Good morning. My name is Lee, your operator today. I would like to welcome everyone to the JetBlue Airways' First Quarter 2022 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions]. I'd now like to turn the call over to JetBlue's Director of Investor Relations, Joe Caiado. Please go ahead, sir.

Thanks, Lee. Good morning, everyone. Thanks for joining us for our first quarter 2022 earnings call. This morning, we issued our earnings release and a presentation that we'll reference during this call. All of those documents are available on our website at investor.jetblue.com and have been filed with the SEC. In New York to discuss our results are Robin Hayes, our Chief Executive Officer; Joanna Geraghty, our President and Chief Operating Officer; and Ursula Hurley, our Chief Financial Officer. Also joining us for Q&A are Dave Clark, Head of Revenue and Planning; and Andres Barry, President of JetBlue Travel Products. This morning's call includes forward-looking statements about future events. All such forward-looking statements are subject to certain risks and uncertainties, and actual results may differ materially. Please refer to our most recent earnings release and our most recent Form 10-Q or 10-K for a more detailed discussion of the risk factors that could cause the actual results to differ materially from those contained in our forward-looking statements. Including, among others, the COVID-19 pandemic, fuel availability and pricing, the outcome of the lawsuit filed by the DOJ related to our Northeast alliance and the outcome of any discussions between JetBlue and Spirit Airlines with respect to a possible transaction, including the possibility that the parties will not agree to pursue a business combination transaction, the conditions to the completion of the possible transaction and the possibility that JetBlue may be unable to achieve synergies and operating efficiencies within the expected time frames or at all and to successfully integrate Spirit's operations with those of JetBlue. The statements made during this call are made only as of the date of the call, and we undertake no obligation to update the information. Investors should not place undue reliance on these forward-looking statements. Also during the course of our call, we may discuss several non-GAAP financial measures. For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website. And now I'd like to turn the call over to Robin Hayes, JetBlue's CEO.

Thanks, Joe. Good morning, everyone. I'd like to begin on Slide 5 of our earnings presentation. I'll start by thanking our more than 23,000 crew members for their continued dedication to caring for our customers and their unwavering focus on running a safe operation even as we work through recent challenges. We realize these difficulties have an impact on our customers and crew members, and we know that we haven't lived up to their expectations in recent weeks. But we are taking swift and significant actions to get the operation back on track in the near term and deliver the JetBlue experience that our customers love and expect whilst not losing sight of our longer-term strategic initiatives. As you will see in our updated guidance, these actions will have a short-term impact on margin, but it's the right thing to do to build the confidence of our customers and crew members and set ourselves up for success as we look to maintain our revenue and cost momentum beyond the summer. Our first quarter results were characterized by very strong demand acceleration with revenue coming in more than 6 points ahead of our initial view in January. We delivered positive year over three revenue growth in the month of March as we exited the quarter with tremendous revenue momentum, driven by very strong underlying travel demand across all of our core segments. Unfortunately, a complement of events resulted in a temporary operational setback here in April that has significantly impacted our second quarter outlook. As you will recall, last month at an investor conference, we discussed our plans to moderate our capacity plan for the year in light of rising fuel prices and building more operational resilience. We continue to experience elevated levels of pilot attrition and training pressures. This was…

Thank you, Robin. I'd also like to thank our crew members for always supporting each other and caring for our customers, especially when the operation experiences significant stress as we have seen this month. Severe weather compounded by ATC challenges, particularly across Florida and the Northeast have had an outsized impact on our operation, where 95% of our daily flights operate. Despite being well on track with our summer operational preparation, we have reevaluated our capacity planning assumptions for the summer in light of these challenges. Turning to capacity on Slide 10. We began adjusting May capacity last month and we are continuing these adjustments into the summer and second half of the year as we focus on building a more operable and resilient schedule that takes into consideration the reality of the operating environment, including elevated pilot attrition, pilot training delays stemming from disruptions to planned training schedules due to Omicron, business partner staffing shortages and ATC staffing shortages. In addition to our capacity adjustments, we are redoubling our efforts to bring the JetBlue experience back to our customers and our crew members. This includes maintaining our hiring pace for the summer despite the lower capacity outlook, getting ahead of supply chain pressures by prepurchasing key supplies and additional ground equipment for our airport and technical operations teams. Making infrastructure investments throughout our network, such as redeveloping the south lobby at JFK to support additional customers and COVID documentation checks, as well as additional gate hold seating and improvements to the roadway to better manage congestion during peak times. We are also investing in additional checking kiosks as well as investing in additional resources for our crew members to better support them with hotels and transportation when there is bad weather, and flights are disrupted. Finally, as our capacity…

