David Barger - Chief Executive officer, President, Director and Member of Airline Safety Committee Mark D. Powers - Chief Financial Officer, Senior Vice President and Treasurer Robin Hayes - Chief Commercial Officer and Executive Vice President

Michael Linenberg - Deutsche Bank AG, Research Division David E. Fintzen - Barclays Capital, Research Division Hunter K.

Keay - Wolfe Trahan & Co. Glenn D.

Engel - BofA Merrill Lynch, Research Division Duane Pfennigwerth - Evercore Partners Inc., Research Division Daniel McKenzie - Rodman & Renshaw, LLC, Research Division Savanthi Syth - Raymond James & Associates, Inc., Research Division Raymond Neidl - Maxim Group LLC, Research Division Helane R. Becker - Dahlman Rose & Company, LLC, Research Division

Thank you, Sandra. Good morning, everyone, and thank you all for joining us today.

We're very pleased to announce another profitable quarter for JetBlue. This morning, we reported a first quarter profit of $30 million or $0.09 per diluted share, an improvement of $27 million compared to the first quarter of 2011 and the best first quarter performance in our history.

Operating margin increased 3 points to 7.4% as the 19% increase in total revenues covered $80 million and higher fuel cost. While high fuel prices continue to pressure the industry, JetBlue was able to fully offset the increase in fuel expense with record revenues.

A strong pricing environment and the ability to execute on our network strategy in key markets, such as Boston and the Caribbean, allowed us to achieve these strong results. JetBlue ended the quarter with approximately $1.2 billion in unrestricted cash and short-term investments or 26% of trailing 12 months revenue.

We continue to believe a strong liquidity position is paramount particularly in light of today's volatile fuel prices. These results, of course, would not have been possible without the hard work and dedication of JetBlue's 14,000 crew members, who delivered the JetBlue experience to our customers, an experience that we believe is unrivaled in the industry and an important reason why our customers choose JetBlue over other airlines.

I'd like to take this opportunity to thank our crew members for doing a great job in running a safe, reliable operation. Despite an uncertain economic environment, demand trends remain strong throughout the quarter.

Passenger unit revenues increased 8% year-over-year even with 12% more capacity as we, once again, outperformed the A4A domestic average. While the first quarter is typically weak from a seasonal perspective, we saw a significant strength in close-in bookings as our efforts to attract high-yielding business traffic continued to pay off.

We believe these results -- these revenue results demonstrate the success of our network strategy particularly in Boston. To that end, the East Coast short-haul markets were, once again, among the best performing markets in our network.

During the quarter, we continued to build relevance in Boston, as measured by the percentage of domestic and international trips JetBlue serves on a nonstop basis. Our relevance to Boston customers has grown from approximately 35% in 2007 to nearly 60% today, significantly higher than any other carrier at Logan Airport.

Increased relevance, particularly for the business customer, drives revenue and has played an important role in the success of our network strategy. As part of our efforts to increase relevance, we plan to commence new nonstop service from Boston to Dallas/Fort Worth on May 1.

With this new service, we will serve 8 of the top 10 markets in Boston as measured by passenger revenue. We believe our Boston network strategy is working well as profitability continues to trend ahead of expectations.

We also continue to be very pleased with the performance of our network in the Caribbean and Latin America. We plan to build on our recent success in Bogota, Colombia with new service from Fort Lauderdale Hollywood International Airport to Bogota's El Dorado International airport beginning on May 7.

Bogota is consistently among our most profitable markets, and we expect to announce further expansion in this region in the very near future. We continue to see significant potential for profitable growth in the Caribbean and in Central and South America.

To that end, San Juan, Puerto Rico continues to play an increasingly important role in our network as we seize on changes in the competitive landscape and expand service there. We recently announced our plans to move into new and larger facilities in San Juan.

We believe these new facilities will allow JetBlue to efficiently accommodate future growth planned at the airport and improve the overall customer experience. During the quarter, we continued to expand the scope of our network through our growing number of airline partnerships as we announced new agreements with Japan Airlines and Korean Air.

In addition, we recently announced plans to begin one-way code share relationships with JAL and Emirates. With one-way code share, partners will be able to place their code on JetBlue operated fights, which we expect will better facilitate international point of sale, driving more traffic on JetBlue.

Successful execution of our network strategy demands low cost, especially in a high cost and volatile fuel environment. We remain particularly focused on maintenance costs, which we expect to rise significantly this year due to the aging of our fleet.

Mark will discuss our cost performance in greater detail, but I'd like to emphasize that cost control has been and continues to be a foundation of JetBlue's success. While we are pleased with the first quarter year-over-year decline in x fuel CASM, we recognize that significant cost challenges lie ahead, especially with respect to maintenance.

In closing, I'd like to once again thank our 14,000 crew members for all their hard work during the first quarter. Despite a high fuel cost environment, we continue to deliver record revenues.

