JetBlue Airways Corp (JBLU) 2005 Q4 法說會逐字稿

Good morning, everyone and welcome to JetBlue's fourth quarter and full year 2005 conference call.

We have on the call today.

David Neeleman JetBlue's chief executive officer and John Owen the company's chief financial officer.

Today's call will begin with comments from David Neeleman followed by John Owen who will discuss the company's resulting in more detail.

Good morning, everyone, and welcome to JetBlue's fourth quarter and full year 2005 conference call.

We have on the call today David Neeleman, JetBlue's CEO and John Owen, the Company's CFO.

Today's call will begin with comments from David Neeleman followed by John Owen, who will discuss the Company's financial results in more detail.

After the presentation we will hold a 30-minute Q&A session for investors, followed by a 30-minute Q&A session for the media.

Please bear with me as I review the required Safe Harbor.

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

Forward-looking statements involve risks, uncertainties, and assumptions and are based on information currently available 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 integration of the Embraer E190 aircraft into it's operations, the Company's significant fixed obligations, its ability to maintain its culture, its reliance on high daily care craft 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 U.S. military involvement overseas.

Information concerning these and other factors is contained in the Company's Securities and Exchange Commission filing, including, but not limited to, the Company's 2004 annual form on form 10K[A] and quarterly reports on form 10Q.

The Company undertakes no obligation update any forward-looking statements [inaudible--background noise] or circumstances that may arise after the date of this call.

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

Good morning, everyone.

Thank you for joining us on our fourth quarter earnings call.

Obviously, a difficult quarter for JetBlue and not one that we have been experience-- accustomed to in the past, so I'll talk a little bit about that and try not to repeat too much stuff that's already in the press release.

Just to recap we had a negative 7.1 operating margin with $0.25 a share loss; for the full year we had 28% operating margin.

These figures as explained in the press release included $13 million of unusual items, 6.9 of stock-based compensation, and 6.1 charge for the development cost of maintenance system that we aren't going implement, which we have moved on to another system.

Excluding the effects of these charges we would have recorded an operating margin in the fourth quarter of a negative 4.1% or a loss per share of $0.19.

I think it's interesting to note-- I think everybody probably had a really bad October, but I think ours was-- was particularly harsh.

In the month of October, for example, we had a $32.3 million operating loss, which probably is more than all of the operating losses of any month in the history of our Company.

It was a really tough quarter, and if you take the quarter operating loss of 31.5, which includes the special items, you can see that after October we were really working from behind to try to catch up, and it was-- it was impossible to close that gap.

The story, obviously, in October was the hurricane, which we were affected by the spike in oil price but mainly the refining cost, the [prax spread].

And also some lost revenue that we had from the hurricanes, the small outfit affecting Florida and New Orleans, which affected revenue.

Combine those events of about $10 million on the revenue side and then on the cost side, obviously, was much than that.

Revenue for the fourth quarter, our RASM improved by 7.4% on a 8.1 increase in yield and a 1.8% drop in load factor.

While, obviously, that is nowhere near industry leading or maybe on the lower end of the industry, we're pleased to have accomplished that in the context of a 25% growth of ASMs in the period and really saw little relief in the capacity reductions from our competitors, which some of our other-- some of the other airlines have seen, and we'll go into that a little bit later in detail kind of market by market what we're seeing on capacity additions or maybe non-reductions as we go forward.

Our new markets that we added in the quarter, we're very excited about.

We started service between New York and Boston, and we--recently, it's New York to Boston to Austin, Texas and despite the challenges of starting in the low January season, I'm pleased to say we're approaching-- the bookings have ramped up sharply in these Austin markets, in fact they are performing higher than our expectations.

And also we started the Boston to Dulles service and those bookings are looking good as well and also above our projections; in fact through the end of February the Boston ID bookings are stronger than even the JFK/Boston, which we're very pleased with as well.

I think all of those markets are 190 markets, and we'll talk a little bit abou---I'll talk a little bit about the 190 in a second as far as its performance goes, but the reason we purchased that airplane, obviously, is we're convinced that we could start business in markets so we could have an accretive revenue picture where certainly our chasm would be--on this airplane, but that the revenue increases would outpace the increase in cost, and all early indications are, from our new markets, that this is going to be the case.

So we're excited about the impact the 190 is going to have on us as we go forward.

Also in this quarter, we were happy to finally get to the point where we could break ground on our new terminal at JFK.

We're really excited to launch this program, and it really extends our commitment to New York.

We expect this facility will be completed in either late '08 or early '09, with a total of 26 gates, with enough room to hold us for a long time.

We think we can probably get close to 250 departures out of Kennedy with that number of gates.

We'll probably be the most traveled, or used, terminal in--per gate--customers per gate than any other terminal in the world.

Obviously you need to do that if you're going to operate in New York, you need to utilize your assets well.

So we're very excited about that facility.

In the meantime to bridge that gap, we have 14 gates at Terminal 6, and so, to bridge that gap May 1st, we're going to add an additional seven gates to our existing facility for a total of 21, and that will allow us to grow--and to grow to that 26-gate facility that we'll have in--in a few years.

We see lots of opportunities in New York and-- and so we're happy to be able to do that, even -- our short-term solution and our long term solution as well.

Moving to operating performance, our operating performance this year was certainly not up to the high standards that we have set for ourselves and that we have historically been able to achieve.

For the full year our completion factor was 99.4, which I think is remarkable considering the degree of [difficulty] we had with hurricanes and other things, which [was] the same by the way of 2004.

What wasn't the same of 2004 was our on-time performance which came in at 71.6 versus 81.6 in 2004.

The mishandled bag rate was up about 1 per 1,000--4 per 1,000 bags, versus 2.97 last year.

Certainly the primary cause of--so the real story here--and customer complaints were not meaningfully up, but really the primary cause of the decline of our on-time performance included, obviously. challenging weather, air traffic control congestion and we do operate in a lot of difficult airports that have a lot of ground delay programs.

I think just to highlight this the other day I was watching our on-time percentage for the day, and as we ended the early afternoon, headed into late afternoon, we were running 87% on the time and then ground delay programs were put in for Boston, LaGuardia, and Newark, and that--we finished the day at 71%.

So, obviously small weather can affect the New York area, and so we have to-- we're closing with the F AA and we're working closely with the port authority because obviously added to that is there has been construction at Kennedy airport where a lot of taxiways have been closed, and some of the runways have been closed during the day, and so we're really working closely with--especially leadership at Kennedy to say, okay, now we have flights during the day now, let's close these taxiways and close the runways at tight as opposed to during the day, and they're certainly showing a willingness to change their--their M.O.

So where we don't-- don't believe that we'll get back to 81 or 82 this year, we think we can narrow the gap and maybe get to the mid to high 70s with some of the changes that we're putting on our operation, and I think our customers understand that, and they're very appreciative and they still love flying JetBlue, but on-time percentage is important for us.

