Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

JetBlue Airlines Corporation (NASDAQ:JBLU)

2012 Annual Shareholder Meeting

May 10, 2012 10:00 AM ET

Executives

Dave Barger – Chief Executive Officer, President and Director

Jens Bischof - Director

Peter Boneparth - Director

Virginia Gambale - Director

Stephan Gemkow - Director

Ellen Jewett - Director

Joel Peterson – Chairman

Ann Rhoades - Director

Frank Sica - Vice-Chairman

Joanna Geraghty - Chief People Officer

Robin Hayes - Chief Commercial Officer

Rob Maruster - Chief Operating Officer

Mark Powers - Chief Financial Officer

Eash Sundaram - Chief Information Officer

James Hnat - Secretary

Participants

Barbara Harrion[ph]

Mark Evans[ph]

Howard Bloom[ph]

Joe Fernicola[ph]

Paul Bogatsky[ph]

Peter Senchenkov[ph]

Dave Barger

Good morning everyone and I would like to call our meeting to order. I am Dave Barger, President and Chief Executive Officer of JetBlue Airways and it is my pleasure to welcome all of you. It is now 10 o’clock and in accordance with the notice of the meeting I will call our 2012 annual meeting of stockholders of JetBlue Airways Corporation to order.

Before we proceed to the business of the meeting, I would like to introduce the secretary of the company Mr. James Hnat.

James Hnat

Thank you Dave and good morning everyone. We’re pleased to be hosting a hybrid annual meeting this morning and welcome those of you here in the room as well as those of you joining via the internet. This meeting is being recorded and will be webcast on the investor relations section of our website JetBlue.com.

We have provided each stockholder a record as of March 15, 2012 with a notice of internet availability of our proxy materials including information on how to access our proxy statement and annual report. Copies of these documents are available to any stockholder who does not have them.

The agenda for today’s meeting and the rules of conduct of the meeting were placed on your chairs, were distributed as you came into the room. Please familiarize yourself with these rules and abide by them at all times. Upon the germane of our formal business Mr. Barger will provide a brief overview of the company after which there will be time for questions. We hope to have sufficient question and answer time to give all stockholders who are present an opportunity to ask questions. When it is time for questions and discussion if you are present in person should you wish to say something please raise your hand. After Mr. Barger recognize you someone will bring you a microphone, please rise and state your name and indicate whether you are a stockholder or a proxy holder before proceeding with your question or comment. If you are a stockholder attending via the internet, if you have a question please submit your questions at virtualshareholdermeeting.com/jblu. We will do our best to answer all questions received, but we cannot guarantee that we will have sufficient time.

I would like to begin by introducing the following members of the company’s board of directors who are here with us today, would each of you stand please when you are introduced. Dave Barger, Jens Bischof, Peter Boneparth, Virginia Gambale, Stephan Gemkow, Ellen Jewett, Joel Peterson our Chairman, Ann Rhoades, and Frank Sica, our Vice-Chairman. Also with us today are a number of JetBlue officers including Joanna Geraghty, our Chief People Officer; Robin Hayes, our Chief Commercial Officer; Rob Maruster, our Chief Operating Officer; Mark Powers, our Chief Financial Officer; Eash Sundaram, our Chief Information Officer. We would also like to recognize our JetBlue crew members and JetBlue leaders who have taken time from their schedule to be here today. Finally, I should mention that with us today are advisors and outside counsel for the board Dennis Glazer with Davis Polk, [ph]Mavis Lee and [ph]Jamie Sanchez, the company’s auditors from E&Y. [ph]Karina Avramenkova of (inaudible) counsel for the company.

This meeting is held pursuant to notice mailed on March 28, 2012 to each stockholder of record as of March 15, 2012. As stated in the notice, the purpose of this meeting are as follows,

1. To elect 11 Directors nominated by the Board of Directors to serve until the 2013 Annual Meeting of the Stockholders.

2. To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2012.

3. To seek approval on an advisory basis of the compensation of JetBlue’s named executive officers.

4. To transact with such other business if any that may properly come before the annual meeting in accordance with the company’s bylaws (inaudible).

In addition, our Board of Directors adopted resolutions providing for the meeting to be held at this time at this place directing that the notice be given as provided in the by-laws and fixing March 15, 2012 as the record date for determining whether each stockholder is entitled to notice of and vote at this meeting. A list of stockholders entitled to vote at this meeting has been available at the company since March 28, 2012 and it is available at this meeting for examination for any stockholder wishing to do so. Finally, there are no stockholder nominations or proposals for business properly filed with me as the corporate secretary. As a preliminary matter I would like to report that [ph]John Rosti and [ph]Chris Bowman have been designated to act as inspectors and judges of election and have filed with me their oaths as inspectors and judges of election. Let’s hear from Mr. Bowen.

[ph]Chris Bowen

Thank you Sir, appreciate that. I have just received the certificate of quorum dully executed by the inspectors and judges of election. According to the certificate, there are 283,253,605 shares and total vote as of March 15, 2012, the record day and the count of shares present immediately prior to the commencement of this meeting indicated that there are 265,362,601 shares present in person or by proxy accordingly a quorum is present.

