JetBlue Airways Corp (JBLU) 2005 Q3 法說會逐字稿

Good morning, everybody, and welcome to JetBlue's third-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 such 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 high daily aircraft utilization; increases in management costs, fuel prices, insurance costs and interest rates; the Company's dependence on New York market; its reliance on automated systems and technology; its reliance on sole suppliers; additional government regulations and future acts of terrorism or the threat of such acts or escalation of the U.S. military involvement overseas. (inaudible) concerning these and other factors is contained in the Company's Securities and Exchange Commission filings included but not limited to the Company's 2004 annual report on Form 10-KA and quarterly reports on Form 10-Q.

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

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

Thank you, Ashley, and good morning, everyone.

Welcome to our conference call for the third quarter.

As many of you have had a chance to read our press release, you know that we had a 3.1 operating margin in the third quarter, resulting in a $0.02 earnings per diluted share.

This is obviously the low end of our margin guidance due largely to the cost of fuel for the quarter of 1.70 versus what we had forecasted at 159.

Obviously had we had our fuel price that we had forecasted, we would have been at the top end of the range.

On a fuel neutral basis and if we had the price we had a year ago, our operating margin would have been 12.6%.

Certainly in this fuel environment, it is tough on all airlines, but I think it's very tough on us, and I will talk about fuel prices in a little bit as it relates to the hurricanes in the Gulf.

Certainly our revenue environment continues to be challenging, although our load factor for the quarter was up 1.7 points and our yield was up 6% and our total revenue per ASM was up 9.4%.

So obviously that would have -- that is why we would have had a 12.6.

So revenue, even though it is stronger than a year ago by 9.4%, it is certainly not enough to keep up with the paces and enough to keep up with the rising fuel prices.

As you see now, we are forecasting a significant loss for the fourth quarter and likely to have a loss for the full year based on an assumed fuel price of $2.00 a gallon net of hedges.

By the way, the hedges would work out to be about $0.15, $0.15, $0.16 a gallon, so gross of hedges, that would be about 2.15.

Just talking a little bit about fuel here, obviously sense that is the big story of the day, 31% of our operating costs this quarter were fuel, which are, of course, our largest expense component.

And we all know that crude prices have been steadily increasing, but really it has not been really the crude price that has hurt us thus far in this quarter.

It has really been the crack spread, which is the refining rate which have historically run about $0.065 a barrel.

And we're facing crack spreads today of about $20 a barrel and a soaring jet fuel differential.

A lot of our fuel here that we need to buy in New York comes from Gulf Coast, and we have seen jet differential from heating oil prices at $1.00.

Fortunately, going forward, those prices have come down significantly, and where, heretofore, we paid about -- from the beginning of the quarter until now, we have paid about an estimated price of about 2.40 a gallon, today's price going forward is just under $2.00 a gallon.

So we hope to see some improvement in the price of oil, and when you talk about net of hedges, that is how we get to our $2.00 number.

It could be conservative; it could be aggressive.

I think it all depends on what happens on the fuel through the end of the quarter, but we are only into the quarter 20 days.

So we think that it is certainly a possibility that we could average this 2.15 price or $2.00 price net of hedges for the quarter.

We have 20% of our consumption hedged in formal swaps for the remainder of the year.

We have put on some catastrophic caps if we were to have a spike in crude, but obviously we did not get that.

So obviously they were not as an advantage to us as it would have been.

We have done some collars in 2006 with some modest protection beyond 2006.

We don't have any hedges, which we spend a lot of time talking about hedges around here, and based on the relative lack of hedges on our competitors, we think at this level it would be somewhat folly to do a large amount of hedging for an extended period of time given the lack of hedges of our major competitors.

I mentioned earlier the revenue environment is challenging.

It was challenging in the third quarter, and that was obviously increased by the fact that we had the hurricanes and really the shutdown of our very successful New Orleans operation.

We figure our costs were about .5 million affected by that, and we lost about 2.5 million to revenues.

There is about 3 million there that was affected by the hurricanes.

We have by the way gone back into New Orleans, and they are flying one flight a day there, and that flight is doing quite well, and we are quite pleased with how that flight is booking out and hopefully to return there in full strength in the near future.

We put some fare increases in place this summer, and we had year-over-year increases, very strong load factor for the summer obviously.

But as we got through September, we tried to sustain some of those high costs, high fares, higher fares, particularly on the trough days.

And what we found is that on the low off-peak days, we did not -- we were not as successful of maintaining those high prices, and we have lost a little momentum in the second half of September and in October, but we loosened those fares up on those particularly off-peak days and yesterday launched a three-day fare sale, which we are seeing great results from.

A very, very strong booking.

So I think the bottom line is the JetBlue brand is strong.

People love flying us, and they certainly are -- we can bring the business in, but obviously we are trying to yield up to the best we can to compensate for these higher fuel prices.

The West markets are obviously particularly sensitive to spikes in fuel prices.

Because obviously the amount of fuel that is consumed by someone going five or six hours is more than someone going an hour or two and a half hours down to Florida.

And so we are up year-over-year significantly on our average fares to the West Coast, but again not enough to cover this big spike in fuel prices, which we are going to have to continue to try and get a little bit more on the West Coast travel.

As far as our -- we are forecasting solid RASM improvements for October, November, December over last year, and we're also forecasting PRASM growth both year-over-year and for -- year-over-year and on a quarter to quarter basis.

So I will get to that in the forecasting in just a second.

What we did in the fourth quarter given that there were days, I guess weeks in this quarter we were paying up to $3.00 a gallon out of New York, we did cut some capacity on some of the trough periods on the low day of week times.

Most of you know we have large amounts of frequency for a lot of our markets, particularly places like Long Beach where we had eight daily flights and places like Fort Lauderdale, so we did do some Tuesday, Wednesday cuts and some day/week stuff.

Not to inconvenience any of our customers.

We only cut flights that were about an hour apart where we could combine and did it on more than a week out basis, so schedule integrity is very important to us.

Aircraft utilization will decrease slightly which will improve our RASM, but will also increase our CASM in the fourth quarter.

We pulled -- and John will give you this guidance -- but about 200 million ASMs out of the fourth quarter to compensate for this and that will -- as we talk a little bit more about the CASM, you have to kind of adjust it for all kinds of things going on, but a portion of the CASM increase obviously was the fact that we have canceled -- pulled back some of this capacity, which net bottom line is better because of the cost of fuel, but it does affect our CASM.

With all that said, the fourth quarter we expect an operating margin -- a negative operating margin between 5 and 7% based on the fuel price for the quarter of $2.00 net of hedges.

