All right. Good morning, everybody. This is the last fireside that's standing between you and a mediocre boxed lunch. Nah, they're not bad. They're not that bad. Heavy on the gluten, though, I've heard. We were sadly referring to the equity carnage of the JPMorgan conference today. So I'm very pleased to present the management or the CEO, in this case, of the sole U.S. airline equity that is up today. So we saved the best for the 11:30 slot, I guess. But very happy to have you know, Ben Minicucci here returning to our stage once again. Let's kick things off, because people are gonna wanna hear about the guide. If you could just bring us. Well, why is your stock up, do you think?
Well, listen, I think we just issued our investor update, and, you know, it's a stronger Q1 than I think most people had predicted for us. And, you know, I'll maybe just take you back, Jamie, almost a year ago when Q1 of last year, you know, we lost $150 million.
Yeah.
Something I was not very happy about, and I told my team: "Look, Q1 is our seasonally weakest quarter, but we got to get closer to breakeven." Because we start with a $150 million hole. We're a very profitable airline, but eliminating that would make us, of course, even more profitable. So we had this goal of how do we get closer to breakeven. So, you know, one of the big things was reducing capacity in Q1, which we're one of the first to do. And then, you know, the second thing was network changes that would optimize Q1 to different markets and reducing some frequencies in some other markets. So, I'm really pleased at Q1. And when we looked at it in December, the revenue trends were strong.
Of course, then Flight 1282 happened and, and of course, the MAX was grounded. It took us a month to get the MAX back in service, and I'm sure we'll talk about that a little bit. But that notwithstanding, our February budget, even with all the book away in January, because it took us, you know, 30 days to get the fleet back up. Even with all the book away in February that people were concerned about, February still beat budget-
Hmm
For us, just to give you a sense that, you know, Q1 is performing quite strong. And so, when you look at, if you exclude the MAX grounding, you know, we believe that the $150 million dollar. We, and we also have higher fuel than we did in our budget.
Okay.
You know, we would have been in spitting distance of breaking even.
Hmm.
So that is a massive turnaround from a $150 million loss. And I think it's just, you know, we knew that we had to make some changes for Q1 of the following year, and we did, and I'm really proud of the team, and it really puts us in a strong footing for the rest of the year.
How would you characterize overall demand in your network? Because there are a couple of moving pieces and comparisons that need to be drawn. Southwest was up here. They got it down today on demand, but their view was that it was mostly self-inflicted, you know, forecast error on their part. You also have significant tech exposure-
Mm-hmm
With the San Francisco hub. All the various moving pieces, both premium, low-end and low-end consumer, how we think about those various drivers of your top line in the first quarter? And more importantly, any, you know, glimpse into the second quarter that you're comfortable giving, I'm sure we would welcome.
Yeah. Well, you know, on the leisure side, leisure is still strong. What's really been helpful is the return of business and corporate traffic for us and our West Coast hubs. You know, we kept saying on every analyst call, there's upside for us, there's dry powder as it starts coming back, and that's what we're seeing. We're seeing more business traffic come back. Obviously, in Seattle with Amazon, Amazon is above 2019 levels, for the first time, which is really good to see. Microsoft, which is still down, is 2x what they were last year, which is really positive.
Hmm.
We're seeing this business travel finally starting to come back in our West Coast hubs. You know, in terms of Q2, not a lot I can share right now, but what I would say is, I think we're just optimistic that, you know, it's starting to return back to 2019 levels. And in combination with leisure, the strong leisure traffic we're seeing, you know, we're in a good spot.
Good. We were joking before we came up here that it was quite a few years since you attended and talked about your merger-
Mm-hmm
E fforts, and yet here we are back on our stage talking about your merger efforts. And I don't want this to monopolize the conversation, but I would think it's probably one of the largest things on your plate-
Mm-hmm
A t the moment. You know, what has evolved on the regulatory front since your earnings call? What other road, you know, mile markers should we be looking for? And can you confirm that there was—I certainly didn't find anything in the JetBlue Spirit decision in that legal brief that I could extract and apply to, you know, Alaska's effort. With Hawaiian, maybe you have, at this point, digging deeper into it. Just-
Yeah.
