JetBlue Airways Corp (JBLU) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to JetBlue Airways fourth-quarter and full-year 2011 earnings conference call.

Today's call is being recorded.

We have on the call today Dave Barger, JetBlue's CEO, and Mark Powers, JetBlue's CFO.

Also 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 very much.

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

We are pleased to announce another profitable quarter for JetBlue.

This morning we reported a fourth-quarter profit of $23 million, an improvement of $15 million compared to the fourth quarter of 2010 and our highest fourth-quarter profit in our history.

Despite higher fuel expense of more than $500 million for the full-year 2011, we reported net income of $86 million or $0.28 per diluted share.

Looking back at 2011, it was a very good year for JetBlue.

In addition to running a solid operation, we executed on our network strategy in key markets such as Boston and the Caribbean while maintaining our cost advantage.

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

At the same time, a continued focus on disciplined capital spending help drive our third consecutive year of positive free cash flow, an important goal for JetBlue.

We also maintain strong liquidity throughout 2011, ending the year with approximately $1.2 billion in unrestricted cash and short-term investments or 27% of trailing 12 months revenue.

These results, of course, would not have been possible without the hard work and dedication of JetBlue's 14,000 crewmembers who bring the JetBlue brand to life every day in delivering the JetBlue experience to our customers, an experience that is unrivaled in the industry and well deserving of our seventh consecutive J.D.

Power award for service excellence.

I would like to thank take this opportunity to thank our crewmembers for achieving these strong results, and we are pleased to reward our crewmembers for their contribution to our financial success.

Our 2011 results include a $31 million profit sharing path to be paid to our crewmembers in March.

Despite an uncertain economic environment, we generated record revenues of approximately $4.5 billion in 2011, up 19% year over year.

PRASM for the full year was up 11.6% year over year, driven primarily by a 10.2% increase in yields.

We believe our 2011 PRASM results are among the best in the industry.

In fact, our monthly domestic PRASM results outperformed the A4A domestic industry average in three quarters of 2011.

We are particularly pleased with our industry-leading PRASM performance in shoulder months such as May and September, reflecting the success of our network strategy to reduce the seasonality of our business, a key driver of sustainable profitable growth.

Ancillary revenues continue to be an ongoing focus for JetBlue throughout 2011 and help drive our record revenue performance.

Recall ancillary revenue is measured as the combination of ancillary revenue reported in passenger revenue and other revenue.

Total ancillary revenue in the fourth quarter was about $21 per passenger and grew roughly $80 million or 18% during the full-year 2011 as compared to 2010.

This increase was driven in large part by strong customer response to our Even More offering as we continued to make this product more attractive to business and leisure customers with enhancements such as expedited security.

We recently opened expedited security lanes at nine new airports, bringing our total to 24 airports systemwide.

We plan to add additional locations later this year.

Our Even More offering generated over $120 million of revenue in 2011.

We also saw significant year-over-year improvement in other ancillary revenue streams, including our Getaways vacation package business and TrueBlue frequent flyer program.

Throughout the year, we continued to make important changes to strengthen our network and diversify our revenue mix, again particularly in Boston and the Caribbean.

We opened five new destinations from Boston and continue to make schedule and frequency adjustments to better accommodate business customers.

In addition, we partnered with Massport to consolidate the security checkpoints in Boston to improve customer flow and the overall travel experience for our customers.

As a result of these actions, we have increased our percentage of higher yielding business traffic in Boston.

We now estimate nearly 30% of our customers in Boston are traveling on business compared to roughly 20% of our customers in the rest of our network.

Our strong PRASM performance throughout 2011 was driven in large part by increases in this higher yielding traffic.

To that end, East Coast short-haul markets were the best performing region in our network during the fourth quarter as measured by year-over-year unit revenue growth, even while we added significant capacity.

We expect our 2012 growth rate in Boston to slow compared to the past two years as markets mature and we harvest the network investments we have made.

During the first quarter of 2011, roughly 30% of Boston's ASMs were in markets that were open for less than 12 months or had business schedules for less than 12 months.

We expect such new markets will be only 10% of Boston's ASM mix in the first quarter of 2012.

That said, we anticipate Boston will continue to be a significant source of growth in the next few years as we aim to grow from 100 daily departures to 150 daily departures by the summer of 2015.

In 2011 we also continued to build on our success in the Caribbean and Latin American where our Visiting Friends and Relatives or VFR traffic complements a strong leisure base.

Last year we opened five new destinations in the Caribbean, including La Romana in the Dominican Republic, and Liberia, Costa Rica.

We also bolstered our strong position in San Juan with new service to St.

Maarten in November and to St.

Thomas and St.

Croix in December.

As we have discussed on prior calls, our Caribbean markets tend to mature very quickly, and we continue to be very pleased with our success there.

With our strong brand and low cost structure, we have continued to effect competitive change in these markets.

As such competitive, capacity decreased approximately 12% in our Caribbean markets during 2011.

