Welcome to day two of our Transportation, Airlines, and Industrials Conference here in New York. Our next panel, glad to have JetBlue, the team from JetBlue here. We have their new President, Marty St. George, with us, their Chief Financial Officer, Ursula Hurley, and their Head of Finance and Strategy, Dave Clark. So thank you for joining us today.
Thank you.
Thanks for having us.
So, Marty, welcome back to JetBlue after you know, few year hiatus. How have the first few months been?
It's fantastic. It's actually been a great reminder of why I came back. I mean, at the core, you know, we have an outstanding franchise. You know, we have 24,000 crew members who are very focused on a differentiated customer experience, and I've been gone almost actually just about five years. And, you know, a lot of things have changed, but I think some of the core things are the same.
Got it. I want to spend a lot of the time today focused on a lot of some of, some of your network changes, your product strategy going forward. But certainly, I just want to start off with one near-term question. Just, there are a lot of consumer concerns out there in the market, in the economy right now. You know, I know they're not U.S. airlines, but last week we heard, you know, Ryanair citing some softer summer fares. Canadian leisure airline Transat , you know, talked about some weaker unit revenues of late took down margin guidance for the year because of that. So just want to get your sense, just in terms of where you are seeing demand, particularly as we head into the peak summer travel season?
Well, I think if you go back to our first quarter earnings call, when we talked about what we were seeing for first and second quarter, nothing has changed to make me feel differently about that. I mean, I can't speak to Canada or Europe.
Right
... but, you know, from my perspective, you know, things are progressing similar to what we had said in our, in our call. Obviously, there are you know, sort of ebbs and flows depending on different parts of the network, but frankly, I think it's been much more supply focused than supply driven than demand driven.
Mm-hmm. Any sense you can give us just in terms of how April tracked versus your expectations, kind of what you're seeing here in May, and maybe just kind of initial thoughts into how kind of June is progressing from a bookings perspective? And how... I guess, how booked are you for June at this point in time?
We tend to not release that type of data-
Okay
... at this type of a conference. I have no news to make as far as that goes.
Mm-hmm.
But, you know, from our perspective, you know, we've laid out, you know, a list of initiatives for 2024 and beyond, you know, which we're on track for accomplishing what we promised to our investors.
I would just add, like in April, the operation performed very, very well.
Yeah.
I mean, that was the theme in the first quarter, and so our revenue results ended up on the better end than cost actually beat. So I think that's a continued theme in terms of the investments that we're making in the operation and the performance that we're seeing. And then we did highlight in the second quarter, we envisioned a certain acceleration in terms of revenue, as we navigated through the year, and we're just seeing a significant amount of capacity in Latin America. We have over, you know, 30%-35% of our exposure is to Latin America, and so, capacity in that market is about 60% across the sector since 2019.
That was kind of the essence of the short-term setback that we communicated in terms of the second quarter. But you know, I'll reiterate, Marty said, we're pleased with what we're seeing thus far here in the second quarter. We're definitely within the expectations that we originally thought.
Great. As the backdrop from a capacity perspective, as you move past the second quarter, certainly improves into the back half of this year and certainly into 2025. You have, you know, you're not immune to, you know, a lot of these GTF engine overhaul issues. Obviously, OEMs are having, you know, trouble delivering aircraft on time. Many other airlines are, you know, trying to get back to more consistent profitability. But how do you view kind of the capacity backdrop in your markets, and what do you think can derail that?
Yeah, I think I'll start, and Marty or Dave can add. First and foremost, I mean, this is a unique year for us in terms of we're not growing. So in the second quarter, we're, you know, projected to be down, like, 3%, and that mainly is driven by the GTF challenges. I mean, I'm a big believer that the GTF challenges are here for the next couple of years. I think we've said on average, we'll have 11 aircraft out of service in 2024, and that will definitely increase in 2025. So I do think at a macro level, the constraints across the sector are helpful in terms of rationalizing capacity. As I mentioned, there's some pockets in the network that see more overcapacity at the moment, like Latin America.
But we do believe that, you know, the constraints are here to stay over the next few years, and it will be a headwind for JetBlue specifically. It's a different dynamic when historically we've grown mid to high single digits, and now we're not growing, and that will be a challenge that we're gonna have to continue to work through over the next few years.
I think it's worth reiterating that really outside of Latin, you know, we are showing exactly the progression we'd expected.
Okay.
It's really a Latin issue with that, I think the industry is struggling with. And I think if you look at the commentary we'd heard on other calls from our key competitors, this is a secular issue as far as capacity. And just like we saw with Florida in 2023, rationalizing, you know, our expectation is, especially in a capacity-constrained environment like we're in right now, that things will sort of regress to the mean, and airplanes will be moved to the places where they're gonna make the most return. So from that perspective, I don't think we see anything that makes us concerned about this being anything other than a blip.
