JetBlue Airways Corp (JBLU) 2015 Q4 法說會逐字稿

Good morning.

My name is Tamika.

I would like to welcome everyone to the JetBlue Airways fourth-quarter 2015 earnings conference call.

As a reminder today's call is being recorded.

(Operator Instructions)

I would now like to turn the call over to JetBlue's Director of Investor Relations, Kevin Crissey.

Please go ahead.

Thanks, Tamika.

Good morning, everyone, and thanks for joining us for our fourth-quarter 2015 earnings call.

Joining us here in New York to discuss our results are Robin Hayes, our President and CEO; Marty St.

George, EVP Commercial and Planning; and Mark Powers, our CFO.

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 our press release, 10-K, 10-Q, and other reports filed with the SEC.

Also, during the course of our call we may discuss several non-GAAP financial measures.

For a reconciliation of these non-GAAP financial measures to GAAP measures please refer to the tables at the end our earnings release, a copy of which is available on our website and now I'd like to turn the call over to Robin Hayes, JetBlue's President and CEO.

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

Earlier today we reported strong results for the fourth-quarter and full-year 2015.

In the fourth quarter, net income was $190 million or $0.56 per diluted share.

For the full year, net income was $677 million or $1.98 per diluted share.

On a year-over-year basis, excluding the after-tax gains from the 2014 sale of LiveTV, our net income more than doubled.

These strong results were made possible by the outstanding performance of our 18,000 crew members who continue to deliver extraordinary service during our busiest year ever, where we carried a record 35 million customers.

I truly believe we have the most dedicated and talented crew members in the industry.

Last Sunday, our crew members terrific job during winter storm, Jonas, enabled JetBlue to be the first airline to get customers off the ground at both JFK and LaGuardia.

On behalf of the entire leadership team, I want to express my sincere gratitude to all of them.

In 2015, total revenues grew 10% year over year reflecting solid underlying demand in our network and the successful execution of fair options.

Fare options enables our customers to select one of three fares based on what they value most, such as number of checked bags, TrueBlue bonus points or the ability to adjust and change their travel plans.

Operating expenses decreased 2% year over year, driven by a continuing lower fuel price environment.

In 2015, our full-year average fuel price-per-gallon was $1.93, down nearly 36% from $2.99 in 2014.

Our 2015 operating margin was 19%, an improvement of more than 10 percentage points.

Our network plans continued to pay off.

This is best reflected by our unit revenue and operating margins which grew faster than the industry average in 2015.

The network is well-balanced and all of our focus cities produced healthy margins.

We are particularly pleased with our performance in Fort Lauderdale, our fastest-growing focus city, where profitability levels continued to exceed our expectations.

Additionally, our Boston focus city continues to grow while producing strong results.

By next summer, we expect to offer 150 -- 140 daily flights in Boston.

We remain excited about Mint's financial performance and the feedback we get from our customers.

In the fourth quarter, we started additional frequencies from New York to Los Angeles and San Francisco.

We also launched Mint service from New York to the Caribbean with seasonal service to Aruba and year-round service to Barbados.

Looking ahead, we are thrilled to bring Boston Mint service.

We are planning -- we plan on commencing Boston, San Francisco on March 24, and seasonal Mint service from Boston to Barbados on March 26.

We ask intend to launch Mint service to Los Angeles from Boston later in 2016.

Once fully ramped, we plan to offer up to three daily Mint flights from Boston to both San Francisco and Los Angeles.

We applaud the decision made by US government and the Cuban authorities to allow scheduled air service between the two countries to begin for the first time in over half a century.

We believe our brand and product will resonate very well for travelers to and from Cuba.

We expect our long-standing experience in charter flights to Cuba and our successful history in the Caribbean markets will position us very well to be the carrier of choice in Cuba.

We are currently awaiting the ratification of the agreement and the initiation of a route application procedure by the US DOT.

This is an exciting opportunity and we look forward to announcing regular service as soon as possible.

We continue to be very pleased with the results from fare options.

Specifically, we exceeded our $80 million operating income target and believe we will achieve a $200 million run rate in 2016, one year ahead of our original plan.

I'm very proud of all of our crew members who successfully embraced this very significant change while preserving our industry-leading customer service.

Another highly anticipated change is our upcoming cabin re-styling.

After extensive collaborative work with Airbus and our front line crew members, our first re-styled aircraft will enter service in the second half of 2016.

Our new, innovative cabin will improve our customer experience and our bottom line.

Marty will provide details about this program very shortly, which is expected to generate incremental annual operating income of $100 million upon completion in 2019.

Let me now highlight our operation -- our operating performance.

Most major operating metrics improved year-on-year in 2015.

On-time performance, measured by systems arrivals within 14 minutes of scheduled time or A14 improved, 0.4 percentage points to 77.5%.

Despite a 1% higher aircraft utilization, our completion factor improved 0.8 percentage points to 98.6%, driving asset and cost efficient available seat miles.

I am particularly proud of our operational performance during the year and holidays.

Holidays are a special time of the year for our customers and getting them to their destinations safely is an absolute priority.

Between December 21 and January 4, we had the highest completion factor of any US airline.

