Bloomberg Audio Studios, podcasts, radio news. We're here in Rio di Jinnaro, and I am here with the CEO of Jet Blue, Joanna Garrity. Here alive at the annual IADA Meeting. Joanna, great to see you. Thank you so much for being make this. I think we were last in our lounge together, I know, and that's a big part of the whole story. I want to start with demand for the lounge, but
more broadly from customers. Whether you've seen it really hang in there the way that we've heard from some of the other airlines, despite some of the concerns and the higher costs that we're seeing.
Yeah, I mean, we're very pleased with the demand environment. Customers are still flying. I think it speaks to the importance of air travel and particularly going to the summertime.
Customers still want to have.
That vacation and so we're very pleased with that. Obviously, the fuel environment is very challenging. We're passing on about forty percent of the cost of fuel right now within the chicket price, which isn't great. Obviously, you want customers to really see affordable air travel, but we're seeing demand strong. We're hoping it keeps up through the summer into the end of.
The year with the forty percent increase to customers, Are you seeing any pushback or people pretty okay with it? Kind of hang in there.
I think everybody understands given the current environment where fuel prices are, that airfares are going.
To be a bit higher.
Since twenty nineteen, before the fuel crisis, airfares, you know, really hadn't kept up with the cost of inflation, and so there's a little bit of catchup happening, and then you add the increased fuel price on top of things, and you know, I think we've got to make sure that we're covering our cost. Spirit is a great example
of an airline that just couldn't cover its cost. Everybody loves twenty nine dollars fares, but when your costs and put cost are a lot more than twenty nine dollars a customer, you know, it makes it makes it challenging.
At this point, it is it's sustainable with forty percent passed on to customers.
If the prices of oil stay.
Where they are current lar or even inflect higher for a prolonged period of time.
We need to continue to see prices stay where they are, so that we can ensure that the full of at the full cost of the incremental fuel costs are being passed on. As we think about this year, I mean it's it's close to a billion dollar incremental expensive.
Jet Blue fuel.
So we're really focused on how do we make sure that we're driving great value for customers and the product offering and the surface we provide, but also making sure that we recapture those fuel costs.
You talked about Spirit.
Have you seen any pick up in business that you've taken on from Spirit as a result of the bankruptcy.
We're definitely seeing some positive trends in Fort Lauderdale. It's one of the opportunities for Jet Blue. Spirit obviously had a big footprint down there. We're the largest carrier down there. Now we look forward to continuing to serve South Florida. We're adding flights this summer. We'll be up to one hundred and thirty flights in Fort Lauterlo the summer, hopefully growing tw one hundred and fifty through the peak next year.
And customers are responding very well to our product, to our service down there, and we look forward to continuing to serve that market.
A lot of people said it was a mistake retroactively post factough it was a mistake that the anti trust officials did not sign off on the merger between Jet Blue a Spirit. I'm sure this is like a dagger through your heart. You don't want to revisit this in anyway. It was incredibly painful. There is a feeling though that there would be a more kind of openness to consolidation
in the sector going forward. Would you want to try again with something or are you just like absolutely not by putting that aside.
Where public try company, So we're always going to do with in the best interests of our shareholders, you know.
With that said, companies need to focus on the organic plan.
And when we think about all the time we spent with Spirit trying to get that transaction done, we have a great plan. Our Jet four plan is working. We're looking forward to bringing first class on by the end of the year across our domestic domestic fleet. We've got our lounges opening up, We've got our great partnership with Blue Sky. So you can obviously never say never as a publicly traded company, but we really need to be focused on getting Jet Blue healthy again, and all the
moves we're making are working in the right direction. Now we just need the macro environment to cooperate with us.
You talk about the upgrades to some of your offerings, in particular some of your premium your lounge for example, which I had tended with you. I'm curious about how much you've been able to meet that demand for upgrades with supply of say Airbus planes coming in. We've heard just some rumblings about delays. Has that been a problem for you.
Yeah, there's definitely delays out there. Obviously, the supply chain is still challenged even following COVID across whether it's engines or aircraft. You know, we've got the right fleet that we're operating now. We're going to be adding a first class seat on through the end of the year. That's
you know, that's on track. That's largely on track, and so we'll be able to meet that desire for a premium seat that customers have today as we introduce that product and then our loungees we bring Boston on at the at the end of the summer, looking forward to delivering that. Our goal is to have no lines in our lounges we all walk by an airport lounge and there's a line and people have you know, buzzers like
the old restaurants and whatnot. You know, the only line we've seen in our lounge or lines to sign up for the Premier card so that you can get into the lounge. So, you know, I'm excited about the new product offerings. We're going to have to deliver that experience to customers.