Thank you, Joanna. I would also like to add my thanks to our crew members for their dedication to taking care of our customers and each other. They have laid the groundwork and are executing every day to position JetBlue to deliver for all of our stakeholders. I'll start on Slide 13 with a brief overview of our financial results for the quarter. Revenue was $1.7 billion, down 7.2% year over three. Cost per available seat mile was up 17.5% year over three. CASM ex-fuel was up 13.9% year over three, and GAAP loss per share was $0.79 and adjusted loss per share was $0.80. We are extremely pleased with the demand and revenue momentum, which accelerated throughout the quarter and resulted in first quarter revenue that was roughly 6 points ahead of our original January guidance. I am also pleased that we executed within the range of our original cost guide despite abnormally elevated winter weather events. Looking ahead, as Joanna noted, we are reducing our full year capacity growth outlook to a range of 0% to 5% as we work to restore operational reliability and as we remain mindful of elevated fuel prices in the back half of the year. That said, the strength in bookings is driving revenue in the second quarter that is expected to be up 10% to 15% year over three, which will set a new high watermark for quarterly revenue in JetBlue's history. Despite the dramatic spike in fuel prices, we have been able to recapture nearly all of the cost increase. Turning to Slide 14. During the first quarter, CASM ex-fuel increased 13.9% versus 2019, in line with our original guidance. As a reminder, incentives and premium pay tied to the Omicron and weather disruptions were worth roughly 3 points of CASM…

Thanks, everyone. Lee, we're now ready for the question-and-answer session with the analysts. Please go ahead with the instructions.

[Operator Instructions]. Your first question comes from the line of Catherine O'Brien from Goldman Sachs.

So just thinking about some of the staffing issues, it sounds like there's some short-term headwinds given the industry are facing tied to Omicron training delays and just being a max training throughput, but then there's also elevated attrition in addition to staffing issues at airports, air traffic control, which aren't directly under JetBlue's control. Can you just walk us through when you see each of those buckets, the shorter and long-term issues within JetBlue's labor force and then throughout the more general travel infrastructure. When do you see those easing? And I guess, what can you do today to influence the pace of those getting back on track? I know you laid out some operational boosters that you're going through for the summer, but just like specifically on hiring and getting staffing back up.

Sure. Thanks, Catherine, for the question. So the teams have done a fantastic job across all of our work groups really ramping up hiring for the last year. If you recall, we ramped capacity faster than any other airline last summer. We've had a couple of challenges across the industry, whether it's the Delta variant, Omicron that have created a level of volatility across the industry. What we're striving for is to find a place where the operation is more reliable and where there's a certain degree of certainty that we can plan around. Getting ahead of many of these staffing issues is critical because there is a long lead time for some of the roles. . So I fully expect our airports team, our in-flight team and our technical operations teams to be fully staffed as we step in through the summer time frame and into a more, I think, normal course of business, where we see, I think, meaningful pressures, and it's something I think everybody is seeing across the industry is on the pilot front. We are seeing elevated attrition levels with pilots. And so we've ramped up to max capacity there. We will catch up on some of the training delays, but we have to plan for a world where we just have elevated pilot attrition and adjust our training plans and adjust our simulator capacity, et cetera, et cetera, to just speak to this kind of new world where pilots are just going to be a bit more challenging from a hiring and in retention perspective. We continue to have a very strong pipeline. We built out a number of pilot gateways years ago, recognizing that this potentially could be a problem down the road. We have great retention among the pilots that come through our gateway programs. But at the end of the day, given the legacy carriers have accelerated retirements through COVID of pilots, there's just, I think, a challenge the whole industry is facing right now in terms of pilot hiring and it will be facing, I think, for the foreseeable future. With regard to the external factors, I cannot speak to when we think the FAA is going to be fully staffed. We've obviously seen acute pressures down in the Jacksonville center in Florida. But I think everybody around the United States is looking at these talent challenges. I think on the good news front, we've got a great pipeline, people like working here, and we're going to continue to double down on our culture. And I'm making sure that JetBlue continues to be a preferred airline employer.

