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>> Bloomberg Audio Studios. Podcasts,

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>> We're here in Rio de Janeiro and I am

here with the CEO of JetBlue, Joanna

Geraghty, here at live at the annual

IATA meeting. Joanna, great to see you.

Thank you so much for being with us.

>> 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 into 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 40% of the cost of fuel

right now within the ticket price, which

isn't great. Obviously, you want

customers to really see affordable air

travel, but

but we're seeing demand strong. We're

hoping it keeps up through the summer

and through the end of the year.

>> With the 40% increase to customers, are

you seeing any pushback or are people

pretty okay with it and the demand kind

of hanging in there?

>> I think everybody understands given the

current environment where fuel prices

are that air fares are going to be a bit

higher. Um, since 2019 before the fuel

crisis, air fares, you know, really

hadn't kept up with the cost of

inflation. And so, there's a little bit

of catch-up 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

costs. Spirit is a great example of an

airline that just couldn't cover its

costs. Everybody loves $29 fares, but

when your costs, input costs are a lot

more than $29 a customer, you know, it

makes it it makes it challenging.

>> At this point, it is it's sustainable

with 40% passed on to customers if the

prices of oil stay where they are

currently or even inflate higher for a

prolonged period of time?

>> need to continue to see

prices stay where they are so that we

can ensure that the full that 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 expense to JetBlue fuel.

So, we're really focused on how do we

make sure that we're driving great value

for customers in the product offering

and the service 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 JetBlue. Spirit

obviously had a big footprint down

there. We're the largest carrier down

there now, and we look forward to

continuing to serve South Florida. Um

we're adding flights this summer. We'll

be up to 130 flights in Fort Lauderdale

this summer, hopefully growing to 150

through the peak next year, and

customers are responding very well to

our product, um 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 facto, it was a

mistake that the antitrust officials did

not sign off on the merger between

JetBlue and Spirit. I'm sure this is

like a dagger through your heart. You

don't want to revisit this in any way.

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 putting that aside?

>> We're publicly traded company, so we're

always going to do what's in the best

interest of our shareholders. Um you

know, with that said, um 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 JetBlue plan is working. We're

looking forward to bringing first class

on by the end of the year um across our

domestic uh 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 uh as a

publicly traded company, um but we

really need to be focused on getting

JetBlue 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 uh some of

your premium, your lounge for example,

which I attended with you. I'm curious

about how much we'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 lounges as 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.

>> 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 are lines to sign up for the

premier card so that they 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.

>> of the Airbus delays have really

affected you at all.

>> 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 deepen it even further? Are

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. And we introduced

reciprocal 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.com so

that they can sell all their ancillaries

on Paisley. And 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 in with affordable air travel is

getting somewhat difficult for people

just because the margins are so narrow

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 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 with United to build

scale. We've got to make sure our costs

stay in check, and we've got to make

sure as we think about that premier

customer who's willing to pay a little

more for a better experience, that we

really redouble our efforts there. But,

also the customer that's that flies in

coach, the customer that flies in

economy, they're equally important. Um,

so we've got to make sure that we don't

um, tinker too much with the premier

experience that we really compromise on

that customer who needs affordable air

travel. But, affordability it's

relative. Um, if you look at, you know,

customers that take a taxi from say

midtown Manhattan to JFK, it's $150

in an Uber to take a take an Uber.

Nobody complains about that, but when an

airfare is $150 from JFK to Fort

Lauderdale, you know, you got a lot of

folks saying air air travel is very

expensive. Um, and you know, I would

submit air travel actually means highly

affordable. Um, 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 it there's a lot of

hangover debt. JetBlue has a bunch of

debt. To service that debt, to invest in

premier experience, to keep up with some

of the major, the big three that have

these deep pockets, it's incredibly

challenging.

What's the pathway to do that? Pay down

debt, to free yourself up, while also

tackling some of these other areas of

growth?

>> mean, the focus is 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. Um, 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. Um, 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 generating an offer

operating profit. That's the first step.

The second step is then free cash flow

and you start paying off your debt. Um

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 JetBlue,

the debt is a 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 an

improved revenue environment for the

company.

>> Where do oil prices have to go to get a

profitable once again?

>> Yeah, I mean, I'm not going to put a

number out there. They need to go down.

That's 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 um sort of

unwind of the escalated fuel prices. Um

you know, and at the end of the day, you

know, our focus needs to be on really

not losing sight of our plan. We see it

working when you strip out all of the

macro noise. Um we do see that JetBlue,

which is our our turnaround plan, is

working. We just need the macro

environment to cooperate with us and

that's been challenging. The fuel

environment, shutdowns, um you know,

it's kind of hit the customer uh hit hit

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?

>> Um it's all about Fort Lauderdale. Uh

so, I'd say, keep keep your eyes focused

there. Um we're actually building a

connecting operation there. So, if you

have a need to go to the Caribbean, to

Latin America, you know, Fort

Lauderdale's going to be a great way to

get there, even if you're not

originating there. 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 uh value to

customers and really helps drive our

profitability.

>> Joanna, thank you so much for being with

us today. Joanna Geraghty here with us

at the IATA General Conference in Rio de

Janeiro.