Now moving to the 190 performance, I gave a speech last week that was well covered by the media and talked a lot about some of the issues we have had with the 190, but I wanted just to recap them quickly with you, and start out by saying: We're an optimistic Company, we like to utilize our assets and I think we were-- I know that we were too optimistic in the beginning.

We were anxious to fly the airplane 11.5, 12 hours, to be able to get the cost we know we can have on this airplane, but obviously it's difficult to do when you are flying a new plane.

So the first problem started out that the deliveries started to arrive late.

Not-- not great delays, certainly within the contractual obligations that Embraer had with us, but we were pushing back two, three, four weeks on the delivery, which really tightened up our schedule over what we were planning.

And then came the expected glitches, software mainly, issues with the 190, where we had dispatcher liability that was lower than what we had on the 320s, so we were already tight and then we had those things come up, and then we had-- strangely enough in New York we had strange weather.

We had--the weather was warmer, therefore, foggier.

And whenever you have a new aircraft type and you introduce it, when your pilots are flying the airplanes for the first 100 hours, there's an F AA requirement that they have to have greater visibility standards than if they were flying an [HV20].

And so that causes some-- some issues as well.

So the good news is, is that we're working closely with Embraer to get the--the delivery schedules back on time.

They are still running a little bit late, but we're confident that which midyear they'll-- they'll catch up.

Also, working closely on the software issues; we have resolved many of issues already, so for the month of January, dispatcher liability for the 190 has improved with each week.

Our [A320] fleet, by the way, we have the highest dispatcher liability among all worldwide operators of that aircraft, which is a real testament to our tech ops team and how well they run the fleet and that same team is dedicated to getting the 190 up to the 320 standards and we think by though time we hit midyear we're going to be greatly improved on that.

Now the result of that is that-- to keep the planes from running late, we have pulled back on some of the schedule that we had intended to fly in the first quarter.

Things that were unannounced we just pulled back, which took about 30% of the ASMs out of the first quarter for the 190, which will have a temporary bump in some of our costs because we aren't able to spread those costs over ASMs; we have planes that aren't flying as much as we had anticipated and obviously crews trained and ready to go that won't be flying.

That's a temporary thing.

We really feel that by the time that we get through this [inaudible] programs, that we'll be able to increase utilization back on those airplanes when we have more confidence that the planes will be here on time and when some of these software glitches are out of the way.

The business plan on the 190 is intact.

Like I said the new markets where they're flying, we're excited about the revenue picture that we see on those airplanes, but we do have a transition period that we're--working through here and for the customers that fly on that plane it's a whole new flying experience with the TVs and the radios.

We--by the way, some of the planes in the beginning we didn't have TVs--we were certifying not only the TVs but the headset display system in the airplane, which was--I don't want to go into detail on that, but it was a lot of certifying that we had to do but when it's all working and working great it's-- the customers absolutely love it, so it's going to be a huge part of our future.

I want to talk a little bit more detail on the fourth quarter on the revenue side of the equation and talk about what our plans are going forward.

Obviously, we are transitioning from an airline that's used to lower fuel prices to one that has to get ready and be used to higher fuel price.

Maybe we're kind of a $40 or $45 airline and now have to do business in a $70 barrel environment.

If you look at October-- I'm sorry, so let's transition out of the fourth quarter and into the first quarter.

I want to talk a little bit about January and what we're seeing and to give you color on some of the guidance that we're giving for this first quarter that is---which is disappointing to us and will help color some of the discussion.

Our north south business in January, we just finished yesterday, was for our north south business we had increased capacity by 25%.

I'm talking about New York down to Florida.

Our average fare that we got in January was the same that we had last year, like, $94.60, and $94.60, so we-- I think in a lot of cases we're our worst enemy by adding too much capacity in certain markets, and if we have to get $104 it's a lot tougher to do when you increase capacity by 25%.

The market as a whole if you want to look at it as a whole is up 13%.

So if you see, other carriers like AIRTRAN talking 15% RASM increases in their markets, we're not getting 15% increases and part of it-- I think they attribute that to be-- the capacities in their markets being down 10 or 15%.

We're up 13% so obviously we're not going to get 15% RASM increases.

I guess the good news is that a lot of that is our own doing.

I think as we transition from this $40 or $50 a barrel price airline to a 70 we have to be careful with our own capacity.

Instead of adding so much capacity in our existing markets, we need to put that capacity into new markets, and we are going to announce a lot of new markets this year.

Last year I think we only announced four new markets and I think that number could be 8 to 10 this year, and 3 are already announced.

So we're--excited to be spreading the battle out, but in the meantime we have to stay the course on what we're doing here in New York to Florida, and obviously one of the big things we're focused on is Song, and and they have announced though Song brand is going away, and they've announced that the Song brand is going away, and they've got 48 757s into that fleet, and at least in press reports and we haven't seen anything lately, haven't made any changes, that that airplane will fly more in the 1650-mile stage length, which is beyond what New York to Florida is, and the only thing we do know is what they said in the press--and that they will add a first class which will reduce their capacity between 7 and 8%.

So we know that capacity reduction would become even if they kept the same frequencies, which, by the way we have talked about this before, can't imagine they would keep the same amount of frequencies because even with the third quarter DOT figures that just came out.

We talked about the second quarter last quarter, but our RASM premiums to Song have increased in each of our markets, so that RASM premium continues to increase on a third quarter basis the same way it did in the second quarter.

We're seeing particularly big increases in Boston, where we're doing much, much better up there.

Just a little bit of a color on that, and I think if you look at the---a little bit of scissor that we're in and that have affected our results.

We have today before we spread the battle into many more markets that we're talking about.

We have really two businesses that account for maybe 90% of our ASMs.

We have a transcon business.

We have done much better in transcon on RASM increases.

In the fourth quarter--and we're seeing the same thing in the first quarter--RASMs are up over 10%---10.4% in the fourth quarter, Where the south in the fourth quarter was only up 5.3%.

So the south is lagging behind and it's because of some of these capacity increases.

That's-- the good news on transcon is that it's up, the bad news is that it's more-- it disproportionately affected by fuel.

If you are flying someone for five or six hours, then it's going to consume a lot more fuel.

So, those RASM increase have got to be higher than 10%, and we're making capacity adjustments and shifting markets to make sure that we can do that and we feel confident we can.

In the south business we're just going to wait to see what happens with Song; we're going to stay the course on what we're doing, because we feel like we're winning in that market even though it's not reflected in our RASM increases, but we feel like your customers like us, they prefer to fly us, and we have really staggering RASM increases.

A lot of people would ask, and we covered this last time, what happens if Delta goes to bankruptcy and gets their cost down, like all of the other carries have, even if their costs were 10% higher than ours, versus maybe 20 to 30% higher than they are today, then they still have this whole revenue deficit that they have to deal with and that comes from the great service that our crew members give to our customers.

So enough about that.

Let me tell you about some of the other things that we're doing to try to improve our revenue performance.

We need to get another $10 or so per ticket.

