a great airplane, but it does limit your range, which limits your flexibility.

The 170, just economics, it just doesn't -- doesn't work for the low fares that we're planning to offer there.

I think as far as the bugs go, I think it's important to note that the 170 and the 190, from an avionics point of view, and many, many of the components are the same.

The engines are different and it's a new engine type, we're very confident in GE's ability to perform on a launch of a new engine.

But a lot of bugs or a lot of the -- the issues with launching an airplane have already been worked out in the 170, and we've been following very carefully Chitaqua and other airlines that have operated that airplane, and we're very pleased with the dispatcher liability based on the short life of the airplane.

And so -- and all those are nearing, obviously to our benefit, and so we're very comfortable.

But even all that said, the way we run our business we're going to keep a spare plane around, and just to keep the operational integrity at the highest levels at what we've come to expect on the A320s

Okay.

And finally, I think you've got a policy of not overbooking your flights.

If it that's correct, is there any plans to change that with the heavy traffic loads that we're seeing going forward?

No, at this time there isn't, Ray.

We always look at it just because -- but we really like our customers going to the airport knowing that we haven't sold their seat twice to somebody else.

Which is really the standard operating procedure for this industry, and we think it takes a lot of pressure off of our people at the airports to not have to deal with that stress.

Now, if you said well, you've had one flight that's operated for five years, and it's always had at least two or three no shows, can't you overbook it by one?

I guess we could take a look at that, but we don't see the revenue impact is that great.

And remember, our booked flights, I would put up our fully booked flight revenue, as far as people showing up, against any other airlines because we have customers that show up when they say they're going to show up, and if they don't, they call us and we resell their seat.

So, there's really no need to get into that game right now, but not saying that we'll never do it, but we continue to look at it.

But, we don't think the revenue impact is that great.

Okay.

Great.

Thank you very much.

Thank you.

Your next question is coming from Jamie Baker from J. P. Morgan Chase.

Good morning, everybody.

Good morning.

John, as the 190 has gone from paper airplane to reality, and as you fine tune your own plan on where it's ultimately going to fly, can you give us an update on how we should be considering its exfuel CASM relative to the 320?

I think in the past you said it was a penny higher, but as you become more intimately familiar with the plane, any update would be appreciated.

Yes.

We really haven't crunched any numbers in recent months to try to update anything yet.

We thought we'd do that after we get the plane in service, so I don't really have anything new I can tell you on that, Jamie.

Okay.

Jamie, the fact that we don't have any operating history, there's nothing in our projections that has changed from what we said previously, but that's with the caveat that we haven't operated the plane yet, so we don't know any -- there's no other thing that would lead us to believe that it would be different than what we have until we start operating it.

I guess I'm a quarter ahead of myself.

Follow-up, David, in the past, you said that it was your preference the status quo at U.S.

Air would prevail, as opposed to the speculation that they would simply liquidate.

Considering the proposed merger, can you give us an update on your thoughts, both as it relates to East Coast fundamentals, but more importantly, how JetBlue behavior might be affected by U.S.

Airways' rejuvenation?

I don't think our opinion has changed at all from that and I think if you said what would you prefer U.S.

Airways' liquidation, or America West buying U.S.

Airways, or a merger, we would say the latter.

We would prefer that.

So, we don't compete that much with U.S. Airways.

Very limitedly.

And, not to say that we won't a little bit more as we get the 190 in some of these markets, but there's other markets where U.S.

Airways isn't, so we don't see them as a major competitor of ours.

And so our feeling about that hasn't changed at all.

Okay.

Thanks for the time this morning.

I appreciate it, gentlemen.

Thank you.

Thank you.

Your next question is coming from Gary Chase from Lehman Brothers.

Good morning, guys.

Just a quick question for a -- on -- on just Florida as we look at the third quarter.

Obviously, last year you had a pretty unusual hurricane season that ended up costing you a little bit.

I'm wondering if we should expect to see any material benefit in the RASM comps, or whether that was just small and whether you'd cancelled enough flights to really make it not a RASM issue.

I think again the fact that this hurricane season is looking to be worse than last year, it would be pretty bold of us to say that we're actually expecting to do better because of the hurricanes of last year.

We -- The hurricanes are obviously -- you're rolling the dies, but the way things have started out this year, we don't have a lot of hope that things are going to be much better than they were last year.

