BC CEO Club: Joanna Geraghty, CEO, JetBlue Airways

So it's been a rough couple of years for JetBlue. We spent a lot of time with our friends at the Department of Justice trying to do a number of different transactions and we're now kind of emerging from some dark days there with a plan to return to profitability over the next couple of years. So that's kind of front of mind. I think the macro economic backdrop and some of the exogenous factors that hit this industry are also front of mind. Last year for the industry, but even for JetBlue in particular, it was definitely a dynamic year. We started with a pretty big setback on the industry in terms of customer demand. The tariff situation scared customers. So while the consumer remained healthy, people kind of stopped taking that second leisure trip as they kind of waited to see how things unfolded. And then you had the government shutdown. We had an Airbus safety recall. And then we started this year with Venezuela. And JetBlue was the carrier most impacted by that. We had 20,000 customers disrupted in a day. I think the good news is most of that has rebounded. And most people now know that Aruba and Curacao are in Venezuelan airspace.

So it's definitely been a dynamic year, and I'm looking for some calmer waters this year. We have a great plan. We just need the macro backdrop to cooperate.

Yeah, sure. The plan's called JetForward. And it's really focusing on how do we identify areas that our customers want us to lean into. So we'll be introducing a first class product across our entire fleet later this year. So we know that's a gap in the customer experience that we have and so we'll start rolling out a first class product in addition to our Mint platform in Q3. We've got a whole set of initiatives around reliability that really underlies everything. JetBlue flies in the most challenged airspace of any carrier in the United States. 80% of our flights hit the northeast. So when you hear about air traffic issues, we are the first on the hill screaming that we need reform in that regard and we've been doing it for 10 years. I think the good news is we're seeing some progress. The proof will be in the pudding as air traffic gets modernized. So that's a big piece is operational reliability and some really nice progress there. We're back on top with our customer scores. Our net promoter score is up double digits in the last two years. So we are back in it. And then it's a whole series of initiatives. We just launched our partnership with United Airlines called Blue Sky. So that will give customers more utility with TrueBlue and allow you to book JetBlue flights off of United.com and vice versa. And then a whole series of revenue initiatives that Marty and the team are in charge of implementing over the next several years. So a lot of action. We've got 5,500 crew members in Massachusetts. We fly to 70 destinations. We have about 130 flights a day. So big operation here. And it's all mainline flying, not regional flying like somebody else I know that has 60% of the flights that are all regionals.

Yeah, I mean, JetBlue is known as just a brand customers love and you know, when you kind of face challenging times, everybody we hear is about kind of get JetBlue back in action. We really want to see you guys profitable. You're a huge force for competitive change in the airline space. When we go into markets, fares drop. When we pull out, fares go up. So, we want to be strong, but we want to be fun. And we've built our brand on just treating people well. Not nickel and diming. We've got obviously live television across our fleet. We're the only airline that has free Wi-Fi across the entirety of the fleet. Oh, by the way, and we've had it for over a decade, and you know, Wi-Fi is Wi-Fi. Sometimes, you know, there's a little bit of a glitch, but it's Wi-Fi. And you know, we've got a great customer experience. We have our Even More Space product, our Mint product, which is fantastic. We've just started flying in the last couple of years to Europe with an emphasis on Boston and a number of destinations there. And then it comes down to our crew members. You know, we have a great culture. You know, we talk about inspiring humanity at JetBlue. We're a values-driven culture and we're really focused on making sure our crew members realize that you can have all these great parts of the product, but they're the ones that make the difference. And when you think about a customer experience in your own life, you don't really remember the TVs or the food, but you remember the person. You remember how they made you feel and that's a really important part for us with our in-flight and our airport experience and our pilots because they have a really great opportunity to make a lasting memory for our customers that fly.

We have been committed to Boston since we started flying here. We don't go in and out. We're committed. Others have gone in and out. We're not going in and out. We have made an investment in our brand and our people, the routes that we fly. The terminal, we're going to be opening a lounge in quarter three, which should be fantastic for your Mosaic 4. You can get in. If you're not, Marty can get you the credit card application afterward.