It's just-- that's not-- if our fuel price-- if your fuel prices go up-- in fact as we looked at 2006, we were using a fuel price of about $1.80.

We were showing a profit for 2006 in our projections and then as fuel prices moved up, and now we're going to give you guidance of $1.98 and if you a add 400 million gallons that we're going to burn during the year and you add $0.18 to it that's what tips us from a profit to a loss on our projections.

Well how do you account for that-- or how do you make up for that almost $80 million of additional fuel costs?

You got to get some more money for your tickets.

You've got to get $4 or $5 or if you want to make more money you need to get $10.

I think the good news is, from JetBlue, is that we have a great product.

Our customers love us; we have loyalty, we have great market share---in so many of our markets we're either the No. 1 player or the No. 2 player, and we're growing in those markets and the loyalty really shows.

The other good news is our average fares are really low.

In 2004, in the fourth quarter, our average fare was only $100.

And in 2005 in the fourth quarter it was only $109.

It's only a $9 increase and obviously fuel went up higher than $9, so we need to figure out how to get to $115 or $120 and I feel our customers will pay us more to fly on JetBlue, because we deserve it, because we give great service, but we need ask for it.

No one is going donate money to our cause unless we ask for it, which means that we need to do a better mix on our fares, we need to do a better job of not only spreading the frequencies out to other markets, but also do a little bit better job of how we manage those flights, and to that end we are relocating our revenue management folks who have been in Salt Lake City for years, to Forest Hills in New York and our schedule planning folks from Darien, Connecticut to New York and we're all going to be in the same room together.

I'm really excited about that change.

I'm spending a lot of time--of my time thinking about revenue and looking at markets and thinking of ways that we can get that average fare up, the $5 or $10 we need to get back to profitability, which I feel we can do and we're excited about the challenge, actually be to able to do that.

Let's see, I deviated from my script here a little bit.

I guess just in closing before I pass the time to John.

I wanted to just say we see no shortage of profitable opportunities for both A3 planes and our 190s.

We announced just the other day we're going to start flying from San Juan to Orlando.

That's going to be a really good market for us.

We do very well in San Juan both from New York and from Newark.

We have a lot of places to go we just need to make sure we spread that battle as I mentioned before.

So with that, I won't go over the guidance any more than what is in the press release.

John will give you more color on it.

Just to say that obviously increase of $1.80 up to $198 is--we're very fuel centrative is you add almost $80 million to your cost over the next couple of weeks it does have an affect, and it's our job to go increase the revenue.

It would be nice to have hedges like southwest because if we did, based on our numbers we would have a similar margin that they are talking about, but frankly we don't.

So we need to figure out a way to get our fares up a bit.

Okay.

Thanks, David.

Good morning, everyone.

I'll try to recap the finances as quickly as we can so we can get on to guidance and then on to the Q&A session.

Revenues for the quarter were up 34% to 446 million.

That was a 22% increase in revenue passenger miles and, as David mentioned, a roughly $9 increase in average fare year-over-year for the quarter.

Capacity was up with 25% to 6.4 billion ASMs, utilization was basically flat at 13.1 hours per day.

Load factor at 81.1 was down 1.8 points from the year-ago quarter, and we had a 21% increase in revenue passengers carry.

The distribution and capacity for the quarter was 54% east west, that was up a 1.5 point year-over-year. 36% Florida, that's basically flat year-over-year. 6% to the Caribbean, 4% short-haul, and about 0.5% in medium haul market.

Fourth quarter yield, per passenger mile, was 816, that was up 8.1% year-over-year on a basically flat length of haul.

For the quarter RASM was 702, up 7.4%.

Passenger RASM was up approximately 5.8%.

If you exclude the effect of new markets using our same store sales basis, passenger RASM was up roughly 8% on a capacity increase in those same store markets of 3.4%.

Other revenue increased to 83%, primarily doing to live TV third party revenues and the marketing component of true blue point sales to American Express and to increased change fees.

During the quarter we placed four new A320s into service, which refinanced through our [eetc transaction] that was previously done and one of which was a mortgage.

We also accepted delivery of an additional five Embraer 190s, four financed-through-sale-lease-backs with GE, and one was mortgaged.

At the end of the year, the fleet then was 85 A320s, and 7 E190s, with a mix of 61 owned and 31 leased, and an average fleet age of around two and a half years.

We ended the quarter and the year with 484 million in cash and investment securities on the balance sheet.

Turning to costs, excluding fuel and excluding the effects of the two unusual items that David discussed earlier, cost performance continues to be good.

Reported fourth quarter CASM increased 18.9% year-over-year to [7.51 cents] but that includes the 13 million and the two unusual items mentioned earlier.

Together those unusual items increased CASM by [0.2 cents] so excluding them CASM would have been 731.

Fuel cost per gallon increased just over 50% to $1.87 versus $1.24 in the prior year period.

Excluding fuel CASM was up 8%.

On a fuel neutral basis, that is had we had last year's fuel price of $1.24 and excluding the effects of the two unusual items to try to take some of oddities out for clean apples-to-apples comparison: We would have had a CASM of 6.57 that would have been up 4% year-over-year and that would have given us an operating margin of 6.4 which would have been an improvement over the 3.2% operating margin in the fourth quarter of 2004.

So it basically shows that, absent the fuel price change, costs are under control, RASM is rising-- I guess RASM isn't rising fast enough to cover the dramatic increase in fuel.

We did report a negative 7.1 operating margin for the fourth quarter which was just slightly outside of our guidance range, and we had a positive 2.8 margin for the full year; excluding impact of the unusual items fourth quarter margin would have been a negative 4.1%.

Couple of things worth mentioning: 6.9 million non-cash stock comp expense is recorded in the salaries, wages, and benefits line.

The $6.1 million write-off of maintenance inventory tracking was recorded in the other operating expense line.

Also, within other income and expense, we should note that we recorded a $1.2 million--or $1.8 million market to market loss on fuel hedges in marking our hedges to market at year and we have-- none of our hedges at this point are designated as hedges for hedge accounting, so we'll continue to market them to market until we actually designate them.

From a guidance perspective, we'll start with capacity, we expect ASMs to be up 28 to 30% for the full year and 27 to 29% for the first quarter.

Average day blinked is projected to be approximately 1250 miles in each of the first quarter and the full year, and that's a relevant figure to note because we were 1358 miles average stage length in 2005, so we're looking at a drop of over 100 miles in average stage flight in 2006, with the consequential increases in the CASM that one would expect as average stay of length declines.

The ASMs are based on aircraft delivery schedule for A320s of four in the first quarter, four in each of the following quarters, brings us to a total of 101 A320s at the end of 2006.

And for the E190, our expected deliveries are 1 January, 1 February, 2 March for a total of four in the first quarter, six in the second quarter, five in the third, and four in the fourth.

So we would end the year with a total of 26 E190s.

From a margin perspective, based on our current forecast, operating margin in Q1 is expected to be between -3 and -5, that's the assumed fuel price per gallon--that of hedges of $1.92 in the first quarter.