Provide us as much of an update as you're comfortable.
Well, it's a great question. I think just on the JetBlue Spirit and what the judge's decision was to block it, I think it's a positive for us. I think the judge was clear in saying that he's blocking the deal because of the elimination of an ultra-low-cost carrier that has benefit to consumers in the country.
Yep.
In our deal, it's, it's nowhere near that. Our deal is completely different. We're actually the low-cost, low-fare airline acquiring Hawaiian. So that's simply not the case. Our overlap markets, we have 12 overlap markets on 1,400 flights, so very few overlap markets. Definitely gonna give Hawaiian residents more choice, 3x more choice than they have today, to connect to the continental U.S. More choice internationally, with our oneworld partnership. And I, I think the other benefit for us is, you know, we become a little bit of a bigger carrier, but, you know, we add a few more arrows in our quiver with international capability now that's possible out of Seattle. Which again, provides more competition, against Delta and other carriers.
And because of our strong domestic presence in Seattle, we have over, you know, 300 flights a day. And, and so I think all this in context provides, you know, a great platform, you know, of why this deal makes a lot of sense. And, and you know, one of your questions is where we are in the process. Second request from DOJ.
Okay.
In terms of information, a ton of information has to be amassed to get to the DOJ. It'll likely, you know, be to them sometime in the May timeframe. They have 30 days to look at it, so we'll know more, maybe in the June timeframe.
Right.
The next milestone. One of the things I will say is, in terms of how it's being received, we've done a lot of work in our diligence process, but even, you know, talking to communities, we had an op-ed by the four mayors of the b ig islands, you know, Maui, Oahu, Kauai, and the island of Hawaii, who totally support the deal going through. So these are the four mayors of the Big Island saying, "We think this deal is good for residents and locals of Hawaii." And so we have their support. And you know, it's hard to say that there's a lot of negative with what we're trying to do.
I think the 49th and 50th state, there's so many similarities in terms of serving, you know, remote communities. Just a lot of people don't know what we do in the state of Alaska, but there's, it's a state that's 2.5x the state of Texas, with 750,000 people, and we fly to 19 different places in the state of Alaska. Only three have roads. So I just wanted to give you a framework of how big the state of Alaska, the land is the ocean, you know, in the state of Alaska. And so we know how to serve remote communities in terms of how, you know, the loyalty that we have in the state of Alaska, it's only about 10% of our network, but we're committed.
Our values come from there, and so there's a lot we can do to really, you know, have a great value proposition for Hawaiians. The other thing is, we're keeping the brand, as you know.
Yeah.
So it's one of the things where it's gonna be unique. We'll have a dual brand exterior with one platform in the background, which is something we're working through. There's gonna be a lot of questions how we're gonna pull that off, but I think it's a unique way of us positioning this acquisition versus the Spirit and JetBlue. So I hope that you know the merits of the case will shine through.
Just to be clear, a second data request is by no means unusual. With the Virgin America transaction-
Right.
I believe you, you had two requests, and then entered a period of closed-door or non-public negotiation.
Correct
D uring which your agreements were settled on. I'm still just curious about the evolution, though, because you-- for so many years, post-Virgin, obviously, the story was comparatively simple.
Yeah.
You know, leaning so heavily into single fleet type, you know, de-leveraging, didn't have a long-haul network to concern, you know, myself with modeling. I mean, did you just fall down and hit your head one day and just, you know, come back with a different view on consolidate? I mean, how did it evolve?
You know, a few ways. First, like, if I had to put it in context, we're just punching the accelerator for our long-term strategic plan. We're just pushing the accelerator to the floor. And look, we already have a billion-dollar franchise to Hawaii.
Yep.