No. I know so much about it, but Marty's giving me the don't do it. And Stephanie, no.

Sports. But Boston is, you know, New York, we're New York's hometown airline, but Boston's our second home. And if you saw the livery that we just launched, Boston strong, you know, that's a fantastic example of how we really want to be part of Boston's community and we want to be authentically Boston. I mean, we serve Dunkin' Donuts coffee. But, you know, it's something that we're not leaving. We're going to stay. We're going to fight for Boston. We're going to continue to deliver a great experience because we fundamentally know the customer experience that we deliver and our people are the ones that make the difference and they're better than everybody else.

Yeah, I think the two biggest areas when we think about sustainability that are the most impactful for the airline space are air traffic modernization. If you can get those planes to fly a shorter period of time from point A to point B that drives significant fuel savings. And then SAF. And JetBlue's really been a leader in SAF. I mean, we're the first airline with SAF in New York. But the government needs to participate. Both Massachusetts, but also the federal government because the cost of SAF is significantly higher than Jet-A. And when you think about customers willing to pass that cost on, it doesn't really exist. I mean, we talk about carbon offsets and whether customers are willing to pay for those features. They're not. They want a cheap ticket price. So, we're going to need the government to help fund that. We're going to need more production. You're going to need facilities at Logan Airport to support that. So, it's a big investment. But, you know, the industry will not get to where it needs to without that kind of infrastructure and without sort of some of those tax breaks that are associated with it.

I think right now everybody's seeing a very healthy demand environment and so that's great but that can change at the drop of a dime. So we're very focused on trying to ensure a level of stability in the macro context. You know, when we see news about Canada and tariffs. That's very concerning for JetBlue and for other airlines because we take a number of our planes out of Canada. So that would just drive additional tariffs. You know, we're getting tariffs on steel and aluminum. So while the US has a trade surplus that flows to the US on aerospace and aircraft newly delivered are actually exempt from tariffs. Replacement parts and things that have steel and aluminum in them are not. Uniforms are not. So, as an airline that's trying to return to profitability, the incremental tariff costs that we have in our budget this year are really challenging. Other carriers are seeing those same things. But I think when you're really trying to turn something around, that's a big hit in the year. We just want stability. You know, there was a government shutdown. That's challenging. We really want if that becomes an issue down the road, controllers, TSA agents to get paid for their work. They're essential in our mind, essential employees. They're currently carved out. You know, we're definitely advocating for putting those types of things in legislation so in the future if this type of situation happens the American public and all of you are not put sort of in the crosshairs of the government's inability to reach consensus on certain issues. So stability is sort of the headline. We want stability so that we can ensure this year is much smoother than last year. Last year was we thought COVID was bad. Last year was tough and it just kind of kept going. So stability.

I'm not going to guess at this point.

Atari.

Junior, I don't know.

Yeah, I think starting with it's safe. It is safe. Our controllers do an amazing job and one of the ways they manage safety is by slowing everything down. So when you see fog, when you see weather, the controllers' work burden becomes much higher and so they just increase the spacing between aircraft. They put something called miles and trails in place. And at some point airlines have to cancel because you just run out of hours in the day. Some airports have curfews. Some airports have closing times. I think LaGuardia's got like a midnight closing time. So, customers get angry when we divert a flight at 11:30 p.m. to JFK and not LaGuardia. It's because the airport's closing. You have a customs cutoff date. We have sometimes clearing customs on Boston flights through JFK and then flying up to Boston because customs isn't available in Boston. So, but it's safe and that's where you get delays from. And as much as I think we become great at predicting weather, weather is still really hard to predict. And the line between when you can operate and when you can't operate is still pretty fine. You know, I look at freezing rain, ice pellets. That's like everybody's worst nightmare is ice pellets because you cannot take off in ice pellets. But whether you're going to see that in the day, maybe, maybe not. And so that lack of predictability makes planning, it makes the customer experience hard. We see delays. We recognize how painful it is, but it's not for lack of trying to work through that. So air traffic, there are so many wonderful things that could happen from a more modern system that would eliminate the number of delays. One of the biggest challenges is we're understaffed. So when you have a certain number of flights every day handled by a certain number of controllers, when somebody calls out because they're sick, that just puts the burden on others. And so with better technology, you would actually be able to balance that workload a bit more. You would actually be able to attract more talent. I have a 17-year-old. I can tell him he would have zero interest in working on the types of computers that are in these air traffic control centers because they are the least inspiring type of equipment. So there's a whole host of issues that, you know, could happen if we were able to improve this. There's about 12 billion that's been approved in Congress for modernization. We probably need twice that to get there. And it's a multi-year path.

