JetBlue Airways Corp (JBLU) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the JetBlue Airways Fourth Quarter and Full-Year 2010 Earnings Conference Call.

Today's call is being recorded.

On the call today is Dave Barger, JetBlue's CEO, and Ed Barnes, JetBlue's CFO.

On the call for Q&A is Robin Hayes, JetBlue's Chief Commercial Officer.

As a reminder, this morning's call includes forward-looking statements about future events.

Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and, therefore, investors should not place undue reliance on these statements.

For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to the Company's annual and periodic reports filed with the Securities and Exchange Commission.

At this time, I would like to turn the call over to Dave Barger.

Please go ahead, sir.

Thank you, Christine.

Good morning, everyone, and thank you for joining us today.

This morning we reported fourth-quarter net income of $9 million or earnings of $0.03 per diluted share.

For the full year 2010, we reported net income of $97 million or $0.31 per diluted share, an improvement of $36 million compared to full-year 2009.

We're very pleased with our year-over-year progress, particularly in light of significantly higher fuel prices and the challenges we faced in the first half of the year as we transitioned to a new reservation system, and we operated without the benefit of JFK Airport's most important runway at our home base of operations in New York.

Our crew members are the reason behind our success in 2010.

In addition to successfully transitioning to a new reservation system, we worked hard to enhance our liquidity, optimize our network, maximize revenue, and maintain our cost advantage.

These actions resulted in record revenues in one of our most possible years in our Company's history.

Our 2010 results reflect the hard work of everyone at JetBlue , and I'd like to take this opportunity to thank our 13,000 plus crew members for helping us achieve these strong and impressive results.

Our 2010 results include a $29 million profit sharing payout to be paid to our crew members in March.

Throughout 2010, we maintained a strong liquidity position.

We ended the year with approximately $1 billion in unrestricted cash and short-term investments, or 25% of trailing 12 months revenue, which reflects our continued solid financial health and stability.

Given the volatility in the price of fuel and the uncertainty that presents, we believe a strong cash balance remains important.

In addition to maintaining strong liquidity in 2010, we generated $225 million of positive free cash flow, which we define as operating cash flow less capital expenditures.

We continue to work with our aircraft manufacturers to reduce our capital expenditures, a critical component of the past two positive free cash flow.

In 2010, we announced the deferral of 16 Embraer 190 aircraft and 16 Airbus A320 aircraft.

These actions substantially reduced our aircraft commitments in the near term, helped smooth our future debt and predelivery deposit requirements, and better matched our network demands with our order book.

In 2010, we generated record revenues of $3.8 billion, up 15% year-over-year, reflecting the benefits of an improving demand environment, an increasing mix of business customers, and revenue improvements enabled by our transition to Sabre.

Last year's average one-way fare of $141 is an 8% improvement over 2009.

We believe that our 2010 unit revenue growth of 7.6% was particularly impressive given our capacity growth of 6.7% during the same period.

Capacity growth typically puts downward pressure on unit revenues.

Instead, we were able to increase capacity in Boston and the Caribbean while simultaneously growing unit revenues.

We are especially encouraged by the improvement in higher yielding business traffic throughout 2010, driven primarily by our transition to Sabre and changes we made to our Boston network and schedule.

Ancillary revenues continued to be an ongoing focus for JetBlue as well.

When we combine all of our ancillary revenue reported in the past the reverence you line with those in the other revenue line, total ancillary revenue in the fourth quarter was about $20 per passenger and grew roughly $35 million or 8% during the full year 2010 as compared to 2009.

This increase was driven in large part by our Even More Legroom offering, which generated over $85 million of revenue in 2010.

As we further enhance our Even More Legroom offering, we expect this to continue to be a very important source of revenue for JetBlue.

In 2011, we expect our ancillary revenues to increase approximately 20% year-over-year.

Keep in mind that last year we voluntarily waived fees in connection with our transition to Sabre which should favorably impact year-over-year comparisons.

In 2010, we seized on opportunities in the competitive landscape and improved the strength of our network.

We acquired coveted spot at Washington's Reagan National Airport and opened new six new destinations from Boston.

With this and other actions, we increased capacity in Boston by 30% versus 2009.

By next summer we expect to offer 100 daily Boston departures, further solidifying our position as this important city leading carrier.

We also continue to build on our success in the Caribbean and Latin America, where our visiting friends and relatives or VFR traffic complements a strong leisure traffic base.

This VFR traffic has helped us better manage the seasonality of our business, improving overall revenue performance.

In 2010, we launched service to Punta Cana, our fourth destination in the Dominican Republic, where we are now the largest carrier as measured by SMs.

In April of this year we expect to be the largest carrier in Puerto Rico as we continue to take advantage of changes in the competitive landscape to bolster our position.

We plan to increase departures from San Juan this summer by 30% year-over-year.

As part of this effort, we plan to begin new service from San Juan to both Jacksonville and Tampa in May.