So none of the airbus delays have really affected.
We're all seeing modest delays, but we're managing through it.
Meanwhile, the United partnership has been deepening, and I'm wondering is it expected to deep it even further or some of the regulators okay with that.
With this partnership really increasing, Yeah, we're still very much in the sort of mid innings of actually implementing the existing partnership. So we're focused on that. We introduce forcimplcal Earn and Burn with our loyalty program. At the end of last year, we just started selling interline flights on
each other's websites. We're also in the process of integrating Paisley, which is our vacation and ancillary platform, into United dot Com so that they can sell all their ancillaries on Paisley, and that's where our focus is right now, is really focusing on how do we continue to bring that partnership to life. So we still got quite a bit of runway to go with the existing partnership.
You know, there's a lot of existential discussion around the model for low cost airlines. This idea of catering to people with affordable air travel is getting somewhat difficult for people just because the margins are so snarrow at a time of crisis, it becomes really difficult. How do you convince people that it's a viable model given all the turmoil.
Yeah, I mean, at the end of the day, we've got to make sure we're covering our costs, and that's an important component of this. If you look at what happened with Spirit, there were many things that went went sideways for them. You know, they had an engine issue, so at one point, you know, a third of their fleet was grounded. The product that they offered, the basic economy product was matched by other carriers. We've matched that as well, so their product offering didn't keep up.
You know.
Then you look at the regulatory landscape and being a smaller airline. So what we're really focused on is how can we leverage our partnership United to build scale. We've got to make sure our cost day in check, and we've got to make sure as we think about that premier customers willing to pay a little more for a better experience, that we really redouble our efforts there. But also the customer that flies and coach, the customer that
flies an economy, they're equally important. So we've got to make sure that we don't tinker too much with the premier experience, that we really compromise that customer who needs affordable air travel.
But affordability it's relative. If you look.
At you know, customers that take a taxi from say midtown Manhattan to JFK, it's one hundred and fifty dollars in an uber to take an uber.
Nobody complains about that.
But when an airfare is one hundred and fifty dollars from JFK to Fort Lauderdale, you know, you got a lot of folks saying air travel is very expensive, and you know, I would submit air travel actually remains highly affordable. Yes, it's a bit more expensive because of the cost of fuel, but we have a lot of input costs and they've only gone up since COVID.
Well, this is the issue, and I think that this is where people are struggling. That there's a lot of hangover debt. Jet Blue has a bunch of debt. To service that debt, to invest in premiere experience to keep up with some of the major the big three that have these deep pockets is incredibly challenging. What's the pathway to do that, to pay down debt, to free yourself up while also tackling some of these other areas of growth.
Yeah, I mean the focus is generating an operating profit to begin with, and we're not there yet. So first step is generating an operating profit, which we were on track to do this year until the war, and so that's a bit of a step back obviously, given you know the cost of fuel and so much money is just being directed towards that. The hope is that that moderates and that comes to an end and fuel comes down over time, and then we'll be back to focusing on.
Gendering and offer and operating profit. That's the first step.
The second step is then free cash flow and you start paying off your debt, but we need to be very mindful of that. We do have a pretty heavy debt burden, but we also have a lot of liquidity. We also have a lot of unencumbered assets. So you know, as I think about Jet Blue, the debt is a challenge, but we are focused on doing all the right things in terms of investing in that premium customer so that we can drive and improve revenue environment for the company.
Where do oil prices have to go to get it profitable once again.
Yeah, I mean I'm not going to put a number out there. They need to go down. That's our focus is they need to go down and moderate. We're not planning even if the war were to end. We're not planning for oil prices to snap back overnight. We think it's going to be a longer protracted sort of unwind of the escalated fuel prices.
You know, and at the end of the day, you know, our.
Focus needs to be I'm really not losing sight of our plan. We see it working when you strip out all of the macro noise. We do see that Jet Forward, which is our turnaround plan, is working. We just need the macro environment to cooperate with us and that's been challenging the fuel environment.
Shut downs.
You know, it's kind of hit the customer, hit the airline industry, I think in a disproportionate way to some other industries.
I just want to finish by asking.
Are there any new routes coming up that you want.
To talk about.
It's all about Fort Lauderdale, so I'd say keep your eyes focused there, and we're actually building a connecting operation there, so if you have a need to go to the Caribbean into Latin America for lauderd it's me a great way to get there, even if you're not originating there.
And we're known for point to point. We're building a bit.
Of a different model down there and excited to see how that brings value to customers and really helps drive our profitability.
Joanna, thank you so much for being with us. Thank thanks so much atuay here with us at the ADA General Conference in Rio Dejaneira.