Looking ahead to 2012, we expect continued growth in the Caribbean.

In 2012 we expect roughly 27% of our ASMs will be in the Caribbean and Latin America.

We also continued to expand the scope of our network through airline partnerships as we began connecting customers with seven new partners in 2011.

Additionally we announced a new partnership with Hawaiian Airlines earlier this week.

This partnership includes interline connections at JFK and LAX, as well as frequent flyer reciprocity.

Hawaiian will become the first of our airlines partners to arrive and depart from our home at JFK when Hawaiian begins new JFK Honolulu service in June.

With 15 partners, we now offer our customers the opportunity to book travel to hundreds of destinations in six continents.

Given our valuable slot portfolio and state-of-the-art terminal at JFK, we believe we are well positioned to serve global carriers.

To that end, we expect to add between five and seven new partners in 2012.

Our network strategy, which we believe has successfully driven competitive capacity reductions, demands that we have low cost.

Fuel, of course, remains our largest cost challenge.

Fortunately we have a young fuel efficient fleet.

In addition, we believe fuel hedging is an important strategy to reduce risk by reducing the impact of price volatility.

We recognize, however, that we cannot control the price of fuel.

Prudent management of our controllable costs is always front and center, and a high of fuel cost environment makes this an imperative.

Thanks to the hard work of our crewmembers we maintained our focus on low cost throughout 2011, keeping our non-fuel unit costs relatively flat year over year.

Looking ahead to 2012, we expect to face significant challenges with respect to maintenance expense, which Mark will discuss in more detail.

While we are taking steps to help offset some of this cost burden, including implementing a management hiring and salary freeze in 2012, we recognize we have more work to do on the cost front.

In closing, we are very pleased with our 2011 results.

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

We took steps, including a commitment to purchase A321 and A320neo aircraft, to ensure we are well positioned for long-term sustainable growth.

We also successfully maintained a direct relationship with our pilots.

We believe our outstanding crewmembers and unique culture will provide the foundation for continued success in 2012.

We are optimistic that the momentum we have built in 2011 will position us well.

We are committed to growing profitably on a sustainable basis and remain focused on improving margins and generating appropriate returns for our owners.

Of course, we look forward to discussing this in more detail at our Investor Day in New York on February 15.

And, with that, I would like to turn the call over to Mark for a more detailed review of our financial results.

Mark?

Thank you, Dave.

Good morning, everyone.

Thank you again for joining us today.

I join Dave in congratulating our crewmembers on another great quarter.

Today we reported the best fourth-quarter performance in our history with operating income of $83 million.

Despite having paid $128 million more for fuel, we improved year-over-year quarterly operating results by $28 million.

Record fourth-quarter revenues drove strong revenue performance as we outperformed the A4A domestic industry average.

Year over year our average one way fare increased 11.4% to $156, driving fourth-quarter passenger year-over-year unit revenue up 11.8%.

Even with 10.5% more capacity, fourth-quarter yield was up 11.3%.

Load factor was up 0.3 points.

This unit revenue growth is impressive given our capacity growth during the same period.

While capacity growth typically puts downward pressure on unit revenues, we were able to increase capacity in Boston and in the Caribbean while growing unit revenues.

As Dave mentioned, we are very pleased with our fourth-quarter revenue performance, especially during the off-peak travel periods.

We believe improving revenue performance during these periods is essential to revenue and margin growth.

Given JetBlue's strong leisure focus, we have always performed well during peak holiday periods such as Christmas and Thanksgiving.

We believe we have ongoing potential for significant improvement in off-peak travel periods as we harvest the product and network investments targeted to attract higher-yielding business traffic, particularly in Boston.

As such, we were especially encouraged by our PRASM performance during the first three weeks of November and the beginning of December as closing demand in our shorter haul business markets accelerated.

We are also very pleased with our revenue performance over peak holiday travel periods.

In fact, holiday bookings at the end of December came in stronger than expected.

Unusually mild but certainly welcome December whether in the Northeast led to a record completion factor of 99.9%.

To provide some historical context, excluding 2011, our December average completion factor is 97.3%.

As a result of this welcome weather, we flew more ASMs than expected.

Turning to costs, quarterly operating expenses increased 20% or $180 million.

As noted, this was largely driven by higher fuel expenses of $128 million.

Fuel, of course, remains our most significant operating expense, comprising nearly 40% of the total.

While the price of jet fuel over the last year has increased by about 30%, we believe we are well positioned.

We believe we have the most fuel-efficient fleet in the United States with an average fleet age of only 6.1 years.

Use of efficient operating procedures such as single items and taxi are also essential, shot out to our site team and pilots who continued to do a terrific job of developing and implementing fuel saving procedures.

In addition, we continue to manage our fuel hedge portfolio, really a form of insurance, to help mitigate price volatility and protect JetBlue against severe price spikes.