We are optimistic that demand for air travel will remain resilient, and we are encouraged by the continued strength of demand for our product. We are committed to growing on a sustainable basis and generating positive free cash flow.

Our goal is to generate appropriate returns for our owners, and we believe we are on track to do so. We remain committed to improving ROIC by 1 percentage point per year for the foreseeable future.

And with that, I'd like to turn the call over to Mark for a more detailed review of our financial results. Mark?

Thank you, Dave. Good morning, everyone.

Thank you again for joining us today. I'd like to join Dave in congratulating our crew members on another terrific quarter.

We expect, in fact, to be one of the few major U.S. carriers reporting a profit this quarter.

Specifically, today, we reported our 8th consecutive quarter of profitability with operating income of $89 million. Despite having paid $80 million more in fuel, we improved year-over-year operating results by $44 million.

Yield improvements once again drove strong unit revenue performance as we outperformed the A4A domestic industry average. Our average one-way fare increased 6.6% year-over-year to $160.

That's our highest quarterly average fare ever. This drove first quarter year-over-year passenger revenues up 8%.

Our passenger unit revenue growth is particularly impressive given 12% capacity growth during the same period. Exceptionally good weather in the Northeast led to a completion factor of 99.7%, our highest first quarter level since 2004.

As a result, we flew more ASMs than expected, of course impacting revenue and cost comparisons. What is noteworthy is we saw nice growth in both yields, which were up 5.9%, and load factor up 1.5 points.

These yields and load factor results reflect the success of the strategy to smooth revenue seasonality with higher yielding business traffic in off-peak travel periods. As for the confirmation, we saw stronger than expected close-in bookings in March and strong first quarter PRASM.

PRASM was up in January by 10%, in February by 6% and in March by 8%. Moving to ancillary revenue.

Total ancillary revenue in the first quarter was about $21 a passenger. This represents a year-over-year increase of 13%.

Customer response to our Even More offering continues to exceed expectations. As part of this offering, we recently opened expedited security lanes at 9 airports, bringing our total to 33 airports systemwide.

As we've previously announced, we plan to begin selling 8 more additional Even More seats on our E190 fleet later this year. Even More is on track to generate about $140 million in high margin revenue this year.

We also look forward to the introduction of broadband connectivity on our aircraft later this year. We believe the Ka product will provide the most speed and flexibility of any Wi-Fi in-flight technology.

Turning to costs. Quarterly operating expenses increased by 15% year-over-year or about $147 million.

This was driven largely by higher fuel expense of $80 million. Fuel, of course, remains our most significant operating expense, comprising nearly 40% of the total.

While the price of jet fuel increased by approximately 10% compared to last year, we believe we're well positioned with a fuel-efficient fleet, having an average age of only 6.2 years, as well as employing prudent fuel conservation operating practices. We hedge fuel as a form of insurance against sudden and severe price spikes.

In the first quarter, we hedged approximately 42% of our fuel consumption. This helped offset some price pressure.

We recorded $9 million in hedge gains during the quarter. For the second quarter, we have hedged approximately 26% of our anticipated jet fuel requirements.

For the remainder of 2012, approximately 21% of our projected fuel consumption is hedged. The underlying details of these hedged positions as of April 20 is more specifically detailed in our Investor Update, which will be filed later today.

Including the impact of fuel hedging and taxes, our fuel price in the first quarter was $3.25 per gallon. Brent crude, based on the forward curve as of April 20, is averaging about $118 per barrel for the full year 2012.

And the crew to heat crack spread is averaging about $15 per barrel. Based on this and including the impact of hedges and taxes, we are estimating a second quarter fuel price of $3.33 per gallon and a full year per gallon price of $3.30.

Excluding fuel, year-over-year first quarter unit cost decreased by 1%. This is slightly better than guidance due primarily to the excellent weather conditions during first quarter, resulting in 1.5 points of additional ASMs over our expectations.

As Dave mentioned, the one area we continue to see the greatest cost pressure is maintenance. During the quarter, this item increased nearly 50% year-over-year on a unit cost basis.

This increase is mainly attributable to more heavy maintenance checks associated with the large bunching of A320 aircraft acquired in the mid-2000s. Additionally, in the past quarter, we had more unscheduled E190 engine removals than expected.

Finally, Aveos, a key maintenance provider, liquidated in March, resulting in higher costs in first quarter. We expect this liquidation will result in higher than expected maintenance costs for the remainder of this year as we seek to find alternate repair options.

We expect this impact to abate, however, by the fourth quarter. Let me highlight one other line item in the income statement.

Other operating expenses declined 13% year-over-year on a unit cost basis primarily due to an $8 million gain related to the termination of LiveTVs contract with AirTran. Moving to the balance sheet.

We ended the quarter with unrestricted cash and short-term investments of $1.2 billion. Not included in this balance is our $125 million fuel purchasing line with American Express.