Without the $9 million stock charge that I will talk about in a minute, the negative margin guidance would be 4 to 6%.

So obviously that has had an effect.

That is the non-cash charge, and I guess I will talk about it in a second.

We are projecting for revenue for the fourth quarter to be up almost 10% if you take total revenue year-over-year.

So on a unit basis, even though we got a little slow start in October, that is still I think very good, except obviously not enough to keep up with the rising fuel price.

Interestingly enough, if we were to run the same forecast on a fuel neutral basis using last year's fuel number -- if wishes were fishes I guess -- excluding and take out the stock comp charge, we would be guiding for the fourth quarter of between 4 and 6 and 8% positive margin instead of the 3.2% that we did last year.

So again revenues are on the rise, but not enough to cover the spike in fuel prices we saw because of these hurricanes.

On the cost side, John is going to go into more detail, but when you look at the forecasting, you look at the cost, we're pleased with our cost performance ex fuel.

There are a lot of things going on there.

As I mentioned, the pullback in ASMs, the 190 start-up which is obviously very expensive.

A lot of pilots now out there being paid not generating revenue, planes flying around empty, doing proving runs.

We also have some profit-sharing we have had to back out.

But when you look at all that and put it altogether, I think we are very pleased with our non fuel cost performance, and John will go into that in more detail.

We're seeing some very good things in our markets where we are flying, and let me just give you a couple of details.

We have had a tough year so far on the South markets going to Florida, and I think there has been some increased pressure from Song and they have added some capacity, and so we have had to lower some of our fares in those markets where we have been getting really fare increases on the East/West.

Song has been keeping the pressure on.

But I'm pleased.

We got our second-quarter numbers yesterday or the day before yesterday and really some really astounding numbers I think, particularly in the Boston market.

But let me just cover.

Our JFK to Florida we actually increased our RASM gap from 30% premium to Song to 32%, so.

And our RASM was down 3%, but Song's RASM was down 5%.

Now Boston is truly astounding.

We had a negative RASM premium -- I guess that is not a premium if it is negative -- but we were minus 11% to Song in our second quarter that we started and now we are plus 16%.

So that is a 27 point swing from being negative 11, up 16, which our RASM was up 18%, while Song's was down 9%.

So that is certainly going the right direction, and we're very very pleased with our performance against Song, and we did some quick numbers, and we try and estimate what their costs are because they don't give them to anybody, so it is hard to know so we have to look for their DOT data.

But we assume that our unit costs are between 20 and 25% lower than theirs.

They are certainly in bankruptcy now, and they are trying to reduce those costs.

But even if they were to reduce -- close that cost gap, which we don't think they could ever get to our costs, even through bankruptcy, they still have a severe revenue problem with -- out at Kennedy with a plus 30% deficit.

So certainly a lot of our performance going forward is what happens to Delta, and based on those numbers, we're going to keep doing what we're doing, and because we don't -- we think it's a little bit of an exercise in futility on their part, but we're going to stay strong because this is our market.

This is what we -- this is very very important to us.

By the way, we talked a lot about Boston before, but every single market where we have, except for Boston, Las Vegas where we entered during the quarter, we had a higher RASM and RASM payments in Song in every single market.

Overall Boston, just to continue on the Boston theme here, is really maturing nicely.

We just added a bunch -- announced a bunch of new service out of Boston.

We have a lot of gates up there that we are going to -- are committed to, and we will be rolling into over the next few years.

We announced service to Austin and Nassau to Richmond, to West Palm Beach, and as well as JFK Boston with 10 flights a day.

And those flights are really booking nicely.

We are very pleased with the bookings on that, and we compare that obviously to the shuttle pricing where it is today.

It is certainly a great alternative for people to go between JFK to Boston.

Just a quick word on the 190s.

We are real excited to have these airplanes.

I was on one yesterday.

We had a board meeting down in Orlando and took the board through the airplane, and it is 36 channels of TV, 100 channels of XM radio, the Fox InFlight movies, just a very comfortable seating.

And we see so many opportunities to put these airplanes into some much higher yielding markets than we have been -- than we have today with the 320s, and it will really complement the 320s in a great way.

And I think these RASM premiums when we are able to do some peak, off-peak stuff in Boston and Florida will really help us a lot as well using the 190s to help supplement that.

We're also using the 190s to bring service to JFK obviously.

We've added JFK Richmond, JFK Austin, JFK -- I mentioned the Boston service, and it is certainly off to a great start.

Just by way of mentioning JFK, JFK is where we really we were born, and it is where we kind of feed our children, and it is where we live.

It is so important to us, and in a press release that we detailed last week, in this fourth quarter, we have about 130 flights a day out of Kennedy.

With the new addition of our new gates that we should have on by Presidents' Day, we will be able to take that number from 130 to almost 200 departures a day with the 21 gates that we will have there, which will bridge the gap between the time we get to our new terminal with 26 gates, which would take us then up to 255 today.

We're very very committed obviously to Kennedy and to growing it, and we see that adding the 190 service to the mix in A320s and adding additional markets that we will announce shortly will only strengthen our presence there and strengthen what we're doing out at Kennedy, and we're very pleased with it.

As far as Newark started service on October 5 -- also very pleased with that.

It is off to a great start.

Month to date load factors, there are about 75%, and in fact we actually expect as we look forward to November and December, we see RASM premium -- RASMs that are equal to or greater than what we will have out of Kennedy after a month or two.

Something we have built out of Kennedy for a long time.

We are already seeing Newark consumer markets outperform what we're doing at Kennedy, so we are very pleased with that.

And interestingly enough, only about 5% of our Newark customer base are coming from Manhattan, so we don't appear to be taking much away from either JFK or LaGuardia service.

So it is a net add of revenue for us -- very excited about it.

Some of you may have picked up that our other revenue increase in the third quarter about 84%, and there's a lot of factors that John will go into later.

But part of that is the fact that our partnership with AMEX on our cobranded credit card is showing really good traction, and that number will continue to increase in the future, as well as our membership awards program, which has been way above the forecast, and also there's some LiveTV revenue and some other things that John will detail.

So we're very pleased with our relationship with American Express, and we are adding cards at a very quick rate.

During the quarter, we also launched our getaway program, which is our online booking tool for packages.

And it has just been a soft launch, but we are very pleased at how that is now working.

And I think week over week we like doubled our business.

So we're going to continue to grow that, and when we do launch it in a big way, it will become a more significant part of our business.