Dave Barger

Thank you Mr. Hnat. On the basis of the report of the corporate secretary and the inspectors and judges, certificate of quorum I find and declare this meeting has been dully called that a quorum is present and the meeting is lawfully convened for the transaction of business for which it was called.

James Hnat

Thank you Mr. Barger. The polls for voting on all matters are hereby opened at this time 10:04 a.m. May 10, 2012. Any stockholder attending via the internet may also vote at this time through proxyvote.com.

Dave Barger

Thank you Mr. Hnat. Based on the foregoing, the business of this meeting is limited to the three matters previously listed in accordance with provisions of the bylaws. On behalf of the board of directors of the company I would like to express my appreciation to all stockholders who returned their proxies. Those of you who requested ballots so that you could vote individually were provided with the ballots when you entered the meeting. Anyone requiring a blank ballot please raise your hand at this time and you will be provided one. Right here in the front, thank you Mr. Rosti. Anyone else here? Great thank you very much.

The proxies solicited by the board of directors can be tallied at one time even though they contain three matters for consideration. Similarly, the ballots had any of you sick to cast here can be handled in the same manner, accordingly we intend to proceed by discussing each matter separately and when discussion of one item is finished we will move on to the next. At the conclusion of the discussion of the three items we will take the vote.

James Hnat

First matter to be acted upon is election of 11 directors for an annual term until the next annual meeting of stockholders to be held in 2013 or until such time as the respected successors have been dully elected and qualified or until his or her earlier death or disability. Those 11 nominees receiving the highest number of votes of shares present in person or represented by proxy at this meeting will be elected as directors. Pursuing to the recommendation of the nominating committee of the board of directors, the board has nominated for election as directors for the company the following persons for whom proxies were solicited David Barger, Jens Bischof, Peter Boneparth, David Checketts, Virginia Gambale, Stephan Gemkow, Ellen Jewett, Stanley McChrystal, Joel Peterson, Ann Rhoades, Frank Sica. Are there any questions or discussions on this matter? If there is no further discussion the meeting will now proceed to the second matter to be acted upon.

Concerning the ratification and selection of Ernst & Young LLP as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2012. The appointment of Ernst & Young was recommended by the audit committee of the board of directors. Adoption of this proposal requires affirmative vote of a majority of the shares of common stock present or represented by proxy. I am going to ask for stockholders to move for the adoption of the following resolution resolved. At the appointment by the board of directors of the firm of Ernst & Young LLP as the independent registered public accounting firm for JetBlue Airways Corporation for the fiscal year ending December 31, 2012 having been presented and considered at this meeting is hereby ratified and approved in all respects. Is there a motion? Is there a second? Are there any questions relating to the auditors? If there are no further discussions, this meeting will now proceed to the third matter to be acted upon approval of an advisory resolution on executive compensation to say on pay vote. The board of directors have recommended approval. Adoption of this proposal requires an affirmative vote of the majority of the shares of common stock present or represented by proxy. I am asking for a stockholder to make a nomination of adopting the following resolution resolved at the company’s stockholder approve on advisory basis the compensation of JetBlue’s named executive officers as set forth [ph]Mark Foley in the company’s 2012 proxy statement. Is there a motion? Is there a second? Thank you very much. Are there any questions relating to this proposal?

The vote will now be taken on the forgoing matters, if you have provided your proxy card, your shares will be voted accordingly. Please do not fill out a ballot unless you want to change your proxy vote. If you are currently holding a proxy card please turn it in. Stockholders who have chosen to vote by ballot rather than proxy and who have not yet done so please mark your ballot and pass them to the center of isle for collection and counseling by Mr. Rosti and Mr. Bowen. If any stockholder attending via the internet has not yet voted please do so now. Mr. Rosti and Mr. Bowmen, please collect ballots from all the stockholders present who have indicated desire to vote by ballot. Please also collect the master ballot which is being cast by the proxy holders from Mr. Powers our CFO. Thanks Mr. Powers.

For sooner the inspector and judges certificate of votes cast the preliminary reports is as follows,

As for the first matter, the certificate recites that David Barger, Jens Bischof, Peter Boneparth, David Checketts, Virginia Gambale, Stephan Gemkow, Ellen Jewett, Stanley McChrystal, Joel Peterson, Ann Rhoades, and Frank Sica each received the plurality of the votes, shares of voting stock present in person or represented by proxy at this meeting.

As for the second matter, the certificate recites that in excess of the majority of the votes of the shares of voting stock present in person or represented by proxy at this meeting were cast in favor of the ratification of the appointment of Ernst & Young.

As for the third matter, the certificate recites that in excess of the majority of the votes of the share the voting stock present in person or represented by a proxy at this meeting were cast in favor of approving on an advisory basis the compensation of JetBlue’s named executive officers.

David Barger

Thank you Mr. Hnat. The preliminary inspectors and judge’s certificates for the votes cast is accepted as presented. Mr. Hnat please safeguard the balance proxies, the inspectors and judges oath and inspectors and judge’s certificate and maintain them among the records of the company. We’ve now concluded with the formal portion of this meeting. I will entertain a motion to adjourn please?. Thank you very much. Is there a second? Thank you very much. The motion has been carried and the formal portion of this meeting is adjourned.

With our official business underway, I’d like to now take the opportunity to provide you with a company update after which we will open the floor to questions and answers.