During the first quarter, we generated $292 million in operating cash flow and made debt and capital lease payments of approximately $45 million. Our debt payments for the rest of the year are manageable.

We expect to meet them with cash from operations. Similarly, second quarter scheduled principal payments on debt and capital leases are expected to be about $50 million.

As to CapEx, during the first quarter, JetBlue took delivery of 1 A320 and 2 E190s, bringing our total fleet size to 172 aircraft. We purchased the first quarter A320 delivery using cash.

For the remainder of 2012, we expect safe delivery of 6 A320s and 2 E190s. During the first quarter, we spent approximately $125 million in aircraft CapEx and $60 million in non-aircraft CapEx.

We estimate capital expenditures of about $170 million in the second quarter and $660 million for the full year, including the core Q1 amounts. With manageable debt maturities and capital commitments for the remainder of the year, we believe JetBlue is well positioned to maintain strong liquidity in 2012.

We expect to end the year with cash as a percentage of trailing 12 months revenue of approximately 25%. Turning to capacity.

We plan to grow second quarter ASMs between 4% and 6% year-over-year. This increase is largely driven by growth in the Caribbean and Latin America, which we expect to be up approximately 15% year-over-year.

As to the revenue outlook. Despite the broader economic uncertainty, we have not seen any negative impact on forward bookings.

We expect the strong demand environment to continue through the second quarter. We currently expect April PRASM to be up between 8% and 9% year-over-year.

Although we're not providing specific guidance for May on today's call, please keep in mind that year-over-year PRASM comparisons in May are challenging as the May 2011 PRASM increased 19% over the May 2010 PRASM results. That said, we believe the success of our initiatives to generate higher-yielding business traffic will continue to produce solid results.

As for the CASM outlook. For the second quarter, we expect x fuel CASM to be up between 6.5% and 8.5% from the prior year.

Again, maintenance expense accounts for nearly 2/3 of the expected increase. We project second quarter CASM, all in, will be up between 4% and 6%.

CASM, all in, for the year will be up between 3.5% and 5.5% versus last year. This is higher than the guidance we provided in January as full year fuel has risen $0.13 per gallon.

x fuel CASM for the full year is expected to be up between 3% and 5%, consistent with previous guidance. We expect high x fuel CASM pressure as a result of the Aveos liquidation largely to occur in the second and third quarters, returning to more normal levels by the fourth quarter.

In closing, JetBlue had a very good quarter. We continue to execute on our commitment to improve investor returns by focusing on profitable growth, controlling costs and proactively managing the amount and pricing of investment capital, all while delivering terrific service to our customers by terrific crew members.

And with that, Dave, Robin and I are happy to take questions.

I guess a question for Mark and then Dave. Mark, in the press release, I did see that you mentioned -- you talked about buying some aircraft for cash and saying that it would be accretive on an ROIC basis.

Since you -- when you rolled it out on the Investor Day, you provided us a little bit of color around it. I know, Dave, you talked about sort of your annual aspirations, what you want to do with ROIC.

Are you -- can you tell us what it was on an LTM basis? And is that something that -- I know a lot of the carriers are now starting to do.

They're starting to put the -- they're starting to put it in their presentation. Is that something we can look forward to in the coming quarters, the ROIC calculation?

At the present time, Michael, we're not probably going to be on a quarterly basis guiding to ROIC. Just to remind everybody, what we said at the Analyst Day is we ended last year at 4% and are committed to improving that, as Dave mentioned earlier, by an average 1% per year.

I don't think we're quite ready to sort of give the granular quarter-by-quarter, month-to-month type of progress against that target other than to say we're on track.

Now Dave, just turning to -- on my next question, when I look at how some of the stocks have traded year-to-date, we look at Airways up a lot. You think about their tie-in with -- maybe doing something with American and how the American unsecured debt has traded.

And I know that, I think year-to-date, you guys are down maybe 10% or so, your stock. And yet a lot of what I read about American, somehow, it seems like JetBlue may play somewhat of a prominent role in the future of American Airlines.

And whether or not it was the pilot agreement, the different proposals that they put forth back in November, there was obviously reference to a code sharing agreement with a domestic JFK operator, which seemed like it would be JetBlue. And then even in their Section 1113 filing about a week ago, a lot of which was redacted.

If you look at it closely, it did look like that there would be a lot to do with code sharing with a domestic carrier at Kennedy. And yet when I think about how your stock is trading, it seems like everybody else is tied to the American merger.

They've been bid up and there's been a lot of talk, yet it's been very sort of quiet on the JetBlue front. So just the question to you is, what's in it for JetBlue?

What do you -- sort of how do you think about these things? And you have American out there talking about various options.

You guys are silent. What can you tell us?

Because it doesn't seem like you're getting any sort of the halo effect like many of the other stocks.

Michael, and you're right. There are other carriers that, obviously, when you look at the rumors that are out there impacting what's happening, where their shares are traded, let's just be clear on that.

