As then in your dad, speaking.
From the day jet Blue launched more than two decades ago. It's cast itself as a refreshing alternative to legacy airlines.
Hey hey, look out the window, world, maybe hey over.
Jet Blue has become the sixth largest US carrier, and while it has ambitious plans to grow, it stayed true to its disruptive roots. One of the coolest things about jet Blue is that kind of startup spirit, right. That's a differentiator, the kind of the smallness of it in a sense, do you do you keep that as you grow bigger?
It won't be easy. With twenty five thousand people today, you know, it's already HoTT than when it was a thousand that at the beginning.
It helps to have leaders on board who've been there for the long haul, like cfo Ursula Hurley Well.
Ursler joined Jet Blue as an intern.
I came home for the summer and needed a summer job and Jet Blue, who at the time, I was like jet who, because Jet Blue was literally three years old back then, had posted summer internship at a university pot board. They gave me freight privileges and so I was allowed to fly across the country if there were seats available on any flight at any point in time. Now fast forward twenty years later, I haven't.
Left working in financial roles across the company. She's developed a broad portfolio of skills and a unique depth of knowledge.
I think curiosity is a great skill in business, particularly in our business, which is so challenging. US is not just a number CFO. Urse understands the whole business. When someone's in front of her asking for more money, US knows whether that's going to work or not, and she can ask the right questions and that's a great skill.
A CEO who's made a name as an instigator and a CFO with passion and perspective will lead Jet Blue on the next leg of its journey.
Robin has always been a very strong advocate of mine, and we collaborate together. There are times when we don't agree, there are times when we do agree, and I believe that that's healthy and we end up in a better position for Jet Blue. So there's puts in takes. We
push back on each other. There are points in time where we need to take risks and we need to do those in a measured way, and so we try to be thoughtful about where we place our bets, and we do that in a responsible way in order to create a product offering that customers really value.
As much as Jet Blue has grown, it's still fighting an uphill battle for market share. The big four airlines United American, Delta, and Southwest control most of US domestic passenger traffic.
We have a two tier system where we have the haves and the have not. Seriously, you have four airlines that are about seventy two to seventy five percent market share. There's this enormous gap between four and five.
In July twenty twenty two, Jet Blue agreed to purchase Spirit Airlines and a three point eight billion dollar deal. In March twenty twenty three, the US Department of Justice sued to block the merger on antitrust grounds. Until the core battle is resolved, the shape and scale of Jet Blue's future.
Remains in limbo.
So you have to, in a sense, make two plans and go along two paths until you know what the outcome is.
How stressful is that and how does ursula help you?
So our number one prior toy right now is to get the Spirit merger done. We think it's transformational for the industry. We think it's going to create a truly national lo fare, high quality airline to challenge the big So obviously Ursula has been really involved in that as early as last year, actually convincing Spirit shareholders to take out deal versus another inferior deal that was on the table, but also running the business day to day.
How hard is it to deal with you forecasting and planning years out with two very different outcomes.
Yeah, we have fantastic teams who are building plans for both scenarios. Right that the benefit of Spirit is it's going to allow us to turbocharge our organic growth plan if Spirit doesn't happen, which I feel very confident that it will, and we have opportunities that we can continue to implement in.
Order to bring Jet Blue the Jet.
Blue experience to more customers. So I'm excited in general about growth.
Jet Blue's growth plan begins with modernizing and expanding its fleet, replacing older aircraft with Airbus A two twenties that add passenger capacity while increasing cost efficiency Airbus A three twenties to support long haul routes, but delivery delays caused by supply chain problems are proving to be headwinds.
We will need to get creative on how we source airplanes in order to continue the Jet Blue growth trajectory.
We have a very big order book of new airplanes, but they're all coming late. On top of that, there are some engine issues, and so we actually have airplanes on the ground today with no engines because there isn't enough engines to support them. I would say right now, that is the biggest inhibitor to that organic plan.
A potential growth driver is the addition of transatlantic routes. Since twenty twenty one, Jet Blue has begun service to London, Paris and Amsterdam.