By the way, if I may just as a reminder of this morning’s presentation of webcast may include forward looking statements about future events. Actual results may differ from those expressed in forward looking statements due to many factors and therefore investors should not place undue reliance on these statements. For additional information please refer to the company’s periodic filings with the Securities and Exchange Commission.

(inaudible) issues the time allotted for questions and answers most effectively I’d like to ask each of you to please confine your questions and comments to no more than 5 minutes, in total limit the number of your questions or comments to three. Other guidelines for the Q&A session can be found on the back of your agenda. Again, I would also appreciate it if you please introduce yourself as you have questions. Again, this is a hybrid annual meeting so we also have questions coming in online as well. On behalf of our board of directors certainly Mr. Hnat, thank you very much as well the executive leadership team, crew member who have joined with us today I’d really like to say thank you for joining us on May 10.

We are very excited being hosting our first annual meeting in our new support center in Long Island City, New York. This is a very very special facility for us. A special thank you goes out to our shareholders in the room with us today as well as those especially online by the webcast and participating again in the virtual component of our annual meeting. I’d also like to extend a sincere thank you to the crew members across the company who are listening to the webcast today or the repeat of the webcast. As you know many of our crew members of course are also shareholders.

Let me first say that it is certainly nice to begin 2012 with a profitable first quarter. Especially, since the first quarter it is typically one of the toughest for the United States airline industry. In fact we are one of the few major U.S. carriers to report a profit during the first quarter. I’ve often said that the airline industry isn’t for [ph]the fan of heart certainly I’ve shared that with the board many times over the last 15 years, but as the industry landscape morphs around us through lets face it, bankruptcy consolidation. Our airline continues to be contrarian in nature a favorite word that I have and our goal is to be a healthy standalone enterprise and in fact we are today.

Although, 2011 presented many challenges to the airline industry including surprised high fuel costs, JetBlue had a very good year. In addition to running an outstanding operation we continue to successfully execute our network strategy in key markets while maintaining a low cost advantage. The success of our strategy resulted in record revenues and one of the most profitable years in our company’s history. Now, despite higher fuel expense of nearly $550 million compared to 2010 we delivered four quarters of profitability. At the same time, we generated positive free cash flow for the third consecutive year and maintained a strong liquidity position with $1.2 billion of cash in short term investments. Now, this represents one of the strongest liquidity positions among U.S. airlines. Throughout 2011, we maintained our focus on profitable growth by leveraging the three main building blocks of our business model. Now, they are --we refer to them as offerings, culture and foundation.

Offerings refer to the products, the services and the experience we deliver to each customer traveling on JetBlue, by the way $28.5 million customers will experience JetBlue in 2012. We believe that JetBlue experience which includes the most leg room in coach of any U.S. airline and free DIRECTV and SiriusXM radio represents the best flying experience in the industry. Our customers are willing to pay for products and services which enhance the core JetBlue experience. Not the nickel-and-diming that you see in the industry. And to that end we re-branded our even more leg room offering which is now known as even more space and it includes things like early boarding, early access to and overhead bend space. In addition to extra leg room and when you think about it even more space delivered more than $120 million in incremental high margin revenue in 2011.

During the year we focused on growing our network particularly in Boston and the Caribbean and Latin America. In Boston, we are capitalizing on our position as Logan Airport’s largest carrier by building our base of customers who travel for business that helps us smooth the seasonality of our historically leisure focused traffic. We now offer non-stop destinations of 45 in the Boston market. We also continue to be pleased with the success of our Caribbean and Latin American markets which compromise approximately 25% of our total capacity. In 2011, we also expanded our portfolio as strategic commercial partnerships. We now have 18 airline partners, as the largest airline operating at JFK Airport, the busiest gateway for international arrivals and departures we believe we are well positioned to expand our partners with global carriers across the world. We are now selling JetBlue on six continents across the world as a result of this partnership of the offerings that have really been very very solid for the company.

Then moving on, we believe one of our competitive strengths when you think about a second key attribute to the company is our service oriented culture. Our company cultures stresses the importance providing of course high quality customer service, however; doing that through a productive engaged workforce that helps us keep costs low and ultimately achieve our financial goals. Crew members our word for employees as you know, know that the more productive and efficient we are as a company the stronger our market position and of course stronger our ability to compete. Crew members also understand the link between creating customer loyalty and business results and they continue to be recognized for exceptional customer service. As a testament for the well deserved recognition for their service, JetBlue achieved the No.1 customer service ranking among low cost carriers by J.D. Power and Associates in 2011 for the 7th consecutive year. I would love to give our crew members a round of applause please. (Applause) Thank you.

Despite our significant presence in high cost cities such as, let’s face it, here in New York and Boston, our productive workforce helps us drive efficiency to keep cost low. Flexible and productive work rules, effective use of part-time crew member and increasing use of technology to automate task each contribute to workforce productivity. We maintain a direct relationship with all of our crew members and we believe this is a competitive advantage as it helps us to maintain our unique service oriented and most importantly one-team culture.

