WBUR Breakfast Club and the Mehrotra Institute - JetBlue CEO Joanna Geraghty

Volatility is the new normal. That's our new phrase. I'm tired of the word unprecedented, because everything appears to be happening that you know, you can't expect would happen and then it does. I mean, we started the beginning of the year with regime change in Venezuela. JetBlue was the carrier impacted the most by that because Curacao and Aruba are in Venezuelan airspace. So 20,000 customers were impacted in the matter of a day. You know, we obviously were on the heels of the government shutdown. We've also had the TSA shutdown by the way in the middle of all this.

So, you know, we have a very resilient team. But you know, it is what it is at the end of the day. You know, our company does such a great job, I think, caring for our customers and our people. And we're really focused on, you know, how we navigate some of these choppy waters that are frankly entirely outside of our control. And, you know, see ourselves the other side of it. At some point something good's going to happen. I feel it.

Yeah, I mean I think at the end of the day, airlines are susceptible to so many things outside of our control. So, like any operation, you become very good planners and you become very good at anticipating what could go wrong. And so that allows you, I think, to take some of these things in stride and not overreact to the conditions that you're in. The shutdown's a great example. The TSA shutdown, Boston actually handled it extremely extremely well. I flew through here during that and there were barely any lines. JFK, our terminal in JFK, you know, you saw the news, Houston, Atlanta, other terminals, not so much. And it is in fact the case that we did not experience the security wait times.

But you know, you focus on what you can control. And you focus on we have a great strategic plan. Our goal is to keep our eye on the ball there. You know, let the senior team worry about the issues that are happening externally and let the team every day run a safe operation. At the end of the day, safety is the number one priority. And the moment you start taking your eye off that ball, you know, other things can happen that are not great. And so that's really been our focus is we have a great strategic plan. Our team wakes up every day trying to deliver a great customer experience. Things happen, we pivot. But at the end of the day, safety, safety, safety. And if you focus on delivering, you know, safely flights and then a great customer experience, you know, let the other things sort of make their way through the executive team, let us handle that.

No. But I will pivot. What was surprising about the TSA shutdown was the humanity that we saw in it and I think that was an unbelievable surprise to me. You know, when people understand what's happening, when they realize that the people who are managing the checkpoints or the agents that are supporting the long lines or our team, we deployed our corporate people, I was out there, there's a pole at JFK that was hard to like see so we'd stand there and guide people around the pole so that they could get on the line. There was these moments of humanity that were just extraordinary and people actually weren't angry. They understood that there was a problem. They understood there were long lines. They showed up at 1 in the morning for a 4 p.m. flight. That created other issues. But at the end of the day, that was a huge surprise to me around just the humanity that we saw throughout it all and how kind people were to one another. And I think, you know, you get so sucked into social media, the divisiveness of the country overall. And that was truly an extraordinary moment for two weeks at JFK. People were not happy. The lines were long, don't get me wrong. But they treated one another really well. Our president and I sat at the end of the checkpoint and handed out waters. One airline gave waters out in the checkpoint, which is not a good idea because water issue. Because you're waiting for 3 hours and we thought, you know, who doesn't want a drink or something when they come through and just to thank them for flying us and thank them for showing up because the easier alternative would have been to just cancel the flight and rebook for another time after the shutdown. You would have thought we were writing $10,000 checks to them. I mean, literally, it was like, 'The water's free. It's free.' We're like, 'Yes, this 10-cent water is free.' Because that's really what it costs. It all gets marked up in the airport. Sorry, guys. Massport. But yeah, you would have thought that act of kindness was so amazing and it was just a bottle of water. And I just I do think it speaks to at the end of the day, you know, there's inherent goodness in people and folks come to travel, they don't come to be disruptive. You know, we don't set the day up to have flights canceled or flights be delayed. Stuff happens. There's a lot of things we don't control. There's a lot of stuff we do control and we can always get better there. But that humanity was extremely energizing and kind of refueled the tank a little bit to realize that everything you see online, you got to drown that out because there's actually a lot more goodness in the world than we realize.

So we had run an analysis to look at the amount of money that they had access to both restricted and unrestricted funds. So we had a pretty good sense of how long, if they had access to all the money that the creditors had put in. Some of it was restricted so they couldn't access it without their approval. So we had a pretty good sense of how long they had. Obviously the government bailout was under discussion so that created a little bit of uncertainty if that were to happen how long Spirit could go on. But at the end of the day, you know, their business model just hadn't kept up with where it needed to be. I mean other carriers, JetBlue included, matched their basic economy unbundled product. Scale is a huge issue in this industry and structurally a really big challenge. JetBlue is 5% of the domestic seats in the United States. 5%. Four airlines have 80% of the marketplace in the United States. I mean, that is an extraordinary number. By the way, there's also, you know, noise that two carriers potentially, you know, United wants to acquire American, that would make them 45% of the market share. I mean, these numbers make it really hard for the Spirits, for the JetBlues, other carriers to effectively compete on a national level and an international level. And so, you know, we knew Spirit was very unhealthy. You know, we didn't think that even with a bailout that they would fundamentally be able to turn a corner. It's one of the reasons why we wanted to merge with Spirit years ago, so we could get scale.

We were planning for when, not if. But it's really hard for an airline to go out of business. There's money out there. There's people who have jobs. I mean, we now see all of this noise on social media around, oh my gosh, I can't believe Spirit's gone. Are the crew members, the team members there who many of them we know. I mean, it's awful. A lot of regrets, I think, along the way. But when Spirit was flying, people bashed on them and you know, it's just an interesting sort of dichotomy to watch. I mean, definitely the customer experience, you know, in our view needed some improvement, which is why we wanted to make it JetBlue. But at the end of the day, you know, we knew the business model wasn't going to survive. There are scale issues with their business. By the way, they had 50 aircraft on the ground for Pratt and Whitney engine issues while we were trying to acquire them. You know, that's a really hard business to run when you're paying for all those aircraft and they're grounded and you're not generating any revenue out of them. So, just a bit of a challenge there.