In the fourth quarter, we hedged 45% of our fuel consumption.

Including the impact of fuel hedges and taxes, our fuel price in the fourth quarter was $3.15 per gallon, up 30% from last year's price per gallon of $2.42.

For the first quarter of 2012, we have hedged approximately 42% of anticipated requirements using swap agreements, caps and colors.

For the full-year 2012, we are hedged about 27%, using primarily swaps and colors.

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

Approximately 5% of our 2012 projected fuel consumption is hedged using a WTI index.

As of December 31, we are required to de-designate these hedges for accounting purposes.

This is a result of deteriorating correlations between WTI and jet fuel prices.

As of December 31, we had $3 million in deferred losses relating to these hedges that will be recognized in fuel expense throughout 2012 as the contracts settle.

Any incremental increase or decrease in the value of these contracts will be recognized below the line in other income and expense.

Our preference is to designate all hedging transactions for accounting purposes; therefore, we may well enter into Brent-based contracts in the future.

Based on the heating oil forward curve as of January 20, Brent crude is averaging about -- I'm sorry, based on the forward curve as of January 20, Brent crude is averaging about $109 per barrel for the full-year 2012.

The crude -- the heating oil crack spread is averaging about $16 a barrel.

Including the impact of hedges, we are estimating a first-quarter fuel price of $3.18 per gallon and a full year per gallon price of $3.17.

With respect to other costs, excluding fuel, year-over-year fourth-quarter unit costs decreased about 1.5%, slightly better than expectations and guidance.

As Dave noted, the one area we continue to see the greatest cost pressure is, of course, maintenance and repairs.

Our maintenance expense per ASM increased year over year approximately 17%.

This is primarily attributable to the gradual aging of our fleet.

As of December 31, 2011, our oldest A320 had an age of 12 years, and the average age of our fleet increased to 6.1 years as compared to 5.4 as of December 2010.

Looking ahead to 2012, we expect maintenance expense will continue to be a major challenge as a large group of A320s acquired in the mid 2000s during a period of rapid fleet expansion are now due for C-checks and engine restoration checks.

In the past year, we have worked with our various maintenance repair and overall partners and manufacturers to address the expected check and restoration increases and with their valuable assistance have focused on smoothing future costs to limit further step change increases.

As a result, we expect the rate of maintenance expense increases experienced in 2011 and 2012 to slow in the future.

Moving to the balance sheet, we ended the year with unrestricted cash and short-term investments of approximately $1.2 billion.

During fourth quarter, we generated operating cash flow of $114 million, made debt and capital lease payments of approximately $65 million.

Our future debt payments are manageable, and we expect to pay them this year again with cash from operations.

Specifically first-quarter scheduled principal payments on debt and capital leases are expected to be about $45 million and approximately $200 million for the full year.

JetBlue ended the year with a fleet of 169 aircraft.

In 2012 we expect to take delivery of seven A320s and four E190s, one A320 and two E190s delivered in the first quarter, two A320s and one E190 in the second, one A320 in the third, and three A320s and one E190 in the fourth.

We will continue to seek opportunities to improve our balance sheet, and to that end we currently plan to purchase several of our 2012 A320 deliveries with cash, and we will only finance A320 aircraft on terms that approximate our weighted average cost of debt.

We intend to purchase the four E190s using Brazilian export supported financing.

We do not anticipate using lease financing for any of these 2012 deliveries.

We continue to take a measured approach to capital spending by making prudent investments that we believe position JetBlue for long-term profitability.

With regard to the fourth quarter, we spent approximately $95 million in aircraft CapEx, $75 million in non-aircraft CapEx.

This also includes $40 million related to the acquisition of 16 slots at LaGuardia and DCA.

The full $72 million paid for these slots will be amortized on a straight line basis over a 15-year period, beginning in May of this year.

We estimate 2012 capital expenditures of about $645 million -- $430 million for aircraft, $215 million for non-aircraft related expenditures.

Non-aircraft CapEx includes $50 million related to LiveTV.

Over the past few years, we have focused on managing and smoothing out debt maturities through a combination of structuring new transactions, as well as prepaying existing obligations.

In 2011 we prepaid $39 million principal amount of our 6.75% convertible notes.

Given a weighted average cost of debt of approximately 4.5%, we believed retiring a portion of this higher-priced debt is a prudent use of cash.

This prepayment also eliminated the potential for the issuance of 8 million shares associated with this convertible debt, which will no longer have a dilutive effect on EPS.

With manageable 2012 debt maturities and manageable 2012 capital commitments, we believe JetBlue is positioned to maintain strong liquidity.

We expect to end the year with cash as a percentage of trailing 12 months revenue of approximately 20%.

As Dave mentioned in 2011, we generated positive free cash flow for our third consecutive year.

Over the past several years, we have worked with our aircraft and engine manufacturers to reduce our capital expenditures, a critical element of positive free cash flow and sustainable growth.