... as, what's your strategy for Latin America? Obviously, you have your big focus city down in Puerto Rico. Obviously, a lot of growth, a lot of competition there. You know, does it make sense for you to take capacity out of that market, you know, or, you know, what, what's your strategy?
Well, I'd say two things. First of all, you know, the Latin region in general is very important for JetBlue's results. And, we do sort of look at it in two lights. First, being the visiting friends and relatives, the more the ethnic markets, the VFR markets, and second would be what I call the leisure beach markets. I think both of them fit very cleanly within sort of the overall positioning of JetBlue on the East Coast of the U.S., which is as an airline more focused on leisure customers. So from that perspective, these markets fit in very, very well. If you look at our presence in, you know, Boston, New York, South Florida, very, very important markets for Latin America.
So from that perspective, if you look at the results we've driven in the Latin region, I think that this has been a franchise that's been very profitable for us. Continues to be profitable, not as profitable, but continues to be profitable. And you know, we're playing a long game here. This has been a very successful market for us, specifically for Puerto Rico. Again, I think the point-of-sale strength we have on both ends of it, which is both in the Commonwealth and on the East Coast, I think set us up very well for success.
Yeah.
I'd maybe add, too, in Puerto Rico specifically, we have a very long history there. We actually celebrate our 22nd anniversary in Puerto Rico this month. Keep in mind, the company is only 24 years old. We are, you know, still by far the largest airline there. We have great coverage, not only the big sort of U.S. cities, whether that's New York, Boston, Florida, which are both origin and destination traffic for Puerto Rico, but also some of the adds we've had really focused on the island. Places like Medellín, Cancun, St. Croix really helps the local traffic coming out of Puerto Rico, where we're really ingrained in the community. We have about 700 crew members there, with plans to very likely grow that. As well as things like... You know, we have the local credit card.
We're partners with Banco Popular. We do a lot of things specific. We are part of the community. We sponsor specific events there. So we're very deeply ingrained in Puerto Rico and feel very confident in our ability to win there, and we will fight extremely hard. It's a huge priority for us.
I would also venture that every person in this room probably knows at least one person who has moved to Puerto Rico since COVID. I know a couple, you know, for tax reasons or the ability to work remote, so we're very bullish on that market.
Got it. So, Marty, maybe, you know, talking a little bit more longer term, you know, over the past, you know, three to six months, you've announced, you know, some network changes. Maybe spend some time there, just, you know, maybe talk about the product a little bit. But certainly want to kind of bucket what, how you think about the network in terms of changes you made on the West Coast, what you're seeing domestically here, what you plan for Europe. You spoke a little bit about LatAm, but maybe we can expand, expand upon that a little bit. But maybe before we get into the regional stuff, just maybe first on the product, right? You know, you rewind five to 10 years ago, JetBlue's product was pretty differentiated, right? You had the, you know, live TV, live seatback TV.
You had, you know, good seats. You had, you know, Wi-Fi. Your competitors, peers, have caught up with you. There's, you know, live TV on a lot of flights right now. Everyone, you know, Delta's offering free Wi-Fi to loyalty plan members. I guess, you know, how do you try to differentiate the product again?
Well, at the core, the advantage we already have, that you mentioned, we still, we still have. You know, we have TV in every seat and every single plane. We have Wi-Fi for free for everybody, every airplane we have. So we are differentiated from that perspective. The second thing is, I think, is very much focused on the positioning that we have. And you know, we've used this phrase over the last 20 years that, I kind of want to bring back a little bit, which we used to call serving the underserved. And, you know, my view of the world is, if you're a, you know, super-duper secret, you know, platinum, diamond, whatever, you know, we're probably not gonna be your first choice airline.
But if you are the silver or gold, sort of the low-tier elite, on any of the full-service airlines, you will all in all have a better experience on JetBlue than you will, as the person who's scrambling for, you know, the upgrade when you're number, you know, 82 on the upgrade list. So from that perspective, I think there actually is a very strong market there, and this is something we'll be talking about more, on our Investor Day, actually, with some more solid data about this. But I'm actually very, very excited about the positioning that we have because, yes, those super elite customers are very, very valuable. I'm happy to have the Big Three fight for those customers.
But there's actually a much larger base of customers that we think we're very well positioned for.
Right.