Yeah. I mean I think put aside the impact to their people because I wouldn't wish that on any of them.

It's definitely a good thing for JetBlue because we have been very clear about our intentions to grow Fort Lauderdale. Fort Lauderdale will be the size of Boston if we're able to accomplish the objectives we've set out.

Correct. And what's great about Fort Lauderdale is it's a very low-cost airport environment which is important because it enables a lower-cost carrier like JetBlue to more effectively compete with a legacy carrier out of Miami that has higher airport costs. So we've been growing Fort Lauderdale. You know Spirit was definitely a struggling carrier, bankruptcies etc for the last couple of years. So we had already started taking steps to grow Fort Lauderdale airport. This allowed us to take a much more meaningful step in announcing 11 new cities, 27 new routes to make sure that we could really solidify our position and get the scale in Fort Lauderdale that we needed to get so we can diversify our own network.

No, I would read it as continuing to diversify the network. Which is really important. Because we're so concentrated in the Northeast, we're going to continue to be a really big carrier in Boston. So that's not changing. But we need to expand beyond the Northeast in a way where we can gain scale in a market that allows us to compete more effectively against the larger carriers.

Yeah, I think had that merger gone through, you put aside the Pratt and Whitney issue because that is a big...

We did and we do. So, put that little pin in that piece for a minute. But had that merger gone through as we had intended to, it would have made JetBlue a 9% player. So, remember we'd be 9%. We're five now. The other carriers reach 20%. So they have 80% of the market. So it would have made us a little bigger but fundamentally not anywhere near the size of some of the larger carriers. By the way Spirit recognized that as an issue too. So this was as much about creating a healthier bigger JetBlue as it was trying to also help Spirit along the way recognizing that they were having scale issues and business model issues as well. And so at the end of the day, you know, that decision I think negatively impacted our ability to scale and grow. And that's been a challenge. By the way, it was on the heels of another deal that we tried to do with American Airlines, the Northeast Alliance, which you know, most customers who took advantage of that loved it and the administration blocked that as well. So another challenge there. So at every turn as we've tried to grow in a meaningful way, not just one plane at a time because it's very expensive to grow one plane at a time and you don't get the facilities, the crew members, the customer franchise that you need. You know, we've been blocked and so now we are a 5% player in a land of giants. Still trying to find a way to get scale.

Yeah, this administration recognizes there are structural issues. You know, I think continuing to work on what the solutions are there. Clearly, this administration is more open to issues around air traffic. So, air traffic control is hugely broken. We need massive reform. This administration has secured 12.5 billion towards trying to improve the air traffic control system. JetBlue is the most impacted carrier with respect to air traffic control delays. So, most of the challenge happens in the northeast. So, that's where there's more understaffing, that's where there's more flying, so there's more congestion. And so as goes, we say New York goes the rest of the national airspace. We are, 80% of our flying is through the Northeast Corridor. Delta, our big competitor up here, 20% of their flying is through the Northeast Corridor. They're able to kind of reset in Atlanta where there are literally no air traffic control delays. And so this administration I'm really pleased with the progress they're making on trying to actually fix the infrastructure because if you don't have a healthy infrastructure for air traffic that drives costs. You need a double crew, triple crew, that drives huge customer inconvenience. Nobody likes delays. And ultimately just an overall experience that is sub-optimal.

Correct. We've all been talking with the administration about relief. Yeah.

Oh, for sure. Yeah. I mean, so we're seeing fuel costs about 75% higher than what we had planned for the year. By the way, at the same time, we get letters from Congress saying, you know, your fares need to come down. So you're sort of trying to navigate this whole complex structure where everybody wants low fares. I get it. Our fares need to cover the cost to operate. For the last six years, they have not. So if you look at operating costs since COVID, they're up 40%. That's before jet fuel. Fares are up 20%. You do the math. Doesn't add up. And so we've been very clear with the administration that we're looking for ways to seek relief with regard to jet fuel. The sooner things resolve themselves in Iran, the better. The sooner the strait opens up, the better. We do not assume that jet fuel prices will bounce back overnight because the supply chain has been so significantly disrupted. But at the end of the day, you know, we're very focused on, you know, how can we continue to navigate this year? It's obviously a large financial setback for JetBlue. But we have time, we have assets, you know, we have healthy liquidity, which is more than some of our other smaller carriers have. And so, but it's a real problem. So the sooner things end, the better.

Oh, I don't eat our snacks anymore because I've had so many of them. And I like the plantain chips. Also, our most popular snack, by the way.

Aisle or window. So, come a little longer. I like the window. However, when I'm on JetBlue flights because I like to spend time with our crew members. I'm up in the galley talking with them. Customers sometimes I give tickets away. I take the aisle because it's disruptive to the person next to you when you keep cutting in front of them.

Okay. I window but not of JetBlue planes. I am not speaking to JetBlue CEO.

Best travel hack. Oh gosh. I mean Global Entry. It is I don't know why anybody doesn't have Global Entry. It is like the best deal. The best deal out there. Yeah.

I used to be soft-sided. I'm now hard-sided. And I have one that has like the brackets on the outside of the luggage, which does not work because it can't fit in the bin. But yeah, I'm hard-sided.

No.

I keep thinking I'm going to do it and then I just never do it. Other stuff happens like airspace shutdowns and things like that.

Gosh, I'd like to go to South Africa. I think it'd be fun.

Yeah. They have nice wine down there. But yeah, I mean it's a beautiful part of the world. As I read about it and whatnot and I just like to spend some time there. Yeah.