Our existing franchise, it's something that was good for Alaska. It's something we wanted to build on. So we said, "What are the possibilities of us looking at growing that?" Or, you know, you know, analysts ask us all the time, you know, "What's the next step for Alaska? Where, you know, where can you grow?
Yeah, that's fair. I fielded that question-
Many times-
Pretty frequently as an analyst.
And Jamie, you know, like, you need.. Where you grow, you need relevance.
Yeah.
Right? You need relevance, and you know, a startling fact is, out of the top 25 cities in the country, top 25 hubs, 23 out of the 25 are dominated by the big four airlines. There are only two cities that are not: Seattle, which Alaska has, and Honolulu. So this was a play for us to say, now we can get relevance-
Mm.
In two of the top 25 markets, and actually do something pretty unique. Hawaiian on its own is constrained, as you know, to do more. They can't grow, really, in the continental U.S. There's only so much you can grow. There's 1.4 million residents in Hawaii. But with a combination of Alaska, with our network in the continental U.S., the pie starts to grow. And so I think this is what makes this unique for us. And when we looked at all this, and I looked at the long-term strategic plan, look, we have 185 MAXes on order. The domestic plan was still there. But really, how you win in this industry is through relevance and through loyalty.
We looked at that from the loyalty lens, from the lens of relevance, and we thought this was a great play for us in terms of what we acquired Hawaiian for, in terms of the dollars. Again, our balance sheet was strong. We're coming out of COVID. You know, we're one of the most profitable airlines in the industry, and we said, "Look, we have the balance sheet, we have the cash, we have the wherewithal to do this, and we think this fits nicely." It's always something we've thought about, but we're just punching the accelerator and said, "This is the right time to do it." You know, the team that did Virgin America is essentially all here.
Yeah.
The scars are still all on my back on, on that one. And I said, "I know the mistakes we made, and we're not gonna do those again. I know what we have to do right." One was the brand decision, and one was just making decisions a lot quicker than we did before. So I feel really good with that, and again, we'll see where we land with the DOJ.
Just to be clear, behind the scenes, you do become one labor entity?
Right. Behind the scenes, we're one labor entity, for sure. One labor, one air, one operating-
This is not a holding company-
No, no, no, no.
IAG type.
No, no. It's not an IAG type. Everyone kind of compares it. No, no. This is one set of labor rules, like one pilot group, one flight attendant group, one mechanic group, one operating certificate. Our people can fly and work on different airplanes, but the branding is gonna be different. So the Hawaiian brand is so powerful, we wanted to retain that, but the Pualani evokes so much.
Mm-hmm.
The Eskimo on the tail evokes so much. So we're going through a huge branding exercise right now. And look, I think one of o ur strength is our brand, and it's also a limiter for us. We know, because when we ask people here in New York, even though we fly here quite a bit, people say, "Oh, I thought you only flew in the state of Alaska." Right? So the brand is a limiter. We understand that. It's also a strength where we are in the Pacific Northwest. So we see this as an opportunity now to take two really regional, but strong brands with strong loyalty and say: What is the overarching brand? Could it be the loyalty program? I always compare it to Marriott Bonvoy.
You know, when you open your app, the Marriott, Marriott Bonvoy doesn't put up a hotel in front of you. They ask you, "Where do you want to go?" And so if you think about what we want to do in the future with oneworld, our gateway will be the loyalty program and say, "Where do you want to go?" And we'll say, "Well, if you want to go to Hawaii, if you want to go international, if you want to go anywhere you want to go, here is Hawaiian, Alaska metal, Horizon metal, our regional, and here is our oneworld international partners." So this is what we're trying to build going forward, really, a bigger platform for Alaska. Again, a lot of questions we got, where is Alaska going?
Alaska is gonna be, you know, more of a national and global carrier, going forward, and so we're putting the building blocks in place for that.
If you knew what a Starwood loyalist I was and how disappointed I was with Bonvoy, you might not have used that example.
Okay.
But I get it.
All right.
I, I-
Okay.