Hopefully, they are and obviously we all have our fingers crossed, and making sure that it doesn't, but I don't know if there would be that much of a difference based on what we're seeing today.

You tell us how many hurricanes there'll be and we'll tell you what we think will happen.

All right.

Well, we'll get back to you with that.

The other thing I was curious about, David, when -- when -- when people think of JetBlue, I mean, what often comes immediately to mind is good brand, great brand, what have you.

You've mentioned opportunities to generate other revenue.

You talked about the get away click on the website, and so on.

As you think more broadly about the ability to leverage what you've built on the brand side, what's the -- is there any way to give us a sense of what you think the long-term revenue opportunity is there?

And how much of your revenue do you think could come from non-passenger sources as you look out, I don't know, three, four, five years?

I think it's obviously a very difficult question, but, I think we have two kind of competing interests here.

On one side, we -- and there are people that have done a lot of things to exploit their brand in a lot of different areas, and I think our branding folks are very cautious.

They probably err on the side of being a little cautious not to spoil the brand, and so we've got the range a little bit on it that, but I think we have to be able to leverage what we have and what we've made.

We had a board meeting yesterday and had a quite extensive discussion, and the board made some really good suggestions on some things that we could do, and we have a lot of smart people here that will figure it out.

So, I guess in answer to your question, I can't give you an estimate over the next three to four years, but I'll tell you we do have a strong brand.

We are going to be very careful on how we use that brand, but I think if we use it prudently and wisely, we should expect that which would get some pretty significant revenue from it, and -- and -- but we're going to go cautiously.

Okay.

Thanks, guys.

Thank you.

Your next question is coming from David Strine from Bear Stearns.

Thanks.

Good morning.

With respect to the new maintenance agreement that you have for the power by the hour, what's the start date of that?

Oh, yes.

Sorry about that.

The start date was July 1.

So, you won't have to listen to me talking about how many engine overhauls we had each quarter anymore.

And so, you said that tjat will still begin to smooth that line item.

In terms of just the immediate near term impact and how that will -- how will that affect you?

That line item?

Yes.

The immediate near term impact, we assumed in the forecast that we used back in April at our earnings call for the first quarter, the effects of this contract effective July 1, so it doesn't really change anything in the way of guidance that we've given, because we already had the competitive bid run at that point and we knew what the pricing was going to look like.

And we knew that the contract was in works and expected to be signed in June, which it was for effect on July 1.

It is lower than what our original budget was for the second half of the year.

Okay, thanks, John.

Yes.

Just one more comment on that, I think a lot of people say, JetBlue, maintenance, as the maintenance goes up, costs are going to go way up and I think this is a very significant deal in my opinion, because maintenance -- engine overhaul is the most significant cost of maintaining a fleet, and I think it's very significant that we've got this deal and with a great company, with a great business partner, and that we actually were able to lower our projected budgeted engine costs for the second half of the year, and take the risk out.

And smooth those out.

We just couldn't be more happy with this deal and with the people that we're dealing with at MTU.

And it really kind of takes away from that equation, what about when you start overhauling engines because they're now paying as we go based on -- as of July 1 and that's in the forecast.

And I would just add to that.

David focused on the second half of the year because that's where your question came from, but obviously, awarding an exclusive 10-year contract through a competitive bid as you might imagine, we anticipate saving money every year over ten years, compared to what our alternative of one off time and materials, overhauls on engines otherwise would have been.

And will it cover the whole fleet?

This covers the entire A320 fleet, in terms of the IAE engines.

Obviously, there's nobody with a shop set up yet to overhaul the engines for the Embraer 190, so it would be highly premature to be thinking about that, but, yes, it does cover the entire A320 fleet.

And, I would suspect that we're going to run the 190s for four or five years like we did the 320s, and by the time we will get down the line and take advantage of the fact that we have the maintenance honeymoon on those engines, and when we get down the line, then we'll look to do a similar deal with somebody.

Okay.

And last question, thank you for that.

John, I got the fuel hedges for the back half of the year ,and I guess in terms of your thoughts about trying to do anything for the longer term, what's your strategy?

Are you just going to kind of hold off on that right now?

We had a long discussion about this at a board meeting yesterday, and we talk about hedging a lot, but you look at the forward curve and you're sitting at $59 or better out into the end of '06, into '07, numbers like that, depending on what day it is.