Okay. Great. And then maybe just one on the June. You gave us June RASM up 20%, showing some nice acceleration over the course of the quarter there. I guess just given the cuts you've had to make, do you feel more confident than in a normal year about that June number, just given some of the close-in cuts. Like can you just maybe give us an update? I know book and curve got really short and varying COVID, sounds like we're moving back to normalization. So just maybe like your confidence level and anything that might make you more confident on June than in a normal year?

Sure. Yes. I mean, we are extremely confident about the revenue landscape right now. We are seeing extremely robust demand across our leisure segment. Premium domestic is extremely strong, Mint. Q1 Mint was 6 points better than core. Our VFR markets are performing exceptionally well. So we're very, very bullish on the revenue front, both from a total revenue but also from a unit revenue perspective. We're yielding up in a meaningful way, fares and yields are now above 2019 levels, and we do expect June and the summer to be very strong.

And your next question comes from the line of Duane Pfennigwerth from Evercore.

Duane here. Robin, I appreciate the brief intro comments, but when do you expect to hear a response from Spirit? What have you learned so far since unveiling this to the world? And what do you think is taking so long?

Thanks, Duane. In terms of any questions you may have about the time line, I would suggest that you address those to Spirit. And I'm not really going to comment any more at this stage other than that our team is working very diligently and very hard to move things along as quickly as possible.

Okay. Fair enough. And then sorry to go here, but just on the growth takedown, this feels surprisingly unsurprising. Many investors believe that the implied growth acceleration you were guiding to felt ambitious aggressive last quarter. Multiple large carriers saw this coming last year and took their growth rates down kind of proactively, yet JetBlue expressed a lot of confidence just last quarter, just on this call 3 months ago that you could hire, and you could sort of pull off the summer. So what specifically broke down here in just 3 months' time? Or was this just a forecasting problem?

Yes. I think at the end of the day, we've had, I think, exceptional revenue performance for the last year. If we could continue to proceed at this growth pace, I think we would continue to have exceptional revenue performance. There's clearly not a demand issue. We've been, I think, planning well for the summer, but there were a series of things early this year that transpired. I think pilot training delays stemming from Omicron in Q1, so that's January. And then in March, we communicated that we will be moderating capacity into May and beyond. Obviously, we would have liked to, of course, correct it quickly. But in this volatile world where there's new variants that happened upon you and attrition challenges across the industry. I think we've done a pretty strong job pivoting and adjusting our capacity to reflect our resources and the environment. Nobody could have anticipated that Florida in April would have 115 minutes of ATC delay -- 115 hours of ATC delays for that month compared to 22 in 2019. So these are challenging times, and I think we're doing the responsible thing by taking capacity down and rightsizing it to reflect the resources we have and the external environment.

I think, Duane, let me just build on that because it's a good question. I think that we are -- we address the -- as Joanna said, we actually made a change in May that we announced in early March. We also, at that point, suggested it would continue into the summer. I think what you're seeing today is just a couple of things. First of all, we wanted to be as clear and transparent with investors about how we're thinking about the rest of the year, because you're still seeing airlines cut schedules every weekend. And so it is still a very nonlinear volatile process. And so I think what we're trying to do is kind of set the stage for the rest of the year. I'd also -- we could be accused here clearly of almost overinvesting and being too cautious as we go into the summer. That is an extremely deliberate approach that we're taking because we know how important it is for us to drive margins, for us to deliver the benefits on the NEA, for us to continue to be the preferred airline in the Northeast for customers' premium leisure and also leisure travel. We know we have to deliver a stable operation. And we have become increasingly concerned about some of the external environment constraints that we may see this summer based on what we've seen in April. And so we want to respond quickly and decisively to that.

Listen, I appreciate the thoughts. And maybe just one last follow-up. I hear you on attrition, right? It's something we've been hearing about for a long time, over a year, right? It's not a new issue. It's something we've been hearing about for over a year. To what extent is staff productivity surprising you? If you could just comment on that.

Maybe I'll offer a broad comment and Ursula can chime in. We need to get to a more stable environment to start seeing productivity settle in. When you're hiring to just backfill the person who left a month before, that's not a great place to be in. And so our focus is on driving stability across the operation. And at that point, we're confident that we will start seeing some of the productivity that we need to see going forward. So I think back half of the year, as we stabilize, I think we're cautiously optimistic that we'll be in a better place.