In fact, during that 15-day consecutive peak day period with an average of 963 daily flights, we did not cancel a single flight.

I want to thank all of our crew members for this incredible achievement.

As we approach our 16th anniversary, our success continues to be built upon our unique culture and our talented and inspiring crew members.

So to recognize these and other amazing efforts, I am delighted to announce 2015 profit sharing of approximately $150 million.

That's equivalent to about two months pay for full-time crew members.

Mark will provide you greater details about this benefit and its financial implications.

Our efforts in 2015 include -- including strong revenue performance, successful execution of fare options, cost control, efficient use of capital and debt reduction resulted in a significantly improved return on invested capital.

In 2015 we delivered an after-tax ROIC of 13.7%.

In closing, we are very happy with our 2015 results and look forward to an even better 2016 as we continue to execute on our return accretive initiatives.

I'll now turn the call over to Marty to provide more details on our results.

Thank you, Robin.

Good morning, everyone.

Thanks for joining us.

Demand in 2015 was sound across our network.

Passenger unit revenue, or PRASM, increased 7/10 of a percent, a capacity growth of 9.5%.

Our industry-leading revenue performance was a result of the maturation of our network, limited exposure to both softer global markets and unfavorable currency exchange rates and the incredible efforts from our crew members who consistently deliver an amazing JetBlue experience day in and day out.

In the fourth quarter, PRASM decreased 1.9% on capacity growth of 10.4%.

Like other carriers, we experienced some yield pressures toward the end of the quarter.

This was driven by a longer December traffic period due to the timing of year-end holidays and its implications on school calendars.

Mild winter weather in the Northeast also impacted demand for our leisure sun destinations during our off-peak trough days.

Nonetheless, we are thrilled with our growth and financial results in the fourth quarter.

Although PRASM growth did decline, our profits, which are what we are truly managing towards, were very healthy.

Mark will provide you with details on our operating margin performance.

Our performance is very well-balanced across the network, with sound demand across all regions.

We continue to see strong customer demand from Mint, which led to a fare increase earlier this month in New York to Los Angeles and San Francisco.

As Robin highlighted, fare options performed ahead of expectations.

As a result, other revenues grew year over year in the fourth quarter by $37 million or 31%.

Fare options out performance was driven by a higher upsell percentage and more paid checked bags than originally forecasted.

We're very excited about the upcoming launch of our new co-brand relationship with Barclaycard on the MasterCard network.

This is scheduled for later in the first-quarter 2016.

Although we still cannot share specific details of the agreement, we are very pleased with the structure, improved economics, and customer features.

As steady-state, we continue to expect annual incremental operating income benefits from the new agreement of $60 million.

Stay tuned for our marketing campaign announcing this launch.

We believe this co-brand relationship will drive promising conversion rates from existing card holders as well as significant new member sign-ups.

I'd now like to provide some more detail regarding our cabin re-styling program which we expect to roll out in the second half of 2016.

As we announced earlier this week, we plan on introducing Airbus' innovative galley and lavatory module on our all-core A321s starting in July, freeing up valuable on board real estate on this popular and successful aircraft.

We expect all-core A321s new deliveries to arrive with 200 seats.

And our current all-core A321s to be retrofitted from 190 to 200 seats by the end of 2016.

Our NPS data shows the customers love the experience on this aircraft and we are pleased to use it as a model for our A320 cabin re-styling.

Starting in 2017, we anticipate reconfiguring our A320s to provide customers with new seats, larger TV screens with over 100 channels of DirecTV, free gate-to-gate Fly-Fi, and, of course, the most legroom of any airline.

We plan to reconfigure our A320 aircraft with 162 seats, which is down three seats from our prior announcement made in November 2014, to make sure we continue to offer our best possible product and service.

As Robin mentioned, we continue to expect the cabin re-style program to generate $100 million of incremental annual operating income upon completion of both fleet types in early 2019.

For more specific details regarding our fleet and cabin re-styling programs please refer to our investor update which was filed with the SEC and made available on the investor relations section of JetBlue's website prior to the start of this call.

Reflecting the increased proportion of revenue attributed to fair initiatives -- initiatives such as fare options and our new co-brand card, we will now provide monthly reporting and forward-looking guidance on the broader unit measure RASM instead of on Passenger RASM.

For your convenience, our investor update include historical quarterly RASM and PRASM since the first quarter of 2014.

And with that I'll turn the call over to Mark to provide further details on our results.

Thanks, Marty and Robin.

Good morning, everyone.

Thank you for joining us today.

This morning we reported fourth-quarter operating income of $330 million and full-year annual operating income of $1.2 billion.

This represents a 95% increase in the fourth quarter and has more than doubled last year's full-year results.

Pretax income for the quarter was $303 million.

For the full-year pretax income was $1.1 billion.

Pretax margin for the quarter was 19%, an improvement of more than 9 percentage points.

With respect to revenue, fare revenue grew 10.2% in the quarter, on capacity growth of 10.4%.

For the full year, on capacity growth of 9.5%, total revenue grew 10.3%.

Yield decreased 3.6% in the quarter while load factor improved 1.5 percentage points.

For the full year, yield was flat while load factor improved 0.7 percentage points.