And then the costs that it drives. With these delays, we have to carry extra pilots, extra inflight. The cost of disruptions, you know, the snacks you see, I mean, it all adds up over time. We carry a significantly larger number of pilots during peak periods and during volatile weather periods like thunderstorms in the summer to make sure that we can continue in operation when you start seeing ATC delays. You don't always know when you're going to see them though and you can get call outs or weather pops up. So, it's a very challenging environment that drives meaningful costs for airlines that have large footprints in environments that are susceptible to these types of delays. Europe has a very different weather sort of environment, better tools. There's a path, but I think the good news is that there's a focus now on this. I think for years we would be pounding our chest about ATC and there wasn't much attention. Now there's a lot of attention around it. Unfortunately, that attention stemmed from the American Airlines plane crash, which it should not have. But now it's like take this moment, seize it, and let's become one of the most efficient airspaces in the world and not something to be embarrassed about. We were down in DC the last couple days talking to a number of members of Congress about our tower here in Boston. Opened in 1973. Lisa's nodding. The tower is so old that it opened with a bar in it in 1973. That is true by the way. I didn't drink there. I wasn't old enough. So but getting a sense of the infrastructure needs and notwithstanding all the great work that the pilots do, that air traffic controllers do, that the team at Massport and our airline partners do is it's amazing what they do every day. It is pretty amazing.

Sure. Yeah. So, we're an all Airbus operator. So, we operate A320, A321 aircraft and A220 aircraft. The A220 aircraft are our newest aircraft. So, the old Embraer 190s, the 2 by 2 seating, which you all saw a lot of here, they're now all being moved to A220s, which are 140 seats, 2x3 seating, better customer experience. Really sort of trying to get that widebody experience in a smaller cabin, great TVs, etc. We have a new engine on both our 321 aircraft and on our 220s called the Geared Turbofan. And these engines have some challenges associated with supply chain issues and inspection that needs to be done which was not anticipated. So that's created a real backup in terms of the ability to put these things through inspection because there's not enough capacity in the shops that do the inspections. So this has been a very significant drag on JetBlue and other airlines. Spirit, for example, at one point Spirit had 60 aircraft grounded on a fleet of about 200 because of this Geared Turbofan engine because they were waiting in inspection. There was just not enough throughput. We've got about eight aircraft on the ground right now. That number will be sort of around there for the next year or so. But it's very challenging because we paid for these planes. We want them to fly. They just sit and we're not able to get any revenue, but yet we have all the costs associated with the ownership of these aircraft. So, we love the new technology. It will get there. The good news is, you know, it is a safety first industry. If you look at, knock on wood, the safety record of the airline industry and what we've been able to accomplish over the last 30 years, it's remarkable. But it's one based on self-disclosure. It's one based on ensuring that when mistakes happen, people come forward. Airbus had a pretty significant recall on software back in the November time frame. It was specifically actually safety software that we had rolled out across a large portion of our fleet. That had to be rolled back and recalled which drove grounding of a significant portion of our fleet over a 2-day period. But at the end of the day, you know, we recognize that that's the priority. It has to be the priority. And with these new technologies, I think people are recognizing, particularly in the Airbus situation, the ability to push software updates. In some cases we could, some cases equipment didn't allow you to push and you had to remove it from the plane to upgrade it which is not optimal. So just a lot happening there. And then supply chain, just there hasn't been the recovery in supply chain since COVID that we need to see. It's getting better. But when you have a Geared Turbofan inspection that puts a lot of pressure on the supply chain for the parts that are needed to be put into the engines to address those situations. So a lot frustrating though as an airline. Sort of the bottom part of the food chain and you know having to deal with all of these cost challenges and lack of revenue associated with grounded fleets.