During the fourth quarter, the Caribbean and Latin America was the best performing region in our network as measured by year-over-year unit revenue growth, even while we added significant capacity.

In addition, our Caribbean destinations generally require minimal up-front capital and despite limited daily operations are relatively low-cost and consistent with our free cash flow goals.

In 2011, we expect roughly 25% of our ASMs will be in the Caribbean and Latin America.

In 2010, we continue to expand our network through airline partnerships as we began connecting customers with American Airlines, LL, Emirates and South African Airways.

Together with our partnerships with Aer Lingus, Cape Air, and Lufthansa, we now offer our customers the opportunity to book travel to hundreds of destinations in six continents.

With our valuable slot portfolio and new terminal at JFK, arguably the most important gateway in the world, a strong network, superior product and low cost, we believe we are well positioned to serve global carriers.

Airline partnerships continue to play key role in JetBlue's growth strategy, and we remain focused on our expanding partnership footprint even further.

To that end, we expect to announce a new relationship with another carrier next month.

In addition, we plan to begin interline sales on our website www.jetblue.com later this year, which should drive additional revenue.

During 2010, we continued to enhance our product offering for business travelers.

As a result of our transition to Sabre, business customers can now benefit from realtime connectivity on the GDS channel.

In addition, we began offering preboarding for our EML customers and introduced several new refundable fare price points.

These actions increase flexibility for our business customers and improve our corporate travel penetration.

Heading into 2011, we continue to make investments in improving our customers experience.

An experience we believe that is unrivaled in the industry and well deserving of our sixth consecutive J.D.

Power Award for Service Excellence.

We are investing in the improvement of our technological capabilities, allowing us to continue to expand our product offerings, improve airport technology, and retain our product leadership.

Looking ahead, higher fuel prices will certainly continue to present a challenge.

We believe, however, we are well prepared to successfully navigate high fuel prices and volatility.

We believe our fuel hedge program, which Ed will discuss in more detail, helps to reduce the impact of price volatility.

We also remain committed to maintaining a competitive cost structure which we believe is very important in a high fuel price environment.

Moreover, we believe we can take advantage of our low-cost structure and seize upon opportunities in the competitive landscape.

In addition, we believe the industry needs to pass some of the burden of high fuel prices to customers.

We are encouraged by recent industry-wide fare increases which have helped offset some of the impact of rising fuel prices.

To that end, we recently implemented a $35 one-way fuel surcharge in our Puerto Rico market and a $45 one-way fuel surcharge in our Caribbean markets.

While we have more work to do to position our airline so that we are consistently driving profitability and positive free cash flow on an annual basis, we continue to take important steps to better position us for long-term success.

During this past year, we strengthened our solid financial foundation by focusing on prudent deployment of capital, cost discipline, and revenue maximization.

Our network strategy is generating solid revenue performance and will continue to make pertinent investments in our product.

We believe our outstanding crew members and unique culture will provide the foundation for continued success in 2011.

While many challenges are undoubtedly lie ahead, our profitability over the past two years demonstrates that we are certainly headed in the right direction.

We expect 2011 will be another successful and profitable year for JetBlue.

And with that, I'd like to turn now call over to our CFO, Ed Barnes, for more detailed review of our financial

Thank you, Dave.

Good morning, everyone, and thanks again for joining us today.

As Dave said, we are very pleased with the results we reported this morning.

Our entire team has done a tremendous job running a great airline, and I would like to take moment to thank all of our crew members for their efforts during a very busy year.

The actions we have taken to build our brand, control growth, bolster liquidity, and strengthen our financial position has helped us meet the challenges of this industry.

We reported fourth-quarter operating income of $57 million, a decrease of $8 million year-over-year, driven primarily by $58 million increase in fuel expense and a $30 million reduction in revenue due to the December storm in the Northeast.

Overall our operating margin for the quarter was 6.2%.

We earned record revenues during the both fourth-quarter and full-year, driven by a strong revenue environment and the ongoing development of our network strategy and revenue initiatives.

Fourth-quarter passenger unit revenues increased 7.4% compared to a year ago.

Yield during the fourth quarter was up 4.1%, and load factor was up about 2.5 points on 7% more capacity.

As we previously disclosed, our fourth-quarter revenue results were significantly impacted by the December storm, and our revised accounting treatment of expiring TrueBlue points.

Overall, we were very pleased with our fourth-quarter revenue performance, especially during trough travel periods, an area of significant focus for JetBlue.We believe improving revenue performance during off peak travel periods is key to sustained revenue growth.

In October, which is generally an off peak travel period for JetBlue, PRASM increased 9% on 13% more capacity.

November revenue results were weaker than we expected at the beginning of the quarter, primarily due to lower yields during the Thanksgiving travel period.

Our strategy to aggressively hold out for yield during peak travel periods, which had worked nicely through most of 2010 did not materialize as well as expected.

As a result, we lowered fares to increase load factors pressuring yields.