As to costs, we are very pleased with our cost performance.

Excluding fuel and profit-sharing, year-over-year unit costs increased 0.7% in the quarter.

That's below the midpoint of our October quarterly guidance range of 0% to 2%.

For the full-year unit costs, again excluding fuel and profit-sharing, increased 0.5%, also consistent with our revised guidance range of 0% to 1% and towards the lower end of our initial annual guidance of 0% to 2%.

Turning to fuel, the continued drop in fuel prices has obvious positive implications for our fuel expense.

In the fourth quarter, 14% of our fuel consumption was hedged using jet fuel swaps and colors.

Including the impact of fuel hedging and taxes, our fuel price in the fourth quarter was $1.68, which is down 38% from last year's per gallon price of $2.70.

Looking ahead, we have no fuel hedges in place for the first half of 2016.

For the second half of the year we have hedged 10% of our expected consumption.

Based on the forward curve as of January 15, we expect our first quarter fuel price-per-gallon, including the impact of taxes, to be approximately $1.12.

More specific details regarding our hedge positions are included in our investor update which was filed earlier today.

Our percentage quarterly and full-year pretax margin growth is the highest of any US carrier.

We are therefore thrilled, our crew members will be rewarded with the largest profit-sharing payout in our history.

In 2015, total profit-sharing was approximately $150 million.

Of this amount recall we paid approximately $50 million to our crew members in November.

The remaining balance will be paid later in the first quarter 2016.

Moving to the balance sheet, we ended the quarter with $876 million in cash and short-term investments.

During the fourth quarter, we made scheduled debt and capital lease payments of $90 million.

This brings the full-year 2015 debt payments to $390 million.

In addition, JetBlue bought out the leases on six A320 aircraft for a total of $110 million, driving future annual rent expense savings of $12 million and mitigating future return condition expense.

We continue to prioritize our cash use to strengthen our balance sheet.

Over the last 12 months, we reduced net debt by over $560 million, driving a significant improvement in our net debt to EBITDA ratio which is down from 2.5 times at year-end 2014 to 1.1 times at year-end 2015.

Looking ahead, we expect to pay regularly scheduled debt payments in the first quarter of $51 million and full-year 2016 of $454 million.

This full-year increase when compared to 2015's is driven -- of $260 million of scheduled debt payments, is driven by the final maturity of our EETC debt issued in 2014 with scheduled balloon payments of over $200 million.

Upon this final payment, an additional 15 aircraft will become free of any encumbrances.

Year-end 2015, our free and clear fleet numbered 61 aircraft.

In connection with its previously announced 2012 share repurchase program, JetBlue purchased 3 million shares from October 30, 2015 through year-end 2015, for approximately $77 million.

For the full-year 2015, JetBlue repurchased 9.8 million shares for approximately $227 million.

Given debt maturities scheduled for 2016, we plan to continue to focus cash deployment on balance sheet improvements this year.

We will, of course, assess opportunities for additional capital returns thereafter and update you on our plans toward the end of 2016.

As Robin mentioned, our year-end after-tax return on invested capital was 13.7%.

This is up year over year by more than 7 percentage points, and well in excess of our cost to capital.

Although we are exceeding our ROIC target from the Investor Day 2014 of 10%, we recognize fuel savings has been a significant tailwind.

We will continue to work aggressively on executing ROIC accretive initiatives including structural programs such as cabin re-styling.

With respect to CapEx and our fleet, JetBlue ended the year with 215 aircraft including: 130 A320s, 60 E190s, and 25 A321s.

We purchased four A321 aircraft in the fourth quarter with cash.

In 2016 we expect to take delivery of 10 A321s, including 3 in the first quarter.

Given the strength of our cash from operations, the current presumption, again, is that we will continue to pay cash for all of our 2016 deliveries.

In order to support our Mint expansion plans in New York and Boston, we've converted an additional A321 delivery scheduled for 2016 from the all-core configuration to Mint.

We now expect six of the A321 deliveries in 2016 to arrive in the Mint configuration.

In the first quarter of 2016, we project total CapEx between $230 million and $240 million of which approximately $190 million relates to aircraft.

For full-year 2016 we expect non-aircraft CapEx of $150 million to $200 million.

We expect total capital expenditures in 2016 of approximately $820 million to $920 million.

Turning to capacity, winter storm Jonas caused the cancellation of over 900 fleets this past week.

Like Robin, I would like to highlight our ability to recover quickly and resume normal operations.

While we have not yet determined the exact financial impact of the storm, you should expect it's P&L impact will be de minimis.

Unless noted otherwise, all of the guidance provided on this call and in our investor update issued today excludes the impact of Jonas.

We plan to give you an update on Jonas' impact with our January traffic release in a couple of weeks.

We expect capacity growth of 14% to 16% in the first quarter 2016 and 8.5% to 10.5% for the full year, with the midpoint consistent with prior high single-digit growth guidance.

Leap year, of course, is driving about 1 percentage point of this growth in the first quarter.

Additionally, cancellations due to severe weather in 2015 increased our capacity growth relative to schedule versus scheduled basis by about 2.5% in the first quarter and 0.5% for the full year.

Looking at our capacity plans geographically, we expect the highest growth rate in Fort Lauderdale.