In 2011 we canceled the delivery of 14 E190 aircraft and announced the deferral of eight A320 and seven E190s.

These actions substantially reduced our aircraft commitments in the near term and helped smooth future debt and pre-delivery deposit requirements.

Before turning to 2012 guidance, let me announce some changes we plan to make toward disclosing practices as we begin the new year.

Given our compressed booking curve, we do not believe we can provide meaningful revenue guidance until we are inside the prompt month.

We will continue to provide PRASM expectations for the current month on the quarterly earnings calls, and we will provide PRASM guidance for the following two months in our traffic releases.

Accordingly today we will provide a PRASM outlook for January.

In our traffic release next month, we will provide PRASM expectations for February.

March PRASM guidance will be provided in March.

Additionally we plan to provide guidance ranges to the nearest half-point in an effort to be a bit more precise when rounding up or down.

Turning to capacity, as a result of our continued expansion in Boston and the Caribbean, we plan to grow year-over-year 2012 ASMs between 5.5% and 7.5%.

We expect first-quarter ASM growth to be much higher than the rest of the year due to low ASM growth during the first quarter of 2011.

Recall, in the first quarter of 2011, we reduced our schedule to accommodate new pilot training.

In addition, winter storm related flight cancellations during the first quarter of 2011 significantly reduced our flow in ASMs.

These two items will impact year-over-year capacity comparisons.

As such, we expect year-over-year first-quarter capacity to increase 9.5% and 11.5%.

Turning to revenue, we are encouraged by demand trends.

We expect the robust demand environment to continue through the first quarter.

The success of our initiatives to attract higher-yielding customers is apparent in our PRASM gains, notably off-peak travel periods.

We expect January year-over-year PRASM to be up between 8% to 9%.

We are seeing similar strength in February.

As noted, we will provide more specific revenue guidance for February in our January traffic release next month.

As we further enhance our Even More offerings, we expect this to continue to be an important source of revenue.

In 2012 we expect ancillary revenues year over year to increase approximately 10%.

Turning to costs, higher fuel prices will certainly continue to pressure us.

We expect the biggest non-fuel unit cost pressure in 2012 will again be maintenance expense.

Looking at ex-fuel CASM guidance for the year, recall, year-over-year unit costs improved as we moved through 2011.

As a result, the comparisons this year will be impacted by that trend with stronger relative cost performance expected at the beginning of 2012.

We expect ex-fuel CASM in the first quarter to range between a decrease of 0.5% and an increase of 1.5%.

CASM all-in will range between 2% and 4%.

For the full year, we project CASM will increase 1.5% to 3.5%, and ex-fuel CASM will be up between 2% and 5%.

Anticipating your questions on this range, again, note that maintenance is approximately two-thirds of that increase.

The balance then is split evenly between estimated benefits and payroll and profit-sharing expense.

In closing, we are very optimistic.

We are committed to building shareholder returns.

We believe our strong financial foundation has positioned us well for future continued success.

We look forward to providing you a more in-depth look at these and related matters at Investor Day on February 15.

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

Thank you.

(Operator Instructions).

Michael Linenberg, Deutsche Bank.

This is actually [Ridga Towa], his associate, just filling in for Mike.

On my first question, I was hoping you could talk about your recently announced partnership with Hawaiian Airlines a little bit more, and on your other partnerships you have been announcing, can you tell us if you can quantify at all the impacts from these arrangements with other carriers or if you have calculated them to be at all accretive?

And, also, on the Hawaiian partnership, I was hoping you could just share what the dynamics of the codeshare are, like when you think it would be possible to implement that and if it would be a one or two codeshare?

Thank you.

Good morning.

This is Dave.

By the way, please say hi to Michael for us.

I think, first of all, with our 15th partnership with Hawaiian, this is implementing on a strategy that the foundation has been laid with our network, as well as investments such as with Sabre previously.

This is our 15th partnership, and while we will certainly share more on this at Investor Day regarding additional color on the type of traffic that we are seeing and also in terms of what this means in terms of revenue for us, it is fair to say that really inside of each of these partnerships the numbers are quite confidential.

Right?

Because obviously this is pretty significant to our business model.

So, on this call, we will not go into specifics in terms of any of the 15 partnerships.

Now, with regard to Hawaiian, we have [Engur] line over LAX today effective June 5 with their inaugural route.

As we have an interline relationship partnership with Hawaiian and one way code, which we believe makes a great deal of sense for our model, we tend to extract the greatest benefits with both of those in place and some the sectors from a revenue perspective.

We are really excited about what this means.

I mean this is the first nonstop in a long time on this side of the Hudson.

And with our network behind it and the ability to catch the mid-Atlantic, the Northeast and even Florida and some of the Caribbean, it is quite positive in terms of what it means.

And, again, five to a seven additional partnerships over the course of 2012, not just at JFK but also across places like Boston, as we mentioned LAX, places like Orlando as well.