Given the recent volatility in fuel prices, it's kind of hard to take a guess, but that's what we have used or assumption, so I would suggest that everyone keep their models up-to-date and put their own fuel assumptions in their models.

For the full year we expect to report an operating margin between 2 and 4%, and that should bring us to a net loss for the full year and for full-year we are using an assumed fuel price of $1.98 net of hedges.

So basically $1.92 in the first quarter and an average of about $2 for each of the remaining three quarters.

In 2006, for the first time, we are going to have stock option expense in the P&L related to the adoption of FAS-123R.

We're expecting that number to be approximately 20 million for the year.

Relatively evenly spread across the quarters.

So keep in mind that this 20 million is a rough estimate.

It is determined by formulas that are highly sensitive to a number of volatile factors, so it could change, but that's our best estimate at this point, and it's worth noting that that is-- that expense item, that non-cash expense item associated with stock option expense is not deductible.

It's a permanent item so it's not deductible when you do the tax provision calculations.

So, it does pretty much flow straight to the bottom line.

CASM for the first quarter we expect to increase roughly 17 to 19% year-over-year, again at the 1.92 fuel price net of hedges.

CASM ex-fuel in the first quarter will be up roughly 6 to 8%.

The biggest drivers to that being the stock-comp expense which I just mentioned where we're assuming about $5 million in the first quarter.

And one other new item that we have, I'm sure you are all aware that we signed a lease with the port authority in New York and New Jersey in November to move forward with the construction of a new Terminal 5 adjacent to the Terminal 6 that we operate at presently.

Under the accounting rules we have a ground lease with the port authority of New York and New Jersey, so during the three years of construction of this new terminal we're going to have be to straight-lining the ground rent expense over the 30-year life of this terminal, and expensing that during the construction period; it's not something that can be capitalized.

We'll be looking at about $3 million per quarter of added costs in the landing fees and other rents line associated with the construction of the new terminal.

For the full year, we expect CASM to increase roughly 10 to 12%, again at that $1.98 assumed price I gave you.

CASM ex-fuel for the full-year is up about 4 to 6%.

Same issues that we had in first quarter, the stock comp expense and the AT 5 straight-line, again about 12 million for the year in stock comp expense, about 12 million for the ground rent for the T 5 construction site.

And again, a remind that all of those CASM numbers for first quarter and full year are based on an average stage length of about 1250 miles down, about 100 miles over the prior year.

So having said all of that I think we feel very good about the cost control that we have on things that we can control.

For the year we expect E190 ASMs to represent approximately 6% of total system ASM's.

Growth of the 190 will create some upward cost pressure on CASM because of the mix of the 100 seat airplanes versus 156 seat airplanes, you would expect higher CASM on a smaller airplane, which we all know, and of course we'll be doing our shorter average stage length on the E190 which also drives up the CASM that we'll be reporting.

We also expect, of course, to get higher RASMs associated with those shorter stage lengths that we'll be operating that aircraft on.

From a RASM perspective for the first quarter right now we expect passenger RASM in January and February to be up in mid-single digits, and percentages, and we expect March passenger RASM to be basically flat year-over-year.

The principle reason for March being flat, of course, is that Easter occurred during March last year and this year Easter occurs in April, so we have a substantial swing in our revenue in our forecast that moves from March to April compared to last year.

With respect to fuel, we do have some collars in place.

For Q1 we have 67% of our consumption has upside protection at $68 a barrel and downside risk at $55 a barrel.

For Q2, it's 40% at 68 with no downside risk, for Q3, 21% with protection at 68, again, with no downside risks, and Q4, 11% of the consumption at 67, again, no downside risk.

For the last three quarter of the year, though, our upside protection is capped in the mid-80s and, as I said earlier, none of these are designated as hedges at the moment.

For CapEx we're looking at roughly 1.2 billion for the year, including pre-delivery related to aircraft and another 175 million in non-aircraft capital expending which includes live TV.

In terms of aircraft financing, all of the aircraft in '06 have been mandated, all but five of them subject to term sheets and with the exception of two capital releases.

The remaining A320 will be mortgage financed and all the E190s will be leased.

Intend to fix the vast majority of the debt on these transactions this year as opposed to floating as we have done so much in the past.

We're also working to refinance eight of our existing aircraft, and in the process we will eliminate some of the highest cost bank debt we have got.

We'll convert them from floating to fixed and the only two aircraft that we have financial covenants on will also disappear, in terms of the debt of the covenants associated will disappear as we refinance those aircraft.

Almost all of the debt, with the principal exception of the 425 million in convertible debt floats as do our cash investments, average debt rate at the end of the quarter was 5.6%, average investment return was 4.

For interest expense, we expect full year interest expense to total just over $153 million.

For shares outstanding, for EPS calculations, since we're forecasting a net loss in both the quarter and the year, estimated basic and diluted shares will be the same.

We're estimating about 173 million weighted average shares in Q1 and about 173 million weighted average shares for the full year.

Tax rate for the full year is expected currently to be around 23%, but I would warn you that it can bounce around very dramatically when you have relatively small levels of pretax income or pretax loss.

Thank you. [OPERATOR INSTRUCTIONS] Your first question is coming from Jim Parker of Raymond James.

Just a couple of questions.

One, David, normally the month of October ex the hurricanes is that normally a profitable month?

It's not-- it's something we usually work really hard to break even on.

So, I think it's better than September--in September we usually lose money and in October we break even and all of the sudden we're faced with a 32 million operating loss, so it certainly was something that set the tone for the quarter.

All right and with regard to the 190s can you share with us any experience you have had so far on what the RASM is running?

I can't give you specifics Jim.

Obviously, these are really new markets, and we can give you some data as we move forward, because I don't have it front of me, but I will tell you that we have projections on what we would do, and without exception every market is running above where the projection that we had had, and-- and I think it's probably-- probably should be based on fuel price, but we are going to work really hard.

It's a different mindset for us, filling 100 seats versus 156, and so we're doing well, but I think we'll even do better once we get better in our mindset of pricing for a smaller airplane.

Okay.

Thanks.

One more thing, Jim, I forward to point out in my remarks, in that our guidance for the year doesn't include any capacity reductions from Song or very little other than what their first class is.

So I think that's an important distinction.

I think we're being conservative.

If we do see some greater capacity reductions-- just to give you an example, Song pulled out of Fort Meyers to New York and in January our RASM in that market was up 11.3% versus the other markets were flat.

So, I think there is---certainly we have some upside if Song were to cut capacity even 20 to 30% like they could if they pulled the 757s out and replaced them with a smaller airplane.

So, David, when would you anticipate that Delta would make those announcements.

I don't know, Jim.

Why don't you call them and ask them?

There supposed to be doing it May 1st, and here we are February 1st, but who knows?

Okay.

Maybe I'll do that .

Thank you your next question is coming from Ray Neidl of Calyon Securities.

Good morning.

Good morning, Ray.