Yes. I would just add, Duane, like coming into this year, we were very focused on a growth track and driving productivity and utilization ramp up throughout the year. Given the pivot and the reduction in capacity on a full year basis means that we're going to have significantly lower aircraft utilization and essentially a delay in the productivity benefit. We do expect, once we get to that optimal staffing level to see productivity improvement in the fourth quarter. However, in addition with the capacity reduction, it also means that we can take advantage of other structural initiatives such as replanning maintenance and also looking at potentially accelerating incremental aircraft retirements. And so those are some structural cost areas that we're now very acutely focused on to ensure that we can deliver on a cost discipline not only this year, but as we enter 2023.

And your next question comes from the line of Mike Linenberg from Deutsche Bank.

Robin, when you -- I guess, you were speaking on CNBC or something this morning, you had mentioned something about $270 million to fix the ops. And then I saw a headline that said $180 million. Is that what was one, a '22 number and one is a longer-term number. Can you just clarify what that several hundred million dollars of cost to fix ops, what that is? And what's the time frame?

I didn't do a CNBC interview this morning, Mike, that's this afternoon. I did a couple of other interviews. That really relates to the 3 points of CASM headwind that Urs talked about. So if we think about, first of all, the cost of the April disruption itself, so we ended up canceling a large number of flights. Those flights are being crude and they were fully operational. So that is a very significant CASM headwind on top of that in order to recover from some of the weather events, we saw a big outflow in terms of premium pay. So that's really about half of that 3 points of CASM that you were referring to. And then the rest of it is us taking a much more cautious approach about -- for the rest of the spring and summer. So for example, even though capacity is significantly down, we're maintaining current hiring plans. We are putting additional resilience and redundancy into the JFK operation. And that makes up the -- those are a couple of examples. And that makes up the other 1.5 points of the 3 points of CASM that represents the other half, about 1.5 points.

Okay. That's helpful. And then just I want to go back on the attrition thing. When I sort of think about JetBlue historically, I mean that's -- it's a destination carrier for airline professionals historically. And yet now, it does seem like maybe for some, it's a stepping stone. And I'm not sure -- like what can you do? Is this a secular shift or beyond throwing a lot more money at the pilots? Obviously, you are a growth carrier, and that's something that's attracted to pilots. For now, you can't grow. Like, is this something that's with you for the next 6 months? Or is this something more structural and it goes on for several years where you're constantly playing catch-up to attract the people that you would attract in the past.

Thanks, Mike. Really appreciate the question. So it's not an issue of attraction. We have a strong pipeline, particularly on pilots, they like coming here. And the issue becomes obviously time to upgrade. It becomes pay. If you want to fly widebodies, there might be different pads that you want to take but we remain a very attractive carrier. We need to plan for elevated levels of attrition, recognizing that there may be some pilots that choose to leave near 0 to 4 because of a different life choice but then we also do a great job retaining pilots as well. And so it's a bit of a mixed bag. We've got a number that's stable and we have a number that leave. We need to plan our training and our simulator capacity for an elevated level of attrition, but we also need to ensure that those who come and want to stay at a carrier like JetBlue stay, which many of them are. We have these gateway programs, which are fantastic. They bring crew members in from JetBlue's family members, friends, et cetera. We've been doing this for several years now. We're now generating a decent size number of pilots coming through those pipelines that have a real stickiness to JetBlue, our culture and the type of organization that we are. Attrition is very low among those cohorts. And so we are looking at continuing to increase the number of folks that come through there. But I think the industry as a whole, I think, is looking at what do we do about the pilot shortage of legacy carrier retirements accelerated this pilot shortage issue by a few years. It could very well lead to lower aggregate capacity growth over the next couple of years. But we are pivoting our philosophy around how do we build a model where we have elevated attrition where we have the gateways that crew members and their family members and other aspiring pilots come through, and they want to stay at JetBlue and then continuing to build out partnerships with other carriers, speeder carriers around the United States.

The other thing I'd like to add to that, Mike, is I think the other structural change you're going to see is that the pay rates for pilots across all of the large airlines will start to converge. And I think we're already seeing that. I think you're going to continue to see that. I think that is something that could be around for a number of years.

Your next question comes from the line of Savi Syth from Raymond James.

Just if I might follow up on Mike and Catie's question. Just based on kind of the capacity growth that you have in mind for the next few years, just how many pilots do you need to hire? And how many of them might come from your kind of internal programs? And to follow up also, Robin, on your pay rate question. If that is the case, then does that mean kind of legacy versus like your cost -- unit cost will then also start to narrow versus kind of legacy carriers because there's a bigger gap there between where your kind of LCC band is versus like a carrier pay band?