While not up to initial expectations, November PRASM performance was still quite strong, up 10% year-over-year.

In fact, our stage length adjusted domestic year-over-year PRASM growth in November surpassed the industry average even as we added more capacity.

In December, we continued to increase load factor at the expense of yield in the face of widespread industry discounting throughout the December holiday period.

Before the storm hit in the Northeast at the end of December, we were tracking to meet the lower end of our fourth-quarter PRASM guidance range of 10% to 12%.

Although winter storms in the Northeast are certainly not unusual, the timing of the storm which blanketed the Northeast with more than two feet of snow at the beginning of a compressed holiday period, magnified the impact.

While we generally have a strong ability to recapture revenue when we cancel flights turning weather events by reaccomodating customers on other flights, our ability to reaccomodated customers during this event was very limited due to record load factors.

Given our strong leisure focus the week between Christmas and New Year's is typically one of JetBlue's most profitable weeks of the year.

As a result, we lost significant revenue from cancellations during this period.

Turning to cost performance for the quarter, operating expenses increased $115 million or 15% on 7% more capacity.

This increase was driven largely by $58 million in higher fuel expense.

Fuel remains our most significant cost, comprising one-third of total operating expenses for the fourth quarter.

While the price of jet fuel has increased by about 30% compared to last year, we believe we are well positioned in an environment of rising fuel prices for the young, fuel-efficient fleet.

In addition, we continue to actively manage our fuel hedge portfolio to help mitigate price volatility.

During the fourth quarter, we hedged 45% of our fuel consumption and recognized about $3 million in fuel hedge gains, which lowered our fourth-quarter fuel expense by about $0.02 per gallon.

Including the impact of fuel hedging and taxes, our fuel price for the fourth quarter was $2.42 per gallon, up 16% from $2.08 per gallon last year.

For the first quarter of 2011, we have hedged approximately 37% of our anticipated jet fuel requirements using swap agreements, call options, and collars.

For the full year 2011, we are hedged about 32% using primarily call options and collars.

The underlying details of our hedge positions are more specifically described in our investor update which will be filed later today.

Based on the forward curve as of January 21, crude is averaging about $93 per barrel for the full year of 2011, and the crude to heating oil crack spread is averaging about $18 per barrel.

Including the impact of hedges and taxes, we are estimating a fuel price of $2.84 per gallon in the first quarter, and $2.89 for the full year.

In addition to hedging fuel in maintaining a competitive cost structure, we have raised fares in select markets to help offset some of the impact of rising fuel prices.

As Dave mentioned, we recently implemented a $35 one-way fuel surcharge in our Puerto Rico markets and a $45 one-way fuel surcharge in Caribbean markets.

Excluding fuel, our fourth quarter unit costs rose by about 3.6% year-over-year, which was in line with our expectations and guidance.

The two areas which continue to see the greatest cost pressures are salaries, wages and benefits and maintenance expense.

Salaries, wages and benefits increased roughly 6% from ASM on a year-over-year basis driven primarily by overtime related to the December storm and higher wage rates resulting from the increasing seniority of our crew members.

Our maintenance expense per ASM increased approximately 20% year-over-year.

This was primarily attributable to the gradual aging of our fleet as more aircraft came off warranty.

Sales and marketing expense increased 23% year-over-year due to more bookings are the GDS channel, which come at a significant yield premium.

In addition, we launched a new advertising campaign in the fourth quarter.

Moving below the line, interest expense decreased 8% year-over-year, or $5 million, due primarily to lower interest rates and lower debt levels.

Our total debt at the end of the year was $3 billion, down roughly $270 million from the end of 2009, reflecting our commitment to strengthen our balance sheet through debt reduction.

We've also continued to take action to improve our liquidity.We ended the year with unrestricted cash and short-term investments of approximately $1 billion.

During the fourth quarter, we repaid approximately $55 million in debt and capital lease payments.

Our scheduled principal payments from debt and capital leases are expected to be about $40 million the first quarter 2011 and roughly $185 million for the full year.

We continue to take a measured approach to our capital spending by making sound investments that we believe will position JetBlue well for the long term.

JetBlue ended the year with 161 aircraft.

In 2011 we expect to take delivery of four A320s and five E190s.

Specifically, we plan to take three A320s and one E190 in the first quarter, two E190s in the second quarter, one E190 in the third quarter, and one A320 and one E190 in the fourth quarter.

I am pleased to report that we have committed financing in place for all of the aircraft we are taking this year.

In addition, we plan to return one leased E190 in the second quarter.

With regard to CapEx, we spent approximately $50 million in aircraft CapEx, and [$15] million in non-aircraft CapEx during the fourth quarter.

We estimate capital expenditures of about $515 million in 2011, of which $390 million relate to the aircraft, and $125 million to non-aircraft related expenditures.

Our non-aircraft CapEx includes [$50] million related to Live TV.

Over the past couple of years we've spent a great deal of time focusing on managing and smoothing out our debt maturities through the combination of structuring new transactions as well as prepaying existing obligations.