I was just wondering if-- with your forecast for 2006, if losses do continue, could that at some point maybe make you consider slowing down your growth and what flexibility, if any, do you have in slowing down your growth?

I know you have got a heavy aircraft delivery schedule and you've got the [inaudible] at Kennedy.

Do you have any flexibility in this area or would you consider doing that?

We'll consider anything if conditions warrant.

We feel comfortable with what we have this year and with the cash flow that we have coming in based on our projections.

Obviously if we have some [indiscernible] event where fuel price were to spike back to $3 a gallon or something, we would certainly consider doing something.

We feel good about the markets we have scheduled to add this year we feel like the 190s are going to strengthen what we're doing, not weaken it, and we have a lot of places for the 320s.

So it's kind of full steam ahead but we're certainly open if things change dramatically for that consideration.

You have flexibility, obviously, from the manufacturers, which you've seen in the industry over the past few years, but more importantly the capital costs of an airplane or the operating cost is really the smallest portion when we talk about fuel prices the way we are today, if you just took the airplanes and didn't fly them as much you have flexibility there, because the capital cost isn't--isn't a big percentage of our overall costs.

In the past I think you said that with your growth you wanted new people to try your product and load factor was maybe a little more important yield as far as pricing goes.

I know you can't talk directly about pricing, but you did allude to the fact that your problems might be solved with a $10 a ticket price increase going forward.

Is that kind of a change in your philosophy that now you are looking at maybe pricing a little bit more aggressively and letting your load factors continue to slip a little bit.

Not necessarily, I think we have to adjust--I mean do we need 14 flights a day on a Tuesday going from JFK to Fort Lauderdale, for example, on the off season, should that be 12?

I think we can do that if we adjust some capacity on some offpeak times of day and maybe offpeak times of the year.

We need to be more aggressive in that area when fuel prices are higher.

So I think if we can adjust capacity we can still keep the load factor at the levels we want to have it and get a few more dollars per ticket.

On the margin we're not talking about a lot, but we do need to figure-- it's just a change of mindset given the higher oil prices that we're experiencing.

Thank you your next question is coming from Jamie Baker of JPMorgan.

Good morning, everybody.

Question on operations, with the on-time performance being somewhat weaker than what you had hoped, understandably you countered this by not cancelling many flights.

I realize there are a lot of operational reasons for this, but would you reconsider an interline agreement with any other carriers and second have you made any padding changes to the block to un--above and beyond pulling down the 190 schedule?

Jamie in answer to your question if we get to that position where we have to cancel flights for a maintenance reason, obviously if we have a hurricane and there are hundreds of flights canceled then people don't just travel.

But we always protect our customers, we don't leave people in a lurch, so regardless of if we have a formal agreement or not we protect them either on our own planes or somebody else's.

So that's not going change going forward and, what was the second part of your question, I'm sorry-- no that was the first part.

Block times, yes.

Yes, we have padded some block times.

We certainly have between JFK and Boston.

That will affect a little bit of the utilization but more just starting earlier in the day and running later, and we have got a great guy that came on, [Rob Marrister] who has a lot of experience, and [inaudible] he's done a great job of-- of really focusing on the operation and figuring out where we need to add a little bit more time.

The other thing we is from a crew perspective we kind of let pilots and flight attendants get as efficient as they possibly could, and because their rules are different we had--the crews were flying separately.

So on those really critical lines that we experienced problems we put the crews back together again and will continue to do that so there's a lot more operational issues than just padding block time, but where we need to do it and there's kind of a new norm of what we experienced before the increased capacity that's in the market---wherever that is we have made those adjustments or are in this process of making even more.

Thank you.

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

Morning, guys.

You know it's a little hard to do but near as we can if we kind of back out impact from the Embraer 190, understanding what the---trying to make assumptions about what the ASM mix are, if you walk through the guidance you are given for margins, costs, et cetera, it looks to imply that revenue gains accelerate pretty meaningfully beyond the first quarter.

You mentioned, David, that you don't have assumptions in there about any changes in Song beyond what you can see right now, just curious--if, a) if that's accurate and also what might be behind that thinking?

What do you see moving through the year?

It would appear that the comps get tougher as you move through the year, not easier.

I think the first thing-- and John mentioned this in his remarks the ASMs for March and April are almost identical and the revenue is about $20 million difference just in those two months because of the move from Passover and Easter into April, and that's what we have experienced historically, and there's no reason to believe that will be different.

So that kind of kicks off the post first quarter period of time and then as it moves into the summer it-- the maturing--the 190 service is part of it, but on the 320 side we're-- our capacity adjustment in the west we feel really confident about and we have seen great RASM increases in the east west and we looked at it every which way, and we think that this is a---it's something that's not only attainable but it's something we can do and we feel confident with it.

Thank your your next question is coming from Mike Linenberg of Merrill Lynch.

Yes, I guess just-- just a couple ones.

David, I know there was an article out recently talking about how the-- the administration later this year is looking to increase the security fee from $2.50 to $5.00 on non-stop flights where a non-stop flight would be similar to a connecting flight and given that you guys do have a lot of point-to-point flying, and I know that you are trying to push fares up--a lot of times we see these security fees ultimately absorbed by the carrier rather than the consumer.

Is this--do you start thinking maybe about more type of connectivity and the vehicle that is Embraer 190, if this were to be imposed and then what sort of connectivity are you seeing now?

I realize it's early with the 190s, and there's some with the A320s, but maybe what percentage of our passengers at present do connect?

Well, I think--we haven't seen any changes because the 190s are such a small percentage of our overall business, but I think this is a huge area of growth for us.

Traditionally we're 6%, 8% connection, which is so low compared to everyone else and if you take another point-to-point carrier, like Southwest, I would guess, and based on stuff that we have seen and heard in the past they are over 20%.

So if you took Southwest down to 6 or 8% there would be obviously a big huge difference for them, and so the-- the 190s will only help that situation as we added the 10 flights today between JFK and Boston and we have now people that can connect going to New Orleans.

When we started the Austin service, we did one Boston/Austin, and we did three JFK/Boston, so someone can connect much-- very similar to what Southwest does over Baltimore where they have some non-stops and they have a lot of people making the one stop.

And our focus will be frankly on the 190s this year to really help strengthen that and to---instead of just doing one off-stop, to really bring more connectors in with high frequency in the 190 market so that it doesn't affect us operationally so if we already have high frequency to a lot of our markets, but the 10 flights a day.

Going to other cities north of JFK to be able to bring more connectors in and---we just announced Bermuda, for example.

That's going to be a great connecting market that we have as well.

So focusing on building that and we think there's a lot of upside there. [Overlapping speakers]

As far as the security fee, that's added to the fare ladder, so it's an added fee in addition to the fare, and what we find on those that it doesn't affect as much as if you put in the fare, but still will and we'll certainly still fight any kind of increase in taxes, this is an industry that's taxed kind of crazily so we think that's not good public policy to keep taxing people to fly especially in light of the high fuel prices that this industry has had to bear.

