In an interview with Bloomberg at the IATA annual meeting in Rio de Janeiro, JetBlue CEO Joanna Geraghty said that consumer ...
What Joanna Geraghty said
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Joanna Geraghty, CEO of JetBlue, discussed the current demand environment and fuel costs at the IATA meeting in Rio de Janeiro. She said customers are still flying despite higher prices, with JetBlue passing on about 40% of fuel costs in ticket prices. She noted fuel is close to a billion dollar incremental expense for JetBlue this year. Geraghty highlighted positive trends in Fort Lauderdale following Spirit's bankruptcy, with JetBlue now the largest carrier there, adding flights to 130 this summer and potentially 150 next year. She addressed the failed Spirit merger, saying the company is focused on its organic plan, including first class seats by year-end and new lounges. She discussed the United partnership, saying they are mid-implementation, and defended the low-cost model, emphasizing cost coverage and the importance of both premium and economy customers. Geraghty acknowledged JetBlue is not yet generating operating profit, which was on track before the war, and declined to specify oil price levels needed for profitability.
Key takeaways
JetBlue is passing on about 40% of fuel costs in ticket prices, with fuel adding close to a billion dollars in incremental expense this year.
JetBlue is now the largest carrier in Fort Lauderdale, growing to 130 flights this summer and potentially 150 next year.
JetBlue will introduce first class seats across its domestic fleet by the end of the year, with Boston lounge opening at end of summer.
JetBlue was on track to generate operating profit this year until the war, but is not there yet.
Geraghty declined to specify oil price levels needed for profitability, saying prices need to go down and moderate.
0:55With 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?
1:28At this point, is it 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?
2:00Have you seen any pick up in business that you've taken on from Spirit as a result of the bankruptcy?
2:32Would you want to try again with something, or are you just like absolutely not putting that aside?
We're here in Rio de Janeiro and I am here with the CEO of JetBlue, Joanna Geraghty, here live at the annual IATA meeting. Joanna, great to see you. Thank you so much for being with us.
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 we're seeing demand strong. We're hoping it keeps up through the summer and through the end of the year.
I think everybody understands given the current environment where fuel prices are that airfares are going to be a bit higher. Since 2019 before the fuel crisis, airfares 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 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 input costs are a lot more than $29 a customer, it makes it challenging.
At this point, is it 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?
We need to continue to see prices stay where they are so that we can ensure that the full cost of the incremental fuel costs are being passed on. As we think about this year, it's close to a billion dollar incremental expense to JetBlue for 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.
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. 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, 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 a publicly traded company, so we're always going to do what's in the best interest of our shareholders. With that said, 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 across our 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 as a publicly traded company, 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 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?
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