I think from a JetBlue perspective, Michael, I mean, it's -- our plans are no different than what we shared at Investor Day. And that is, again, as you know, organic growth, our own people, our own airplanes.

That is our commitment. And we think the performance such as this first quarter and how we're looking at this year is something that we'll be rewarded for in the long term.

And that's how we're running the business. Specific to American Airlines and what they're thinking in their boardroom, I think, is an appropriate question for AMR and their leadership.

We have a partnership with AMR and at same time are also competitors with AMR as well when you look at our route network. And our partnership today is interline.

That's the bulk of what we have with the now 17 airline partnerships across our system, and really, Michael, when you start to take a look at that, they're longer haul, they're international, they're into locations where we don't fly our aircraft. And so we'll see what happens in the future in terms of what makes sense with the first set of one-way code share when we look Japan Airlines, as well as Emirates, in addition to South African.

But at this point in time, it's status quo from the standpoint of American Airlines and the partnership with JetBlue.

Just a question on Delta's slot swap, obviously, they were talking fairly optimistically about it yesterday. I'm just curious, does that ultimately change or impact your business travel strategy at Kennedy?

Dave, I think let's let Robin chime in on how he's looking at the New York landscape and specifically, Kennedy vis-à-vis LaGuardia. Robin?

David, no, it doesn't. I mean, if you look at the portfolio that we have at JFK, it's predominantly a leisure origin portfolio from -- we'll have a lot of Florida operation and Caribbean, international, very, very small dependency on business travelers in New York.

And indeed, if you look at what we have added from LaGuardia, it all serves our Florida, predominantly leisure market.

Okay, that's helpful. And just conceptually, on the ROIC goal, how should we think about how growth plays into that?

I mean, as you look at Kennedy, do you think that those gains in ROIC, at least as the earnings component of that calculation, do you think that's something that's broad-based through the network and steady improvement uniformly? Or does this really hinge on some of the growth potential and opportunities you see in Boston or San Juan sort of raising the margins on average?

David, I'll take that again. It's Robin.

No, I mean, certainly, we've been very focused on Boston and the Caribbean because that's where we've been able to grow significantly and do so profitably, which is accretive to ROIC. If you look at the rest of our network, then really, I would say for the last couple of years, capacity has largely been flat or some very modest increases.

And that's also really helped us improve the performance of those markets. Every -- at the end of the day, every route and every focus city has to earn its way into our network.

I mean, it is true, right in any year, different parts of the portfolio are going to do better than others, and that's also the benefit of having a hedged and diverse network plan.

Let me add, if I may, Robin, to that. As we -- I think we had this discussion at Analyst Day.

The point we made was, if in the short term our sole objective was to increase rapidly ROIC, we could easily do that by just shutting down all growth and maybe even starting to pare down routes that aren't meeting a certain level of profitability. But I think we are really trying to manage ROIC in the context of a long-term perspective.

And while it could really increase growth in the near term, in the long term, if we were to do that and basically walk away from all of the hard work and investment that we made in the -- in Boston in particular and the Caribbean, we would quickly lose our value. So it's -- the conundrum here is we don't quite have our, if you will, our defensible fortress-type hubs or networks yet.

We're building that, certainly, and close to it in Boston and the Caribbean, but it's not time to stop the growth. And so working through an ROIC commitment with the full knowledge that we need to continue to grow, I think, is something that's going to distinguish us as we move forward.

A little follow-up on Mike's earlier question about the AMR situation. Dave or Robin, how does that work in terms of having terminals that are obviously not contiguous with each other?

I mean, I think that's one of the big pushbacks that we hear a lot about a potential ramped up code share. So putting aside the implications from, say, a broader code share with AMR, if they're able to emerge from bankruptcy standalone, do you find that there is customer dissatisfaction with having to connect and I guess, correct if I'm wrong, go through security twice in some cases?

I mean, would that even be leverageable on to a bigger platform with them?

Hunter, it's -- I'll take that. No, not really.

And in fact, if you look at the connection experience between American and JetBlue at JFK, it's 2 new and very high quality terminals. And any customer landing internationally is going to have to clear customs and go through security again in any case.

So the only bit that you could argue is slightly different to maybe an airport where that's all under the same roof is you, I mean, you have to leave the terminal. But you get on the AirTrain, it is a very quick, less than 5-minute connection, and to a security, again.

And I think the excellent facilities offered at JetBlue's Terminal 5 and also the new Terminal 8 American facility at JFK, I think, more than offsets that sort of 5-minute-or-so transfer. So no, it doesn't come up at all as an issue for our customers who connect.

Okay. broadly on the code share issue, how do you guys track the profitability of this code share?

I mean, because there are costs associated, obviously, with having code shares, particularly if you have to say, "we accommodate passenger connecting to the international itineraries," things like that. I know you guys don't like to talk about the specifics of it, whether it's a free sell or a block space, things like that.