We really tried to this year look at ways that we could increase revenue other than just our customer revenue and just passenger revenue.

We could do other things like credit cards and packages, and so we are off to a great start there.

Just to say a few words about our operating performance in the quarter, it was a challenging one.

Obviously we had a lot of thunderstorms.

We have worked really -- we have really looked at the aftermath of the summer and really identified some things that we could have done a little bit better.

We're pleased with the fact that our completion factor was -- their top or industry-leading at 99.4%, even though we had a difficult summer.

I think that's what our customers want.

They don't want us to cancel flights.

It certainly run late other than to have us cancel a flight.

Our customer complaints remained low, so I think there is a tremendous amount of loyalty for JetBlue.

A couple of nights ago we received our fourth award of the Conde Nast, our Readers' Travelers' Poll with 30,000 people surveyed.

So I think our brand is strong.

People are certainly excited about flying JetBlue, even though we had a rough operating summer.

By the way in September, we were 83.6% on time and expect to hopefully be in the 80s in October as well, even though we had a lot of rain here over the last 10 days or so.

Lastly, I am going to talk just a little bit about the decision that we have made -- the board has made to accelerate the vesting on the stock options that we have out there.

This acceleration is being done for all option holders of the Company, excluding our Section 16-B officers and board members.

We think that is important that they don't vest obviously.

We have offered stock options to our pilots, to our dispatchers, to our maintenance technicians, managers, directors, of course, vice presidents because we believe options encourage crew members to think and act like owners of the Company.

85% of our options are in the hands of our nonofficers and crewmembers.

We certainly regret that the FASB has mandated expensing these options.

We don't think it is really the right thing to do, but we see it as a reality now, and so we have decided to accelerate this vesting effective December 9.

If our crewmembers will have the option of vesting or not and if all of them vest 100%, there may be ramifications for doing it or not.

Our expense for the fourth quarter could be up to $9 million, but that will then over the next seven years we will avoid $90 million of expense by doing the 9 million in this quarter.

And I think it's a very prudent thing to do. it is unfortunate we had to do it, but certainly we don't make the rules, we just have to follow them.

So with that, I will turn the time over to John to talk more specifically about the results.

Thank you, David.

Good morning, everyone.

We will start with the revenue side of things.

As David said in his press release, he pointed out we had a 3.1% operating margin for the third quarter.

Nonfuel costs were slightly better than our own internal expectations, but fuel at $1.70 versus $1.59 that was embedded in the guidance that we gave on our Q2 call kind of overwhelmed the good performance on the nonfuel side of unit costs.

But still, of course, we did manage to hit the low end of the targeted operating margin range for the quarter, and overall we are pleased with the way nonfuel cost control has gone and with the RASM increases that David has pointed out.

We have had solid year-over-year RASM increases every one of the four quarters this year.

Unfortunately the RASM increases have been eclipsed by the dramatic increase in fuel prices, particularly post Hurricane Rita.

Operating revenues for the quarter were up nearly 40% to $453 million.

That was a 31% increase in revenue passenger miles and an $11 increase in average fares.

Capacity in the third quarter was up nearly 28% year-over-year to 6.3 billion available seat miles.

Aircraft utilization was pretty much flat at 13.7 hours with the same quarter last year.

We had a strong quarterly load factor of 86.6.

That was up 1.7 points from last year, and for the quarter, we had a 25% increase in passengers carried.

Capacity distribution in the third quarter was 61% going East/West.

That is up 3 points over the prior year third quarter. 28% was North/South.

That is down 1 point. 7.5% was to the Caribbean, which was down 1 point.

And 3.5% was in our shortfall markets, which was also down about a point.

Third-quarter yield was 7.87, that was up (technical difficulty)--.

(OPERATOR INSTRUCTIONS).

Your teleconference will resume momentarily. (technical difficulty)--.

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Thank you, Ashley.

Well, folks we apologize for that.

We have no clue what just happened, but we are back.

Anyway, continuing I just said that third-quarter yield was up 6% at 787, and that was despite the fact that the average length of haul also increased about 5%.

Normally an increase in length of haul should drive yields down, so that real strength was quite good.

And for the quarter, RASM was 715, up 9.4% over 2004.

Average stage length was up 4.4%.

Excluding the effect of new markets, let's step back.

The RASM I just gave you a moment ago at 9.4% was total RASM.

If you look at passenger RASM, it was up a little over 8%.

But if you exclude the effect of new markets, we always like to use this same same-store sales basis because the Company grows a lot and adds lots of new markets.

If you look at it on a same-store sales basis in terms of markets that we were in last year, we increased capacity in those markets by 14% in ASMs, and passenger RASM in those markets was up nearly 11%.

So, again, we have seen a lot of benefit from the RASM side, just not enough to offset the fuel prices increase.

Other revenue increased 84%.

As David mentioned earlier, primary drivers of that were increased revenues by LiveTV with our third-party customers, revenues from our American Express membership rewards and cobrand credit card programs and increased change fees.

During the quarter, we put four new aircraft into service, all A320s, all of which were financed with escrow funds from the AATC transaction, which was priced back in November of 2004.

We also accepted delivery of not just our first two Embraer 190 aircraft, but the first two Embraer 190 aircraft delivered to anyone in the world during the quarter, but, of course, they were not in operation and generated no ASMs, and we plan to place them into service on November 8 starting with the JFK Boston service that David mentioned earlier.

And those two Embraer 190s were financed through sale leasebacks with GE Capital.

At the end of the second quarter, operating fleet was 81 Airbus A320 aircraft -- 56 were owned, 25 for leased with an average age of 2.6 years.

On the balance sheet, we ended the quarter with 491 million in cash and investment securities.

Looking at the expense side of the P&L, again excluding fuel, cost performance was good.

Operating expenses were up 439 -- were a total of 439 million, up 46% year-over-year.

That is a CASM of 693, which was up 13.8% year-over-year.

Again primarily attributed to a fuel price increase that was 58% year-over-year from $1.08 last year to $1.70 this year.

On a fuel neutral basis, had we incurred the $1.08 fuel price we saw in the third quarter of '04 this year, we would have had a CASM of 626, up only 2.7% year-over-year, and we would have had an operating margin of 12.6% versus the operating margin of 7% that we had in the same quarter last year.

Taking a closer look at some of the expense line items, sales and marketing expense increased by 17% on a unit cost basis.

That was due mostly to increased advertising spending and higher credit card fees as a result of the increase in average fare.

And, of course, part of that advertising spending was to launch the opening of Newark.

It is I think the largest new city opening on one day for us, even eclipsing our start-up in Boston January a year ago.