So more on this as we get into Investor Day here February 15 in New York.

Thanks for the question.

Jamie Baker, JPMorgan.

David, you cited some business traveler metrics, but it still does not seem that your share of the wallet in New York and Boston is where it could be.

I do realize you are pretty aggressive with up sales and what have you, but it still does not seem to be much of a recognition of your most loyal higher-yielding passengers, no elite program for example.

I guess I'm just surprised it almost seems as if you are letting it happen naturally as opposed to really being out there and courting higher-yielding business travelers.

Is my understanding incorrect in that regard?

Actually I believe so, to be candid with you.

When we look at really our mix, the problem that we are trying to solve is really the trough period.

Historically the troughs, the peaks just screened in the troughs were weak.

And so, as we invest in more of a network, a business model in places like Boston and now we are seeing 30% type traffic on business in and out of Boston, that is significantly enhanced from what we see across the rest of the network at 15% to 20%.

And so, keep in mind, as we are talking about those markets that are now starting to mature in the year two are harvesting some of the investments that are taking place.

Listen, when you look at the history of some of the other carriers in Boston as we are flying to places like O'Hare, as we are flying to places in the mid-Atlantic as an example, into a Newark, certainly the investment that is taking place previously at Reagan National and potentially more, clearly I think that our offering in addition to TrueBlue, in addition to Even More, it is quite a nice offering.

It is a little bit contrarian from -- by the way, the platinum, the gold, the silver, by the way, here is the club experience.

Our model is a little bit different along those lines.

So I think what we are seeing the trajectory is quite solid in places like Boston.

With regard to Kennedy, when you really look at our franchise at Kennedy, yes, we take a look at this airport differently because of its geography versus LaGuardia and versus Newark.

And, as such, we certainly see our fair share of business customers, but that network is really positioned for the leisure traffic, for the VFR traffic.

And so it is kind of nice.

I think what I am seeing with really this year-over-year PRASM growth during the troughs we are really pleased with.

And we saw it again in early November, the first three weeks, and we saw it in the early part of December.

It is a little bit of a tougher comp, but we are quite pleased with what we are seeing with our investment.

Okay.

I appreciate that color.

Thank you very much.

Gary Chase, Barclays Capital.

I just wanted to see if I could ask one of Mark and then maybe one for Dave and Robin.

The first, Mark, as we are running through the numbers and we did this quickly based on your two-thirds comment on the maintenance issue, it looks like it is somewhere between $50 million and $90 million of additional expense that you will be incurring in 2012 versus 2011 on maintenance.

And I know you have described this in the past as sort of the contracts were set up in a way that rewarded growth that did not ultimately materialize.

When you think about this problem, can maintenance costs actually go down, or what we are really talking about is really just a smoothing out of this process?

And I guess maybe another way to ask that, is when you look at maintenance that you will actually spend in 2012, is it an appropriate level, or was it -- and, therefore, it was too low last year, or are you paying too much now and you need to rationalize that?

So I think your observation is right.

The range is probably on the high side that you cited, but certainly that is kind of the order of magnitude.

It decreased a little bit.

We are I would say, Gary, that this is one of those areas that we are willing naturally to spend and invest to reduce the amount and to change the shape of that curve going forward.

I will give you a very specific example.

In the fourth quarter and the first quarter of this year, we purchased six spare engines, new spare engines from IAE to put into the MTU engine pool and take six other engines out.

That had the effect of essentially reducing the flight hour effective flight hour agreement under the MTU agreement.

Now the terms with MTU are not fully documented, but they are nearly complete.

But recognizing, as you said, that these are high costs, that is the kind of investment we are willing to make to essentially bend the shape of that curve.

Having said that, you know, the fleet is -- it is a fact the fleet is growing older.

So the rates and honeymoon that we enjoyed prior to this period of time are in the past.

You will recall as well that when we are taking 36 aircraft a year, that mix, that honeymoon mix was much different than what you see today.

So this is in some respects the other side of the benefits that is slowing the growth and generating free cash flow.

So it sounds like you are really just catching up on where -- there is not much opportunity.

It is not like you feel your 2012 maintenance expense is going to be too high for what your -- for the maintenance that you are actually performing?

No, I think it is again -- the adjustments that we will make will be in the millions of dollars, but it will not be 50% type of cuts, structural cuts.

And for Dave and Robin, if I could just pick up with one quick follow-up on that last question that Jamie asked, I mean you did mention the Boston markets having a higher business mix than New York.

At least on our numbers when you look at the RASM numbers and try to index them, it does not look like they are outperforming New York.

When you take stock of typical spool and development, whatever you want to call it, market maturation, do you have line of sight on this higher business mix outperforming what you have in New York, or is it comparable or inferior?

Gary, it is Robin and good morning.

Let me take that.

As we think about the investments we have made in Boston, we have had two years of very significant new network investments building a sales force there in terms of going in and winning corporate contracts.