But how do you track the profitability in the earnings accretion, if there are any, of these code shares? And how do you allocate the costs associated with them?

I'll take that again, Hunter. I mean, first of all, I think we've talked before about how we price these connections.

So the way we price it is much more akin to a fare equivalent to what we could sell locally ourselves as opposed to a more traditional prorate agreement, which tends to disadvantage the airline who's just providing the shorter segment. In addition, if you look at what -- a lot of the costs really come with code share.

It really comes around when you're placing your code on another carrier because you now get into a exhaustive list of the closure requirements, you're providing a lot of training for your staff or crew members at JetBlue, whether that's in the call centers or ticket desks and we've been very careful to avoid two-way code. We started with the interline, where we have sizable interline partnerships and we see benefit to take that to the next level, which means one-way code, which really puts the onus on our partner to manage that complexity.

And finally, again, if you take JFK and Boston, where we transfer the most of our customers between our partners, we really -- the way we set up that with our colleagues in operations has been to minimize cost. So our partner airlines, for example, will deliver bags to us at JFK.

They will come and collect them from JFK, allowing us to avoid the infrastructure investment in interline baggage transfer. So I think just a couple of examples of how we've done it differently to: one, protect our yield; and two, minimize our unit cost per customer.

Couple questions. One, other revenue was up only 0.5% or only 1%.

And it had been running up double digits?

Yes, that's right. I mean, it's still -- we're still looking at a 13% or 12% quarter-over-quarter rather increase in the ancillary ticket price.

Why am I seeing though, in the other revenue, no growth at all?

I'm sorry, we're looking at the press release, right?

Yes.

Yes.

Okay, good. Sorry.

Glenn, it's Robin. There was a payment from American Express relating to the end of one of our previous contract periods in the previous year that you're not seeing again in this year.

It was a one-off settlement, and we haven't got the benefit of that in quarter 1 this year. And so that has impacted the like-for-like comparison.

And second, if I looked at sales and marketing that grew much less than revenues, what drove that?

I think a couple of things there, first of all, some activity that we shifted out of quarter 1 into the rest of the year. And we continue to be very active at managing our cost through our online distribution partners and making sure that we drive those unit costs down on a year-over-year basis.

And third, can you go through why Aveos makes so much of a -- makes a difference to maintenance? I didn't -- why you can't just get it somewhere else?

Why does it cost you more?

Well, we were able to -- sort of good news, bad news on that, Glenn. We were able to negotiate, obviously, some time ago a very, very favorable flight hour agreement, which covered a significant number of our A320 parts.

This is a long-term favorable agreement and, of course, with the liquidation, we certainly found ourselves in a situation where -- I guess sort of the good news, Glenn, by the way, is that we were able to successfully recover the parts and therefore -- as well as the work in progress, so that we were able to avoid a material write-down this quarter associated with that liquidation. But with their liquidation, we immediately had to essentially move to time and materials providers which, of course, are sort of piecework and very, very expensive.

We are aggressively scouring all other service providers on a part-by-part basis to enter into hopefully, similarly favorable flight hour agreements. And hopefully, that -- all of that work is done and completed by the fourth quarter.

So a lot of the CASM questions that I'm sure you have with respect to the balance of this year are really a function of the time and materials cost versus the flight hour agreement costs that we have -- we previously had with Aveos. And again, I can't sort of represent exactly when we'll have flight hour agreements covering all of these part types nor can I guarantee that we'll have in place those replacement flight hour agreements priced as well as the Aveos agreement.

So that's what's driving a lot of the maintenance cost increases through the end of the year.

And can you give us a sense of the incremental impact from this Aveos alone?

Yes. I think it's a double-digit type of million dollar number, again, associated with -- some of it is in first quarter and some of it that we're modeling is largely second and third.

And hopefully, again, we're sort of back to a normal level by the fourth.

Just on your April unit revenue commentary, can you just give us a sense for how you think about the comps? It looks optically like it's a tougher comp, yet it looks like you're going to see some acceleration sequentially here.

So is it capacity changes that we're seeing? Or how would you characterize the April comp versus March?

Duane, it's Robin. I'll take that.

April was very kind to us this year in terms of how the holidays panned out. So obviously, New York and Boston, 2 of our largest origin leisure markets.

And the holiday periods really were separated from each other as opposed to being on top of each other last year. But it's actually gave us a sort of that 2- to 3-week holiday travel period as opposed to a 7- to 10-day period we had last year.

And obviously, that sort of is very favorable. So though the comp in April is tough, and thank you for recognizing that, the beneficial holiday span has enabled -- allowed us to continue to see good revenue -- unit revenue growth.

And then just a follow-up on the other revenue question. It looks like last year, there was sort of consistent growth each quarter.

Can you talk about the outlook for other revenue growth going forward?

We typically haven't gone [indiscernible].