It's still early days, right, It's still a relatively small part of our network, but it will grow.
Leisure travel to Europe has spiked in twenty twenty three, with airlines adding capacity to meet demand that's far exceeded twenty nineteen levels. Jet blues global ex bansion has helped offset a decline in domestic passenger traffic.
One of the benefits these large airlines have not only are they large, but they also have a lot of hedging due to the fact they fly to so many different markets. So we don't have that. You know, we're very, very focused on domestic and Caribbean and Latin America. The hedging I call it, or the having access to more geographic diversity will actually help us.
So we are actually flying to Europe with the Airbus A three twenty one long range aircraft, so it's actually a narrow body aircraft. There is a way in which we can pivot that asset to more domestic flying if we have to, if the demand environment in Europe pools.
Jet Blues revenues have bounced back from the troughs of COVID. The pandemic's long tail has created an uncomfortable new normal on the expense side.
In general for the industry, revenues are back to twenty nineteen levels, but costs are over twenty nineteen levels by about eighteen or nineteen percent.
We're operating in a very volatile environment, so Jet Blue has a very large presence here in New York, and there are air traffic control challenges, so we've had to over invest in hiring access crew members and building flexibility into our planning process. Over time, we hope to wean some of those investments back as the operating environment around us stabilizes.
So I mean to give you an example, we have about one hundred million dollars more of reserve or standby pilots in twenty twenty three than we had in twenty nineteen just to fly the same schedule. Because the infrastructure is still more brittle.
And pilot salaries are about to sort. New labor contracts are building in raises that will add significant labor costs to every airline's ledger. With a shortage of qualified pilots looming, their leverage would continue to grow.
Hey, it's going up by thirty five to forty percent, which is insane. I've seen this movie before and this is not sustainable in my opinion.
We've certainly seen since COVID know a lot more pilot attrition. We saw a lot of the time as during COVID, and that then created this kind of gap of pilot's once business return.
The pilot shortage has been an issue for years, and I do believe we are on a I hate to use the term crash course for you know, even bigger issues in the future.
Nobody has problems hiring, it's retaining that's the problem. The flight attendants are negotiating for contract and let's you know, just give them a smaller increase. I just look at all these costs that are going onto the industry and I don't see the revenue offset.
The pressure is on Ursula Hurley's team to trim costs in an inflationary environment.
We've committed to.
Deliver O one hundred and fifty to two hundred million dollars in structural cost savings by the end of twenty twenty four.
You know, it's a team effort, right as CFO, however capable, they are kind of do it all by themselves.
You know.
Part of it is to kind of bring the whole organization together. And I think you know, Ursules's strength, because she's worked here for so long, is that she knows how.
To do that in a capital intensive industry. Rising interest rates are another concern.
Liquidity is the lifeblood of an airline. We make very conservative decision making about when we raise funding and how we raise funding. We try to diversify our sources and we're always very focused on the actual rates and we like to build an inflexibility in these financing structures so that we can we have an opportunity to prepay debt when appropriate so that we can continue to optimize the overarching rates that we're paying.
It's been a turbulent year for Jet Blue shares, one more example of the volatility that Ursula Hurley is determined to stabilize. You worked in investor relations on the way to this chair. As a result of that, are you extremely sensitive in terms of the stock price, in terms of analyst ratings?
I am.
I mean, that's the core of what I do and what my teams are responsible for. I probably checked the stock price way too many times a day. We have three stakeholders. We have our customers, we have our crew members, and we have our shareholders, and so those are the lenses that we look through when we make any type of decision, and so we need to be balanced. But at the end of the day, it's all about returning for our shareholders.
Since Jet Blue began flying in February two thousand, the airline has prided itself on offering a high end customer experience at a moderate price. It pioneered a meddies like free Wi Fi on every flight and live TV at every seat. Airfares have risen in the last two years as demand has recovered, but Robin Hayes insists Jet Blues low cost philosophy will not change.