I think we have talked before that the ramp-up bid on these markets are it takes longer.

I think we have been able to offset some of those investments with very successful and profitable flying to additional markets in Florida and the Caribbean.

And I think what we are now seeing -- and I think Dave made these comments in his call -- as we looked at quarter four, if you looked at what were the best performers for us in terms of year-over-year growth, it really was the short-haul market out of the Northeast, predominately Boston.

So we feel very good that for the last two years we have been making some major investments.

And, as I looked to 2012 and beyond, slowing the growth slightly just because we have been accelerating at such a tremendous rate, as we have more markets in the mature phase, I see it -- our ability to reap the rewards from those investments.

And maybe just touching on Jamie's earlier question about share of wallet, I mean I agree.

If you look at where we are in Boston, which is how I look at this, we still underindex in terms of share of wallet in terms of the very high frequency business traveler.

We have made great inroads, and we are doing really well in this low to medium frequency.

And with things like the network development that Dave talked about, the security check line, improved terminal facility in Boston, we are, as we have said before, we are planning this year to make some changes to our TrueBlue program that we think will better motivate a very small group of very high frequency business travelers, particularly flying in and out of Boston.

Bill Greene, Morgan Stanley.

Mark, I was wondering if I can ask your thoughts on the Embraers.

I realize you adjusted the fleet plan last year.

But I've got to believe that over $100 we have got to start asking again, do the Embraers work?

I realize you said some of the shorter haul markets you saw some of the best RASM improvements, and that, of course, would make sense given that you would also assume that some of your least efficient flying from a fuel perspective.

So is there a price point where we have to revisit that fleet plan again?

Do we have to think about that, or did you set that last year, and you feel pretty good even at substantially higher fuel prices?

Well, the flip answer is -- good morning, by the way.

The flip answer is I think about it all the time.

I think about the A320 all the time, as well as the A321 all the time.

So we are constantly in a state of looking at what this network wants in terms of fleet demand.

And absolutely, as we look at higher fuel prices, the calculus is absolutely right.

And does the fleet want to be 50, does it want to be 75, or does it want the full 100 that we have on firm order?

As we have discussed in the past, we have been working with as part of, again, the more recent A320 commitments, resizing the E190 fleet down to 75.

Is it really going to be 70 or 80?

We are fine-tuning that with the network constantly asking the precise questions that you have asked.

Do you want to add anything else to that?

The only thing I would add in addition to that is, when we look at that gauge aircraft and what we have been able to do in a place like Boston, but also let me take you down to some of the shorter haul in the Caribbean, which we launched into St.

Thomas and St.

Croix and St.

Maarten and potentially other locations across that part of the world, that size gauge aircraft has actually been very beneficial for us to literally -- this Boston 150 plan that we are talking about by 2015, the 100-seat gauge was really important to us in terms of frequencies to the Buffalos, to the Raleighs, to the O'Hares of the world.

So, Mark, I think you captured it.

Bill, your calculus is right on but, at the same time, we are committed to the aircraft this size in what looks like 75 into the fleet and deploying it now and into the future.

Okay.

And then you were successful obviously at keeping your relationship direct with your pilots.

How should we be thinking about what that implies for labor CASM?

But even broadly, not just the pilots, but also just how do we think about labor inflation costs for 2012?

Thanks for the time.

Sure.

You have got it.

Thank you.

Well, first of all, this was not a -- this was significant in 2011.

A threat to our culture -- I'm just going to be candid -- with a third-party was something that is very significant to building our culture, this collaborative history that we have had.

And so, again, I think the ability to just educate our pilots and the rest of our crewmembers about our model.

And there is plenty of room for other models at other companies in this industry, but our model has been pretty special for us.

Now all that said, specific to comp and benefits across all of our work groups, we have a history of peer competitive compensation and benefits.

Actually when you start to take a look at it, as we are growing in this year and we start to take a look at, even internally unit costs from a labor perspective, we are quite pleased with what we are seeing over the course of 2012.

And I will not go specific on individual areas, but I will be -- I will add color into areas such as when you look peer competitive and benefits, there is no doubt that we look at pilots with peer competitive retirement.

And this is discussions that we have had with our pilot group in the past, as well as with the team here at Forest Hills.

So when Mark talks about 2% to 5%, as we are giving guidance on ex-fuel CASM, including maintenance, material and repairs, clearly, as he highlighted, we have some growth investments in there tied into comp and benefits and also things such as profit sharing when we take a look at our 5% guarantee.

So I think we are rightsized as we look at 2012.

The fact that -- I think what you are maybe asking is, are we inefficient because we have a direct relationship?

And we are absolutely not.

Sorry, no.

I actually was just trying to figure out if that means that we should see a step-up in labor inflation costs.

That is all I was getting at.

I think we feel good about labor over the course of this year.

Glenn Engel, Bank of America/Merrill Lynch.

You talked about competitive capacity in the Caribbean in 2011.