Duane, yes we -- obviously, we haven't sort of guided on that in the past. I think -- if we think about sort of some of our larger other revenue lines, then I think it's sort of is like change fee in bags.

We did just put an increase to our second bag fee in here in March, but I think the biggest impact has been in -- is in Even More revenue, Even More line, which Mark talked about in his comments, where we continue to see good demand for this product, a good growth of this product. And in fact, we've taken the decision to speed up the reconfiguration of our 190 fleet to add an additional 8 fleets, I thought Even More -- our Even More Speed and Space customers.

We are finding in markets like Boston, where sort over 50% of our departures are E190s to business destinations with frequency. We are selling out of the product quickly and there is a strong demand to add it.

And so I think we continue to see good growth in our Even More Space line.

And just to clarify, would that be in your fares and in your PRASM? Or that shows up in other revenue?

It shows up in passenger revenue.

Okay. And then just lastly, as you think about how to use your cash, you've got a healthy cash balance here, your stock is trading below book value, is share repurchase any higher in your potential options than it has been historically?

Thank you for wading into this debate that I'm having with Dave all the time. Candidly, I'm still focused on looking at aircraft as a potential use of cash.

I'm -- we're also possibly considering using some of our cash to fund certain significant facility improvements that are on the horizon, notably at JFK. And I will continue to look at possibly using that cash when the pricing is right to repurchase some of the converts, which is, I think, we've said in the past is great because the converts are at an interest rate higher than our average weighted cost of debt and has the added benefit of not only retiring debt, but then removing from the calculations related to EPS any of the associated common shares.

And so clearly my preference is probably -- doesn't favor share price -- share repurchases at the present time.

One quick housecleaning item and that's on the $8 million gain on the termination of the LiveTV. I guess I didn't see that stripped out as a onetime item.

Should we be thinking of that as onetime or...

Yes, as AirTran was acquired by Southwest, and Southwest was making decisions as to fleet commonality on their entertainment system. Under the terms of our contract with LiveTV, this was a onetime facilitation or termination payment.

Got it, okay. And if we -- I guess I'm not sure of the tax impact with that, but if I look -- is my math correct if I'm coming up with $0.06 a share for the quarter and stripping that onetime item out?

I haven't done that.

I'll circle back with...

Okay, circle back, please.

But anyways, I have, of course, been public about your market share successes. And if I could just play devil's advocate for a moment on the growth here, can you talk about the cost dynamic versus the growth dynamic?

And I guess what we've seen from Southwest is that when costs and particularly labor costs get too high, growth stops. And I guess what I'm wondering is at what cost level do you conclude the growth lever has to be shifted into slow mode?

And I guess related to that, what I'm getting at is, how comfortable are you that you don't necessarily bump up against that, looking ahead 1 to 2 years?

Dan, just on a macro level, it's a -- the company is very much focused on all-in CASM, of course, x fuel CASM as well. And as we've talked about last year and as we talked about this year, we knew that we had a couple of years' worth of fairly significant -- I mean, very significant year-over-year increases when it comes to MMNR [ph] in the maintenance category.

So we're aware of that. As we're a little surprised by what played with the immediate liquidation, if you will, with Aveos, not even a really a process tied into reorganization.

So that was, obviously, has surprised and impacted us. But when we look at our CASM, our x fuel CASM from a labor perspective as we're working out on a 5-year plan with our CASM and we look at our revenue opportunities as well, listen, we're focused on CASM but we're comfortable with the aircraft, the skyline that are coming into the fleet with these opportunities.

And I think, again, on the revenue perspective, it's the maturation of Boston. It's the maturation of the Caribbean and Latin America.

We've talked about, for example, Colombia in the past -- shortly, as we're adding service into cities like this, it's a nice way to add service with Bogota to Fort Lauderdale, Kingston to Fort Lauderdale. So it's -- Dan, it's -- we don't see out on the horizon that 1, 2, 3 years out, as you're mentioning with Southwest that, "Hey, it's time to shut the growth lever."

We're focused on it. We've got some opportunities.

And I think, really, above the line, the revenue opportunities are quite significant with the investments that we've made.

Okay, very helpful. Appreciate that.

And then given the M&A backdrop, can you update us on any poison tails on the bylaws? So for example, labor contracts that might reset any other items.

And does the poison tail make sense just given your business model versus the industry?

So I'll confess, I'm a lawyer in recovery so I'm not going to wade into that because I'll violate my recovery rules. But there's a -- I think it's pretty much disclosed.

I'm looking to Jim Hnat, our General Counsel. I believe that that's probably pretty well outlined in the K and the proxy statements.

So let me defer to people who have crafted that language very carefully, if I may.

Just a quick follow-up on the maintenance question. How do you see the timing and what -- where will we see -- kind of see the kind of peak and leveling off of maintenance cost?

