Dan McKenzie

Dan McKenzie with Seaport Global Securities LLC inquired about the impact of a competitor's Chapter 11 filing on JetBlue's Fort Lauderdale operations and potential revenue upside for the Jet Forward plan. He also asked about the potential for lost revenue from the government shutdown in 2025 to return in 2026, and how Jet Forward initiatives contribute to the company's momentum.

Answer

Marty St. George, President of JetBlue Airways, explained that competitor pull-downs in Fort Lauderdale created a "generational" opportunity for JetBlue to expand international services, particularly to the southeast and south, by gaining access to constrained customs facilities. He noted a short-term Q4 headwind but expressed strong optimism for the long-term strategic advantage. Joanna Geraghty, CEO of JetBlue Airways, confirmed no material impact from the government shutdown. She highlighted JetBlue's consistent achievement of guidance metrics and the $290 million EBIT target for Jet Forward in 2025. Geraghty emphasized the strategic pivot to premium products (Premier credit card, lounges, domestic first class) as crucial for recovery and achieving a break-even or better operating margin in 2026, noting that carriers with higher premium exposure experienced less margin impact.

Dan McKenzie asked about American's confidence in Chicago returning to its position as a major hub, questioning if the airport can support two strong competitors long-term and if the 20% enrollment improvement is sufficient to close the margin gap by 2026 or 2027.

Answer

Robert Isom, CEO, affirmed that Chicago can support two hub carriers, citing American's nearly 100-year presence and plans for it to be their third-largest hub with over 500 departures. He also addressed the $1 billion labor disadvantage, stating that competitors' labor cost advantages are not sustainable long-term. He expressed confidence in American's positioning for 2026, driven by market-rate labor contracts, the new Citi deal, sales and distribution improvements (14% YoY corporate revenue growth), and a rebalanced domestic supply/demand environment.

Dan McKenzie questioned American's confidence in Chicago returning to a profitable hub, contrasting it with competitor messaging, and asked if the 20% AAdvantage enrollment improvement is sufficient to close the margin gap by 2026 or 2027.

Answer

Robert Isom, CEO, affirmed that Chicago can support two hub carriers, as it has for almost 100 years, and American will continue to invest in it as its third-largest hub with over 500 departures. He also addressed the $1 billion labor cost disadvantage, stating it's a 'rate' issue that should not persist. He expressed confidence in American's positioning for 2026, citing labor cost certainty, the new Citi deal (expected to significantly improve net income), and strong sales and distribution efforts (14% better corporate revenue YoY). He believes domestic supply and demand are rebalancing, benefiting American.

Asked about the scope and timeline of the network reconfiguration needed for profitability and whether the positive margin outlook includes Pratt & Whitney compensation.

Answer

The necessary network changes are being implemented now and should be largely complete by the end of H1 2024. The positive margin outlook for Q2, Q3, and Q4 does include an estimate for P&W compensation, but this compensation only partially offsets the full financial drag from the grounded aircraft.