Yes. Savi, on the second one, I don't think it's going to be a huge issue for JetBlue. Our pay rates were already pretty close. And in fact, with this adjustment that we just did, I think you'll find -- if you'll compare our fleet 20 pay rates versus some of the legacies, you'll find them very similar. So it's more a comment aimed at maybe some of the other carriers that have lower pay rates and how those will probably need to come up, just my opinion. In terms of go-forward rate, we'll provide more color at Investor Day about how we're thinking about multiyear. But I think that we are going to continue to clearly prudently plan and plan more conservatively around pilot attrition until we have a better sense of how long this is going to be. I mean the good news for JetBlue is, and Joanna mentioned this, we started our gateway program a number of years ago, and it's producing a meaningful number of pilots. And so it's not like we're sort of starting from scratch last year and trying to get this thing going. And we have every confidence that as we recruit more and more through these programs, those are pilots that have more traditionally seen it as remaining as a destinational carrier. So I think that's how we're thinking about the next few years. But I certainly think that in my opinion, and some of you heard this before, that the access to pilots really becomes the governing factor for growth in the industry over the next few years.

That's helpful. And if I might, just Joanna, just to follow up on some of the kind of the ATC-type issues. I'm just trying to understand is kind of Florida saw a lot of capacity being added to over the last several years and that accelerated the last couple of years, I think. Is this -- is this more of a near-term staffing issue that FA needs to address? Or is it becoming kind of a congested airspace like you have in the Northeast? I'm just kind of curious if there's something fundamentally structurally changing in Florida or kind of an issue that just need to be addressed?

Yes. I mean I know you're down in Florida. I think everybody is in Florida right now. So I think it's probably a temporary issue with just the amount of capacities in there. We do think once international opens up a bit more, once the COVID document checks go away, the inbound international you'll start seeing, I think, a rebalancing of capacity into other leisure destinations beyond Florida. But -- and then I think you've also got a winter summer thing playing out as well there. But I do think there are structural issues regarding SAA ATC staffing, we've talked about it before. I think April was a particularly acute month. If you look at JetBlue's network footprint, 45% of our flights touch Florida. And so it makes perfect sense that when you have a significant ATC center understaffed by, call it, 50% and with that volume of flights you have going in, there's no way that you aren't going to see significant amount of delays from those carriers to have a very big footprint in Florida. So I think the capacity will be largely hopefully, short term, as carriers rightsize their networks over time and COVID doc checks come away. But I do think this FAA staffing shortage could be potentially a more protracted item. And so we continue to be very focused on that.

Your next question comes from the line of Conor Cunningham from MKM Partners.

I think that investors are -- I mean a lot of -- there's been a lot of conversation about structure versus temporary here. So I'm just trying to unpack it -- unpack like what's actually going to be your long-term utilization rate of the airline going forward. Like why shouldn't we just assume, given the host of issues that you have that it will be a challenge for you ever to get back to this 12 hour of flying per day. I mean can you just speak to the utilization in the context of hiring problems and you leaning more into tougher airports like New York and so on. So if you can just speak to that, that would be great.

Conor, thanks for the question. As I mentioned, at the beginning of the year, we were acutely focused and on a growth track with high utilization. And given the meaningful step back, due to the challenges that we've seen in April, utilization is going to be down double digits throughout the remainder of this year. And I also think as we think about 2023 capacity most likely will be below our original anticipated capacity growth. And one of the structural levers I highlighted was taking another look at aircraft retirements in light of the lower utilization levels. And can we have the ability to drive some structural cost savings that, quite frankly, some of our peers were able to take advantage of in retiring fleets throughout COVID. So that's an opportunity that we're looking at given this reset and the lower utilization levels that we'll expect this year as well as into next year, given the constraints.

Okay. Okay. That's helpful. And then yes, your head count is actually up fairly nicely in the first quarter. I think your capacity is done and I realized you talked about the productivity conversation earlier. But I'm trying to pinpoint like when we should expect -- it seems like that's going to expand further that gap between capacity and headcount in the near term, but then should gradually improve. Is that like a 3Q event when we peak out? Or should we just expect that to kind of be elevated through the pandemic part of even next year?

Yes. I would expect us to see a level of staffing stability and operational stability and that will drive productivity in the fourth quarter. So we're making investments in the short term in order to continue hiring and staffing through the summer, and we believe that we'll bring a level of resiliency to the operation, and we'll be at optimal staffing levels in order to get that productivity in the fourth quarter.