I get it. That's. It's not them, it's me. I'm sure. So you brought up loyalty, and it's, it's. And that's been a theme all morning and will continue to be this afternoon, and I think for decades to come. It's fascinating to me that loyalty is actually proving a catalyst for consolidation, because I mean, that was certainly part of JetBlue's. Well, it was part of Spirit's thinking with Frontier. Initially, it was part of JetBlue's thinking. It's part of your thinking. Where would you rank your loyalty returns right now, just Alaska standalone? You know, the benchmark, and you know, this came up earlier today. I mean, you know, Delta's clearly in the lead.
Mm-hmm.
You know, with Amex. Where do you put your profit contribution relative to your other larger competitors? And then what are the contractual openers that will allow you to renegotiate that? And then what are the post-merger aspirations for loyalty?
That's a great question.
Correct me if you-
No.
Don't agree.
No, no. Look-
Loyalty is one of the biggest things that-
Yeah
Sort of separates, you know, the margin haves from the have-nots.
No
A t the industry level, at least right now.
You're absolutely right, Jamie. I would say it's loyalty, and it has to be linked to relevance in your markets. I think those are the two things, which is what we have in Seattle, in the Pacific Northwest, in Portland, State of Alaska, of course. I mean, that's what gives Alaska its strength. If you look at, what is it, like, past the Great Recession, after 2008, we've been one of the most consistently profitable airlines with one of the best balance sheets since 2008. And I think a lot of that has to do because of relevance in our markets and the loyalty that we have and what the loyalty program delivers. You know, delivers, you know, $1.5 billion of cash to Alaska, so it's very strong.
There's more we can do. I agree, Delta is in the lead.
The gold standard.
Is the gold standard with Amex. But we just renegotiated with Bank of America and Visa. Really happy with the rates we have there. And we've got some things in the hopper we're gonna do with, which I'm not—it's too early to discuss here, but we're working on to really extract more value from our loyalty program that we're working on. So we're excited about that. So that's coming. And post-merger, look, I, we're excited about it. This was part of our synergies. There's, out of the $235 million, I think there's $80 million in loyalty.
Mm-hmm.
If you look at the 1.4 million people in Hawaii, most of them have a Hawaiian card. But most of them also have a United or Delta card-
Right.
Because Hawaiian cannot take them anywhere.
Yeah.
Past the continental U.S. So we believe for us, not only will our goal-- This is why the branding is so important, that we want to retain the brand, because, you know, Hawaiians love the-
Mm-hmm.
The brand, is retaining the existing loyalists, but then make a play for: Look, we can take you. If you want to go to D.C., Hawaiian can't take you to D.C. For us, I can take you to D.C. from Seattle, to Portland, from San Francisco, and LAX, I can take you to D.C. So we believe there's a big opportunity for us, for Hawaiians to have one loyalty card in their wallet, for their one-shop, one-stop needs, to take them to the continental US, and also internationally with our 25 global partners that we have partnerships with, a lot of them which operate out of Honolulu, and of course, elsewhere. So, so we believe that's the big play for us, and there's a lot of value for there. But it, it is like you said, it's...
Honolulu becomes our second-largest base, with this, you know? So the relevance will be there, the loyalty will be there, and we know what value that brings to the bottom line.
Were there any particular loyalty lessons that were learned with the Virgin acquisition? Because that, that was also very much about, you know, particularly, I mean, from my opinion, it put California into play with Rapid Rewards.
You know-
Or against Rapid Rewards.
You know,
Southwest's program.
I think everything we're doing today with this acquisition are lessons learned from Virgin America.
Okay.
I would say mistakes that we made-
Sure.
With the loyalty program, with the branding, with a lot of the stuff. So right now, we're trying to create a company for the future that is capable with. Look, I can never see-- I believe Alaska Blue. I can never see, Alaska going away. And so, you know, when you think about growth and you think about, you know, being more of a national and even a global player now with, we're going to have seven 787s traveling the world, you got to think about it in a certain context. So how do you retain this massive loyalty and strength you have with that brand, but grow into different things?