In New York, JFK, where we operate in a slot-constrained environment, we expect our growth will be driven by up-gauging of our fleet as more A321s join the fleet and we offer additional Mint frequencies.

Turning to the revenue outlook, year-over-year comparisons for January and February are very noisy.

Recall severe winter weather affected mostly off-peak days in the first quarter of 2015, driving a RASM benefit of several percentage points in January and February while reducing our capacity growth for the whole first quarter of 2015 by about 2.5%.

Prior to winter storm Jonas, January RASM was expected to decrease roughly 5% year over year.

Now, while we're still working through the final impact, we would expect RASM in January to be positively impacted by approximately 2 points as a result of the storm.

Again, this guidance relates to RASM rather than PRASM.

I'd also like to comment on the impact of holiday timing this quarter.

Easter falls in March this year compared to April of last year.

However, the positive impact of this shift to March will be somewhat muted by the timing of school breaks, with many vacation breaks remaining in April.

This was the case for most of the schools in our New York and Boston focus cities.

Moving to costs, in the first quarter we expect year-over-year change in CASM, excluding fuel and profit-sharing, to be flat to negative 2%.

Looking at full-year 2016, we expect CASM, ex fuel and profit-sharing, to grow between 0% and 2%.

While this is in line with our cost discussion during our 2014 Investor Day, we are and will be working to bring this number in at the lower end of that range, similar to our cost efforts in 2015.

In closing, we're very pleased with our fourth-quarter and our full-year 2015 results.

Crew members remain actively engaged and we're excited to keep executing on our long-term strategy.

With that, operator, Robyn, Marty, and I are happy to take questions, please.

Thank you.

(Operator Instructions)

Savi Syth, Raymond James.

My question was, on those fare options, could you provide a little more color on what's been achieved so we have an understanding of what you're thinking the incremental contribution could be in 2016?

I'll ask Marty to enter that.

Other than the guidance we gave on achieving our $200 million run rate earlier than we expected, I have no significant additional color to add other than what we added on the call.

Fundamentally, we had originally done a forecast as far as what we expected, the average revenue we'd get for each customer and then the number of -- percentage of customers checking bags.

And we have revised our guidance up, so you can do your own math as far as how that happened but I can't give any more guidance than that.

Okay.

And just a question on Mint, bear with me, when Mint was first announced, there seemed to be a very unique trans-con opportunity to address the high paid load factor in those markets.

And also maybe to JetBlue's detriment, where maybe some of the competitors were possibly using the strength in the premium cabins to discount the main cabin.

So I got that and then the extension to Boston made sense, given the similar type of passenger, but now you're starting to see more leisure markets, not just seasonally, like year round getting it?

Are you coming to the realization maybe that your customer base would maybe need a premium cabin?

I know one of your competitors has a small premium cabin and just wondering as you rollout more and more Mint aircraft, you're also increasing the complexity of the fleet and the product?

Would like your latest thinking on Mint.

Sure.

Thanks, Savi.

Let me answer that and maybe if Marty has any kind of additional comments.

Look, I think when we set out to create a Mint, the idea was to offer better product at a lower price and I think we've been extremely successful in doing that.

Our paid load factors in these cabins are something we're absolutely delighted about, and I think the strength of response we've had from our current customers, and also the ability to attract new customers, I think has really given us a lot of excitement about the size of the opportunity with Mint.

We've no news to announce beyond what we've announced already.

But the Caribbean opportunity was very, markets like Aruba and particularly Barbados, they're very premium markets and the ability to attract high fare paying customers who are willing to pay a higher fare for a different type of experience, and certainly better than any of the other airlines are offering today, I think we've been pleased with that.

We do a good job of isolating the complexity, we're conscious about that, but I think really happy with where Mint is performing.

Yes, Savi.

One thing I want to add.

This is Marty again.

I think I can't stress this enough, we're very bullish on the A321, we have a lot A321s coming, and every time we add a plane to the Mint fleet it's actually one fewer all-core A321 that we take.

And we find the all-core A321 to also be a very important part of our network strategy plan, specifically in New York where we are slot constrained.

If our goal is to continue to keep fares low and continue to satisfy all the demand we see in New York, the A321 is actually very important.

So, although it's very attractive to take A321s in at the Mint configuration, there is a cost to that.

So we're constantly balancing that as we make the choice between taking the all-core 321s and the mixed-cabin 321s.

Got it.

Good to hear.

Thank you.

Darryl Genovesi, UBS.

Maybe first on the A320 cabin retrofit program, some carriers that have added seats to their aircraft through similar retrofit programs historically, at times have had a little trouble with the scheduling as the retrofit airplanes came back into the fleet, which created a little bit of a unit revenue headwind for the first few quarters of the program.

Have you thought through that?

Is that something that could be an issue for you, too, as the A320s ultimately come back?

It's Marty again.

Listen, every large project has many, many moving parts to it.

I'm very comfortable with the quality of the team we have here to manage that process.

And, although we'll certainly work through our contingency plans for it, we're not losing a lot of sleep on that.

Second issue is, what is a little bit unique for our situation, is that we are actually going from three in-flight crew members to four in-flight crew members on the A320 when it comes in.