With managing -- manageable debt maturities and capital commitments in the upcoming year, we believe JetBlue positioned to maintain strong liquidity in 2011.

We expect to end the year with cash as a percentage of trailing 12 months revenue approximately 25%.

While we are comfortable with our current cash position, we are committed to continued vigilance in driving additional balance sheet improvements going forward.

Before turning to 2011 guidance, I would like to announce some changes that we plan to make to our disclosure practices as we begin a new year.

These changes relate to our revenue guidance and monthly traffic releases.

Given our compressed booking curve and limited visibility in the revenue environment further out, we have decided to discontinue issuing quarterly and annual revenue guidance at the beginning of each quarter.

Instead we will provide revenue expectations roughly every six weeks.

At each earnings call we plan to provide or PRASM expectations for the current month and the following month.

During the third month of each quarter, we will provide PRASM expectations for the quarter.

So, today we will provide our PRASM Outlook for January and February, and in March we will provide our PRASM expectations for the quarter.As a result of our continued expansion in Boston and the Caribbean, we plan to grow our ASMs between 7% and 9% in 2011 versus 2010.

Of course, we will be watching fuel prices and market conditions very closely.

As we've done in the past, we will take prudent action to maintain our strong financial position and mitigate risk.

As you recall, for example, we reallocated capacity from our Trans Com markets to the Caribbean ahead of escalating fuel prices in 2008.

Fortunately, our size allows us to be more nimble and quickly adjust capacity should market conditions warrant.

In the first quarter, we have reduced our scheduled to accommodate new pilot training related to the six A320s we leased from [G-Pass] in the second half of 2010.

As a result, we expect first quarter capacity to increase between 1% and 3% year-over-year.

We expect significantly more capacity growth after the first quarter as we ramp up into the busy summer travel.

Period.

Turning to the revenue outlook, we are pleased with the trends that we are seeing at this point.

We continued to be encouraged by the success of our initiatives to improve revenue performance during shoulder periods by attracting higher yielding customers particularly in Boston through schedule optimization, enhanced pricing capabilities, and better connectivity in the GDS.

We also continued to see significant unit revenue improvements in the Caribbean and Latin America.

However, we do expect year-over-year PRASM comparisons will get more difficult in February and March compared to January.

We currently expect January PRASM to be up about 11% year-over-year.

We estimate February PRASM to increase between 9% and 11% year-over-year.

Looking ahead to March, we face a difficult comparison versus last year when PRASM increased 14% year-over-year.

March of 2010 had the benefit of an early April Easter, which we will not have this year.

Given our VFR and leisure focus along with strong Northeast Florida traffic, the Easter and Passover holiday trend tend to have a greater impact on us compared to many of our peers.

We continue to focus on the cost side while at the same time making prudent investments in our business.

We expect better cost performance in 2011 as many of the one-time cost pressures we faced in 2010 dissipate, and we are able to focus on running a more efficient operation.

However, fuel prices will certainly pressure cost.

We expect ex-fuel CASM in the first quarter to be up between 3% and 5%, and CASM all in to increase 11% to 13%.

For the full year we project CASM will increase 8% to 10% and that ex-fuel CASM will be down 1% to up 2%.

In closing, 2010 was one of the best years in JetBlue's history.

Our results reflect outstanding work by our crew members, particularly in light of challenges and investments we made this year.

While the near-term environment continues to be marked by volatile fuel prices, we believe we have the right tools in place to successfully navigate this environment.

And with that, Dave, Robin, and I are able to take your questions.

Thank you.

We will now begin the question-and-answer session.

(Operator Instructions) The first question comes from Michael Linenberg from Deutsche Bank.

Please go ahead.

Hello, good morning everyone.

Two questions here.

I think Dave in your comments you talked about the improvement in higher yielding business customers through the buildup of Boston complementing New York and also the transition to Sabre.

Can you provide us with any sort of metric, do have a percentage of close end bookings or maybe full wide passengers, what that number is, what percentage of the mix for you today versus maybe a year ago?

Any data on that would be helpful.

Good morning Michael, this is your first question so the higher yielding business customers I think the headline really Boston our plan is working nicely.

The balance of the Ember Air with the AirBus really offer the frequency with 100 seat platform and what we are doing with the investments and the network and to see sponsorship marketing in Boston has worked quite nicely with the business customers.

We're still at a macro level 15% to 20% of our traffic is core business.

We know that it is higher than that, I'm not going to add color to where we think that, that number is, but it is trending quite nice.

So up in Boston Mike, and as we work with Mass Port in Boston with our current operation and we are very hopeful about plans to continue to expand into all of Terminal C and we are really excited about what we're seeing in Boston.

When we are adding that level of capacity but we're seeing unit growth outstrip -- it's racing ahead of what capacity we are doing in Boston up 30% year-over-year and we are going to be up another 20% this year on a year-over-year basis, very excited about what is happening up there.