Now, moving to our foundation, when we think about offerings, culture, foundation, well a solid financial foundation including the competitive cost position and a strong balance sheet, it’s absolutely critical to the success and stability of our business. Fuel of course, remains our most significant operating expense involving the price of jet fuel increased by about 40% in 2011 compared to 2010. We believe we are well positioned for a high fuel cost environment with fuel efficient fleets, and a focus on fuel conserving operating procedures, such as single engine taxi before the aircraft departs.

(inaudible) saved the company over $5 million for the techniques of our pilots across the company. In addition, we continue to manage our fuel hedge portfolio as insurance to help mitigate price volatility and protect JetBlue against severe and sudden spikes in oil prices.

In June 2011, we announced significant adjustments to our fleet plan, which we believe will better position JetBlue to compete successfully over the long term. These changes include deferral of 8 Airbus A320 aircraft, however the conversion of 30 Airbus A320 delivery positions to the larger Airbus AS-321 and plans to cap the future size of our EMBAER- 190 fleet to no more than 75 aircraft. This is a reduction from our original order book by at least 25 aircraft.

Now in addition all of our A320 and A321 deliveries beginning in 2013 will have winglets. This is expected to save or conserve fuel of approximately 3% on each machine over the course of the fleet, very exciting for our company. We anticipate that the improved fuel efficiency of these new aircraft will provide significant savings against our largest and most unpredictable cost. Finally, we announced plans to purchase 40 Airbus A320 new engine option aircraft or A320 NEO’s as they’re called, representing a significant investment in game changing technology. The aircraft which we expect to be on taken delivery of in 2018 should significantly reduce our fuel consumption and provide JetBlue with improved operating and performance economics across our fleet.

In closing, I believe our business model, it’s built on a unique culture offerings and a strong financial foundation. It puts us in an attractive and a lucrative niche in this industry. And we believe we’ll only be successful if we balance the needs and expectations of all stakeholders. Of course that’s our customers, that’s our crew members, and it’s also our shareholders. We call our plan to succeed JetBlue at 3.0.

JetBlue 1.0 well, that was our start up days, encouraging customers for the first time to try us and experience the difference we offer on the products and the offering side. In this space we grew quickly picking delivery of as many as one new aircraft every 10 days. There was a lot of growth in the first phase with JetBlue 1.0.This rapid expansion, well it helps us establish our strong network foothold in places such as New York JFK Airport, again our home base of operations.

JetBlue 2.0 is built upon our success in building a loyal customer base and focused on investments that solidified our infrastructure and our culture. In this space we slowed the growth, not a surprise made course corrections in our strategy and enabled our company to achieve the largest airline status. Well not only here in New York, but also in Boston, across Florida, in the Commonwealth of Puerto Rico, the Dominican Republic, and other locations across the Caribbean and Latin America.

JetBlue 3.0 is designed to leverage our strong financial position, the foundation and maximize the shareholder benefits of our offerings and our culture and to best position JetBlue, so that we have the luxury of choice, in where our destiny may lead.

We plan to run a great business execute on every flight and live up to our values, safety, caring, integrity, fun and passion. While growing JetBlue organically with our own people in our own aircraft. We’re committed to grow in profitably on a sustainable basis. We remain focused on improving margins and generating appropriate returns for you, our shareholders and our owners. On behalf of our 14,000 plus crew members who deliver the JetBlue experience, we thank you for your continued support.

And with that Jim and I will open up the floor for questions. Thank you very much.

Question-and-Answer Session

Dave Barger

I remind you that if you have a question please raise your hand in any case whether you are a stockholder or proxy holder, we’ll recognize you and please introduce yourself. There’s a microphone right here.

Barbara Harrion

My name is Barbara Harrion, I have 300 shares. I travel almost exclusively on JetBlue. My question is this. I always book ahead of time and it always says lowest possible fair, wonderful. And then between the time I book and the time I fly, my flights go on sale. And I have called and I now have an account, getting that difference in money and my question is this. Perhaps, you can get even more loyal JetBlue riders, if you announced that if you’re part of the JetBlue plan, any time you book a flight and eventually it goes on sale, you will automatically be given the change in fair.

David Barger

Barbara, thank you. Thank you very much, there’s above I am looking at Robin Hayes our Chief Commercial Officer out of the corner of my eye. I am just curious. Where do you live, is this home New York? And first of all thank you for your loyalty. And we don’t’ have 10 million people in the TrueBlue program. I wish all 10 million were as active as you and but many of them, millions are active. I think it’s a very good take away, it’s one of the reasons we come together annually or over the course of the year that we can take back into the commercial team to see. What’s important is, if the fair is reduced that you’re seeing within 30 days, you’re seeing a travel credit issue without a change being associated with it. And I am glad to hear that that’s taking place, but I think your saying, hey listen, automate it in some way.

Barbara Harrion

(inaudible) and therefore you have x number of taxi money or whatever.

David Barger

Sure, we’ll take that back, we appreciate that. Where’s your favorite destination?

Barbara Harrion

Chicago or Fort Lauderdale.

David Barger

Great, thank you. Really could say Fort Lauderdale a Hollywood right, across the JetBlue team but thank you Barbara, appreciate it, thanks for being here today. Are there questions?

Mark Evans

How are you Mr. Barger?

David Barger

Good, how are you.