So interestingly enough, the challenge of putting the fourth in-flight crew member on there actually gives us a little more comfort as far as how to manage the other revenue side of it.

So we're very comfortable with the plan as it's laid out, and we have no change to our guidance on the incremental revenue -- incremental op income benefit from cabin re-style.

Okay.

Thanks for that.

And then, I guess, Mark, it looks like the share repurchase was a little bit bigger than we'd expected.

Just wondering, it sounded like last time we talked about this issue, it sounded like most -- that you were thinking about 2017 as the year when you would embark on a meaningful share-repurchase program.

Can you provide some updated thoughts there?

Yes, sure.

Don't read too much into it.

The share-repurchase program to date is really consistent with, I believe it was our discussion at Investor Day in 2014, where we are basically trying to neutralize shares issued to crew members.

And so the amount of the share repurchasing is largely driven by that.

There may have been a little bit of catch-up between this year from the prior year, so that's perhaps why you saw a few more shares this year than in prior years.

But again, as we go forward, we'll still continue to look at purchasing shares essentially equivalent to the estimated RSU and other crew-related grants.

And as I think I indicated in my comments, we have a fair amount of scheduled debt payments this year, so it's really just not appropriate at this point in time to engage in the big discussion on accelerating that share repurchase program.

Great.

Thanks very much, guys.

Michael Linenberg, Deutsche Bank.

Two questions here, just when I look at your cost guidance for the year, and you can see, it starts at where you have declines and then those moderate to what looks like unit costs, ex fuel increases by year end.

Is that just all in line with the movement in capacity, or is there anything timing, maybe maintenance-wise or anything else that drives it a little bit higher the latter part of the year?

No.

It's largely driven by the denominator, just to say a lot of ASMs happen in the first quarter.

Great.

There's not a big bubble, extraordinary bubble, that we're projecting on of one or two single-cost items this year.

Great.

Second question, this is probably for Marty, just on some of the headlines that we're reading about Zika, I'm just curious if you're seeing any noticeable decline in bookings to Latin or Caribbean markets?

Anything on that front would be fine.

Thanks.

Thank you.

First of all, from when the news first came out about Zika, we've been watching it very closely.

We do have a waiver in effect for our customers who may choose to change their plans, but to be clear we've really seen no measurable impact either to advance bookings or customer refunds.

Obviously, we're going to watch it very closely.

We're already having conversations about if we need to do some redeployment of ASMs in the margin what we would do, and obviously, it's something we're going to pay attention to with our footprint in Latin America.

Marty, on the point about re-deployable ASMs, I know earlier you did mention that I think you were going to see probably the highest growth rate at Fort Lauderdale this year.

How quickly can you adjust?

Some airlines can tell you that they can do a significant adjustment of the schedule a month out; some will tell you that they can't change the schedule for six or nine months.

What's -- how nimble can you be?

Michael, I think, listen, we're still a small company, we consider ourselves very nimble.

I think all 18,000 of us are successful because we're willing to make changes quickly.

I think the most important thing for us is to get ahead of it and have our plans laid out.

So we're certainly not in the six- to nine-month time horizon at all.

Great.

Thanks, Marty.

Duane Pfennigwerth, Evercore ISI.

Can you just help us with how you view the comps for the rest of the quarter and if there's any way to back into PRASM for January from this guidance?

I'm just wondering how we should think about the trajectory for February and March relative to this down 3% that you've given us for January.

Duane, thanks.

It's Marty again.

Listen, first of all, we have actually moved over to RASM guidance.

I think based on feedback we've gotten from the investor community, so I really can't give RASM and present guidance going forward.

The one color, I can give you, which I think will be useful, is just to remind you of, or remind everybody, excuse me, of what happened in 2015.

We did go through a long series of storms both in New York and in Boston over the first quarter.

Last year we had about a 2-point tailwind from the ASM reductions and customer re-accommodation during the January storms.

And it actually went up to a 3-point tailwind for February because as you know, up in Boston they had, I don't know, 600 inches of snow, whatever the hell it was, 100-something inches.

It was a very, very, very big period and obviously the biggest airline in Boston.

You think about specifically that it was a New York and Boston-specific winter, I think it did impact us disproportionately.

Mark did give some guidance as far as what happened in January of 2016.

We'll see what happens in February, but clearly I think laying out those tailwinds from last year could be helpful.

By the time March came, it was less than a point.

I think it was actually half a point.

But obviously, this year in March, we've got holiday moves, too.

So back to the point that Mark made in the script, it is a very, very noisy first quarter.

So sorry to pass through here, but would you say that we're dependent upon if we get more weather, going forward.

But would you say that January is likely to be the worst print of the quarter and March should be the best, or any color like that?

We generally haven't given guidance more than the specifics that I laid out earlier, so I don't really want to break that tradition now.

Okay.

It'd certainly be worth following up with Kevin or Driss after the call as well to try get more color.

I mean, we would like to give as much as we can without changing how we guide normally.

Okay.

I think in the past you actually have given directional color on months but maybe I'm mistaken.

Thanks for taking the questions.

Jamie Baker, JPMorgan.