Okay and then my second question, when we look at the guidance for capacity, the 1% to 3% in the March quarter to Ed you indicated that, that was maybe a bit of a pull back due to reaccomodating some pilot training on some new airplanes, but you're still targeting the 7% to 9%.

Can you give us a feel for how that ramps up through the year, and the fact that, that also coincides with what I believe is going to be a lot higher fuel price just based on the guidance that you have given us, we could be looking at a sizable capacity growth in the second half of the year with some of the highest fuel prices.

You would think that at that level of fuel prices, all things being equal, that, that would maybe be a catalyst to rethink those higher growth rates.

I don't know what the growth rates are, until you provide me some color on what you think capacity will be in the second half.

If you can do that, that would be great.

Michael, you probably need to take a look at our delivery schedule, which will be in our investor update, but obviously slight pullback as you mentioned in the first quarter, we did indicate that we are going to be watching fuel prices and general market conditions on our capacity for the second half of 2011.

So that's about all the color I can give you at this point.

Honestly, we are going to continue to pound of Boston and the Caribbean with that additional capacity.

It's going to be very focused on investments.

Okay, very good, thank you.

Thanks Michael.

The next question Jamie Baker from JPMorgan.

Please go ahead.

Hi guys,

Good morning Jamie

Hey David, I don't want to shift the focus away from JetBlue but I do want to discuss GDS' and online agencies.

You're obviously aware of what is going on at the industry level.

Obviously at one-time you didn't participate in the GDS' now you do but you are somewhat unique in having a direct connect model.

I'm curious whether distribution savings are something we should think of longer-term for JetBlue and what impediments if any does your current connectivity result in, in terms of being able to unbundle the product, push EML through corporate agencies and so forth.

Any thoughts on this hot industry topic at the moment?

Thank you, good morning Jamie, I will also tee Robin up for comments as we use Robin into the mix with Q&A.

Obviously you have met and Robin has met the analyst in the past as well.

I think to headline this direct model that hasn't changed, right since it's in the fabric of our DNA since day one and even with the conversions, to Sabre and as we're in the GDS world the OGA world, and the direct model certainly has not changed.

Granted, we have seen the percentage shifts over a period of time, but I think again, headlines that's not going to shift for us.

Robin color on the GDS environment, what's happened in the landscape?

Sure, David.

Good morning, Jamie.

Our share of business through the GDS channel has significantly grown however, it's still a small slice of the pie.

We remain and continue to remain a largely consumer direct business.

To some extent we don't have the same skin in the game as some of the more traditional airlines have.

I would say as far as GDS is we have seen a strong yield premium from the distribution that we have added to some of the corporate agency channels, we still have the capability to add EML to that channel, we can do that within the GDS infrastructure.

We don't need direct connect for that.

I think the online travel agents we said before the jury is still out we are not sure how much of that distribution is truly incremental.

A lot of focus from us on making sure that channel if we are going to participate in it is at the right level of cost for us.

Got it.And as a follow-up, US Air identified yesterday a year-to-date improvement in the booking environment.

They believe potentially related to corporate budgets now being in a new year, having reset versus 2010 which reflected budgeting from 2009 when the world was ending.

You admit your pursuit of higher yield traffic last November didn't quite work out as hoped.

I am wondering if you are seeing anything year-to-date that is similar that might otherwise rekindle your optimism in terms of the pursuit of the last-minute booking.

Just to clarify it the issue we had last November was really linked to more the leisure fares over Thanksgiving that we were hoping to get that didn't come in.

Our performance during the first half of November as we start to build the business space was extremely strong.

As we look forward, I would describe my thoughts is being positive about the outlook.

The industry has absorbed a lot of fare increases, not all of them have stopped, but a significant amount of them have stopped as we go the back half of quarter four into January.

I think that's an encouraging sign.

Okay, excellent.

Thanks for that gentlemen.

Thanks Jamie.

Your next call comes from Bill Greene from Morgan Stanley.

Please go ahead.

Hello, good morning.

Given the cost pressures including rising fuel, do you think maybe it is time to revisit the first bag fee question?

Just a headline Bill and good morning, our position right now with charging for the second bag we feel very good about it.

Are we looking at the different levers we can pull?

You bet.

But we have not had discussions recently in terms of what you do with the first bag, we are pleased with what is happening, with the customer reception to it, people understand what is happening, from our product perspective, and as you will note into the comments today, with the fuel surcharge that we put into play this is another lever that we added into the Puerto Rico markets, the Caribbean markets as well.

And so the rising cost of energy is certainly not lost on us in terms of what makes sense to share some of those expenses with our customer base.

Yes, I would just think something that affected most of the customers would be more effective than just some of the customers in non-US markets.

But-- how about in the first quarter, do you have an estimate for the cost of the storms and in your CASM guidance for the first quarter, can you remind us if the comparisons with last year will exclude any one time charges from Sabre?

Hi Bill, good morning.