One thing I'd just add on the head number is that whilst capacity is flat, stage engage is up. So for example, more 321s, the restyled 320s, both of which are 4 in-flight crew members. And so -- and then in terms of customer support or reservations, we've seen a big increase there related just to -- and you've seen this across the industry, the vast number of additional calls that are coming in for disruption. So those 2 areas are sort of driving a disproportionate increase in actual headcount.

Your next question comes from the line of Helane Becker from Cowen.

Robin, you actually just partly answered my question about bigger aircraft. How can you accelerate delivery of bigger aircraft to alleviate some of your staffing issues, especially with pilots? And then my other question is related to scaling up to 300 flights in the New York area. Can this air traffic control system handle that level of airport utilization? And I know you said you would be more conservative, but how should we think about getting there from here?

Thanks, Helane. In terms of your first question, I think, no, we don't have any plans to accelerate any more airplanes. We talked recently about the 220s. I think what this adjustment allows us to do is to, as Ursula mentioned earlier, look at some of the retirement opportunities that exist for some of our older airplanes and accelerate out of that, because back to [indiscernible] comment, whilst I recognize that aircraft utilization probably needs to be a bit lower than it has been historically reflecting the air space. Now obviously, that lower aircraft utilization also creates the opportunity to drive some retirements in a world where we look at sort of structurally lower growth because of pilot supply. In terms of the growth in New York, one of the areas that we have been adjusting is Newark. And we have some of the capacity changes that we make have reduced our flying in and out of Newark. Obviously, from a JFK and LaGuardia perspective, with just slotted airports, that is something that's much harder to do. So we do have slightly less dependency in the New York air space following this capacity adjustment than we did before because of the changes that we're making in Newark.

And your next question comes from the line of Jamie Baker from JPMorgan.

Without commenting on the deal specifically, just given the first half challenges, do you stand by the leverage recovery guidance that you gave us when you announced the bid? The stand-alone outlook is obviously worse. So just trying to quantify the need to potentially issue equity.

Jamie, the original plan still stands for the offer for Spirit to be a full cash offer. Obviously, we've taken one step back in terms of our projections for full year profitability this year, but we still have a strong balance sheet, and our offer stands as is. Our 2022 leverage will now be slightly above 1x, which is obviously a slight change compared to the presentation that we laid out last -- a couple of weeks ago, and that's really driven by, obviously, the April step back here.

And second, and specifically to Robin, look, 2007 was a different era for the industry for JetBlue. The constitution of JetBlue's Board is different today, but it's worth noting there's precedent for senior leaders being let go when operations have suffered. How would you characterize your recent conversations with the Board? Could you say how much that time has been split between discussing the merger and discussing the operational challenges?

Well, first of all, Jamie, let me, as I often do on this call. I wish you a very happy birthday week not forgotten. No, look, I think the operational concerns are of concern to all of us, the leadership team, the Board and more importantly, our crew members. And clearly, as you know, we operate in the most congested complex geography in the country. And what we have to do is just get better at managing that. And as these -- I mean, as you know, weather comes in, flights will get canceled, there'll be ATC delays. And really, we continue to make a lot of investments to allow us to get better at that. And so I think that the pivot that we're announcing here in terms of reducing capacity, distressing the summer, investing in staffing, all of these things are the things that will help us deliver a better, more stable operation. We can't control the weather, but we can try and control everything in out, and that's what we're laying out to do. But the #1 priority from that for me or the leadership team for the Board right now is restoring our operational performance because that is the path to margin recovery. And whilst I fully accept, we take a step back in the second quarter, there is -- there will be no catalyst for driving better cost performance and improved revenue than a stable operation, and that's what we're focused on.

Okay. Robin, I appreciate that. Also worth noting that I share my birthday with the Piedmont hub in Charlotte, proving that there's always an aviation angle.

Always, Jamie, with you always.

Your next question comes from the line of Dan McKenzie from Seaport Global.

A couple of questions here. Profitability in the back half of the year. I'm just wondering if you can elaborate on how we get there. Is it being driven by premium revenue, corporate demand? So is there some revenue acceleration from here? Or how much of the profitability is just tied to better utilization?

As mentioned in our remarks, the revenue and demand environment continues to be really, really strong. And so we're expecting profitability as early as June, and that's really driven by a top line RASM number of like 20% as of right now. And as we navigate through the year, we expect especially in the third quarter, demand in the revenue environment to be extremely strong. In 2H of this year, we'll also see a 4-point improved -- sequential improvement from a CASM ex-fuel perspective. So we will start to gain some efficiencies as we discussed earlier around maintenance as well as productivity in the fourth quarter. So that's the road map, but maybe to give more detail on top line, I'll pass it over to Dave.