And while we were well-known in the New York Metropolitan area, we kind of went out of our way to make sure that everyone in the New Jersey side of the Hudson River really knew who we were, and I think have had a very successful launch at Newark.

We obviously have limits to what we can do at Newark.

It is a very gate constrained airport.

They have only got two gates, so don't expect us to be doing any significant additions to Newark.

We are operating what we can with the gates that we have got.

Related to sales and marketing, we did book 77.7% of our reservations through JetBlue.com for the quarter.

That was up 2.7 points year-over-year.

We now have over 2.8 million members enrolled in our TrueBlue flight gratitude program, and our online corporate booking tool, CompanyBlue, continues to sign up new registered companies to use it.

We have 1500 registered companies now signed up to be able through their travel departments to enable their people to fly on JetBlue end track the travel of their own employees.

We are also now running -- roughly 11% of all of our check-ins are online at JetBlue.com with an additional roughly 30% at our airport kiosks.

So the automation process to simplify things for our customers and for ourselves seems to be working fairly nicely.

Maintenance materials and repairs was up 34% on a unit cost basis.

We had 18 airframe checks this quarter, including three of the heavy C-4 checks and eight engine removals compares with only 10 C checks in the third quarter of '04, of which three were the C-4s and a total of seven engine repairs.

One thing to note, we have a new powered by the hour engine maintenance contract for our A320 engines with MTU in Germany that took effect July 1, so that we will probably quite reporting how many engine removals we had every quarter because it won't be really relevant anymore to your analysis and understanding of things.

And we will have the effect of taking some of the swings in expenses that run up and down depending upon how many engine removals occur in a quarter out of the volatility in the P&L.

So that is a positive thing.

Within the other income line, we did record a net gain for fuel hedging ineffectiveness of about $2.1 million during the quarter.

It relates to our hedges for the fourth quarter because of the breakdown in the correlation between crude and jet fuel that occurred principally after Hurricane Rita, some after Katrina, but particularly after Rita.

And so in essence we were forced by the way the accounting for hedges works to take hedging effectiveness for hedges that -- are really hedges for fourth-quarter fuel, and recognize the income during this quarter.

So that's where that 2.1 million came from.

Tax provision for the quarter looks downright odd.

And forgive my long-winded explanation here, but it is pretty bizarre when you lose money on a pretax basis and make money on an after-tax basis.

So let me explain what is going on there.

When you do a tax provision, you need to do a forecast for your full year, determine what you expect your full-year provision would be, figure out what that rate would be that goes with it, and then true-up your year-to-date on a cumulative basis.

What happened this quarter was as we put a new forecast for the year in place, which was the much higher fuel price assumption, took our forecast forward the full year from a gain to a loss, we wound up essentially over accrued from a tax perspective through the first two quarters based on the new information that we had with the new forecast.

And so in trueing that up, we wound up with a fairly substantial tax provision that was a tax benefit for us in this quarter and a fairly significant rate change.

You can get some very large swings in tax rates the closer you get to zero.

Because your permanent differences start really causing some strange effects.

So my apologies to everybody who was trying to do models and figure out what this was.

We were not expecting this one either, so it was a bit of a surprise to all of us.

Now switching to guidance, we continue to expect capacity to grow between 24 and 26% for the full year and for the fourth quarter as well.

Average stage length is projected to be around 1300 miles in the fourth quarter, and that is down a good bit from what we have been doing, and that is purely a 190 effect.

The A320s are still going to be in the mid 1300s for average stage length, but the 190s are being deployed on a much lower average stage length, particularly the 10 flights between JFK and Boston, which will be one of the shortest segments we fly.

And that just brings down the average stage length of it.

And from an aircraft perspective, A320 delivery schedule has one in October, two in November, one in December to bring us to a total of 85 A320s at the end of 2005.

We will also end the year with eight Embraer 190s.

Again, we commence service with the first of those on November 8.

From an operating margin perspective, as stated earlier based on our current forecast, we are expecting between a negative 5 and a negative 7 operating margin for the fourth quarter and an assumed fuel price net of hedges of $2.00, and that is inclusive of the estimated $9 million non-cash onetime charge for stock compensation expense related to the accelerated vesting that David spoke about earlier.

Given the recent volatility in fuel prices, that $2.00 assumption, we think it is good but who knows.

We have had such huge swings.

In one week we watched fuel prices at JFK go up $0.90, and another week we watched them go down $0.40.

So with the volatility situation, I think forward curves starts to become a little bit irrelevant after awhile, but $2.00 is our number.

You are welcome to amend your models for whatever number you think it ought to be.

We do expect to report a full-year positive operating margin of between 2 and 4%.

But the below the line items will be such that that would bring us to a loss for the full year.

That is our expectation at this time.

From a CASM perspective, we expect CASM to increase roughly 20% year-over-year, again using that $2.00 fuel price assumption.

And we expect CASM ex fuel to be up roughly 6 to 7%.

That is largely a result of reducing capacity somewhat. the shorter stage lengths run by the Embraer 190s during the quarter, some of the drag associated with getting started with the 190s, whereas David said, we are out flying empty airplanes around right now for FAA approving runs and for pilot check airmen initial operating experience that has to be done.

So we're incurring a lot of expenses and generating not a lot of revenue.

Again, that is a onetime issue that occurs right before you introduce an equipment type and should not reoccur.

And, of course, that CASM ex fuel estimate increase of 6 to 7% also includes the onetime stock comp charge that we mentioned.

With respect to fuel, we're about 20% hedged on our projected fuel burn for the fourth quarter.

That is in crude oil swaps at just under $30 a barrel.

We have purchased some caps for the fourth quarter, and we look at them as catastrophic insurance.

So in addition to the swaps I mentioned above, we have about an incremental 30% hedged in October at just over $68 a barrel, for November an incremental 20% at just over 70, and in December an incremental 20% at 71.35.

We also did recently purchase some costless collars for 2006 which hedges about 25% in the first quarter, 20% in the second, 15 in the third and about 5% in the fourth.

From a capital spending perspective, total aircraft capital spending is expected to be roughly $300 million, including purchase deposits in the fourth quarter of the year.

Other CapEx, including LiveTV and spare parts purchases, is expected to be around 40 million for the quarter.

We did enter into a loan agreement to allow us to borrow up to $49 million to finance the purchase of several of our A320 and Embraer 190 simulators.

As of end of the third quarter, we received just over $36 million of the funds under that and expect to close on the balance of that transaction in the fourth quarter.