Again, as we -- just to focus, if we can, on just 2012, I would sort of guide to a somewhat of a flat type of performance going into the second quarter and even perhaps the third quarter. Then by the fourth quarter, the maintenance costs ought to be abating or coming down to more of a normal level.

Again, the big challenge here we have is that we have a -- we've got to essentially source on a flight hour agreement on favorable terms virtually 20% of our components on the Airbus. And so there's a fair amount of work we need to do.

And so that's -- our best estimate is -- or an accurate estimate is probably around that period. Of course, the operation teams are fully incented to accelerate and get good terms in place sooner.

Sorry, I understand the obvious aspect of it, but there's also kind of the heavy maintenance aspect of it. I was just hoping to kind of get more color on the combination of both.

Yes, again, we have -- you're absolutely correct. This year, as we've indicated, we've had a higher engine removal rate and a higher heavy maintenance cost running through this year.

I think that's probably going to be by quarter, pretty flat with the exception of the summer quarters, summer quarter because that's obviously when we're working the planes really hard and so we probably are eliminating the number of aircraft that we put into heavy overhaul in the third quarter.

Okay, that's good. And then on the PRASM side, you've talked about it and we've obviously seen it in the results, the kind of the positive impact of this increasing business mix.

I was wondering if you could help quantify that or talk about maybe how that trends? I know in the past, you've talked about you were having more -- less and less that have been in service for less than 1 year.

And just wondering, how much further we can see this kind of off-peak outperformance.

I'll take that. It's Robin again.

I think we continue to make good progress in Boston and very pleased to see the profitable growth that we are seeing in Boston. I think there are still a number of markets in Boston that are important to business travelers that we don't serve.

There is an argument that we could have made that, we could have gone at Boston even harder and faster. And we made a conscious decision to meter that growth in order to make sure that we balance the growth there versus taking advantage of the opportunities that existed in the rest of our network, particularly in the Caribbean.

So we continue to see, as we look at the months ahead, an opportunity to outperform our PRASM performance in what have been traditionally weaker months for JetBlue. It does, obviously, as time goes on, you're cycling against tougher comps.

Mark made the point in May -- at May last year, we were plus 19. But we are still confident that there's opportunity in Boston to grow from 100 to 150 flights a day.

We're going to continue to make those investments to grow, and that's going to help us do an even better job of filling the troughs.

And just my last question is, in the recent past I've noticed kind of the hedges put in place were about, maybe roughly 40% and I kind of noticed going forward it's around 20%. Was there anything -- is it kind of the run up in fuel prices?

And it's kind of costlier here? Or any change in the thoughts there?

No. Just to be very candid, so we were at 40% for the prompt.

And moving into second quarter, we're in the 20s. At full year, I think we're at 21%.

I think that in this case, probably not being aggressive on the fuel side has proven us well, particularly if you look at our full and quarter fuel guidance relative to perhaps some of the other airlines who have reported so, sort of being a little bit more reticent if it were -- or even just a little bit slower in terms of -- or less aggressive, I think, is probably the better word is -- has proven to our benefit.

Yes, just looking at your overall strategy, it seems like San Juan, are you developing that into a hub or focus city similar to JFK? And does the Boston and Caribbean expansion pretty much keep your hands full?

Or you're looking at maybe secondary markets in your service territory, where start-up carriers are coming in? For example, using your smaller aircraft to go from someplace like Syracuse to Cincinnati, which has lost a lot of service.

Ray, I think first of all, with San Juan, as we move into the new terminal, that's the terminal that has not been used ever. And we'll be moving into it in the June time frame.

We're very excited about it. We'll consolidate it into one facility, much better ground experience, I think, that we'll have in San Juan.

I think it's fair to characterize San Juan as a focus city, which really, when you look at the opportunities, yesterday as we added Newark into San Juan. West Palm Beach, shortly, is going to be added into San Juan.

I mean, routes that have never been flown before for us, for example, or anybody like West Palm Beach to San Juan. Newark, certainly, has in the past recently added in places like Hartford, et cetera.

There's plenty of opportunity, San Juan north, and we also think San Juan across the Caribbean and potentially south. So yes, it is a focus city.

The second, your comment about the use of 190s, the network strategy and really crediting Robin and team, the discipline of our focus cities, Boston, New York, obviously, it's Kennedy, but we're in 5 New York airports, Orlando, Fort Lauderdale, Hollywood. We talked about San Juan and the LA basin focused at Long Beach.

The routes, the discipline, they have to touch the focus cities. And so when we look at -- I think I heard you say something along the lines of Syracuse, Cincinnati or point-to-point flying that doesn't fit within the lattice, the network typology that we set up.

Tell you the truth, they just don't receive support across the commercial team. They don't receive support across the company.

So that's how we're looking at it, and the use of the 320s, the 190s and obviously, the partnership traffic as well. It's an opportunity for me to just comment on Japan Airlines' 787 inaugural route from Tokyo into Boston Logan and now plugging into our network behind it, pretty exciting stuff that I think that we offer a lot of carriers across the globe.