So one of the things I know is just because something worked in the past, it doesn't necessarily work again in the future, but you have to keep what's good and recreate something that can build on that. So I think that's how we're thinking about branding. It's a big exercise we're doing right now. It's something that we hope to have, you know, more clarity that we can share in six or nine months. I'm excited about it, because I think it links in this loyalty that is so important and how to build on it going forward in the future.
Mm-hmm. Well, let's shift gears slightly. Obviously, a lot has changed since your last formal Investor Day.
Mm-hmm.
And I don't think you're on the calendar for anything coming up anytime soon. If memory serves, 11%-13% was the pre-tax margin aspiration. Should the folks in the room just sort of discard that now for the next several years? Do you expect returning to those types of, you know, a similar magnitude of targeted return going forward? I'm not going to hold you for it. I'm not asking for a formal guide. Should we just push 11%-13% permanently out of our minds? How should we think about that?
No, absolutely. I will tell you, Alaska's DNA is about setting the bar high. We are still focused on 11%-13%. Absolutely. You know, a lot of things have changed over the last. Before we set those targets, it was pre-COVID.
Yeah.
COVID.
Yeah.
Labor rates have gone through the roof, taking, you know, several margin points away from when we were producing those margins. But that's just the way the world changes. We have to figure out how we get back to those margins. And I think one of the things that I think we're distinguishing ourselves with, and something we're going to talk more about, as an airline, it's one of our big priorities this year, is talking about premium and making sure people know that we are a premium carrier. We're not a carrier. We don't have the network carriers here, you know, using your term, the LMA is here, and Alaska is stuck in the middle. No, we have a premium product. We have 300-some-odd airplanes between mainline and regional airplanes, all with a First Class, a Premium Class.
We have lounges across the country, full service on board. We are a premium carrier, and that's something that we're going to let people know. It's one of the reasons why, again, our margins, without international tailwinds last year and a refining margin that took 1.5 points of margin away from us, is our margins were still near the top in the industry, with United and Delta. So why does Alaska perform that way? One of the reasons is that we have this premium product. And I think it's going to be a differentiator for us. One, that we can go back, you know, as, you know, labor costs settle, that we can gain this revenue premium that we need. And on top of it, for us, you know, like, we've got this mindset on cost, right? We've cost discipline.
It's in our DNA. I've been 20 years with the company. We hammer productivity across our labor groups. So even as labor rates become even across the industry, our goal is still to have a relative cost advantage to the network carriers, and our cost advantage to Southwest is almost, you know, it's close. So that's our mindset, you know, cost discipline, high productivity, low overhead, a premium product, and but also a great Main Cabin Saver fares. We have all that for cost-conscious travelers, but we have a beautiful product for people to travel. I don't know if you saw our latest commercial. Did you see our latest commercial?
I did not see your latest commercial.
It's a commercial.
I don't stay up very late.
No, no, it's a commercial. Like, we're trying to advertise our premium product. So what we say, so the person's in the seat. And they lean back and say, "Oh, oh, oh, I can cross my legs," you know, in premium, because we have the most pitch in premium. So, it's one of the ways we're trying to advertise that Alaska has a premium product. It's not a fake premium. It's a real one. You can cross your legs. People can get out in and out. Same thing, our first class, we have the most on the domestic first class. We have the most pitch in our first class.
And so we are really positioning this airline as a premium airline that can go toe-to-toe with anybody, and with a lower cost structure, we can compete vigorously, and it's the reasons why we deliver the pre-tax margins we do.
Do you expect to be free cash flow positive this year?
It is-
We have you slightly positive, but, you know, with everything going on in the OEM side, I mean-
Yeah
That's the metric that I find myself manipulating.
I think on the higher guide of EPS, moving there and-
Five.
And lower CapEx.
Okay.