Again, all of our debt with the exception of 425 million in convertible notes is floating-rate as are our cash investments.

Average debt rate at the end of the third quarter was 5%, and average investment return rate was 3.5.

Shares outstanding, estimated shares outstanding for Q4 and the full year -- we got a lot fewer assumptions this time because since we're forecasting a loss for the year, basic and diluted become the same thing.

So on the assumption of no additional shares from option exercises and the two convertible deals remain antidilutive, we would wind up with basic and diluted weighted average outstanding each forecast for fourth quarter of 105.9 million and for the full year of 105.0.

So with that, I think David and I are finished with our prepared remarks, and we will be glad to open it up for questions.

(OPERATOR INSTRUCTIONS).

Jim Parker, Raymond James.

Just some thoughts about cutting back on capacity.

I think last quarter in the call you indicated that a bit of the overcapacity was a result of JetBlue itself.

What is the outlook going forward in capacity down to Florida on the part of JetBlue?

Well, Jim, that is a good question, and I think given the fact that we have the RASM premiums on Song and Song has in the fourth quarter -- there is a lot of flip-flopping going on.

They pulled some service out of LaGuardia and put it over two Kennedy and then took it back out of Kennedy and put it back over to LaGuardia a month later.

But they are still up net about three flights a day -- a flight to Orlando, a flight to Tampa, a flight to Ft. Lauderdale.

They have pulled out of Fort Myers.

And I think if you looked -- okay, yes, short-term, let's maybe cut back a little capacity, get the RASM up, rates, fares.

But if we have a competitor that we feel has really underperformed where we are, I think that maybe looking at the short term and saying okay, we can do a little better short-term, but what does that do to us long-term?

I think it's very important for us to keep the pressure on and to maintain or even in some places add a little capacity through the peak times.

We will probably do a little better job in the future on the troughs, pulling down on the off-peak days.

But we are full on the weekends, and we will continue to be, so.

But we need to look more long-term in more of a towards the end of the year basis and what is going to happen to Delta and Song long-term as opposed to trying to pull stuff to maybe make a quarter or two look better.

I am going to elaborate on that, Jim, just a little bit.

We want to emphasize when we talk about these pullbacks we are reducing three markets during the November troughs to the early board of November leading up to Thanksgiving by one round-trip a day on certain days of week only.

It is like a Tuesday/Wednesday type deletions.

Likewise, we are doing in the early December through after Thanksgiving and before Christmastime where we are taking a total of seven markets and dropping one round-trip on certain days of the week only.

So this is not massive cutbacks in capacity.

This is very selective focusing on the fact that, we like every other airline, have a hard time getting people to pay us a whole lot of money to fly on a Tuesday or Wednesday.

I think the only one that we did the daily was when we went from -- we pulled one Long Beach flight, and by the way, Long Beach we did overdid it a little bit in Southern California, because we only added a flight or two to JFK Long Beach, but we added the four Burbanks and one to Ontario.

So if you add it all up, I think it was about 14 flights a day, and we probably need to be more like 13 or 12.

So these are surgical day of week stuff ,as John mentioned, with a little bit of trimming on the Southern California for the off-season.

Okay.

A question regarding the options for crewmembers.

I understand why you're doing this and vesting immediately.

What does the plan going forward for options for crewmembers, what in order to keep them incentivized to keep the share price up, what can we look forward going forward?

Status quo.

We aren't going to split in the stock, which affect the expense by a third.

But we're going to continue to give the same number of options to our pilots and to our technicians.

So we think it is very important.

You know, largely we hope that analysts will look at that and kind of it is a non-cash charge that we think is really nonsensical, but it is something we have to deal with.

In addition to that, we also have a CSPP program, which we think is very successful in the Company, and that will obviously add to the expense a bit -- as well will add to the expense.

We have almost 80% participation from all of our crewmembers in that.

And, you know, with our rankings and our RASM premiums, with our competitors and our Conde Nast award premium over our competitors, we think a lot of that is derived because our people are owners of the Company.

They feel vested in the Company and they feel -- it's very important to us.

And just because some accounting organization makes some ruling that is a non-cash issue, it is not going to change the way we do business.

Mike Linenberg, Merrill Lynch.

Just I guess a question for John.

When you look out for your aircraft deliveries for next year, the Embraers and the Airbuses, how many of those airplanes have you already lined up financing for?

If you could just elaborate on that, John.

Sure.

On the Embraer 190s, we have sale leaseback financing lined up with GE through to April 2007.

So it covers everything this year, everything next year and first quarter of 2007.

With respect to the A320s, we have worked out term sheets with bank debt for and awarded deals basically.

All the term sheets are being finalized at this juncture for all but three of our A320s delivering next year, and that was not for lack of capacity.

We are working on another transaction at this point to get set up to cover those three.

So we are very well financed all the way through for all of next year.

Just my second question, what is the rationale behind for splitting the stock?

It is a long-winded answer, kind of complicated.

I really don't want to take up all the time on our call for this.

I will be glad to talk to you off-line if you like.

But the essence of it is, by the time you work your way through and how our stock option program works and how 123R works, we are better off using a lower stockprice with more frequent splits than a higher stockprice with less frequent splits in terms of trying to manage the P&L effect of 123R.

Raymond Neidl, Calyon Securities.

David, if we assume the worst, that all prices are not going to stay up at current levels and the industry is really having a hard time making money at current ticket prices with these high oil prices, what would be your plans for your growth?

Do you have the capability of slowing down growth, or would you even want to slow down growth?

Or you are going to try and keep the current pace up regardless of oil prices?

I think it all depends on what prices you are talking about.

If we are talking about 2.46 a gallon, it's different benefit than when it is 1.90 a gallon.

But right now the intention is to continue to add growth.

What we have done in the past, as you know, is add more and more frequency in our markets.

We think the cheapest add it makes our Company stronger.

But maybe changing a little bit of the philosophy going forward of maybe adding new markets, more new markets as opposed to continue to add frequency in existing markets is something that we could certainly do that would -- I think if you've got 12 or 14 flights a day in a market and if you've got to raise prices $5 or $6 to cover the added fuel price, maybe you don't need to be at 16 5 today.

You can stay at 12, and then take those couple of airplanes and go open a new market with it.

So I think that would be maybe a little bit of a shift, but right now we are fully intending on delivering all the airplanes, and maybe you can see some new markets as opposed to increased frequencies.

Okay.

And with the 190, I saw it last week.

It is a beautiful piece of equipment that you have there.

And I'm just wondering what are you looking at and what should we be looking at as critical hurdles as you receive more of these aircraft, potential problems that could crop up?