Mark Evans

Good. Thank you. My name is Mark Evans, I am a stockholder, have been a stockholder for many years. I fly on your aircraft and airline, it’s fantastic, its rolls really smooth. And what’s really interesting is your employees are very happy and that’s really good. I have to compliment you on that. The attitude of everybody is really good, all my flights. I have had over a 100 of your employees tell me to come talk to you. So, for the last 3 to 4 years, I’m like, one day I’m going to go over there, so my schedule worked out to come to this stock meeting.

Well, I live in Chicago and I was a Master Sergeant in the U.S Air force for 26 years regular and reserve and now in the military, after being retired, I’ve been recruited to a Pizza delivery guy for the military. So one day, on a Friday night with my son, 16 years old freshman in high school, we’re eating Chicago Pizza and the war was on the TV. And he asked me, you know what’s man’s night was our first man’s night actually. And you know my son, freshman in high school, I have a daughter who just came back from Afghanistan flying combat mission, she is a pilot and she came back doing well. So, with that said, he asked we could send pizza’s to the soldiers in Iraq. And you don’t want to tell your kids no, you want to shoot as high as possible. My parents said become an astronaut and look at me I am a pizza delivery guy, so I surpassed their thoughts. And with all that said, so I said yes, and he said well, who do we talk to, I had met three presidents, I had done some communications and stuff in my career, for the military. And I said we’ll contact David Petraeus. So, I called my good friend at a certain level of government and he said I was going to get arrested, but I e-mailed General Petraeus, he did give me his email address and he answered in 24 hours, I said can we send you come pizza, Chicago deep dish. And he said, yes, let’s have a pizza party, and our goal was 300 and it exploded to 3000 pizzas. Well, to date for now, we’ve shipped over 70,000 pizzas to Iraq and Afghanistan that’s 480,000 slices of pizzas. It goes out to the farthest operating basis and camps where the soldiers are all the way out. And we just want to provide them a few minutes of thinking of home and that we would go to any length and that what General Petraeus and all the Generals, ODierno, not Mr. McChrystal I supposedly meet me with him one time and something came up. Presently, I work with Centcom of General James Mattis and I was just down and asked, if we could feed every soldier in Afghanistan, that’s 30,000 pizzas. Like hey I’m the 10,000 pizza delivery guy not 30. So, we pay for the pizza’s put them on dry ice, and the expense is pretty steep, but DHL gives us free delivery. I work for AT&T, I don’t know the pizza company, so I am here asking you to become a part of this opportunity, it’s been 5 years, this is the one feed every soldier in Afghanistan on 4th of July. We also do Veteran’s Day, that’s in veteran hospitals and super bowl. This 4th of July we are going to feed every soldier there and the military and us are very excited. We know we can do this, and we need help. That’s why I am going around asking for support, that’s why I am asking you for support to help do that.

David Barger

Very good, Mark if I may, thank you for the comments and thank you for the question as well. Thank you and thank you for your service and you can pass it on to your daughter as well. And (inaudible) Jim may meet you up too, because you are very much involved with what we do across to support the military. I think you’ve got our commitment to understand the logistics and how you’re doing it. We’re not large in Chicago, but we’re certainly in Chicago but I’m from the Midwest and I think the pizza in the Midwest is the best in the country. New York’s good, New York’s good, we’re going to have a little fun with that. But Mark, we’ll take that back, and it’s, I think the ability to bring a slice of home part in the fun, right. There is somebody who is serving our country, right, and that goes a long way. And so logistically to the extent that we can assist you better, we’ll take that back. Jim, any comments as I think about our support as well, and we’ll certainly share Mark’s comments with Stanely McChrystal.

James Hnat

Sure, thanks Mark. Before I begin, our CFO has also shared his views that he’s a Brooklyn resident and he takes exception to your Chicago pizza comment there. Very well, Mark, I think we also may have met other wounded warrior events and as your know, JetBlue is very committed to giving back to our community, we’re involved in the wounded warrior projects, what we also are involved with the people department, that is from placement services. Dave is getting involved in the USO, and in addition to that, we support the Fisher House at Andrews Air Force Base outside of Washington. I told you I would put you in touch with Mr. Hayes, at the end of the meeting because we continue to expand our support and our appreciation to the service, so after the meeting, I think you, Robin and I should talk about how we can better support this, so thank you for your question.

David Berger

Jim, thank you and again, Mark, thank you, and thanks for the feedback from our crew members, I appreciate it.

Howard Bloom

Hi good morning.

David Berger

Good morning.

Howard Bloom

My name is Howard Bloom and I own a 180 shares stock. I’d like to find out from over the last couple years, I have heard about crew members, you know going haywire, if anything backed that?