The 900 canceled flights aren't necessarily relevant in the quarter unless that's all that you budgeted for and we have another storm.

So generally speaking, is there a level of quarterly IROPs that you're -- just sheer cancellations that you budgeted for that you can share us with, or share with us, that way we can assess the impact of any incremental weather?

I'll take it on the CASM side and if Marty or Robin want to comment on revenue.

But on the CASM side for sure, the full-year guidance that we've provided of 0% to 2% also incorporates essentially the recognition that we do live in a fairly weather-driven environment here in New York and Boston.

So for sure, a little bit of what's in there, without breaking it down by a percent, is embedded in our cost guidance full year.

As it relates to the quarter, though, could you put the 900 in perspective?

Does that use up 100% of your budget or is that half of the typical weather disruption that you plan for?

No.

When we release our traffic in a couple weeks, Jamie, we'll actually have a little bit better breakout of sort of -- I've given you an indication of RASM and P&L.

The last thing that comes in, frankly, is the ability to provide accurate guidance or indication of what happened on CASM.

Sure.

Second question, the industry wage bar for aviators is rising at a much faster annual clip than when your pilots first voted to unionize.

And whether -- I'm curious whether this haste in management's resolve to get something done sooner rather than later or if we should just assume that your mark to market is a, I don't know, give or take, a 2018 event?

Also for new hires, what's -- new pilot hires, what's the estimated time before one achieves a captaincy?

I'm just curious how that's changed over time because it doesn't seem like it would quite be the carrot that you used to be able to dangle in front of new hires in hopes of maintaining a below industry average pay scale.

Thanks, Jamie.

Good morning.

It's Robin.

I'll take that.

I think in terms of the question about the pilot compensation, we had the last compensation adjustment in January this year.

Which is already embedded in our guidance, which relates to the three-year agreement we put in place pre -- bringing in ALPA.

Negotiations are underway with ALPA.

I think both sides are engaged in a very constructive way, our pilots are very important to us.

But as you know, it takes time.

So we haven't put anything in for 2016, additional accrual for 2016, assuming a contract this year.

We think it will be 2017 at the earliest, if not beyond, before we see a final agreement.

And the transition time to the left seat?

It depends on the aircraft type, et cetera, but looking at the moment four to six years as the average.

Okay.

Thank you very much, gentlemen.

Thank you.

Helane Becker, Cowen.

Just a couple of questions, with respect to the fourth quarter, specifically sales and marketing expenses up quite a lot year over year, and I'm just wondering if that's a trend that we should expect to continue?

And that was my first question.

Hi, Helane.

Thanks.

It's Marty.

No, that is not a trend you should expect to continue.

Obviously with increased revenue of increased credit card fees, that's generally sort of a lumpy expense but there's nothing dramatic happening that you shouldn't look at that as a long-term trend.

Okay.

And then my other question was actually with respect to the maintenance costs.

So now they're up much less than they had been.

And that's another question that I was thinking about, especially relative to the rest of the year.

Right?

So is that our new level of how we should think about it?

Yes.

It's actually a delight on this call, Helane, not to have to actually single out, in a cost discussion, maintenance expense.

Credit really to a lot of people and the team, actively addressing power by the hour agreements and that sort of thing as well as the way the whole tech works flows are structured.

So it will still be lumpy because ages and parts -- airplanes and parts age at different times, but it, and I don't want to overstate it, but it doesn't seem to be the theme of 2015.

Right.

Very good.

Thank you.

Thank you very much.

Those were really my questions.

Hunter Keay, Wolfe Research.

Marty, can you talk about the 2016 ASM growth in the context of stage, gauge, and new markets?

And maybe in the new markets you're going to add, can you give us a sense of, at a high level, about the competitive dynamic?

Are the new markets going to be added because they're un-served or because they're overpriced?

Generally?

Hi, Hunter.

Let me take that in pieces.

With respect to 2016 ASM growth, [I guess it'd be great to move by] first quarter, the majority of the ASM growth, one majority is coming from aircraft deliveries.

There's a slight increase in stage.

Obviously, a significant, a measurable increase in our forecast to completion just because first quarter 2015 was so tough.

And a slight increase in utilization.

With respect to how we look at our opportunities for growth, we talked about this at Investor Day, we've talked about it in many opportunities as we're describing the future path of JetBlue, we have a long-term network plan for all six of our focus cities.

I don't think any, we don't view any of them as anywhere nearly fully played out, and we're going to continue to follow that plan.

Our growth rate has been in this -- the range we're in right now is very similar to the rate we've been over the last several years because we are the little engine that could and stuff like this.

We're going to keep growing with our plan.

We have a great pathway laid out as far as where we want to grow.

Sometimes those markets have high fares, sometimes they have bad service, sometimes they are just markets that we have large corporate customers in a place like Boston that really want us to fly to and can guarantee us a good amount of revenue.

I wouldn't say there's one formula that fits all.

Okay.

Can you maybe just (inaudible) I'll take it up a level, how much of the 9.5 percentage points are gauge and stage, let's just, why don't we just do that?

I think stage length overall this year is up about 1%.

With respect to gauge, all of our airplanes are coming Air321s, although half of them are coming in, in the Mint configuration, so I'll get back to you.