I think we can get there. Now, as you know, and we can talk about Boeing a little bit. Look, we have 23 deliveries that are planned for this year, 24 next year, so 47 deliveries over the next two years. We're not gonna get 47 deliveries-
Yeah
over the next two years. It's obvious. We have 23 deliveries in 2024. 10 airplanes are built, awaiting delivery. Of course, Boeing is under FAA scrutiny, DOJ investigation. It's gonna take a while for us to get those 10 airplanes. I can tell you the delivery is gonna be 10 to something less than 20.
Right.
So obviously, CapEx is gonna be lower. I think Q1 with our better performance in Q1, you know, is a good sign for us, you know, for, in terms of margin. So that's strong for us. So I believe free cash flow positive is very doable for-
Okay
2024. But, you know, a lot of things still have to fall in place. We still have a lot of things. But I can tell you, I am focused on free cash flow positive. It is something you know, we had to get the rat through the snake in the last 2 years, just to be honest. We had 65, 72 Airbus, that we have from the Virgin acquisition, that we went single fleet. That's 72 extremely bad leases that we have to get out of and then purchase, replacement MAX airplanes. So that was massive capital that went through in the last, couple of years. That rat is through the snake, and so now we're starting really with a single fleet of Boeings, on the domestic, you know, front for our network.
We feel like we're in a really good position now with CapEx. The last thing I'll say on CapEx, too, with the Hawaiian acquisition is they have 65 airplanes. You know, there is opportunity now to really rationalize and optimize the combined fleet.
Right.
I think there's more opportunity for us on the CapEx front. But I will tell you, free cash flow positive is squarely in my sights and my leadership team's sights.
Well, we have the near entirety of the aircraft leasing complex presenting tomorrow. So the folks that you need to talk to about those uncompetitive leases, you know, stick around, book a hotel for the night.
Yes.
We got a few minutes left. Mark, I see your hand going up, and hopefully it'll be joined by some in the audience. We'll get to you in a second, just because she's already walking up with the mic.
I'll make it quick, but Jamie, you led me right to the point I wanted to make then. So, when you bought Virgin, obviously, I don't recall if it was an immediate goal, but clearly, the goal was to get to the single Boeing fleet and so forth, which you achieved. With Hawaiian, it seems like a more difficult task. We do have all those lessors there, coming tomorrow. You did some creative swaps with Air Lease and so forth on some of those, you know, Virgin aircraft. Would you envision, is it a goal that if Hawaiian goes through, that you'd like to follow the same path and maybe figure out some creative ways to get back to, single fleet commonality, if you would?
Mark, great question. And with the Virgin and Hawaiian, totally different. You know, Virgin did not own all the, didn't own any airplanes, or maybe just a handful, with very onerous leases. Hawaiian owns two-thirds of their fleet, 40% of which are unencumbered. So totally, totally different. That gives us a lot more flexibility on what to do with it. Is there opportunity for optimization, rationalization? Yes, but at this point, there's not that sense of urgency. You know, with the Virgin thing, with the Airbus and the Boeing, the reason we went single fleet is we had two aircraft types performing the same mission in the Lower 48. And we said: Look, that's costing us 75.
Again, here's where our cost discipline comes in, is it's costing us $75 million-$100 million a year operating these dual fleets between pilot training and reserves, and maintenance, and parts, and all that stuff. So let's just eliminate that. Let's be the same one airplane for one mission. With Hawaiian, they have different airplanes performing different missions. Inter-island, you know, they have some domestic, long haul, international, and now they just got their first 787. So we have to look at that and just really understand, you know, which airplanes play a certain role for us, and then we're gonna rationalize. But we got time. The good thing is they, again, own most of their fleet, and it gives us more opportunity than with Virgin.
Okay. Question in the room. I had a question in the back?
Oh, good.
I just wanted to ask quickly about your strategy in Portland. You mentioned Portland earlier. You know, obviously, a lot of investment between yourselves and the airport in creating a new product that's finally gonna come to fruition this summer. On the other hand, a lot of growth from Delta, Southwest, United, and in that marketplace. Kind of curious, as you think about the relevance point, where does Portland fit into your network strategy?