David Berger

Howard, by the way, thank you for joining us today. I think you have been at all of our annual shareholder meeting, so thank you, appreciate it. Let’s be transparent, we have had a couple of rather high profile of ends, over the last couple of years, right. And as we think back in 2010,with an in flight crew member most recently of a captain and a diversion of our aircraft in Amarillo, Texas, I think. By the way with the captain who I know personally, and the team head knows the captain personally, we continue to work. But with the family and the captain supporting him as we believe, he works through his medical condition. And I think the consumer professionalism of the crew and also the collaboration with the customers was extraordinary, because this is not something you find in a playbook, but it was text book in terms of what transpired with the diversion into Amarillo of the supports of the industry in Amarillo, and then the medical and public safety officials and the customers all made their way, with the exception of one who travelled separately over to Las Vegas in 6 hours. So, as we look at it the individual acts are not representative of the 14,000 plus crew members and the day-in and day-out professional delivery of the JetBlue experience that we see hovers. So I think for our shareholders, we do look at these as extraordinary circumstances, we don’t see a relationship and along those lines, again, this most recent one we’ve believed is medical. I’m certainly not a doctor so we’re on the receiving end of whatever plays out and we’ll take care of the Captain, his family, all of our crewmembers and you bet, making sure we took care of our customers as well. Appreciate the question, Howard. Thank you.

Operator

We have a question over here.

Joe Fernicola

Hi, Joe Fernicola, shareholder for many, many years. I had over 1,000 shares, but I had to sell some of it to pay some of my bills. Now, all these years, I have been having a very blue, blue Christmas, because our stock price just doesn’t go anywhere. Now, I know you can’t comment about it, but my net worth has gone down quite a bit since owning JetBlue nearly 10 years. I am looking for the turnaround when it’s ever going to happen. I have come to annual meetings before at the other address, but I missed one last year. I had to go somewhere else. I know that every year, just prior to the annual meeting, there is always some incident that happened the year before the meeting or during that year, like one time, there was the delay on the – because of snowstorm at the airport, there was one time where someone locked himself in a bathroom or something, and there was another time when, well, just recently the attendee who jumped out of the shoot from the plane there and quit on the job, and then the pilot.

There is always something negative before the annual meeting. Is there ever going to be anything positive? Besides that, now that you have this building here and you share with MetLife, I don’t remember, did you buy the building or you lease the building? And if that’s the case, are you going to have a permission to put up a giant billboard on the roof, so all that traffic on the Queensboro Bridge can see JetBlue? That’s all.

David Barger

Got it. Joe, thank you. Nice to see you again, and Joanna is not here at this facility. Let me just start with the share price and we will come back to the facility at that time. Of course you can.

Joe Fernicola

I want to say you can get the share price up to $10 and hold it there, let’s say, by the next annual meeting, I will dye my beard blue.

David Barger

We got a deal, I love it. What we have public record of that, you sound like one of my board members, by the way.

Joe Fernicola

But you got to stay at $10, okay?

David Barger

Joe, thank you. Very seriously, I will tell you, we know that we work for the shareholders, and as we look at the landscape, I mean, building this company for the long term, the best first quarter we had in our company’s history, a solid 2012 that we are looking at, whether it’s revenue environment, the cost environment, Mark’s leadership and the team with a strong balance sheet, we believe that over the long run and again, I know you have heard this in the past, this company is really well positioned to take care of our shareholders, our customers and our crew members. And I am not going to give you an excuse about – be careful, almost half of the industry went through bankruptcy, and the mergers and acquisitions and consolidations and they took their shareholders to basically zero. Right? We are not looking at that as – that’s a variance that we can explain in terms of building our company.

The industry is consolidating around us, and the company as we are now into our – 2000 and to now 2012, actually into our 13th operating year. As a standalone independent company, that’s the first airline to ever do that since the industry deregulated in 1978 without a bankruptcy, without being taken out or failing in the first 10 years, JetBlue was the only carrier.

Our stock price will go up because of that? I just believe at our fundamentals, right. So, this foundation, the financial foundation, the technology foundation, the physical plan foundation, the product, the offerings and the culture, I believe that’s just an absolute terrific equation for our shareholders, our customers and our crew members over the long run, and that’s how we are running the company, over the long run. So, I hear you and for all of our shareholders, you heard the number close to 300 million [ph].

We are very, very positive about the future. Let’s talk about this property. First of all, this building, as we moved from Forest Hills, our lease was expiring. And so, as we looked at staying in Forest Hills or moving to someplace else, by the way, including outside of the New York metropolitan area, it was clear to us that it made sense to stay in New York. This is New York’s hometown airline. There are other airlines that say that they are New York’s hometown airline, but they are not. They are based in other states. We operate in five airports here, just in the New York City, regional area, let alone three more states. So, as we move with basically the same financials in terms of lease costs, so we now have a 15-year lease with MetLife and this building, they have a leasehold with the owners of the building. We can’t be more satisfied with the facility, and of course, with us. We have approval that we are finalizing to put a rather large, but respectful well-lit sign on the roof of this facility, which will be blue during the day and white at night. So, look forward in the not-too-distant future. Joe, thank you. Appreciate you coming today.

I don’t know if there’s a clock there. Thanks Joe.

Operator

Question right here.

Paul Bogatsky

Good morning. My name is Paul Bogatsky [ph], I am a shareholder and thank you this morning for the business update. My question is around fuel cost. And recently, one of your competitors has a strategy or announced a strategy where they are considering buy a refinery to help mitigate the potential increases in fuel costs. My question for you is, is that a strategy that JetBlue is considering? And if the answer is yes, is that something that the capital structure can sustain?

David Barger

Yes, I actually think, Mark that you probably should (inaudible) here. By the way, Paul, thank you for joining us today. For an airline, we do make sense operating an airline as opposed to operating refineries. But there’s some creative looks with what’s happening in the industry. Mark, your thoughts from the standpoint of our Number 1 cost and this most recent acquisition of the refinery.