We can't see doing any kind of swap related activity that would lock in numbers that are unprecedentedly high like this, so I think at this juncture, our mood is only to be buying additional catastrophic coverage like I alluded to where we bought some caps.

So that if some supply disruption happens somewhere and fuel price spikes dramatically, that we have some true insurance type of protection there, but the mind-set here and within our board is that we really don't think that this number will hold at this level.

We expect it to decline and consequently, we're not prepared to lock anything in at this level.

Okay.

Thanks for the help.

You're welcome.

Thank you.

Your next question is coming from Glenn Engel from Goldman Sachs.

Good morning.

Can we go back on the maintenance side because I'm still a little bit confused.

Do you no longer benefit from the honeymoon period for the A320s that you still have that are not there?

Will the costs gradually rise over time?

Can you give us any sense of where does the maintenance costs for ASM end up gravitating towards overtime?

Can't give you an answer on the maintenance CASM per ASM in total, but what I can do is discuss the MTU contract and how it works.

Obviously, their job as a supplier is to look at the totality of engines we have today and their relative ages and the order book that's coming, and forecast when they think they're going to incur shop visits and when they think they're going to incur the money -- the expenses associated with those shop visits, and then structure a payment stream from us that starts low and rises over time so that the money -- the cash flow that they receive from us works for them to match up with the cash flow they expect to spend in the repairs of the engines.

So, it is a graduated payment structure that starts low and moves up, which is representative of the fact that the average age of our engines will increase and some of our engines will start getting older, and start incurring larger shop visits, LLP replacements, and things like that.

So, it's not like this is one flat line number for ten years.

It steps up over time based on their estimate, as well as ours, of how we think that trend will occur over time, which is that engine maintenance costs will increase over time.

But, I think that John's last point on the last call is that we haven't anticipated where that step up would be, and this contract is less than --

what we would have been if we'd stayed on a pure one off time and materials without an exclusive contract.

Thank you.

That's pretty clear.

Can you also help me on the -- you said advertising was down and that helped with distribution costs in the second quarter.

Can we expect that to be -- bumped up again in the fourth quarter significantly with the Embraers?

David?

I think we have a budget now for that and I'm not sure -- that's in our forecast obviously.

The strategy on the 190, I think to begin with, and this could change, we're continually looking at it, that is to focus on markets where we already are and maybe connect some dots for a little while before we enter some new markets, so I would just -- without looking at the exact fourth quarter number, I don't have it right at my fingertips, but I would say that it's not going to be hugely significant over what we have because we're not going to be doing a lot of -- yes, I just got it handed to me here.

It's not up significantly at all versus what we had in the second quarter, or I think the third and fourth quarters is virtually the same that we have in our budget so it wouldn't be any great jump up there.

And along the lines of what David said, we're not looking to be adding any new cities in November and December as we inaugurate the 190, and consequently, that tends to be where a lot of your one off higher ad spending is is when you're trying to introduce yourself into a new city and we're not planning any of that at this juncture.

That will probably come in the spring after we get through the winter.

Thank you.

Thank you.

Your next question is coming from Helane Becker from Benchmark.

Thank you very much, Operator.

Hi, gentlemen.

David, I thought I heard you say that your load factor in July is running around 90%, or maybe 88%.

Did you mean to forecast that level?

No, I was talking about the second quarter.

I was just basically talking about the second quarter saying -- I said close to -- close to 90% and then clarified it was actually around 88, so --

88.7.

I think our load factor for July will be announced when we finish the month.

All right.

Got you.

Okay, thanks.

Thank you.

Your next question is coming from Al Portal from PIMCO.

Yes, hi.

I missed part of the call, so I apologize if I'm asking something that's already been covered, but it sounded like -- like most of the call was focused on East Coast routes and fares, and I wonder if you could just speak to West Coast potential expansions of any of your airports, specifically Long Beach, and any -- maybe any material changes to your number of day flights or fares.

I think we talked about the improvement -- dramatic improvement in our Transcon business over what we experienced last year, and the number of exclusive markets we have now versus the non-exclusive, which actually we have one more exclusive market, which means we're the only ones doing the service, compared to the ones where we have competition.

As far as West Coast goes, Long Beach obviously, we're capped out because of slots that we can make some shuffling of the deck, but our short haul business out of there is doing so well that we're hesitant now to pull those flights for some more long-haul flying.

The 190s are going to be East Coast based airplanes for some time to come, because of the -- it's where we're based and we think there's more opportunities out here, more people, higher fares in some of the markets that we're targeting.