And just a quick second, I think it looks like you may have added another gate out at Newark;

I was curious how that's going and maybe how the revenue performance of that market is versus some of your other New York/Florida markets.

We're very pleased with it.

And if you look at the RASMs alongside of JKF, obviously we're-- we're not up--year-over-year on JFK but it has come very close to what we're doing at JFK already.

Which is amazing for a market we have just been in for a few months, so yes, we're pleased with our performance at Newark and the operation is tough;

I've got to be honest with you, the ground delay programs there are-- I don't envy Continental having that many flights, I don't know how they run their operation over there, with just the few number of flights that we have, it's something that we look at a lot.

Is that-- is that third gate to address the delays or is that portend expansion at Newark?

I think I could be both but right now it's just an operational gate so woe can have another gate that we can flow flight onto as they're run if they're on a ground delay program over there.

Okay.

Great thank you.

Thank your your next question question is coming Glenn Engel of Goldman Sachs.

Good morning, can you go through what the maintenance pressures will be in 2006 versus '05?

Actually maintenance stays under pretty nice control in '06, compared to '05.

No dramatic increases.

One of the nice things about it in terms of predictability, of course is that we've got the power-by-the-hour contract for our engines on the A320s, so that you don't have some of the swings from quarter to quarter depending upon what is going in the shop, and the other aspect that we've got that we'll see phased in during the course of the year is that we have received permission from the FAA to follow air bus' new program for seat checks, where previously the interval between seat checks was 5000 flight hours, air bus increased it to 6,000, and we'll be implementing that now that we've received that approval.

We'll expand to the next few months, so you won't see as many seat checks this year as you might otherwise have expected as we stretch out those intervals.

If you have unit costs--non-fuel unit costs up 5% and maintenance isn't really an issue, can you go through which of the items will growing faster than 5% and which ones will be lagging behind?

I don't have that kind of information at my fingertips at the moment.

Let me clarify the bit about maintenance.

I said maintenance wasn't a big issue, but maintenance will continue to go up; it's just not going up dramatically.

In that 5% it includes the $32 million, right, of the expense?

Right it includes [overlapping speakers] and it includes the--the drag from the ground rent on the T5 location.

Which we'll see as an expense in our P&L for 3 years here as we get ready to move into the terminal so in essence, we're paying for one terminal, and we're paying for the ground rent on a second one during the three-year construction period.

And actually expensing more than we are actually paying cash because of the flat lining of the 30 years.

So, it's actually worse than it is on a cash basis.

So, Glenn, I think in answer to your question, take that-- you know the $32 million out of that-- the majority of which is the non-cash expense, but it's kind of SEC as the accounting than I think that gets you down to the lower single digits that we're used to and that-- we're doing-- absent all of that we feel really good about our costs.

And on the service side it just sounds like you are largely resigned to the fact that it's hard for you to run the same operation that you used to?

Not largely resigned, I think Dave Barger, our President always talked about a snowman which is an 8 in front of an 80%.

I think we're resigned that we're not going to be able to do 80%, but no reason that we shouldn't do mid-to upper 70s.

Based on the adjustments we can make in block time.

So, I think that's totally attainable, and based on the fact if you are on a ground delay program and you can go from 87 to 70 over the period of a couple of hours it's just goes with the territory.

And, it's tough to plan for that kind of stuff.

We are adding an extra spare and we have-- ironically enough--the Fort Lauderdale situation we were experiencing last year with changes from the FAA and the fact that we put a spare down there have really helped a lot and that's really not an issue any more; it's more the northeastern markets.

You know, there's a lot of work, also, I think, Glenn, to working with the F AA and looking at travel patterns and---the Kennedy growth has gone from 30 million [enplanement] to 42 million, and the arrival pattern having stayed the same during this whole time, so we're working with them to say look is it really right that you should arrive this way when capacity is up so much?

I think we can some improvements there as well.

Not 81 or 82 but high 70s, mid-to high 70s I think is certainly still attainment which would be great given this environment.

I think it's also important to point out, much as we don't like the overall statistics we're performing fine relative to competition at each of the airports that we're at.

It's just that our route system has a far higher concentration of delay-prone airports between JFK, Boston, LaGuardia, and Newark than anybody else's route system in the U.S. and we're finally seeing the effect of that with the proliferation of ground delay programs in all four of those locations.

Thank you.

Thank you.

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

Good morning.

Thanks.

How much do you have left on your shelf registration?

At this point it's right around $100 million, so one of the things we're going to do this spring after we have the 10K out of the way and everybody gets a chance to take a big deep breath because year-end close is quite an effort, but eventually we will be reloading that shelf-registration.

And John, you mentioned in your comments some of the detail about what aircraft were covered in terms of financing for 2006.

Can you explain which--or how much of the aircraft are not covered for '06 and then what is covered in '07 at this point?

Let's do '07 first, because it's easy.

The only things covered presently in '07 are about four or five Embraer 90s at the beginning of the year, because we have sale lease back financing arranged for 30 or our first 31 aircraft.

So I believe that's five aircraft in early '07.

In terms of '06, we've bid out the financing for all of the aircraft.

Again, all the E190s are covered for '06 with GE capital and the sale lease backs, but for the A320s we bid them out.

Have plenty bids.

Awarded based on the most cost competitive bids and are working through term sheets and documentation on the various financing.

We're using bank debt this year, but doing it on a fixed-rate bases rather that floating-rate basis.

Having done bank debt for A320s in the early years and then the last two years having gone to the capital markets and done [eetc], the bank market was actually quite aggressive and we found all end costs looked like they were going to be cheaper doing the bank debt than the [eetc] and we liked the diversity of not continuing to go to one well over and over year after year so we toggled back and went to bank debt for the majority of the A320s that are being delivered in 2006.

All of the 190s [inaudible--background noise] and then when you say the majority of the 320s is bank debt is that just over 50% or like 90%?

There's a group that we are looking to do a-- a private placement on that isn't really technically bank debt and that's why I said that.

But beyond that, out of the 16, I think we're covered with something along the order of, like, the majority of the 16 are covered under the bank debt.

I can't remember precisely how many we were doing into the-- the planned private placement.

I think it was only like two or three though.

Okay.

Thanks and then just last question just to clarify on a follow-up to Glenn's question about CASM, if we excluded the additional 12 million to landing fees and rent, and--and we compensated for the stage-length adjustment and the--the stock options, were-- were you saying that non-fuel CASM would be roughly flat year-over-year excluding those items?

No we didn't say that, we said it would, excluding those items on a fuel neutral basis, it would be up about 4 to 6% but with a stage length that was 100 miles shorter, and we'll kind of leave it to everybody to make their own stage length adjustments to figure out what they think it would be on an apples-to-apples same stage length basis.

Thanks a lot.

Thank you.

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

Yes, good morning.