The storm really didn't have a meaningful impact on first-quarter CASM for the most part.

That was all absorbed into the fourth quarter.

We will wait to see how many more storms we have this quarter.

On the comparisons to last year, they did include the one time cost from last year, they also include some of the one-time savings from last year as well and the first quarter of last year we tended to relax a lot of our marketing events just to what we knew would be a difficult conversion period.

Okay, so net-net you don't feel there was a sort of elevated CASM level last year?

There was a slightly elevated CASM level certainly.

But it wasn't as significant because there were some offsets to that.

Okay, thank you for the time.

Thanks bill.

Your next question from come Duane Pfennigwerth from Raymond James, please go ahead.

Hi, good morning guys.

Good morning

Just wondering in your January PRASM was there any carryover from December passengers that couldn't get out in December?

No, that wasn't a significant part of our January PRASM guidance.

Okay thanks, and then, just with respect to the pipeline for additional airline partnerships, wonder if you can comment at this point who is your largest contributor, and maybe not from a contribution perspective at this point, but are there other airlines in the pipeline that you foresee partnerships with us as probable that are similar in scale as to an American?

Hi Duane is Robin, I'll take that.

In terms of airline partnerships, that has something that we haven't broken out to date for the foreseeable future, we won't do that.

I think I would say we are very pleased with the -- all the partnerships that we have today.

I'd be looking to 2011, Dave made a comment in his remarks earlier that our plan is to announce our next partner within the next month.

And as I look ahead at 2011, I wouldn't be surprised if we closed 2011 with a further fixed partnerships also.

Any commentary on perhaps the size of those airlines?

Other any whales in the pipeline?

At the moment that's not something that we choose to get into.

Thanks.

Thanks Duane, look forward to seeing you soon.

The next question comes from Hunter Keay from Stifel Nicolaus.

Please go ahead.

Thank you good morning.

Good morning

I am wondering if you guys can give us some specific measurable goals that we can look for in 2011.

What are your goals that you can share with us and how the current capacity plan supports that?

So, is it to be free cash flow positive?

Is it to grow earnings?

Is top line?

Is it market share?

Anything you can quantify for us?

Good morning Hunter.

I think certainly we go into a year planning for free cash flow.

Obviously, fuel has escalated quite significantly in the current period.

So, we will have to see how oil behaves through the rest of the year and mainly how revenues react to that.

Other goals that I would provide and Dave and Robin, you may want to have some input here as well, just to continue to build on our strength in Boston and build on our strength in the Caribbean, but that's where a lot, as I said before, a lot of our capacity increases are going to be.

Hunter, I think obviously the industry looks at return on capital plenty of discussion on that, free cash flow, and so even versus the plan that we had resolved by the Board at the end of the December timeframe write the cost of energy, when up above 90, it's back to 86, 87 today, but the [PRASM] spread is moving so that's some of the leverage that again, I think we look at what the fuel surcharge that we put into place.

And these different levers that we can pull.

So as specific leadership goals, certainly, the financial metrics, very, very important to us and whether it is operating margin, ex-fuel CASM and free cash flow, but this leadership team is also focused on customer metrics and crew member metric as well.

That's how we grow our business.

In tandem I should say with all three components of the investors as well as the customers and crew members being really part of this three-legged approach.

Okay, thank you for that color.

Maybe one for Robin.

I'm going to try and push some more on this business travel stuff, Robin, can you try to provide a little bit of color on how much improvement that you are seeing in business travel is maybe due to your own specific market share gains versus just an overall rebound.

Some of the other carriers right now that are still business travel, very heavy business travel are still reporting year-over-year growth in the 20% to 30% range still.

Are you exceeding that clip or is this participation in the broader industry trend?

I think it's both Hunter, I can't break that out for you.

I think the Boston story is a story that is very unique to JetBlue.

That is a market where we are putting a lot of focus and effort into -- in fact, I'm hoping to leave here today and head up to Boston where we are part of an event tonight with 150 companies based in Boston.

I think clearly in Boston we are seeing some significant market share gains above and beyond what we are seeing in the industry.

I think as I look across the rest of the network where most of what we take, again is leisure and more of what call kind of spill business traffic, I think there, what we're seeing is more sort of linked to the way the general industry shifts are rising.

Okay great, thanks.

And one last quick one.

And when was that fuel start surcharge implemented?

That (inaudible) we filed this week.

Great thank you.

Thanks Hunter.

The next question comes from Gary Chase Barclays Capital.

Please go ahead.

Good morning, everybody.

Morning Gary.

Wanted to see if I could ask Robin to follow-up a little bit on December.

You talked about, or Ed did in his prepared remarks, about some of the issues around into November as you approached the December peak did you have that issue resolved?

If you kind of X out the storm, were things progressing better in December or you still didn't quite have that right?

No, if I look at December, and I thought the storm impact to one side, I think we saw some fare activity in the trans-con going into the peak that we didn't expect that we have to respond to.