And, Andrew, you kind of mentioned it earlier. I think a big part of that is also running a good operation, so you have that kind of the reliability that your customers kind of want and deserve. I guess what has changed operationally that has, you know, improved those numbers so much? I know there's been some relief at JFK and things like that, but what are—what have been the key driving forces on just that, you know, improved operational performance over the past several quarters?
Yeah. So coming out of COVID, in terms of customer choice, reliability is now, like, one of the top three items, like, customers, like, value. And so just given naturally our geography, we're going to be challenged with ATC and weather. And so we've got to focus on the things we can control, and we've been investing in reliability. And so what does that mean? That means ensuring on good weather days, we're making—we're delivering on our operational metrics. We're also investing in tools and technology to recover the airline more effectively, because we know that given our geography, we will have weather and disruption. And so what we're seeing is, even though we're seeing more disruption days, we're recovering more effectively from a crew perspective and how we handle our customers.
So there's been a significant amount of investment in terms of our Technical Operations and making sure that our techs have enough time with the aircraft to build reliability. We're also giving our frontline crew members and our System Operations crew members better tools to make real-time decisions in order to assist with that recovery. So it's a significant underpin of what we're trying to do here, is reliability and just building more credibility for our crew members and our customers, given that it's such a high, you know, customer value item at the moment.
I also cannot emphasize enough the value of the slot waiver that the FAA-
Yeah
... approved for New York because, and this is like the deep, dark secret in New York, but, you know, these airports are slotted for blue sky days, and unfortunately, blue sky is very far from reality for a good chunk of the year. So, you know, we've been working very closely with the FAA for quite a long time, trying to work on air traffic control relief. And obviously, with the exposure that we have to the Northeast and Florida, I think this is more important for us than anybody else. But in the interim, the slot waiver has been very, very helpful as far as sizing the operation a little bit more to reality as opposed to hope.
Mm-hmm. When does the slot waiver expire? End of the-
Um-
The fall.
I mean, in the fall.
Yeah, the fall.
We're still talking about-
Yeah
... a possible extension, so.
Got it.
Yeah.
I know in prior peak summers, there have been some airport projects, you know, runway closures, things like that, that have impacted the operation. Is there anything we should be aware of as we go through, you know, August, September, just in your focus cities that could impact the operation?
Nothing major.
Okay.
I mean, there's small stuff. Puerto Rico actually has runway construction going on right now. You see San Francisco's runway construction going on right now. Nothing big that we anticipate will impact our-
All right
... performance this summer.
There's no JFK runway closures or anything like that.
No
... you have to deal with?
No, I mean, to Marty's point, the most material thing that's going to impact us is ATC staffing levels-
Yeah
... and them not being where they need to be, given the congestion and the weather that we deal with here in New York.
Right. And Marty, maybe lastly, on the product side, how does Mint fit into the, you know, your whole vision for JetBlue? I think all the aircraft you have on order right now have Mint configurations. How important is that for you?
I would say Mint has been a shining star of success for us, and I remember vividly, going to the board however many years, eight--seven, eight years ago, and promising it would only be 13 airplanes, and now it's 52 or something-
Yeah.
Fifth- you know, low 50s. And frankly, you know, we just as part of our network announcements, we just made an announcement of pulling New York, L.A., in Mint, which was a tough pull, but frankly, the opportunity cost from Mint airplanes is extremely high. So that's why you're seeing things like, you know, Gatwick becoming a seasonal station for us, because the Mint planes have been gold for us. I can't say enough positive things about how successful that has been. And I think what... It's funny because I feel like it's... If you look at the customer base that we have, you know, Mint was extremely well-timed for the change in customer demographics.
You know, we are an airline that does extremely well anyways on high-end leisure, and we now have a product that is very much built for high-end leisure. So, you know, Mint has been an absolute home run. And frankly, you know, it's in my view, it's funny, I think I will take solace that I've heard basically the same thing from Michael O'Leary. You know, it is impossible to be successful across the Atlantic without a premium product.
Sure.
It's been an important part of the ramp-up that we've had in the Atlantic as well.
I think this is also like a differentiator for us compared to some of our peers, is playing in this, like, high-value, premium leisure space. I mean, when you look at our fleet of aircraft, I mean, 26%+ of the seats that we fly are, quote-unquote, "like premium." So think of Mint, think of Even More Space. And I think that's really, you know, paid dividends for us coming out of COVID because the, you know, people are valuing an elevated experience. And so, Andrew, to your point, you know, this year we'll take seven A321 aircraft. They will all be in the Mint configuration. Next year, we have another five A321s coming, and those will be in the Mint configuration as well.
This is an area that we're gonna continue to invest in, because to Marty's point, like, from a pure margin perspective, it continues to perform exceptionally well.
Yeah.