Mark Powers

It’s a fairly aggressive measurement to move. I would not that, that airline has probably five times as much cash as we would. Their investment is probably about $150 million to $200 million. So, as a percent of the total cash, it’s a fairly modest investment. It’s sort of toe in the water, let’s see how it works. They also have pretty good insurance around that whole exercise in terms of a long-term contract with BP for the sourcing. I candidly, as Dave mentioned, we run an airline. I am not entirely sure I want to worry about spills and the vagaries of the refinery business. It’s a tough business. There is a reason why Phillips 66 got out of it, at least out of this trainer facility over in Pennsylvania. I think that two things, number one is our cash is probably better spent in other shareholder accretive actions. Also, I think that in terms of fuel, our fuel practices in terms of conservation, our forward fuel purchasing activities where we lock in low rates and keep them available for us, as well as a hedging policy that really looks to mitigate risk is really the right way to go.

And candidly, the other thing is the revenue side. Last quarter, our revenues covered the fuel increases. So, that’s really I think the best way to do it. We will continue to look in and see how delta goes with the refinery. And we would certainly entertain that we have from time to time entertained not buying a refinery, but from time to time buying a tank, tanker of it, and particularly if there is sort of fuel interruption issues in the Caribbean addressing that with the tank.

Paul Bogatsky

Mark, thank you.

David Barger

Paul, thank you so much for the questions.

Operator

Are there any additional questions?

Unidentified Participant

Many years ago, I asked Neeleman, previous Chief Executive, who I asked him about the future of fuel for the airline industry and he said at that time, he believes there will be gasification of coal for the future. But now, there is also things about algae-growing fuels and recently tested with an airplane, I think with the United States Army or Navy or something like that. What do you feel will be the future fuel? And also, LNG is being touted as a fuel source for ships, and I don’t know, maybe also for airplanes as well. I know they use it in trucks in some cases. So, what do you feel will be the alternative fuel for the airline industry that would probably – more choices of fuel should bring the prices down my thinking anyway?

David Barger

Joe, I think, Mark, feel free to opine here as well, we think that that’s probably a longer term. And so, what we really doing is things like, first of all, the age of our fleet. Very young age relative to our competitors. Things like the direct relationship in a culture to support the company and technique, single engine taxing. The winglets next year, which start to reduce fuel burn by 3%. Things like the new engine option on the A320 family, beginning in 2018, by the way, we think that platform is 15% improved.

There are other experiments that are happening around the world. The Department of Defense is really to your point leading the charge here in the United States, but there are efforts across the world, but I think we are doing it more through the manufacturers as opposed to maybe with our oil equipment. Mark, comment?

Mark Powers

And through industry associations, we would also note that (inaudible) rather than keeping in touch with them in terms of their success with this. But again, we are 10 years into our life, if you will. It’s probably not a pretty use of your resources to go spend a lot in the fuel. We will let the people with lot more money than JetBlue. Go forth and explore.

Unidentified Participant

Great, thanks.

Operator

Thank you. As we come towards close, are there any other questions? We have a question here.

Unidentified Participant

Good morning. I have been a shareholder from the very beginning, and I am not sure I am going to phrase this, but in the last couple of years, we are coming to these meetings, JetBlue has evolved into this very finely-tuned, corporate entity that’s fixed to its business plan and is making good strides. Not so much for the shareholders, but for the company itself. I just wanted to, as a perspective from a customer as well as a stockholder, remind you of two things. I remember when the stock used to move like crazy. And back then, you were fine-tuned, and you were learning from mistakes and you were growing. And what was going on was that you were creating loyalty, but you were returning a lot of that loyalty back to your customers. And so, your company thrived and the stock went way up.

Then, things changed, and I just want you to remember two things. Right in the middle of your logo is a heart, and sometimes, lately in the last couple of years, I don’t see the heart of JetBlue anymore. I find that sometimes your prices are not the best in the neighborhood when you always used to be. I find that trips can cost 21,000 points or 52,000 points, depending what seats are left whereas other airlines pay max out 12,500 or something like that. And it gets a little scary when you have to spend that kind of money for a simple, maybe one-way flight in points. It just seems like the loyalty has not always been returned. It’s strictly business. That’s great. It does help you bottom line and make you look good on Wall Street, but in the view of some of your customers, I think some of us might want to see a little more heart involved when it comes to these transactions. I would like to still think you are – I know you think you are very competitive, but you were the least competitive. That, your response to me, we was because we were selling our seats, we are doing good. I understand that. But at the same time, I think it’s a little too gung-ho and needs just a little more heart, little tweaking.