Can you go through your major markets, transcon, the Caribbean, Florida and how competitive capacity looks early in 2012?

In terms of -- I think right now we have just got insight into the first two quarters of the year.

It is hard really to tell second half of the year exactly what is going to happen, especially (inaudible - microphone inaccessible) which tends to be a kind of sensitive time if fuel does run for some capacity at north.

I think we feel good in terms of a peek into competitive markets that we are going to see -- continue to see capacity reductions.

We are looking out between 1% and 2% for the first quarter in terms of fleet.

If we look at -- just to give you a couple of examples, Boston, so we are currently seeing L.A.

capacity down 3.6% quarter one, Caribbean nearly 7% in quarter one, and also reductions like changes on Boston DTA would just be JetBlue and US Air flying that market.

We continue to see other airlines pull out of the market in the Caribbean.

For example, (inaudible - microphone inaccessible) out of Hartford down to San Juan.

So we still feel pretty good about competitive change and our ability to influence that in some of our core markets.

In Florida?

In Florida, we saw some increases there, and some of that has been coming out again.

And that was one market that I thought yield had been lagging behind over the last couple of years versus the others.

Is there any sign that that is catching up?

Yes, I think there was a couple of factors.

I think, first of all, it's a very mature market that we have been serving a long time, and secondly we did see some additional capacity go in that started to come out again.

Also, more recently actually just this week seeing Southwest, AirTran's announcement to withdraw from the White Plains into Florida market.

So I think we feel very encouraged by what we see at Florida, and it is still a very profitable part of our franchise.

Duane Pfennigwerth, Evercore Partners.

I wondered if you could dial back to December?

It sounded like in the commentary you were pleased with the first half of December.

Maybe I'm reading too far into it, but did December close the way that you anticipated?

(multiple speakers)

December was great.

I mean I think the point that was being made in the earnings call was really as we -- what we saw -- our challenge in December has always been those first two weeks, not the second two weeks.

And, as we have got better and better at filling the off-peak periods, we were very pleased with both the first two weeks of December and back for those 10, 11 days for December.

And the peaks performed very well as well.

The only thing that surprises us about December was the ability to, one, a completion factor that was close to 100%, which is significantly -- and we planned, if you remember last December, that was a very major event.

That did not happen this year.

I think that was the only thing that surprised us about December.

Okay.

Thanks, Robin.

And then I understand visibility is probably a bit limited into March, but it seems like most industry folks have talked about March maybe being a little bit of a tougher comp given the fare increase activity that started to take hold last year.

So how should we be thinking about the March comp for JetBlue?

I think, as Mark said, our visibility beyond February is very limited.

I would just point to you, though, in previous years I think the unique thing about our business model versus others is I think we are having great success in filling some of the off-peak months with very different businesses.

Okay, fair enough.

And then just, lastly, just going back to engine maintenance, can you just remind us what percentage of your fleet is on Power by the Hour agreements and when you started to layer those on?

Thanks for taking the questions.

I mean the V2500, which is the mainstay of our fleet, of course, is covered under a Power by the Hour agreement.

The CF34s on the E190s are currently timing materials, and we are looking at power by the hour options on that engine.

So the preponderance of our fleet, i.e.

these, are covered by FHAs.

So is the issue for this year, going back to when these aircraft were added, is the issue that you were not under Power by the Hour back then, or it relates specifically to the 190s?

So the V2500 Power by the Hour -- I am looking at it -- is at least five years all.

I'm looking at Dave for validation because I was not here, but I think it is (multiple speakers).

So it is not a recent contract.

It is a contract that we have had, and the rates and charges under that contract are -- have essentially the buckets under that are largely a function of hours and a time on the engines.

And so it's a little bit dissimilar to some of the engine contracts that you might be thinking of, which are just flat rate over the full term.

In this case with MTOs, the rates are variable based upon a number of factors.

Dan McKenzie, Rodman & Renshaw.

Nice quarter.

I wanted to circle back with a network question, and I understand the growth at San Juan, Boston and New York, but going back to just a couple of years ago, one market that had a really big spotlight was Latin America, particularly Bogota.

And today the price in the market has really kicked in.

So I guess what I am wondering is with just Bogota, it looks like you have given up on what appears to be a pretty high-margin geography.

I guess I'm just wondering what is the difficulty of doing business in that part of the world, and what is holding you back from building out more to that region?

Thank you for that question.

As I recall, it was probably about a year ago where you asked a same, a similar question regarding maybe an experience anecdotally that you had Orlando to Bogota.

I will tell you that the Latin American, Caribbean and Latin America, obviously the region some are very much different than others when you think of VFR traffic features, etc.

Bogata and the Latin American route stand at the top, the top, when we look at margins at this company.

And similar to maybe even reference to Boston, it takes time where you can start to harvest some of the -- reap the benefits of what has taken place, for example, in Bogota.

And you can certainly draw the conclusion that we are going to continue to invest in that part of the world.