I think in Florida we were probably more optimistic than we should have been about our ability to price into that peak.

I think we have learned from that.

If I look at President's Day into February, personally I'm very pleased with the way that is building.

And I think what some of the issues around the November, December peak took away from, I think with some of our very strong success in building into the trough into those two months which is been previously sort of a tougher period for JetBlue.

And then if I could shift gears for one second and ask Ed about the other revenue and expense lines combined.

I am wondering as you look into 2011 if we should be thinking that there is a story there with Live TV, the other expense certainly was lower than I was thinking it would be for the fourth quarter.

So I'm wondering if the activity level at Live TV is winding down a little bit and we will see that affected in both of these line items, or whether there were some other issue that might have helped on that item for the quarter?

Yes, I can't think of anything specifically in those line items related to Live TV.

I think Live TV continues to be a very good business for us.

They continue to work on the installations on the Continental fleet, I think that is going very well.

I don't think any specific color that I would give.

So no decline in the rate of activity with Continental?

No.

Thanks very much guys.

Thanks, Gary

The next question comes from Dan McKenzie from Hudson Securities.

Please go ahead

Good morning everybody

Good morning, Dan.

Following up on the Live TV, I know that you guys tabled plans to take it public, but given the recovery in the capital markets, is that something you are reconsidering?

I think right now Dan we are very focused on completing our commitments to Continental Airlines, now United Airlines.

And figuring out what they want to do with what is now a mixed fleet.

The second thing I would mention is that our recent announcement of our partnership with Live Set in offering a new product there.

I think there are plenty of things that we can do to grow that business right now, and we are not really focused on monetizing the Company itself.

Understood.

And then I guess for my second question, if I could shift gears a little bit.

Following up on the San Juan growth comments, AMR is down sizings San Juan by 35% in the second quarter and obviously you guys have picked up on that.

I guess looking ahead, I'm wondering if that city makes more sense as a regional focus city rather than say Fort Lauderdale or Orlando given Southwest's looming merger and AMR's build up at Miami and Spirit's build up at Fort Lauderdale.

Or I guess to ask the same question differently, given the San Juan opportunity, does that change your level of commitment to fairly crowded markets in Orlando and Miami?

Yes, hello, it is Robin.

I will take that.

I think they all have different purposes.

If we look at Orlando, it's really a market that people claim to as a destination and it continues to be a market that performs to be very well for us whenever we fly our -- going south from Orlando is fairly limited to markets like Costa Rica, Bogota as well at which also performed well.

Fort Lauderdale, again another very strong market for JetBlue, and really only plans to grow that.

San Juan I think, we had plans to grow this market anyway.It's a very successful market for us.

I think American's decisions to pull down capacity, I think has only really helped maybe speed up what would have happened anyway.

Continues to be a very strong market for us.

Okay, thank you.

Thanks Dan.

The next question comes from Helane Becker from Dublin Rose.

Please go ahead.

Thank you very much, operator.

Hello gentlemen.

Good morning, Helane.

Can you update us now, the business has shifted so much.

Can you give us your capacity by region?

Number one.

And number two, can you say from a geographical standpoint where your next interline partner is coming from or if you don't want to be that specific, can you just mentioned the geographies that you would like to be in generally speaking?

Thank you.

Okay, I will take that.

It's Robin.

In terms of capacity -- I'll take your first question first, as we look into next year, I think you can look at Florida, Trans Con and our Latin America business as the three largest chunks.

And then rest kind of combined to make up the 100%.

Florida you can expect probably over 30% Trans-Con will probably be slightly under, and then Latin America will grow to about 25% in 2011.

In terms of geography, I am not going to be specific, I think what we are trying to do though is connect customers into our core networks.

And so if I look at JFK, if I look at Boston, two markets today we have a partnership with South African Airways into Washington Dulles, and we just moved terminals -- we just moved our fifth generation in Orlando to a different part of the airport, which is going to allow better international connectivity down there.

And on the West Coast, if I look to LAX we see opportunities there.

Without being specific on the geography, you will see us build partners that help us connect into our core focus city markets.

Okay, can I just follow up on that in the LAX specifically, that market?

Does your interline agreement with American include that market?

No.

Okay.

Thank you.

So anything you did there you would have to have a separate agreement with American for, or is that agreement expandable?

I think it would be a different discussion with American.

At the moment, the focus with American has been very much focused on New York and Boston.

There are a number of airlines that fly into LAX that I think would make good partners.

Okay great, thank you for your help, have a nice day.

You too, Helane.

Thanks.

The next question comes from Glenn Engel from Bank of America Merrill Lynch, please go ahead.

Good morning.

Couple questions, one, can you give me what the Caribbean Latin RASM gains were in the fourth quarter?

Hi Glenn, we don't break that up by region.

Two, can you give me what jetblue.com sales were in the fourth quarter versus what they were a year ago?

Nice try, but we don't bring that up by region either.