People want low fares. Our model has always been offering low fares with great service to stimulate additional trips. I mean, I think given the pivot for the industry away from business travel to leisure travel, when you're talking about someone's leisure travel, you're not just competing with other airlines, right, You're competing with am I going to get a new car?
So you're competing for a people's show of wallet. And I think what we have to do is make sure that travel is a compelling choice for people.
A compelling travel experience starts well before a customer boards the aircraft. Ursula Hurley walked me through Terminal five at New York's John F. Kennedy Airport, where the complexity of the business she oversees really comes into focus.
We operate one thousand flights a day, we serve over one hundred destinations, and we transport about forty million customers per year. When you think about a person booking a flight to getting them to their destination and home from their destination, it takes an army of things to go right. As we were coming through the depths of COVID, the
labor market was very very challenging. You had people leaving the company to do life changes, and so we had to very quickly hire thousands of crew members to staff back up. Because the demand for air travel came back so quickly, attrition has stabilized, so we're always monitoring the hiring metrics, how long it takes to get them through training, and what the job market looks like for each of these specific work groups.
Of course, premium products help airlines relieve margin pressures. I got to sample Jet Blues revamped Mint experience.
This is the new Mint.
This is our premium business class offering.
What's the process like you order the plane from air Bus and then do you fitted out yourself?
Or how does how does this work? How do you make a Mint?
It's a multi year process that we work with our Jet Blue product team and my fleet team work and collaborate with business partners to define and create what we want the experience to look like. We stress test it, we make sure that we're doing it in a cost conscious way. We optimize the seating configuration on every airplane to drive margin. On this aircraft, we have one hundred
and sixty seats in total. We have sixteen Mint seats and then we have one hundred and forty four core seats in the back of the airplane.
What kind of growth are you expecting from Mint?
So we have forty six Mint aircraft today and we have over twenty more aircraft on order that will be configured in Mint that can fly to Europe. So we're really excited to spread the jetbou brand throughout more European destinations.
I'm spoiling myself. Wow, that's really it's really flat and I fit look at that.
There's change on the way at JFK ground has been broken on a new Terminal six. It will connect with Terminal five and add capacity for up to ten gates. Jet Blue joins a consortium of companies managing the four point two billion dollar project, helping definance, design, and guide its construction towards completion in twenty twenty eight.
I think that what people want these days is an easy, quick experiments through the airport.
We need to have better technology at all points throughout the journey. We need to embrace biometrics. Consumers hate standing in lines. There is biometric technology that can help cut security lines and check in lines.
In a third, we're still in the design phase for Terminal six. But we leverage what other airports have done and what we've seen throughout the world, quite frankly, and we're going to pick the best of everything to really elevate the game, and technology is going to be at the backbone of that journey. We want to be able to create and give customers experiences where they can self
serve as much as possible across the travel ribbon. So whether it's checking in, whether it's checking your bag, going through security, boarding a flight, we want everyone to be able to do that seamlessly and be able to do that with your own handheld technologies.
Also, I'm just going to say, for Jet Blue, you need to have a lounge. Jeff Blue has you know, the T five is great, but for premium travelers, especially now that flights are delayed so much, you.
Don't want to wait in the terminal, there's no VIP lounge here.
Is that right? No specific Jet Blue VIP lounge. Is that going to change with the new terminal?
It could there could be a potential where we're evolving the mint and premium customer offering. We need to make sure that we're building out our customer offerings in a cost conscious way.
Chief financial Office Ursula Hurley has spent her entire professional.
Career at Jet Blue.
Her rise from college intern to the c suite is rare for an industry that's still male dominated at the highest levels.
We don't have a lot of diversity in the c suite. We have a lot of diversity below that level, and airlines are working on improving it. They have goals for their boards, they have goals for management, but what they have to do is attract and.
Retain the Jet Blue bucks the trend. It's the only airline among one hundred and twenty three global carriers tracked by Bloomberg with fifty percent gender parity among executives.
Diversity drives innovation. At the end of the day, innovation provides stronger returns. I also am president of our Jet Blue Foundation, and the mission of the foundation is to promote access to STEM and aviation to young girls of color and two young girls who don't have access to experiences.