Couple of follow-ups on the 190, I'm wondering if we could quantify the technical dispatch reliability, and also do you expect to receive any compensation from Embraer, GE, or [Gtech] for breaking any minimum performance guarantees, and could you try to quantify the magnitude of losses of what you are seeing as a result of the below-expected performance?

To give you an idea there's a rate called technical dispatch reliability that speaks to flights that are delayed or canceled.

And the A320 is running around 99.1 for us, which is leading the world of all A320 fleets.

The 190 has been in the 95s, and that's pretty much consistent with what one would expect with any new kind of aircraft, and it is trending upward as we at Embraer are attacking all of the issues that we can attack on the plane.

I know, for instance, of the top five items that caused us problems, we and Embraer have already implemented fixes on four of those five, so it's a matter of just analyzing each and every one, and, as David said, in the course of January we have seen our technical dispatch reliability for that airplane go up with each succeeding week.

So I hope that gives you a little bit of a quantification of how it's doing.

It's not doing, I think, as badly of a lot of what some of the press coverage would imply.

It's doing pretty much doing where you would expect a brand new airplane to be.

That's very helpful and a just quick follow-up on the new terminal.

Are the cost estimates roughly at 875 to 900 million?

And, I guess, when I look at that you talked and the ground rent to the port; ultimately when it enters service, you are going to be bearing a good chunk of the, indirectly, the consolidated revenue bond debt service, so I'm wondering if you could quantify what magnitude of that 900 million or so will be borne by you and what percent can ultimately be accrued to parking and some of the other vendors.

I think I can answer that.

The total amount of the 850 to 900 obviously isn't the cost of the terminal.

It's all of the improvements going into the parking garage and the amount that's allocated just at the terminal itself is going to be a lot less than that, so our deal that we have-- terminal is 443 million of that.

So, that's a net to net number, so it could go higher than that with interest, but how the port authority is going charge us is on an enplanement basis, and so we know what our enplanement rate is today in Terminal 6, and then we have an enplanement rater for the new terminal.

It is a bit higher, not dramatically so, and-- but we think with-- we also get revenues off of the terminal from concessions and we do really well on that, so we think with the increased quality concessions and more concessions that we'll be able to bridge that difference in that rate, and it will be---hopefully very similar to what we're paying today.

So we're confident.

We spent a lot of time thinking about that and certainly we're going to have to have the flights to be able to that, but it is on a per enplanement basis not on a large capital cost of a large terminal.

I want to clarify one thing, too that John said, just to make sure that we're all--- the 46% CASM guidance increase does include the 20 million in stock expense and the 12 million for this land rent so as you work through--and I know there's a concern about cost, and if you strip away all of the stuff I would tell you that if you take that-- that money off and others we're talking about low single digits, so we feel good about the costs, the effect of the 190, and the effect of these other items that are non-cash related, a lot of them.

And so I didn't want you to think that we were 4 to 6 on apples-to-apples basis, you have to strip out those as you do your calculations.

Thank you.

Thank you.

Your next question is coming from Travis Anderson of Gilder, Gagnon and Howe.

Hi, two-- two questions.

One, I think you mentioned the other day at the conference that you were actually looking into adding another handful of gates on the new terminal if possible, given that you are looking at shorter stage lengths going forward.

I wanted to ask what would that cost and is that something that can be done kind of on the fly like this while you are building it?

And secondly, just wanted to ask about this Orlando to San Juan route.

You mentioned that you thought it would be doing very well but it seems like an outlier to me I was wondering what the logic is.

First question, Travis on the question of-- on the terminal, yes, the gates are going be very inexpensive, obviously the cost of adding those gates--they are going to be a temporary gates they are going to be a temporary building that's going to be kind of in a construction area in Terminal 5, and we'll be sending people over there every five minutes on-- on a shuttle.

It's a lot less per gate obviously than we are paying today, because it's just going to be a temporary space that we'll throw away.

So it is going to work into our cost structure rather nicely, and it can be done on the fly, and like I mentioned that earlier it will be done-- we expect those gates-- seven gates additional to be in by the first of May.

As far as the decision to fly between Orlando and San Juan we have a really great presence, not only in San Juan but in Puerto Rico; we fly to Ponce, we fly to Agua Dia, we fly to San Juan, certainly we have a large Puerto Rican community living in New York.

It is very accustomed to flying on JetBlue.

As near as we can tell the second largest Puerto Rican community in the United States is in Orlando.

So, Orlando has attraction not only from just the obvious of going to vacation and visit Disney and the other theme parks that are there that have been very popular for Puerto Ricans, but also there's a large community that have relocated there and obviously need to get back and forth --to see Grandma and to share holidays and all those other things that we experience on the New York side, so we-- we feel like it's-- it's a great extension of our San Juan presence and with our costs and with our product advantages and with the loyalty we have it made a lot of sense to do, and forecasted really well for us.

Okay.

I guess I misunderstood I thought you were talking about on the permanent structure adding an additional five or six gates.

No.

Yes it's-- the temporary.

So it takes us to a total of 22 gates.

Okay.

Thanks.

Thank you your next question is coming from Helane Becker of the Benchmark Company.

Thank you so much operator for taking my question.

Hi, gentlemen.

Just a couple of things, one, is John, could you just go through that tax rate again;

I think you said it was 23% and can you just explain how you get there?

And then second on Newark can you just go through, maybe, David how pleased you are with that market and what the competitive response if any has been and if you'll be adding more cities out of that market.

And then, lastly, on Bermuda, when you are thinking that will start because I isn't see it in the system yet?

Thank you.

Okay.

First item is the-- the tax rate and frankly it's such a convoluted way you get to it I would rather handle it off line rather than tie up time on this call with the tax rate discussion so feel free to give us a buzz and I'll try to explain how we get there, because it's a long winded explanation and it's pretty obscure.

Okay.

Thanks.

Second half of the question-- or second part of the question.

David you want to talk to Newark?

Yes.

I mentioned earlier in this call we're pleased with the RASMs in Newark.

I think overall we're not--need to get more money for all of New York, Florida and another $5 or $10 would certainly help our bottom line because we we have so many seats.

Part of our, kind of our problem, we're-- we're the largest airline in New York to Florida.

In January we had 36% of all of the available seats which is shocking when you think of the short time we have been in this market compared to other people, and that is up obviously on our own business 25% over what we had last year.

And that kind of drove our flat fare; the market itself was up 13% , if you add our 25%.

Now Continental was up 63% on their seats out of Newark.

So, we certainly encountered a strong competitive reaction as we had expected from Continental.

But, even with that strong competitive reaction, we have RASMs that are very similar to what we have out of JFK.

So we haven't made any decisions whether we add any additional cities.

We are gate limited there, we have access to a third gate, but we are pretty well using what we have today.

It's not an airport that has a lot of room to grow and frankly it is-- the operating environment over there is a lot-- a lot tougher, and we have ground delay programs four or-- many four or five times many-- as often as we do as JFK, probably even more than that to be honest with you, so like I said I don't really envy Continental and probably don't think it would be wide for us to add a lot more capacity out there just because the operating environment is really tough.