What are you looking at?

And would the sister airplane, the 170, be a possibility in your future as well?

Well, I think, first of all, to answer your last question first, the 170 does not really make any sense for us at all because I think the 170 is really a product (inaudible).

You know it would not be -- I don't think anybody who is flying them would be flying them at 70 seats if they did not have scope clause.

And so we are free from that thank goodness, and so 100 is we think a much better number for us.

The costs of the plane are very similar to operate the plane are very similar, so why not take the extra 30 seats.

As far as major hurdles, it is a -- the plane, the 170, is in service from a maintenance point of view.

It is performing relatively well for a brand-new airplane.

Our eight plane schedule for this year contemplates a spare airplane.

All flights will be relatively short in the fourth quarter and close by, and so we are going to get really familiar with the airplane and then when as we start the next year flying to Austin and to Richmond and other places.

So now the proving runs are going well.

We don't anticipate any problem at all with the startup date on the 8th of November, and I think when our customers get on board and fly this airplane, they are going to say wow, this is unbelievable, as I think you experienced when you visited us and saw the airplane.

I think one comment back to your first question about maintaining high load factors and how are we going to do this with frequency, you know, we are going to get it to the load factor.

The question is, what fare do we get it at, and if we need a little bit higher fares, then we are going to put the additional frequencies in other markets.

It's just that we are pretty good at doing that.

I think our yield management department is we have learned a lot.

We've got a little improvement to do, but we are going to continue to manage it, and it is great to have a product everybody wants to fly, and that makes our job a lot easier.

With Independence Air kind of imploding in Washington, and I know they have been really racking up problems for pricing on the East Coast, do you think that East Coast pricing may strengthen a bit and help you out in that respect?

I don't think it can get worse.

So yes, it certainly is a factor, particularly on the connecting flights to Florida from upstate for us.

But we do really have a lot of competition.

I think where Independence Air has hurt us is on the Transcon out of Dulles.

You know, especially as they are kind of extracting themselves from that market, they have really gotten some really low fares out there, which United has matched.

So I think we have underperformed our expectations in Dulles Transcon because of that, but it will be nice to have them out of that market.

Jamie Baker, J.P. Morgan.

John, in the past, you have discussed a 75% leverage target.

Has that number changed at all?

I have got to think you might be going above that if you completely debt finance the Embraer fleet?

Your conclusion is yes, that we would go above that if we completely debt financed the Embraer fleet and if we persisted at the kind of $2.00 fuel price that is not going to result in any kind of substantive additions to retain earnings.

So, as we said all along, if we think it is prudent to maintain the balance sheet leverage of the Company at a lower leverage level and to ensure that we maintain our ratings with the rating agencies, we will always consider follow-on equity offerings as needed to keep the ratios in line.

Okay.

Good answer.

Thanks a lot, everyone.

David Strine, Bear Stearns.

John, good morning.

You mentioned some collars in '06.

Where are those?

At what prices?

Okay.

Hang on a second and let me get the information.

I have got the percentage breakdowns quarter to quarter.

For the first quarter, we're at a call price on the top of 68.50 and a put price of 55.25.

Second quarter, same put and call prices.

Third quarter a call at 68, a put at 54.75, and fourth quarter, call at 67 and put at 53.75.

Thank you.

And David, you mentioned that obviously you are having trouble generating enough revenue to cover the cost at this point, and I would just like to get your thoughts on adding additional revenue, and you have done a great job of enhancing other revenue.

It is obviously up big time again this quarter.

Is it time to start rethinking charging for some of the offerings that you have that are different than other people like using that credit card swiper on the TVs, for the movies or any of the other things that you have to offer?

We are charging for movies.

That is the good news.

I guess the bad news is that the TVs are so attractive to people that we are not having a really high take-up rate on that yet.

More so on our Transcon flights than we are on our shorter flights.

But, you know, if we wanted to, we could charge for LiveTV and save ourselves maybe 20, $30 million a year by extra revenue, but we think only about 40% of the people would buy it, and we want to have anyone experience the JetBlue experience, and I think part of the reason that we outperform in some of the areas is because we have such a great product and it is so synonymous with what we do.

So I think we are content to be where we are at.

You know, one of the little things that we did that's not a huge impact, but we started selling an upgraded headset for a $1.00 that helps our cost on the existing lines and we make some money on it.

And stuff like that I think we can do to help increase and lower our cost and make some revenue.

It is maybe a headset that is worth $6.00 or $4.00, we sell for a $1.00.

It is leather.

It is really nice.

So if any of you out there listening want to fly, please pay the dollar to use the headset and you will be happier.

And last, you mentioned earlier in your comments that with respect to Delta that some of their behavior might be an exercise in futility I think were your words.

It seems that they clearly have at least one advantage now, and that is that they are playing on a different playing field than you are.

So if history is any guide, it does not seem like that behavior may change very quickly.

Are you seeing things evolve more rapidly now in terms of Delta's behavior?

I think it is erratic right now.

I think they are just in flux as far as moving flights around and doing things.

But I think it's real important I think -- this is a very important point.

I assume that the different playing field is bankruptcy.

When we looked and it is really hard to piece together their cost, but when we did the best we could and gave them every benefit of the doubt, what we are seeing on their performance numbers is that they are underperforming Delta, which is really a tough thing to do actually maybe by as much as 10 margin points.

So putting aside all of the other costs associated with it, this is a company that from a -- it's got a cost problem, but they could narrow the cost problem through this different plan that you're speaking of.

But then if they were to even get, say, a 10% disadvantage to us, which if you work through all the pilot salary requests and all that, they have still got a -- they have got a revenue problem of 30%.

So how do you fix that when it's going the other direction?

It is not even going in their direction.

So I think yes, they can buy themselves some time.

They can get some good financing, but at the end of the day, they have got to decide whether they are going to run those routes for profitability, and is there some other intrinsic reason why they need it?

I don't know.

I cannot answer that question.

But some time somewhere I think if we continue to keep the pressure up and continue to do what we do, I think we will be rewarded for it.

Bill Masters (ph), Bank of New York Capital Management.

I would like to touch on an earlier question that referenced a 75% debt to total cap.

John, one of the things that you have emphasized in the past is reaffirming your current ratings to maintain your cost of capital advantage.

Could you give us a roadmap of how you are going to do that to protect that particular rating so that you don't lose again that average debt cost of, let's say, 5% or don't see it escalate?

In this environment?

I think that is a damn difficult task.

Put yourself in the shoes of any rating agency and you see an industry in crisis.