The company's diversity goals include getting more women into the cockpit.
Pilots are tough. I mean, historically, you know in the US we've been about ninety five percent men five percent women. That's clearly a significant imbalance.
We have made great strides in increasing the number of women in our pilot work group. We have what are called our gateway programs. The diversity is very impressive, so you see a lot more women, and you also see a lot more women of diverse race as well.
Along with plans to make the future of aviation more inclusive, Jet Blue has taken steps to make it more sustainable. In the last two years, it signed agreements with suppliers for millions of gallons of sustainable aviation fuel or SAFF.
We have committed to net zero by twenty forty and we have also committed to fly ten percent of our fuel consumption on SAFF by twenty thirty and so today we actually consume SAFF in three of our airports that are based in California, and so we're on a path
to achieve that ten percent. There is not enough staff out there for consumption, and so we're encouraging producers, financiers as well as other airlines to help push this forward and provide us opportunities to achieve our sustainability goals.
Like many companies, Jet Blue is exploring the potential of artificial intelligence.
We can utilize AI to make better decisions. We can also utilize AI to help us gather and analyze information.
It's already invested in AI tools to improve its operations.
A number of years ago, we set up Jet Blue Ventures, which is one of our subsidiaries that really is at the intersection of technology and the travel industry. Tomorrow Io, which is our weather forecasting company, one of our initial investments in Jet Blue Ventures, and they use a lot of really cool technology, including AI to more accurately put weather and deciding what flies to cancel and delay, or what run ways to land on, or how much fuel to load based on a more accurate forecast. Using AI
and other technology is a game changer for us. So you know, I think that we're going to continue to see that across more aspects of our company.
Jet Blue fights off the Dog lawsuit and pulls off the Spirit merger. Robin Hayes will lead the company into a new era of size and scale. He believes customers will benefit.
We have four large airlines today that have about twenty percent of the market each. A Jet Blue Spirit combination will put us between eight to nine percent, so we'll still be a distant number five we'll still be less than half the size of these Big four, but it's not sustainable to have this bifurcated industry where we have four big players at twenty percent and everyone else is
showing twenty percent of the market between them. So we feel passionately that one of the best things that can happen for consumers is the Jet Lo Spirit deal because it will give customers a truly more national choice than just flying on the Big Four.
In any future scenario, Ursula Hurley will have a lot on her plate. She'll play a key role as Jet Blue continues to innovate and grow.
I asked her what she sees when she looks ahead.
What are you most excited about for the next ten years of Jet Blue.
I'm really excited to see jet Blue continue to grow. At the end of the day, we view ourselves as a destructor and a maverick in the aviation industry, and we want to bring more of the Jet Blue experience to more customers across the country. And I'm really excited to play a meaningful role in that growth journey.
And So, what's the biggest challenge over the next ten years that keeps you up at night?
The biggest challenge is just managing the volatility of the industry that we live in. And I mean there are many puts into our business and we're thrown many curveballs, and so it's just having the agility and quite frankly, the resiliency to power through it and look for ways in which we can deliver for our customers, our crew members as well as our shareholders.
What is one skill set or knowledge area that you think every CFO is going to have to develop or have over the next ten years.
Just resiliency, just the dynamic of the world that we live in. You need to be able to power through. You need to be able to see through the trees. You need to identify opportunities and push people. You really need to inspire and bring people along with you in order to be successful.
And what advice would you give someone who is promoted to CFO today.
You have to have.
An exceptional team around you in order to be successful. You also need to dive into the details. Knowing and un understanding the analytics and the drivers of the business will allow you to push back and quite frankly, create more value. And then I would also tell people you need to manage your stakeholders effectively. So whether that's a shareholder, whether that's the board, a customer, a crew member, taking in their feedback and implementing their thoughts to make Jet
Blue an even better company than we are today. So at the end of the day, hire a fantastic team, dive into the details, and ensure that you're managing your stakeholder base as effectively as possible.
I'm Matt Miller, this is Bloomberg