I'll have, we'll give the numbers to Kevin and get back to you after the call.

Okay.

I don't want to misquote.

Okay.

Cool.

And then maybe also, Marty, can you talk about maybe some fare pressures you might be seeing, particularly on the East Coast, sort of the north-south stuff as some of the larger airlines get a little more aggressive selling connecting fares?

Have you seen a lot of that recently pick up over the last couple quarters?

Yes.

Anything that's connecting traffic?

Go ahead, sorry.

That's a great question.

Honestly, we have not really seen that, that much.

We've been competing against other low-fare carriers all along.

Certainly look at Fort Lauderdale, where we've been competing with Spirit from the day we started growing that operation.

We're very happy with what we're seeing in first-quarter bookings right now.

And from -- I just don't, I read the commentary about what's happening up there in fares and certainly we're impacted a little bit.

But one thing that's a little different about JetBlue, and it's something I think we don't stress enough, is we really don't carry connecting customers to any big number.

I think we said publicly it's very low-teens as far as total connecting customers, for domestic it's in the single digits.

Other than international, we don't carry a lot of connecting customers.

This is the benefit of having our six focus cities actually being large metropolitan areas.

We can create demand by stimulating.

And I get into leisure airlines, we're playing in the more elastic part of the demand curve.

So from that perspective, we feel like we do our own thing.

We know what we like our structure to be in the market.

We like structures that allow as many customers to fly as possible, and we haven't really been -- we haven't really felt any dramatic impact like we're reading some of the airlines talk about.

Thanks, Marty.

David Fintzen, Barclays.

Question I guess for Marty.

I think, Mark, you may have mentioned or, Marty, you mentioned, that Easter would be more muted in terms of the shift.

Can you just put some numbers around that?

Dave, I can't put specific numbers around it, but the one thing I will say is, back to the point that Mark made in the script, it's a very lumpy first quarter.

And I will only extend that into second quarter, only in that, yes, Easter is mostly moved into March.

We were actually at Passover stay in April, and New York school holidays also in April, so I think first four months of the year are going to be pretty lumpy for that exact reason, because it's going to be a different profile of demand.

In general, again, we've been doing this many years, this is the type of demand profile that I think plays very well into JetBlue.

The thought of having Easter and Passover not being at the same time is generally very, very good for us.

The New York school holidays moving to April is very good for us.

So again, we're happy with what we're seeing in advance bookings for the first four months.

Okay.

I mean, just to help us sort of play through the months, when you say muted, does that mean we really shouldn't be thinking about much, if any, sort of shift between March and April or is it typically like, I think, historically, it's what, 2% to 3%?

Should we be thinking half of that?

I'm just, just from a pure arithmetic standpoint, is there anything you can help with?

Honestly, I don't want to get too deep into any, giving more detail than have already.

And honestly, just as a reminder, we talked about this before as well, we play relatively close in on the booking curve versus some of the legacy competitors.

So from that perspective, we know historically what happens when Easter and Passover shift, but we're not taking a ton of bookings for April right now.

Okay.

All right.

No, that's helpful.

Mark, just given the kind of free cash flow you're now generating, and with the debt repayments that are coming up, can you talk a little bit about what's sort of the ideal net debt balance that you'd like to get to eventually?

How do we think about how far you want to go with balance sheet?

Even if it's not 2016, just over the next few years?

I can tell you we're not where I want to be quite yet, although I will also tell you, I don't wake up in the morning dying to be investment grade.

(Laughter) okay.

Honestly, I don't really know what the benefit of that is because of the rates that we're able to finance anyway.

But so, I would certainly, simply say that, that doesn't seem to be the target that I wake up thinking about.

Nor does Jim Leddy think about it.

But I think we still have this year, obviously, a lot of scheduled debt payments.

And so that's really a great place for our free cash flow right now, and it's part of the capital allocation discussion that I think we'll all have towards the end of this year.

Okay.

All right.

Appreciate the color.

Thanks.

Rajeev Lalwani, Morgan Stanley.

Just a question on the RASM guide, what's the impact of the credit card there?

And then also how much is competitive -- how much are competitive dynamics coming into play as far as what you're guiding to in January and just your commentary the rest of the quarter?

Rajeev, it's Marty.

First of all, on the credit card, other than the guidance we've given for the long-term operating income benefit, we don't break anything out beyond that.

Although this is one of the reasons why we did go to a RASM guide versus PRASM, so that you'd hopefully get a better full picture of the revenue picture for JetBlue.

Could you repeat the second question again?

I want to make sure I have that right.

Yes.

Just some of the noise and weakness you're seeing.

How much of that is attributable to, say, competitive dynamics and competitive capacity as opposed to what you were describing in terms of calendar-type dynamics and storm stuff from last year?

Well, first of all, I'm not sure I'd use the word weakness to tell you the truth.

We're not like a legacy airline in that we're always looking to try to get our fares up and up and up.

We've talked about, historically, what would happen in our Mint product.

We haven't given a number as far as demand, but I think if you were to look on JetBlue.com and look at how quickly Mint fills up, we tend to be very full.

But we're still not out there saying, I'm going to go back to this $2,000 price point that our legacy competitors used to do in the past.