Back to you, Ray.

Okay. Yes, that point-to-point stuff, that was just something I was throwing out there.

That makes a lot of sense avoiding that at this point, in my opinion. The second thing is a little bit more broader on your focusing at JFK.

It looks like Terminal 6 is going to be landmarked; I think it's torn down or it's being torn down right now. So does that leave you lots of leeway for expansion, Terminal 5 over to the Terminal 6 area, as you grow JFK and connect it with New York also?

Is your move completed into Queens? And what kind of problems are you having with the giant sign you want put up?

Yes, great. Ray, we're in our new facility right now in Long Island City.

It's nice to be consolidated from Forest Hills and our Darien, Connecticut campuses into one facility. By the way, a commentary, I think, just a long-term lease rate that makes great sense for this company as we look at our cost structure.

Proximity is just a talent that our brand has access to here in the New York metropolitan area. So the move went very well.

We're in the final hold of the approvals for a large but respectful JetBlue sign here in the New York landscape, and I think that's a matter of weeks and maybe even less to close that out. Then if you go over to JFK, just a little update, of course, Terminal 5, we're close to celebrating 4 years, really just optimum performance for that facility.

We're very close with the Port Authority of extending Terminal 5, we call it T5 International, internally. It's on the footprint of the former Terminal 6.

Terminal 6 is -- was not landmarked. It was, obviously, as you know, originally there to support National Airlines decades ago.

It's now a tarmac and we're very hopeful that we'll be breaking ground on an international arrival facility, similar to what you see happening over at Terminal 4. There's a lot of growth happening at Kennedy.

We believe that having all of our operation under one roof -- and again, we'll have Hawaiian Airlines in here very shortly, is really exciting. By the way, the completion on that, as we work through final approvals with the Port Authority, it's probably something that looks like 20 to 24 months.

So we're excited about, again, further investment in New York, Ray.

Just a couple of things. On aircraft utilization, you've pushed it up to 11, more really than 11.5 hours a day.

Are you reaching a maximum now? Or is there room to go in that area?

And how does -- would that work with maintenance requirements? Or do you need to actually think about other aircraft?

Helane, it's Robin and I'll take that. Look, there is certainly an opportunity to increase that utilization further.

We clearly have to balance that against sort of concerns about operability and the impact onto the maintenance cycle. I think we still see an opportunity, specifically into the Caribbean, for more back of the clock flying than we do today.

Obviously, as fuel goes up, you have to weigh that more carefully because it does tend to come at a lower average yield than from the daylight flying. And where we see those opportunities, we'll do that.

What we don't want to do is just increase utilization for the sake of doing so without being sure of a real -- a sort of profitable benefit in having the extra capacity. But yes, the opportunity is there and we'll take it where it makes sense.

Okay. And then so, Dave, I think you were stopping off in Lufthansa on your way home from Istanbul earlier this week.

And I just wondered if there's really opportunities for you to work with easyJet without having an international connecting opportunity.

Boy, it's hard to be a secret, isn't it? It's a...

It was all over the paper.

Yes, the -- our visit with easyJet with members of our leadership team, it really -- it's about how do you look at best practices. And when you look at best practices about what they're doing in Europe, what we're doing in the United States, I don't see synergies between our 2 companies.

We're here in the Americas and they're across Europe. But when you start to take a look at things like A320 operations and the family of aircraft, maintenance, how they're operating them, their interest in winglets, by the way, as I hope that Airbus is listening to the call or looking at the transcript about the retrofit opportunities.

It's that kind of thing. When you look at ancillary revenue opportunities -- by the way, this isn't the first visit that our team has done with other carriers across the world.

There's a lot of interest in JetBlue with what we've been doing over the course of the past 12 years, now in our 13th year. And I'll tell you, we're always interested.

And one of the best practices that are happening across the world, and hats off to easyJet in terms of what they've accomplished over the last 1.5 years under the leadership there. It's been quite nice with Carolyn's leadership.

So there's not synergies in terms of some kind of a bridge across the Atlantic that's -- we're different point-to-point models, if you will, in different continents. Back over to you, Helane.

Okay. And then are there -- you might have said this and I missed it.

Are there code share or interline opportunities for you at DFW with American on the Boston DFW route as well?

I think Dave touched on the partnership that we have with American, which is an important one for us, at the moment really looking at continuing to maintain the status quo. We'll see what happens in the future.

There are other additional code share opportunities with some of our partners while we just have interline relationships today. And I'm sure you'll be reading about some of that here and about some of that later in the year.

Sandra, thank you very much. We'd like to once again thank all of you for joining us for the first quarter 2012 earnings call.

And a special thank you to our 14,000 crew members delivering an outstanding quarter, safe, reliable operation. We look forward to talking to you as we close the second quarter.

Everybody, have a great day. Sandra, thank you.