I hope so. Yes.

Make your product and our relationship even stronger.

Keep your costs under control. Everybody loves big, beautiful terminals. I mean, LaGuardia, it's amazing. If you fly out of LaGuardia, it's beautiful. It is incredibly expensive to operate out of LaGuardia. So much so that we had 50 flights at one point and we have 13 now.

Newark is now the most expensive airport in the JetBlue system. London Heathrow is second. So while the customer experience is amazing, and concessions are great and whatnot, when the cost of operating an airport becomes too expensive, it puts a ton of pressure on the airline. Because as much as I would love to pass those costs on to all of you as a customer, there's zero chance you're going to take an incremental, I don't know, $30 fee on your ticket because you get to see a water fountain and you have a slightly better restaurant.

But it is really truly important. I mean, it's one of the reasons why, for example, we love Fort Lauderdale because Fort Lauderdale has a very low cost of employment compared to Miami. And so that enables us to pass those lower costs on to our customers. And so as I look at JetBlue in Boston, where it becomes relevant is we're a smaller airline. We need to have airport authorities that understand that we want to keep our fares low. We don't have large hub operations in cities that are in the middle of the country or down south that can offset the more significant costs in the Northeast. And so ensuring that smaller carriers that want to be forces for good, that want to drive competitive change can afford to operate in those airports is really really critical. And I'm concerned in some airports that smaller airlines are getting priced out because they're just so expensive to operate out of. Massport does an amazing job. I mean Ed Freni, rockstar, you know, recognizes the balance between operations, the business community, airlines, competition and how to balance all of those pieces. So JetBlue can do well here. Rich is pretty good too. But formerly at Massport, I mean, just you've built such a strong team there and it goes down beyond Ed. I mean, it's not just Ed. It's the team that supports our operation. But I'll say costs are the most important thing. Customer experience is really great. You can do that, but you got to keep your costs low.

Oh God, I have no idea.

I don't even know what sociology is, by the way. I was in place.

I have no idea. My friends from Holy Cross are literally like the last person we thought would end up in a job like this, literally. I don't know. I work really hard. But I do, I mean, I really like people. And I really enjoy leading. I really enjoy seeing people succeed. You know, we had a wonderful inflight crew member yesterday who's been with the company four years. He's having his first child in September. And I look at him and I think, God, we've got to get this company profitable because you need to have a job. You need to provide for your family. You know, you need to feel like you have a career here. And so I think I fell into JetBlue. And it's a great culture. We have a great team. But it's truly a place that wants to do right in everything that we do. Whether it's operationally, whether it's the customer experience, whether it's treating our people. And when you work for a company that is guided by sort of the idea of just let's do right if we can at all times, that's a pretty special place to work. And I just, you know, I'm so proud of my team. I'm so proud of the stories that I get around how we made a difference in somebody's life. Airline travel is amazing and I think oftentimes we can focus on the negative stuff which is the delays and you know maybe a bad experience on a flight or a lost bag and that happens and it's not acceptable and we're always looking to improve that. But if you pull up, there's so much more good than bad that happens in this industry. The fact that we can fly 35,000 feet in the air and bring 40 million customers every year all around the world for all reasons, it's truly remarkable. And if we have a little great part in somebody's journey that makes it more memorable for them or comforts them when they're traveling for you know something less than a fun event, that's amazing. And feeling like we can play a little bit of part of that, that's a lot of inspiration to get you out of bed in the morning.