So that is probably the only way that describes the U.S. airline industry.

And I would say I would emphasize U.S. because the phenomenon seems to be isolated to the United States.

The rest of the world seems to be doing pretty nicely from an airline perspective.

So if you look at that and if you look at the decline in your basic margins and cash flow type measures that they look at and an increase in leverage, I think we are faced with a difficult task of trying to keep our rating where it is.

So we are doing everything we can from a revenue and expense perspective to try to deal with the high fuel prices and keep the P&L in as good a shape as we can.

And as I said before, if we need to issue additional equity to keep the balance sheet in line, we can do that.

But even the issuance of additional equity that would keep balance sheet ratios in line, if you're not generating sufficient cash through the course of '06 because of high fuel prices, rating agencies care about cash flow measures too, not just balance sheet measures.

So we need to address both issues, and there is no assurance that we can do it.

Kind of as a follow-up question, John, with all these bank term sheets that you have referenced for the A320, the '06 deliveries, is there an average debt rate that you could share with us?

And then closely aligned with that, is there any provision in there for that that rate would increase if there is a downgrade?

There is no provisions in any of the term sheets that would adjust rate for downgrade.

And the plan with all these term sheets is that they would be fixed-rate financings or the bank would execute a fixed floating swap internally, and we would wind up borrowing -- our contract with the bank would be at a fixed-rate.

Obviously we don't know what that rate will be and won't know until we get to the delivery and closing of each individual aircraft during the course of the year next year exactly where those will pencil out.

I can say that the spreads over LIBOR that are implied and embedded in this before the swaps are done are every bit as competitive as the kind of bank financings that we have done over the last few years.

I know we sat out the banks over the last year and a half or so with (inaudible), but we have always able to get very good spreads there, and there is no difference really of any substantive way what you see for us next year versus what we've done in the past (inaudible).

The only real difference is that we're going to opt to do some fixed-rate, whereas historically all of our bank debt has been floating.

And that is pretty much a function of the yield curve in (inaudible) right now.

And then I guess as the very last follow-on there, with any of this bank debt if the rate environment were to change or you were to get your ratings affirmed, could you roll that bank debt, or would you plan to roll that bank debt into another AATC financing?

Certainly all of our bank debt is callable by us.

It is floating rate, so the typical floating rate financing is that way.

You can call it at anytime.

So we would have the flexibility to refinance I think virtually every airplane that we have got on debt financing if we were to so choose to do so.

So lots of flexibility if we wanted to avail ourselves of it.

Gary Chase, Lehman Brothers.

Just a couple of quick cleanup questions first, John.

I apologize if I missed it.

Did you say how many or what the ASMs contributions in the E190 was in the quarter?

I know it is going to be small.

No, I did not say, and I don't have that number at my fingertips at the moment.

But I think we ascertained that it was something on the order of about 0.5% of total ASMs for the year.

So it's a relatively small number.

We can get it for you off-line afterwards.

Okay.

And as those aircraft come in, obviously you are only going to have a couple of them in service.

Should we be thinking that the expense from the aircraft that you take but do not have in service are not going to hit the P&L until they are in service?

No, we took the liberty of our first airplane and we signed the lease for it, and that rent expense is going through the P&L, even though the plane is not operating.

You know, not operating in revenue service.

We have been through many evacuation exercises.

We've been through a simulated ditching exercise.

We have been through a whole lot of things that you have to do -- that any airline has to do -- in introducing a new aircraft.

But the ditching is unique to being the first airline to do over water with a particular airplane type.

So we are doing a fair number of things there, and that expense is hitting the P&L right now in October, even though we are not flying the planes at revenue service.

Okay.

And just one last cleanup one, the tactical capacity that you have taken out in the off-peak times and so on, I assume that if fuel prices stay in this range for next year, we should sort of be thinking you would also have the capacity out during those time periods next year as well.

Is that a fair assumption?

Yes, I think that is a fair assumption because in essence with the day of week reductions that we have done, it is an extension of what we have always done.

We have always ramped up for peak times and pulled back at off-peak times.

So, for instance, if you watch between New York and Florida at what we have during the summertime, then we begin to add in the fall, and we add a lot over the Thanksgiving holiday.

We pull it back for the trough in early December.

We add it back for Christmas holiday starting usually around the 18th to the 20th of December and running through about the 6th of January.

Then we pull it back, and then we wrap it back up again towards Presidents' Day.

So we are used to taking the entire schedule and doing that.

In this case, we have just extended a little bit further and said in those times where we normally pull the entire schedule down, we are also going to pull down some of the selective day of week thing.

That is it.

Presumably just because fuel costs have made it at the margin less economical?

That is true.

And, David, just one last question.

You noted some pretty good year-on-year improvement in some of the Boston market.

As you look at it, though, on an absolute basis and you think about how Boston is developing relative to New York, can you give us a little context about how you are thinking about Boston as an opportunity?

And as you look over the long-term, obviously it's a bit smaller of a city than New York.

Do you think you can be as profitable in Boston as you have been in New York over a long period of time?

I think so.

Definitely over a long period of time.

I think the advantage -- it is a smaller city.

There is less competition there, too, ex -- certainly you have the Song competition there that was there before we were, but we were that detail we're doing well against them.

I think the 190 is really tailor made for Boston and a lot of these markets.

This announcement of flying three flights today JFK Austin and then putting one from Boston to Austin, and then having our customers in Boston being able to go to Austin on the JFK flights by the 10 flights a day we have connecting, I think what will really strengthen JFK and Boston is this link between the two and the 190s into Boston.

So the ability to do 320 stuff stay in New York from JFK and then 190 to upstate at some point in time, New York from Boston, it just gives us a lot of flexibility.

So I think the advent of the 190 and how it has entered Boston can certainly make it a very successful market for us, and it's a market that we think we can do very well in and become one of the major players up there with the 11 gates that we have.

And on an absolute basis, you feel pretty good about where you are (multiple speakers)?

(multiple speakers) yes, you know, with our RASM up 18% year-over-year in the second quarter on just the Florida routes, we feel very good about how we did Transcon there.

I think we're seeing a little bit more in that market maybe more seasonal swings than we do in New York, particularly with Florida.

And I think we're going to look at maybe in the off-season taking some of those 320s and maybe increasing some of the Transcon stuff during the peak and maybe doing a little 190 Florida in the summertime.

It's certainly a possibility, but it just highlights the flexibility that we have.

Travis Anderson (ph), (technical difficulty) Builder, Gagnon and Howard (ph).