Great question. So for one, I'm really excited about the investments in Portland. I think, when the airport unveils its new airport, it's gonna be one of the flagship airports in the country. It's gonna be a gorgeous airport. I hope you get a chance to see it. So Portland is still hugely, hugely important to Alaska, and we still have relevance, dominant relevance there. And, you know, we were slow to put back capacity because, you know, of all our big hubs, Portland and the Bay Area were the slowest to come out of COVID. So we're seeing a lot of signs of life now out of Portland and the Bay Area, so you're gonna see us start adding back capacity.
But our view is Portland is an Alaska hub, and will continue to be so going forward in the future.
Did we have another one over here up front? Thanks.
Similar question on network. You talked about from a Hawaiian perspective, about the opportunities to bring more people from Hawaiian east, you know, to the East Coast of the US. What about the combined network going west, Asia, maybe Australia, New Zealand? Are you thinking about that on within your, owned aircraft, Hawaiian, Alaska, whatever the brand is, versus your, your oneworld partners?
Great question. I'm really excited about the opportunity from the West Coast to go to go west. And we're looking at that right now. So the network team has a big homework assignment from me to look at what the network is gonna look like with the combined airline. And look, we have, you know, a massive presence in Seattle, and that domestic feed is perfect for launching international flights from. So we think that going west and east, even south, is a huge opportunity for us, and we're just exploring which one makes the most sense. Hawaiian got its first 787 a few weeks ago. They're getting 4 this year, and there's 12 firm coming. So there'll be 12 airplanes in the fleet that a nd these are long range of 787-9s.
These airplanes have long, long legs, and we're excited about what to do with those airplanes, you know, off the West Coast.
Last question from me. I've never been a fan of fuel hedging.
Yeah.
I've always considered it, maybe this is sort of warped, but sort of a personal victory anytime an airline backs away and abandons, you know, fuel hedging, which you recently did. How did that decision? Was that a contentious? Well, one, why? And two, was that a contentious internal debate, or you're looking at your team, which makes me think it was.
You know, I think it was all because of you, Jamie. But-
Yeah, I doubt that.
Look, look, I'll be honest, I think in the last five years or so, I became very critical of our hedge program. The problem was the hedge program, the premiums just got higher.
Yeah.
The volatility for us on the West Coast wasn't in the oil that we were trying to protect. It was in the refining margins. So just last year alone, we had, we have almost a 30-cent-a-gallon disadvantage from the, the industry because of the volatility of the refining margins. So I pretty much said: Look, let's stop protecting against oil. Let's do something with the refining margins. So last year, we spent $60 million hedges that produced us nothing, and we're gonna take those funds and figure out how to reduce volatility. There's a whole team working on it, how to reduce volatility in refining margins that really cost us a couple of hundred million dollars. So if you look at. Again, if you look at our, our potential of profitability last year, we lost a point and a half of margin.
Yep.
Because of that volatility. So I agree with you. We're gonna figure out, you know. And the key is, how do you take. It's not developing a new hedge, it's how do it take volatility out of refining margins? There's a lot of things. I got the team working on it, because it's just too much margin to go away, you know, on gas. So, but, it we did have a lot of. You know, it's something. Look, it's something you, we did for almost 20 years.
Yeah.
People just get comfortable, and it's just because something worked in the past, and it did work for us, somewhat in the past, but it wasn't working for it in the future. So those are the things. It's hard as a leadership team, when you get comfortable with a certain way of doing things, it's like, "No, you know what?
Good.
A new path. We got to think differently. The world's changed, and the industry's changing fast, and, you know, you got to adapt. Yeah.
Well, I did want to thank you. You were the first CEO to embrace my term, LMA, so I can assure you that my inflated ego is intact.
Good.
Thank you very much for that. Thank you for coming down.
Thank you, Jamie. Pleasure.
I appreciate it.