And Bermuda I know you applied for it last week I think.

Right.

We applied for it; we put an announcement out.

We haven't started to sell it yet.

But I would just watch the news that-- that should be coming shortly.

Got you.

Thank you so much.

Thank you.

This concludes our session with investors and analysts.

At this time we'd like to open up the call for a 30-minute media Q&A, again. [OPERATOR INSTRUCTIONS] Your first question is coming from Andrew Compart of Travel Weekly.

Good morning, how are you guys doing?

Fine, thanks.

Good.

I had seen a report where you talked about code sharing perhaps with a global carrier or international carrier.

Is that the case as you are talking about someone like MaxJet or more of an established major carrier?

I think what we said and as we get more and more flights out of Kennedy our route system that we have today out of Kennedy where we primarily fly to Florida and to the west coast--perhaps isn't it as attractive to an international carrier, because you have non-stop international flights out of California and Florida.

As we start adding cities like Richmond and Austin, and other cities that we'll announce shortly that don't have that international connection; what we said is that it becomes a lot more attractive and we have been approached obviously by a lot of different-- not--not just MaxJet but others that are very interested in our network and not only where our network is today but where our network will become as we---we have always had upstate New York but we'll add a lot more.

So we think that there's a way that we can do that and not increase our costs.

We have a method that would allow international carriers, and I'm not sure if this is the exact same number but at one time I saw there is 105 different airlines that serve Kennedy, so there's a lot of different airlines from a lot of different countries, but a system where they could actually sell on us provided that they agreed to pay-- pay for the ticket whether they fly or not and if they want to bring the bags over we can put the bags on the airplane and then they can come and get them if we have them.

So, not a lot of increased cost, but we think we can get meaningful revenue off of that as our route system for Kennedy expands and gets bigger, but haven't started yet, but we have a way to do it and I would assume that over the next year or so we'll be experimenting and implementing with a handful or carriers.

But-- but to clarify that we are not looking at a traditional code share the way most people think of -- each carrier selling the other carrier, doing interline connections, ticketing, and all of those sorts of things.

This is not a traditional code share arrangement.

We are looking at-- as David put it a low-cost way of doing it and the way to keep it low cost is to not add all of the complications that go with a full blown code share.

Which includes if they want to sell on us and send somebody ever we'll put them on our airplane obviously.

But we don't sell on them obviously.

Could you explain how that would work more exactly?

You would sell tickets on them and they would send them there or you would just link to each other or how--

If-- say you are an airline that's flying somewhere in the Baltics to the United States and you want to get someone to Richmond, Virginia you can sell a ticket on us and we'll have a link to do it, but if you do you buy the ticket.

So they show up.

They get to the ticket counter, and we put them on the airplane.

It just allows them to have a connection option that they don't currently have today.

Not that we would be selling someone to the Baltics ourselves.

If you called reservations, we wouldn't offer that service, but we're not ones that need the section on an international carrier because they are the ones that need the connection.

And it would work the other way around, too with JetBlue customers, I'm assuming?

Yes.

But they would contact that carrier to book it.

Okay.

Thanks.

Thanks.

Thank you.

Your next question is coming from David Jonas of The Beat.

Hi, yes, thank you everybody.

I'm just wondering what the impact has been or what the experience has been over the past year of not having any participation in a global distribution system.

Well we haven't-- well I think-- we pulled out a saver-- that was a long time ago, I think-- was it a year and a half or so ago.

You know we-- we are not in any of the distribution systems today.

And we certainly have lower costs for doing it.

You know we have-- there are a lot of different ways that you can do distribution, we are in--Kayak and Side Step and you can find us in there with-- that's a low distribution channel.

We also have some of the internation-- the-- the corporate booking tools that we're starting to appear in.

We're going to do a lot more of that this year if those are reasonably cost.

And we have been approached obviously by the other guys Travelocity, Expedia and Orbitz and they continue to propose things and if we find something that fits within our cost parameters we will consider it, but right now [inaudible] pretty high load factors with the distribution channels that we have today.

Given the intention to add more markets this year where there's not as much JetBlue exposure in the past and then also taking into account the recent acceptance of some new GDS deals with the likes of AIRTRAN and Northwest would you rule out GDS participation moving forward?

We don't rule out anything, obviously-- we-- we look at everything, but I guess if there was the right deal there we-- we would take a look at it, but I think-- we would prefer the more-- our website or maybe even some of the-- the corporate-- you have these corporate channels that get the corporate business direct.

Like Get There and others that we would prefer.

But we'll-- we're always open to suggestions, and I'm not sure what the AIRTRAN deal was but I'm sure we will be getting it shortly, and we'll take a look at it.

Historically the price of participating in the GDS was simply-- it was not competitive.

So the only way I could see us moving into a GDS if the pricing structure was altered in a fairly significant way from what we have historically scene.

Okay.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS] Your next question is coming from Ted Reed of The Street.com

Hello.

I'm just wondering you are forecasting losses into the future I gather because of fuel price increases, increased Kennedy ramp new airplanes.

What has to happen to make this airline become profitable again and to renew your profitability and when does that occur?

We covered that quite a bit on the call, but I think it's really -- either fuel prices-- we were projected profits in '06 based on fuel prices we had a couple of weeks ago, but obviously it has run up based on concerns of--you name it, Iran or Nigeria or whatever.

We're obviously very sensitive, 400 gallons of fuel burned--price goes up $0.20 or $0.15 or $0.10 you can times that amount by the price of if it's $0.10 it's about $40 million.

In answer to your question either fuel has to come down or-- we're going to---if you take the number of people we fly this year and assume it is around 20 million people, to cover an $80 million increase, we have to get $4 more on an average ticket.

If we get $10 more we'll make money and if we get $3, we'll lose a little bit of money-- I think it has to do with either getting a few more dollars on the ticket or having the fuel price go down.

Those are the biggest determinators.

But yet you are not projecting that you'll be able to get those ticket cost increases?

Well, I think, the fuel came up quickly and so we had to change the fuel assumption and in answer to your question, no we didn't bring the revenue up to-- to obviously cover that fuel cost increase, and it's our job to go out and make sure we can do it.

And kind of exceed what we have given you as guidance.

I see.

All right.

Thank you.

Thank you.

This conclude our Q&A session with the media.

With that we will turn over the floor to David Neeleman for closing remarks.

Great.

Well thank you everyone for enduring this long call, and I guess just in closing, we're going-- we have got a lot of smart people around here.

We have got a great product we have got the best crew members in the industry, and we've got the 190s, we've got the 320s, we've got a great game plan.

Certainly the fuel has caught up to us a little bit here.

We'll adjust on the revenue side and it is our full intention to get to profitability as soon as we possibly can, and I feel confidence in our team.

So, thanks again, and we'll talk to you next quarter and hopefully we'll have some better news.

Thank you.

This concludes today's JetBlue Airways earnings release 2005 conference call.

You may now disconnect.