This is a company that was at its heritage a young company that was going to fly domestic, everything was in and out of New York.

And then when I look at it, our first foray into Santo Domingo, which we closed, we went into Santo Domingo, it was too hard, if you will.

When we looked at the operations in and out of Santo Domingo from Kennedy, we went back in any significant way.

We are the largest airline to and from the Dominican Republic.

We are the largest airline to and from the Commonwealth of Puerto Rico in growing both of these locations.

We are in five locations in the DR, three in the Commonwealth.

There's potentially other locations.

Bogota, Cartagena, you start to take a look at Cali and others, and others within the geography of the range of our current fleet, listen, this has been very good for our Company.

And it took a period of time to understand how do you sell in another country?

How do you sell through the travel agencies and collect taxes in another country?

Do you have the systems in place?

And so it has been very pleasing.

I take you over to Costa Rica with San Jose and Liberia, now nonstop out of Kennedy.

So we could not be more pleased with what is happening down in the Caribbean and Latin America and specifically Latin America.

I appreciate the question.

Yes, well, you have definitely figured it out.

I guess if I could focus my second question domestically here, looking at Orlando and Fort Lauderdale, you folks have called those two cities out in particular as focus cities.

But when I look at what is happening there, it looks like growth is really tapering off.

So I guess I'm wondering if you are all concluding that essentially you are full up at those cities, at those focused markets?

If I may, and, Robin, jump in, the answer is Fort Lauderdale Hollywood -- I should probably include [Dennon] in that as well, the south runway, Rob was down there, our Chief Operating Officer, with the investment that is taking place by the FAA in Broward County to the extend that runway, which is very nice when you think about its geography versus Miami and versus West Palm Beach or I should say in addition to or obviously in PBI.

Fort Lauderdale is open for business, and we are going to keep growing it as we talk about Bogota to Fort Lauderdale and we are working our final flight schedule as we are taking a look at additional flying from Fort Lauderdale down to the Caribbean.

Interesting, a large competitor that is a discount carrier in JetBlue markets on a year-over-year basis is down close to ASMs in similar markets.

I don't think that that is just a happenstance as those airplanes are flying elsewhere.

Let's go up to Orlando.

And our investments that have taken place in Orlando with, by the way, the 190s and the 320s over time, including south.

And so we are very much committed to both of these locations.

And, by the way, the geography and the purpose within our network of both of these locations are considerably different.

They are destinations, of course, but they are certainly -- there is quite a bit of margin traffic and a lot of VFR traffic as well.

You look across central Florida and the second largest Puerto Rican population in the United States across from Tampa to Daytona Beach with Orlando right in the middle, I mean it is just terrific geography.

We are going to keep growing those locations.

Robin, anything else you want to add?

Just to address that Fort Lauderdale, I think we are going to continue to see low single-digit ASM growth there this year as we start to Jamaica end of April.

And that is certainly what asks Orlando to -- without going into too much detail, we have to remember sort of infrastructure challenges with the airport that we are working through before we can turn the growth over, but once we overcome that, we think that is going to be a source of growth.

Savi Syth, Raymond James.

First of all, I was just wondering if you have made a decision on the additional seats, additional EMS seats on the E190s?

Yes, that reconfiguration is due to happen second to third quarter of this year, going to provide an extra eight Even More Space seats per E190.

On all of them?

Yes.

And what is the general premium versus the regular tickets on those?

Even More Space seats goes from anything from $10 up to, I think, it is $65 or $70.

I see and just one last one.

It looks like, if you look at unit costs ex-fuel unit costs, they seem to be growing every quarter for the past few years, and then we saw them decline the last few quarters of 2011.

And it looks like it was helped maybe by the labor costs per unit costs perhaps coming down.

And I was just wondering what that kind of a one-time thing, or once the maintenance costs stop being such a big headwind, if we will see that continuing?

I would say ex, if you sort of looked at our year-over-year CASM ex-fuel and you made an accommodation for some of the maintenance costs that we have been talking about, I am quite pleased to see that we are very, very flat, really a credit to a lot of crewmembers around this table, as well as all of our crewmembers in productivity.

So I think you are really seeing a lot of maintenance issues that we need to work through, but beyond that, it seems pretty flat to us.

So in a kind of high single-digit growth, capacity growth environment, you think you can keep ex-fuel CASM flat?

That is certainly one of our goals.

Again, carving out the topics that we have been talking about earlier today.

That makes sense.

Thanks so much.

Thank you.

That was our last question.

Great.

Thanks so much.

Let me just close by saying I would like to thank everyone for joining us on our call this morning highlighting the fourth quarter and the full-year 2011.

I would also like to close by thanking our 14,000 crewmembers for a tremendous performance over the course of the past year.

We are very excited about 2012, and we look forward to talking to you all again as we close the first quarter.

Thank you.

Have a great day.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating.

You may now disconnect.