One small just clarification to your point earlier, Andrew. So as Ursula just mentioned, on a 321 fleet, they're gonna be Mint for the next year or two.
Yeah.
They've been all Mint the last couple of years. We do have flexibility for that in the order book to decide which configuration we want.
Yeah.
And then, of course, the 220s-
Right
... don't come with Mint, but as Ursula mentioned-
Yeah
... they have 30 Even More Space seats, Even More Space seats. So they're in the, you know, low 20s in terms of premium seats, from that perspective.
Got it. Marty, maybe changing gears a little bit and talking about some of the network changes that have been announced over the last few months. I guess it was back in, what, mid-March, you know, made the decision on some of the West Coast flying, Central America flying. So, yeah, you've made some changes just in terms of transatlantic. I guess, of all the regions that you've, you know, announced so far, what was the most difficult decision to make?
I mean, every decision is difficult, honestly. Not because of the numbers, just because of the disruption. And I think what you're seeing is that we have phased out our announcements, basically tied to seasonality as far as which months things are going away, impact on crew members, advanced booking for redeployment, stuff like that. But frankly, I mean, I'll speak for Dave, even though I probably shouldn't. You know, we're paid to make these decisions, so these are not difficult from that perspective. I mean, the numbers are the numbers. Every plane has got to earn its way into the system. And, you know, I will say that the Spirit transaction, I think, had a big overhang on our ability to make changes.
And it's not worth getting into the legal side of it, but, you know, we had set the network in a certain level, a certain amount of overlap with Spirit. I think once the Spirit transaction ended up going away, it really opened up the gates for us to make a lot of changes. So, and it's also important to note that the majority of the changes we've announced have not actually gone into effect yet.
Right.
Um-
I think you just started pulling LatAm in the fall, or-
Yep. Well, just—we just—Baltimore just closed two weeks ago, for example. We announced that back in November or December, probably—
Mm-hmm
... before my time. But, you know, moving the airplanes around for it, you know, that's the easy piece of this. And, you know, I feel like with the core franchises we have, you know, Boston, New York, South Florida, Puerto Rico, we have plenty of places to put airplanes. So, you know, frankly, it's best and highest use of the capital. You know, obviously, it's done a little bit different for the Mint airplanes than it is for the all-economy airplanes, but the process is more or less the same.
Yeah.
And I'll just try to follow up on what Marty noted. I think this really illustrates the urgency and seriousness with which we're pursuing a return of profitability. These are hard decisions. You know, we're doing town halls with our crew members who are affected by these, when their station gets cut in half. And, you know-
Mm-hmm
... there's not going to be as many jobs going forward. It's difficult, but we are serious to urgently get back to profitability, and these are the types of decisions we've got to make to do that.
Fair to assume that the markets that you cut were probably towards the lower end from a margin profile?
Oh, yes. No question.
Right.
Yes. No, I mean, the North Star is getting us back to the profitability levels that we've seen historically. That's everything we're doing is motivating us towards that direction.
Got it.
Clearly, with you know, capacity headwinds from the industry, from the GTF issues, you know, there are all sorts of, you know, boulders in the road, but, you know, I think the path is very clear.
Got it. Can you touch upon how you're thinking about your transatlantic strategy from here? You've obviously announced some more seasonal routes, but maybe, you know, Marty, since you're kind of back and looking at everything anew, in your new role here at JetBlue, just, you know, how is the transatlantic rollout progressed versus plan, and how you're thinking about it over the next few years?
So I'd say on the revenue perspective, we're more or less, you know, we're at or above the pace that we laid out in the original business plan. Cost side, we're not, and that's really because of the overall inflation we've seen in the industry, whether it's labor, fuel, handling, catering, you name it. But I will go back and say, to the point I made a little bit earlier, every plane has to earn its way on the network. And it's funny because as I've read a lot of the media that was done from a distance about the Atlantic when I was in South America, you know, people, I think, sort of made this look like this is some, you know, massive move by JetBlue that is the beginnings of, I don't know what it was, colonizing Europe again.
I have no idea. You know, my view is, these are spokes, and every spoke has to justify itself, you know. And frankly, you know, I think I'll lay out a decision I think was tough for us, which was Gatwick, because, you know, our London, certainly, you know, London and Paris have been very successful for us so far on a relative basis from what we expected to be. But the opportunity cost for Mint airplanes is high. And as winter came up, you know, your third and fourth flights on London were gonna be less valuable than, like, additional flights from Fort Lauderdale to the West Coast and Mint. So, I think, you know, when Dave talks about the decisions, that's the type of difficult decision because we were investing in ramp and Gatwick.