Sure. Dan, thanks for the question. Just a little bit more color on the revenue. In addition to the really strong demand environment we're seeing, we have a couple of other factors that will improve as we go through the year. First, just a reminder that we had a 4-point revenue headwind this quarter from the operational disruptions that should not continue past Q2. And then the NEA is off to a great start in ramping up well. We expect that to continue throughout the year. So we expect to have additional revenue acceleration as the NEA performs better and better.

Okay. And then, I guess, just bigger picture for those investors that take a longer view of the story, you have lots of patients. Going back to the PowerPoint, the goal of expanding margins beyond 2019, so the $2.50 to $3 a share target at this point, what's the path and time frame for getting there today? Is that -- how much corporate travel has to come back? What size or scale from a growth perspective is required? And are new revenue initiatives or cost initiatives needed to offset some of the challenges we're seeing today?

Yes. Maybe I'll sort of take a high level. And I think, Dan, first of all, it's a great key up to Investor Day because our plan at Investor Day is going to really lay out that multiyear path. And I think that -- I think '23 will be the first year we're actually comping against the year before as opposed to 2019. So it feels like it's a new beginning. But look, on the revenue side, I think we've talked about a lot of the catalyst. And I think we have a lot of very strong revenue initiative for the ramping up nicely. I mean if we didn't have that 4 points of headwind for the very significant operational disruption that we talked about earlier, we -- our top of the range for the quarter would be 20 points. And so -- and by the way, we do factor in a certain amount of weather events, right? We don't want to just always talk about the weather. But Joanna described how meaningful it was that in Florida, for example, the first 20 days of April, we were in ground stop or ground delay programs for over 115 hours. And I think if you compare that to 2019, it was 22 hours. So significantly bigger impact. And so I believe that we will work through those challenges. Already, we've seen a better traffic control environment in the last 10 days of April. So that's encouraging. And hopefully, that will continue. So Dave talked about the ramp-up, the NEA revenue, the growth of JetBlue travel products. And then on the cost side, I think that we are making good progress on some of the underlying cost initiatives that we've talked about before. We'll share more of that at Investor Day. We've also concluded the work on a new multiyear structural cost program that we've been working on for the last several months. We have been working with some external partners on that, and we'll be laying that out at Investor Day as well. So continued and accelerated revenue momentum. And when we get past some of this noise of what we're seeing this year and I fully recognize the difficulty for people to model it when you sort of have these big pop-up numbers that appear into the quarter. But when you take the revenue acceleration and you take the structural cost initiatives, we'll share more about. We're very [indiscernible] some of the benefits and some of that, and we'll be sharing more of that at Investor Day as well [Technical Difficulty].

Asked and answered, but one for Robin I guess, when I look at this kind of short-term cuts to capacity just seemed like these operational problems. When I think about kind of longer term, how much does M&A actually attempt to solve this labor issue as opposed to just accelerating the growth of the airline? Interested to get your thoughts there.

No. Thanks, Andrew [ph]. I do think -- you're right. I mean some of what you're seeing now is us just trying to significantly derisk the summer. And we can talk about how much we should derisk it. But I think we recognize that we need to plan conservatively. I mean, to give you a sense, I mean, this is the first time in JetBlue's history that June block outs or ASMs will be significantly below April's. Those April and June tend to be the strongest month we have in quarter 2. So it's a very sizable change. I think when we think about the longer term, I do think the pilot supply issue will be a governor of you in capacity in the U.S. for a period of time. And I think when I think about M&A, the reason that we believe the opportunity is for the JetBlue and Spirit merger is it would allow us to supercharge and accelerate that organic plan, bring in a large group of pilots into the airline, creating more growth opportunities, kind of creating a bigger destinational carrier, potentially reducing attrition. So I think that for airlines who want to pursue an organic plan, and we've been there, obviously, for many years, I do think that is more challenging over the next few years given the pilot supply environment.

Your next question comes from the line of Chris Stathoulopoulos from Susquehanna International.

So I realize that there's a lot going on here, the NEA, the potential Spirit deal. But CASM ex has been a key area of focus and for some pushback on JetBlue since the structural cost program was first communicated in, I believe, 2014. And I guess the moving parts of the 10% to 15% CASM ex-guide. But on your Spirit call, you indicated that you would not expect that to go lower, I think, on what was a 60% to 70% larger base due to certain dissynergies. And I realize you can't comment on Spirit here, but directionally, how should we think about your core exit rate for CASM this year? And again, this is probably more suitable for Investor Day, but at a high level, what should we put in the structural versus temporary cost buckets at this point?