But, we're certainly going to increase our West Coast presence with more frequencies.

I think we could have done more frequencies this year, had we had the airplanes to do so.

And we'll have those next year, as we continue to grow those markets.

Okay.

Thanks.

Thanks.

Thank you.

Your next question is coming from Douglas Runte from Morgan Stanley.

Yes.

Good morning.

You talked a little bit about the new terminal at JFK, and it seems to be moving forward with some shovels in the ground.

I guess looking at everything else that's been built at JFK, whether it's 1, 4, or the new 89, seems to be 50 to 75 million a gate.

I'm wondering what you're expecting for the total cost and how you're going to keep it below some of your competitors, and also will it have FIFs?

Okay.

The totality of the project, which includes the air train connector, a parking garage, roadways, some of which are the Port Authority responsibility, some of which are our responsibility.

The totality of the project is estimated somewhere in the -- as I recall, $800 million range.

850 or something like that.

And that's 26 gates that we're planning to add there.

But, the actual terminal is substantially less than that.

And we're -- the terminal is being financed by the Port Authority and the way that we are going to pay for that, obviously, is by non-employment rate that's been negotiated, and that -- we feel that that employment rate is more based on the costs of the terminal, not for all the improvements, because the Port Authority derives revenue from parking structures and other things, so they have their own economics at work.

And that the cost for employment versus what we're paying today at Kennedy is -- we've said this before, about $1.00 or so higher per employment but, we also have other revenue opportunities in that building, with maybe expanded food facilities and retail facilities that we don't currently have at terminal six, with better quality stuff that we think that we can -- we hope to kind of mitigate some portion of that, and also have better operating expenses.

And so, overall it's just a huge win for us particularly because we're doubling the number of gates that we have.

So, we think our customers are going -- going to really like being there.

So, now if you just took the cost of the terminal and divided it by the number of gates, it's not anywhere near the number you're talking about, and it's more akin to what we're paying today with the slight improvement.

Do you expect to have FIS facilities in your current --

Yes, the FIS facilities -- obviously, there's two issues with FIS.

You have to -- you build it and then they have to agree to staff it.

Our -- our intention is obviously in that particular terminal is not to do a live international fly in.

We don't really have -- we have A320s.

We can reach the international destinations, but if you go north, it's all precleared.

You don't need FIS.

There are even places obviously in the Caribbean that have -- San Juan and others don't need it as well, as far as the American Virgin Islands.

But there are some places that do, and so we're looking at possibly a small FIS, if can it can even be staffed, but wouldn't be a major cost of the project.

It would be a place where you could do maybe plane at a time for some one off destinations that we can do, maybe even on a seasonal basis.

But it's not a huge emphasis of what we're planning there in terminal five.

One last quick airport question.

If a new finger suddenly materialized at terminal A at Newark, how many gates would you like to take?

Obviously, you're limited to two currently.

I guess we'll see how it goes.

I think that's a big market.

It's a very lucrative market over there, but you are somewhat constrained by the runway configuration there and we're -- we got those two gates because we were told that they were going to be available and not for very much time, and so we grabbed them and moved some of our capacity -- moved some of our growth over there.

But I think that's really too early to say, but we'll continue to monitor it closely but we think we'll do well there.

Doug, I would say that part of the decision-making process when we took the two gates is that they came available, and we had to kind of view it as a situation where it might be years before you could ever see another gate available at Newark.

So, here was an opportunity and we had to make a decision, yes or no, to react to something that doesn't happen all that often.

So, we reacted to it

Thank you.

Thank you.

That does conclude the Q and A session.

I would like to turn the floor back over to management for any closing remarks.

Okay.

This is John Owen.

Before David does his closing remarks, I'd just like to correct one misstatement of mine earlier in the call.

Our eagle-eye director of financial reporting has pointed out that I didn't do a very good job of reading my script when it came to the guidance, with respect to capital spending.

So, what I should have said is, $200 million of nonaircraft capital spending for the full year, which is about 75 million in the second half.

I said 150 earlier.

So, I wanted to correct that while we were still on the call, and then I'll turn it over to David to do closing remarks.

Great.

From our experience, we know that we're doing closing remarks, you all drop off the phone anyways and you never hear it, so I'll just say goodbye and look forward to talking to you next quarter.

Thank you very much.

Thank you ladies and gentlemen.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.