Mark Powers

I appreciate it very much. (inaudible)

David Barger

I know you and Robin were talking earlier and we will continue that dialog as well. I appreciate that, right. I appreciate it. Again, two thoughts. One, the shareholders, that drives me that 3.0 [ph], right. So, we are riding the business for collectively. Our shareholders, our stockholders, our customers our crew members, and as I laid out to the earlier question from Joe, we really believe that the foundations, culture and offerings will continue to propel this company into the future. Again, some pretty interesting headwinds. This industry, when you look at the cost of oil, you look at the economy, you look at the mergers and acquisitions, the number of bankruptcies that have taken place, it’s not just the United States, but across the world, we really think that we are well positioned into the future. I think certainly here from the heart, if you will, comments about, hey listen, this value proposition just maybe a little bit more emotional along those lines, and we still think the value though respectfully, JD Powers seven years in a row, best airline in class. And when we think about, and that’s – you can quite experience, it’s the fair, it’s the human side, it’s the whole entity. So…

Unidentified Participant

What I am just saying is make it more fun for us, because we are the ones that are going to drive your stock price up.

David Barger

Appreciate that.

Unidentified Participant

And I am just saying, making it more fun for us to be stockholders and that’s how the stock will start to grow. Because everything you are doing now is working, but it’s not bumping. So, it’s just status quo. And I just think if it’s more fun for us to be stockholders, it will start to show in the price.

David Barger

Thanks.

Operator

As we try to close with any additional comments, and welcome back. It’s very nice to see you.

Peter Senchenkov

Thank you. I have a friendly suggestion if I may. In the past year, we took a –

David Barger

I am sorry. Could you introduce yourself.

Peter Senchenkov

I am Peter Senchenkov [ph]. This is my mom, Mary. She definitely wanted to come today, she broke alarm but she is wearing a blue cast, so you all should know. We took a JetBlue vacation, it was great, everything worked out fine. But I would like to make friendly suggestion of what we might want to put on our website. When we got to the airport, the air train moved down, when we got to JetBlue we were expedited perfectly, we got to TSA very fast, but TSA, the line looked line Disney Land on its best day. And there’s no getting through TSA any faster. There’s really not too much you can do about it, my suggestion is if we could put some sort of disclaimer or warning on our website, to warn New York travels. When you’re travelling in New York, there is an array of things that could probably get in your way. I mean, it was nice taking the tour of Kennedy Airport, but we could have done without it. So, if that suggestion might come up the next time you’re asking, how you could tweak your website, I think it will be good idea because, you get to the airport, your anxious to get a plane and the next thing you know, you’re on a bus, and it really wasn’t that-- what happens is, everybody blamed the airline. They don’t blame TSA, they don’t blame the bus, they don’t blame the air train. Oh, I took a JetBlue vacation, that’s what their thinking, so maybe a small little reminder that things might go wrong beyond our control, might be a good idea. And thank you for having us again.

David Barger

Thank you very much Peter, Mary, right, nice to see you again, thank you for the blue cast. Sorry about whatever transpired with your arm. Yeah, by the way, whatever we’ll take that back, because it is nice what is happening at the airport. Whether it’s Burbank, or Burlington, or whether it’s Seattle and Santiago, and all the airports in between, because it an inability to tell us what’s happening in that airport. Air train, TSA, our own business partners whoever they might be, throughout the facilities, that’s JetBlue. That’s the way we look at it, we don’t look at who do they get their paycheck from, that is different from than JetBlue. So we appreciate the sound bites, because we don’t want the ground experience, if it’s a hassle. I mean, that’s a large part of the experience as well Peter, so we’ll take that back for the website, and again Mary, thank you for the feedback as well. Nice to have you here as our new support center, here in Long Island City. Thank you, James?

James Hnat

Thank you. As we come to close, any other additional questions. So Joe, will give you the last word, we recognize you.

Unidentified Participant

I am just curious about the JetBlue I love New York logo combination. Is that something New York City did with you, to give you an opportunity to mark the city as well or your paying the city for that, you need a registered logo that supposed to be by the new I love New York.

David Barger

You so one of the lawyers than the remaining, looking at the general counsel, you so chewed up my closing comments, right, because it is literally, as your taking about the sign, the I heart New York, this was a, Milton Glaser is the designer of the I heart New York campaign. And I believe the campaign goes back 37 years, but we’ll back check that, Jenny will help me back check that, this is part of the project home town team. As we are looking at either remaining in Forest Hills, moving someplace else in New York, we also looked outside of Ney York City. I think the city of New York, the Economic Development Corporation, the State of New York, the Empire State Corporation as well. People went just off the charts, and one of the items with a 10-year licensing agreement that was put into place by the state of New York, because they have their rights to this logo, was the co-branding first time ever where a corporation was co-branded legitimately. Not what you might see with the, I heart all over the place, right being sold in other locations, usually on the street. But it’s really talking about New York City, New York State, our commitment but their commitment to us as well. I’ll close with this and over to you Jim. The number of dignitaries that we had here with Mary Bloomberg to Senator Schumer to Pat Foye the port authority, it was just terrific, here with the (inaudible) about 7 weeks ago. So, in addition to the 41 sign, you’ll also see the, I heart New York and this is done on the aircraft as well. Thank you very much, I will turn the floor back over to James Hnat. On behalf of our Board of Directors, on behalf of the executive leadership team, on behalf of 14,000 crew members across JetBlue, thank you for joining us today for our annual shareholders meeting. We appreciate it’s a great deal. James, over to you for close.

James Hnat

Thank you Dave and thank you all for attending. We are now concluded and we will be terminating the webcast.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: JetBlue Airlines Corporation's CEO Hosts 2012 Annual Shareholder Meeting (Transcript)
This Transcript
All Transcripts