On the cost side, when do the maintenance cost for ASM do you think start to level off?

Hi Glenn good morning, I think obviously our fleet continues to age.

Aircraft come off of warranty, so I think we are going to see escalations this year that look a lot like last year.

I think we are looking more towards 2012 to 2013 as when it will start to moderate a little bit more.

So what is driving the big rate of cost deceleration in 2011 then?

Well, I think that there is a couple of things.

It's really some of the one-time investments that we made last year really having a full-year impact this year.

So we spent the last two years making some investments in our crew members, making investments in our infrastructure, incurring some additional distribution costs, and I think all of those are starting to level off a little bit more.

Okay, thank you.

Thanks Glenn.

Your next question comes from Will Randall from Citigroup, please go ahead.

Good morning

Good morning.

Wanted to hit on, sorry, January and February PRASM trends you mentioned.

I just wanted to get a sense, one, in terms of capacity growth within the quarter, is it pretty constant l call it up 2% year-over-year per month?

And then also, just thinking about it a bit differently, you said the comps get pretty hard in March and if I look at a multi-year comps is it possible for March to be negative territory for PRASM year-over-year?

Hello Will, it's Robin.

Yes, I would assume that for capacity throughout quarter one, you should look at that as fairly consistent.

I think the comp does get harder in March for a couple of reasons.

One, we don't have some of the favorable comps that we are seeing in January and February that run into March.

Secondly, both Passover and Easter have been slid well into April, where as last year although we had some of the outbound travel over those holidays in March.

As we look at the rest of the year then, some of the comps do get harder as you get into quarter two and quarter three, but I would not expect March to be into the negative RASM territory.

Appreciate that.

And then just in terms of Dave on the business model, are you starting to rethink things like seating density and reducing your order book respectively just so you get a little bit more capacity and lower cost to improve ROIC.

As well as you mentioned business, are you thinking about like a priority security line at certain like terminal five for instance?

Will, to follow the last comment about things like priority security, yes we are.

And that is away with that we can further add value with a bundled product if you will such as with EML and so there are other enhancements that we can roll up now that the TrueBlue program was rolled out last year, that change.

What we are doing with EML as we are now having the priority boarding for this group as well.

So yes, we are looking at that, not just at Kennedy but at other locations.

I think that would be a very nice benefit for the consumer.

I think in terms of the business model, Will, no, the business model we believe is working.

From the standpoint of I don't mean that in an arrogant sense, of course we are focused on a ROIC metric.

We are a much younger company I think than many other companies that are out there with the assets that they have been deploying over decades when you look at our competitive landscape.

And we are now successfully into our second decade.

So I think that ROIC, free cash flow, the business model, and the business model not just domestically or across the Americas as we call it, but also now onto six continents with our interline partners.

And the 150 seat capacity on the 320, we believe is a real good fit for us.

We think the 100 seat capacity on the 190 is a good fit for us.

We're real excited about things like wing lifts and let the with the new engine option could mean on the Airbus.

But I think from a density perspective, we're quite pleased with what we are seeing.

Okay and if I could just slip one in on priority security, what is the timing on some of those initiatives when you start making decisions?

Hello Will, it is Robin.

We successfully introduced early boarding throughout Even More Leg Room customers on the first of September and that is gone -- that has been received extremely well.

We probably needed to allow six months for that to settle down-- what I'd say is the teams are hard at work to bring this priority security product to market at selected airports, and I think we will be giving you more news on that in the next couple of months.

Appreciate the time.

Thanks guys.

Thank you, Will.

Today's last question comes from Kevin Crissey from UBS.

Please go ahead.

Hi good morning, thank you for sneaking me in here.

Sure, good morning.

If I think about in terms of same store -- not you're growth markets but the markets you have been in for a while, what percentage of them lose money at this fuel price and how long to give them before you think about reduction of capacity in those markets?

You know Kevin, I will tell you, and good morning, we are pleased with the cities that are part of the network.

And so I think we built a model that is quite defensible actually with oil at this level and as it moves north as the forward curve is showing.

Currently with 63 locations, we have announced as well 64 with the Turks and Cacaos, seasonal Anchorage as well as Martha's Vineyard, and so again from the standpoint of our business model, our cost of energy, our cost structure, we feel good about the contribution we are seeing across the network.

So, granted this is a couple years ago we had experience with oil at $147 and change, that's a different ball game altogether.

But really quite well-positioned with a band around the current price of energy and higher.

Okay, thank you.

Sure.

That was the last question.

Please go ahead with any final remarks.

Thanks Christine I would like to thank everybody for joining us today as we reviewed the fourth quarter and 2010.

Also for our crew members who are listening or on archive listening, we look forward to seeing you at our state-of-the-airline conference taking place on February 8.

Thank you, have a great day.

Thanks Christine

You're welcome.

Thank you for participating in today's JetBlue Airways fourth quarter and full year 2010 earnings conference call.

This concludes the conference for today.

You may all disconnect at this time.