We're still a low-fare airline so I don't look at any pressure on fares as a bad thing.

We like to have low fares.

We think that's an important part of what JetBlue stands for.

So from that perspective, I'm not sure I would agree, I'm not sure I'd call what I'm seeing weakness.

I think we're very comfortable with what we're seeing as far as our demand right now.

With respect to what the competitive dynamic is, I think competitive ASMs come and go.

I think if you look at how ASMs and unit revenue has ebbed and flowed, just both for JetBlue and for the industry, we really view this as playing the long game and we're very comfortable with what we're seeing right now.

Rajeev, this is Kevin.

Was your first question on the new credit card impact on our RASM guidance?

Correct.

Just whether or not from --

That's what I thought.

It wouldn't have a real impact because the new credit card hasn't -- our guidance is for January and the new credit card is not really impact -- is not there yet.

So that's a question for maybe next call.

Yes.

No, that's why I was asking.

Thank you, gentlemen.

Julie Yates, Credit Suisse.

On other revenue, clearly exceeded expectations, are you able to parse out what the underlying growth in Even More was?

Just to help us think about the actual outperformance from fare options?

Julie, it's Marty.

Thanks for asking that, but no.

We've actually combined other revenue, there's a lot of things contributed to the revenue.

We've talked before about how we continue to see growth in Even More as we have more customers purchase the product and also our ability to yield manage it, but we haven't given any more guidance besides that.

I will also give a reminder that Even More actually has always been in PRASM guidance, so the move to RASM doesn't really impact that.

Okay.

Got you.

And then, now that you are charging for bags with fare options, is there more of a priority for load factor versus yield in order to capture that incremental fee revenue?

Honestly, we don't look at it that way.

Our view of the world is a good percentage of our customers don't check baggage at all.

Many of those customers are actually getting a discount with how pricing has moved around since we've added in fare options.

And our view is, we still view this as giving customers choices.

We've seen, I go back to the point we made earlier in the script, which was, we had forecasted changes in behavior for customers.

We've now guided up versus what we see the benefit of fare options.

And I think fare options has been accretive in many ways and actually has been -- has not had a dramatic change or the change we'd expected as far as customer behaviors.

So we look at it as a win overall.

We've never been a load factor biased airline even as a low-cost carrier.

I think part of that is, back to something we mentioned earlier, we're not up there trying to fill low-yield connecting seats over at Kennedy or at Fort Lauderdale because that's not really our model.

We still focus on carrying local customers and trying to stimulate demand with low fares.

Okay.

Understood.

Then is there any change or update you can give us in terms of how you're thinking about dynamically pricing fare options at some point?

Yes.

I have no update versus what we've talked about earlier.

When we originally announced fare options, we said that we, our hope was to make sure that part of building it in the way we built it is that we would have that option ultimately.

We do feel like that we built the structure for that, but we can't really go into any details about a future plan for that.

Okay.

And then just one last one for Mark, has there been any change in hedging tactics or strategy?

I saw you added some for the second half of the year.

No.

Not at all.

Our general guideline, again, is a great long-term way to manage risk.

And as fuel is dropping through the 40s, we decided to layer in a small bit for the third and fourth quarter.

So we will continue to use it as a tool to manage risk.

Okay.

Thank you very much.

Andrew Didora, Bank of America.

First, I just wanted to ask a question with regards to Boston.

When we look at a lot of your key markets, Boston is the one that stands out in terms of having some higher capacity growth heading into 2016 relative to last year.

And based on what we've been able to see, it doesn't seem like it's coming from any one particular carrier.

Can you maybe talk about the competitive environment you're seeing up in Boston?

And maybe what you saw from a pricing perspective in 4Q?

Andrew, thanks.

Again, I think competitive ASMs come and go.

I don't think we don't look at anything dramatic happening in Boston.

We're the biggest airline up there.

We've got our coverage of the Boston market has more than doubled over the last five or six years.

We certainly watch as ASMs come and go.

Our goal is to make sure that we're providing ASMs, to make sure we keep fares low and serve as many customers as possible.

So it's a market we're growing in as well.

Okay.

And then I know you in your investor update you gave RASM by quarter in 2015.

Any chance we could get the RASM by month for 1Q 2015, just so we can compare going forward?

No.

Sorry.

We can't do that.

Okay.

Thank you.

Joseph DeNardi, Stifel.

Marty, I'm wondering if you could just provide a breakdown of your ASM growth this year, domestic versus international?

Let me flip through here quickly and see if I can get it quickly, but we can follow up after the call and get you the exact data.

Okay.

And then, Mark (multiple speakers) -- Sorry.

Go Ahead.

No, go ahead.

We'll get back to you.

Just on the -- just based on kind of what you're planning for debt payments throughout the year, is there any way you could help us just kind of think about what interest expense could look like by the end of the year, just based on what you have planned right now?

That may be something that I'd probably get past best get back to you as well.

Okay.

Oh for two.

If you don't mind.

Thanks.

Thank you.

If there's no more questions, thanks, everybody, for joining us.

And we look forward to talking to you soon and have a great day.

Thanks.

And again, that will conclude today's conference.

Thank you all for your participation.