A couple of questions.

First of all, is it too early to know whether the cost of the 190 on a per hour or per mile basis are in the ranges that you had expected when you ordered the airplane?

Obviously fuel is much more expensive, but allowing for that, how does that look?

I think knowing -- yes, Travis, you make a good point about the fuel.

These are rough numbers, but we have about 35% less people that we carry on a 190 than we do on a 320, and we burn about 25% less fuel.

Again, we don't have experience with the airplane, but that is what we are hoping for.

So there is a gap there between that, and there is a higher CASM on fuel on a per seat basis.

But we think with the market that we're going into we will be able to recover that fuel advantage by adding a few more dollars onto the average fare to make up for that.

As far as other costs, not ex fuel, it is just way too early to tell.

We certainly know what our crew member costs are, but -- and we certainly -- and have the maintenance holiday obviously on the airplanes with the warranty.

But I think it's really too early to tell on the whole thing, but we are again really looking forward to it.

When you look at a place like New York/Richmond where the average fair for a flight that is about the same distance as New York/Buffalo, it is $184 a day, and we are going in there with obviously a substantially lower fare.

It's easier for us to get a higher fare than we get from New York to Buffalo to Richmond, because it is coming off such a huge base.

And to elaborate on David's comment, it will take a few months in service where we have enough of them to have a fully efficient schedule and everything else for us really to be able to evaluate on an apples-to-apples basis how the 190 and the A320 come out on a relative cost.

And even then, it will become a little harder exercise because they are operating at stage links that in one case is 100% longer than the other one.

So even though we can evaluate the actual results, you then still have to do some extrapolation to equate them to a comparable stage link.

So in terms of the stimulative effects of the fares you are going to be offering, are they still do you hope going to be in the range of what you had thought when you ordered these airplanes?

I think if your answer is, at the end of the day when you do -- we will certainly be able to stimulate fares based on the difference there, and we don't have to stimulate as much obviously because we're not selling as many seats on the airplane.

We only have to fill 100 seats as opposed to 156.

But if you take -- at the end of the day you take the revenue where the CASM is, we still maintain that our margins will be higher on the 190, and it is certainly way early in the game, but there is no reason that should not be the case.

I have a question.

I know it is early days, but how is Boston JFK booking?

It's gangbusters right now.

Obviously we started out with a $25 fare to kind of get everybody excited, but in the first few days, we are booking many times more seats than we would have had seats available had we been flying it.

So there is a lot of excitement on that market, and as I mentioned, it is going to strengthen our JFK presence and our Boston presence by being able to float people back and fourth as well.

The reason I asked was I was just a little surprised to see you extend it beyond the first month.

A little surprised to see what?

To see you extend that $25 fare --

Beyond the first month?

Yes.

Well, I think it is just through the trough period of time.

I mean I think you've got the first month and you know you have a little bit of down flying, but we will manage the yield and manage it up.

I mean if it is selling well, we are not going have too many of those $25 fares out there, and the average fare we booked is significantly higher than the $25 on a percentage basis.

So I think at this -- it is always being used, as you know, Ryan does it a lot over in Europe and Southwest does it.

It is a little bit of a shock factor fare and creates a lot of word-of-mouth and you don't have to advertise as much.

Susan Donofrio, Fulcrum Global Partners.

The remaining question I have has to do with capacity growth for '06.

Just wondering if you have any preliminary guidance and also if you have any ex fuel CASM targets for that year as well?

It is way too early for the latter in terms of a CASM target for next year because we are still going through our budget process.

So we really don't want to even try to give any kind of preliminary guidance that we can have a far better handle on things from completing our budget process.

And I apologize.

I just don't have the percentage growth in ASM number handy right now for next year.

We can give it to you in the terms of airplanes that we are adding.

Obviously we are going to be adding 18 Embraer 190s (multiple speakers) and 17 A320s.

17 A320s.

And then are you surprised -- I mean it appears that Song is going to be ramping up more.

Obviously you guys have done a lot of work with Song.

Have you kind of kicked around why you think they are going that way?

Well, I think we've seen some ramping up, and then we have seen some pulling back.

You know, they had, for example, they went from five JFK Fort Lauderdales to eight for one month, and they pulled them back to six.

And they went from two -- they were at four West Palm Beachs with a much higher RASM out of LaGuardia, so they pulled two of those and put them over at JFK.

So we added three West Palm Beaches out of LaGuardia.

Which, by the way, we do better on RASM even out of LaGuardia to Fort Lauderdale.

And then they brought them back.

So I don't know.

I think there is certainly a lot of disarray, and they are going through some difficult times now.

But I think if when you look at the numbers that we are looking at, and I think what everyone is looking at, it seems the behavior seems to be strange at best, but I think if we just stay the course and keep the pressure on, and I think we'll have a good result in the end.

So we are going to keep -- we are going to just keep doing what we're doing.

David Jackson, PKI Capital.

You commented in your January call that you expected fiscal year '05 to end with the same cash approximately as you finished fiscal year '04.

I was just wondering if you could comment on that and give any insight into where you expect cash and debt to end this year?

We did some rough forecasts on cash at this point, but I don't think anything good enough that I would like to discuss on the call.

I'm sorry.

If I was going the give something on the call, I would like to have a much more precise forecast than I have got at this juncture.

It is certainly forecast, though, to be less than we had at the end of the third quarter.

Okay.

And any comments on debt level?

In what sort of way?

I'm sorry I don't --

Is debt going to go up or down?

I mean --

Debt will continue to go up as airplanes deliver.

Sure.

We have deliveries between now and year-end, so we will be taking down debt.

We will obviously have some current maturities that will also be paid back, but the additional debt we layer on from the aircraft will exceed the current maturities in the quarter.

Okay.

Also, just to elaborate on David's comment answering Susan's question a moment ago, we were originally scheduled to have 17 A320s this year.

We actually --

Next year.

Or next year rather.

And we actually let -- Airbus requested that we accelerate one from January of next year into December of this year, which we did.

So we were originally 17.

We will actually be 16 deliveries that occur next year on the A320s.

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

Great.

Well, I guess it is what it is, and we are going to continue to do our best to control cost and to increase our revenues and continue to grow this airline with the kind of quality people that we have before, and just continue to give the best product in the industry.

And I think if we can stay the course and do that, then we will certainly be in better shape than we are today to be able to handle some of the challenges that we have.

But I'm very proud of our crewmembers and what they have been able to accomplish, and look forward to talking to you next quarter.

Thank you very much.

Thank you.

That does conclude today's teleconference.

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