Chris. So when you look at the 2022 CASM ex forecast, if you take the midpoint of 12.5%, we essentially have 4 points of nonrecurring investment. And one of those was driven by the Omicron hit to Q1 of this year. And then the remaining 3 that we've highlighted here today in regards to the investments in the spring and summer operations. So those are nonrecurring, and you should expect those to fall away as we enter 2023. So then that brings you down and you -- essentially, as a reminder, you have 3 years of inflationary pressures across the business when you look at labor and business partner spend. But even outside of that, we have incremental costs that we need to offset. And as Robin mentioned, we are looking at structural levers given the reduction in capacity. So think of reflowing through your maintenance plan and investment levels. Think of how can we accelerate incremental aircraft to drive cost savings over the next few years given the lower utilization. And as Robin mentioned, in addition to that, we also have hired external help to put -- to get -- help us put together the next set of structural cost initiatives. The JetBlue business model works if we have a lean cost structure compared to the peer set. And we acknowledge we have to execute that, and we look forward to providing you guys more color at Investor Day next month.

Okay. If I could get one more in on the corporate side, based on any survey work or other data that you're looking at, what does your mix of users look like now versus pre-pandemic? Are you seeing a shift in, say, your mix of finance, consulting in pharma or health care now versus 2019? And what should we think about in terms of that mix for your 2022 guide?

Thanks, Chris, for the question. This is Dave. I'll take that one. One of the great stories over Q1 has seen the corporate customer come back, and we've seen that mix really start to return back to what we've seen before the pandemic. So lots of growth in the consulting sectors, finance sectors, education. So we're really back now pretty close to where we were pre-pandemic, which is terrific and has really helped fuel that growth from corporate recovery was about 50% for us as we exited 2021, and it was at 75% as we exited Q1. So really good growth in return back to our historical mix.

We will take one final question from the analysts.

Wonderful. Your last question comes from the line of Scott Group from Wolfe Research.

Can you talk about your exposure to New York [Jet] and any potential to reduce that? Or do you think this is just temporary and it will sort of fix itself over time?

Yes. I appreciate the question. Our exposure to the New York over index, this -- in the second quarter was to the tune of about $0.06 to $0.07 on our fuel price. And obviously, since we marked fuel and over the last few weeks, the New York Harbor Index has drastically come down compared to where it was a month ago. But as I said, minimal -- generally speaking, minimal impact, $0.06 to $0.07 in the quarter.

Okay. And then as I look out to next year, if you've sort of taken 10 points of capacity out of this year, would you -- if you can, would you hope to sort of get 10 points of capacity growth next year? And then assuming you can grow next year, you think CASM is down in '23?

I mean, first of all, I don't think it's realistic to take the 10% of capacity this year and add it into next year because, again, it's not aircraft or fleet or demand that is driving that change that we would normally say, well, when the demand comes back, you ramp it up. We know demand is exceptionally strong. It's really sort of pilot supply. And until we see a different trajectory in terms of attrition and sort of the number of pilots being produced in the U.S., we need to take a more prudent approach. And so I think you'll see that from us at Investor Day. And in terms of multiyear CASM outlook, the way I think about it is strip out the onetime CASM numbers that we've seen here due to sort of exceptional circumstances. If you really go and look at that then that cumulative number is sort of 3 years of inflationary pressure and everything else that you see us, and other airlines talk about. And then as we exit into '23, then we have the benefit of the structural cost initiatives that are unfortunately masked by some of the issues we've seen in Q2. You have some new initiatives that we'll be talking to you about. And then we have the ability on the maintenance and retirement side to retire some of our sort of more costly older airplanes. I think all of that comes together to drive a CASM outlook. When I look back at 2018 and 2020 and getting back to sort of the cost discipline. Now I think the difference between then and now is inflationary pressure in the industry. I think we have to wait and see a little bit how that continues to play out. But we need to make sure that we're doing everything on the productivity front, everything on the maintenance front and everything else that we're doing to drive a low CASM growth outlook in the face of moderated capacity that which will go to drive margin expansion.

Thanks, everyone. That concludes our first quarter 2022 conference call. Thanks for joining us. Have a great day.

And again, ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.