It would be nice to be able to sort of continue on that path. You know, we plan to be back in the summer of 2025, but, you know, we had too many opportunities in Fort Lauderdale in the winter with the Mint airplanes that really forced us to make decisions like that. And I think back to Dave's point, which I think is incredibly important, the decisions are hard, but these are all the decisions that we're going to make. I mean, profitability, we work with the investors. Our job is to make money, and these are the changes we need to make.
Mm-hmm. Post-pandemic here, what do you think about Boston? Obviously, Delta's come in very aggressively in Boston there. Do you think about Boston any differently today, given the kind of change in the market share there, or is Boston as high on the focus city list as it, you know, always has been?
I feel the same way about Boston as I did when we started building it up in 2012, maybe 2010?
Yeah, 2010.
2010, yeah. You know, we continue to be the largest airline up there. We continue to have... Our data, we have better Net Promoter Score than our biggest competitor. Yeah, we, we still are gonna be bullish on Boston. You know, frankly, I think Boston suffered a little bit during the NEA as we moved airplanes to New York.
Mm.
... but I think as the NEA also unwound, the planes are gonna start moving back to places where we, you know, have other opportunities. So, you know, we'll absolutely continue to see more growth in Boston.
Got it. Maybe switching gears a little bit, just in terms more towards kind of growth and trying to maybe offset some of the GTF, you know, issues that you're having over the next few years. You know, or so, you maybe talk about kind of the decision process around maybe, you know, extending the useful life of certain aircraft, what goes into that, and kind of how you're thinking about that, you know, particularly through 2025, as your aircraft on the ground kind of just continues to accelerate.
Yeah. So, we've previously communicated that... Well, maybe to back up, in January, we actually executed an aircraft deferral. So we, we were faced with-
... having to digest 80 aircraft over the next two years, and that just, you know, wasn't feasible. It's even more painful to buy an asset and then have it parked on the ground, you know, weeks later. So, we executed that deferral, and we also made a decision to continue to extend over 30 A320s that we were set to retire. This is a very capital-efficient, capital-light way to add capacity that back into the network, to help backfill some of the capacity that's being lost, due to the GTF. So, I think it's a smart decision. You know, we originally had these aircraft retiring, and so, we basically optimized the maintenance profile over the last few years to retire them.
Mm-hmm.
So now we are taking a certain level of investment, whether it be buying out aircraft that are currently on lease or whether it be, putting engines through the shop in order to keep these aircraft flying. But, again, we think it's a capital-efficient way to add capacity, that back into the network.
Yeah, and I'll just note, these are very reliable aircraft, right? They have the older engines that are very durable. Also, 90% of our A320 fleet has new interiors. We did a retrofit, sort of mid to late last decade.
Yeah.
Most of these planes that were due to retire, a customer would walk on and think they're fairly new.
Right. But not all. We will reconfigure the last few that are not, that have not been reconfigured, so the customers will have a great new experience in every one of the planes.
Got it.
This is a, you know, as Ursula alluded to, these are sort of timed around maintenance cycles. So, you know, we're basically making the investment in the next four years, four plus years of the airplane, and then we have the optionality in four years beyond to see if we want to do that again. But, it's... You know, from a capital efficiency perspective, you know, we're very, very excited about the opportunity.
I guess in the next five to 10 minutes we have left, I wanted to, you know, turn maybe more to the balance sheet and capital spend. But wanted to first open it up to the audience, see if there's any, any questions at this time. We have one here. In front here.
Okay.
Ursula, given you talked about the GTF might be a bigger headwind next year, this year, you're shrinking capacity, the unit costs are up mid- to high-single digits. How should we think about next year with capacity potentially again challenged, the A320 maintenance you're talking about, and then what are the offsets, further structural cost takeouts, et cetera?
Yeah. So it's a good question, and, I think it's important to note, we are being militant in terms of the cost structure, especially in light of us not growing. You know, we've done voluntary opt-out programs. We're shrinking our real estate footprints in certain cities, and we're also continuing to progress very well with the structural cost program. I mean, I was pleased in the first quarter, we did beat our cost guidance. Half of that was driven by operational performance, but the other half is driven by just you know, great work by the team in delivering on these initiatives. And we're not stopping. Like, we're gonna have to continue to see how we can move the cost structure to more variable versus fixed.
And so the team is focused on identifying initiatives there, to help us get through the next few years, because the growth rate is going to be challenged. So, you know, this structural cost program wraps up at the end of this year. We're gonna have a whole set of new initiatives, to ensure that the controllable cost base is competitive in light of the capacity headwinds that we're seeing.
Yeah. I would just note, on top of all that, we also have our E190 fleet retiring.
Mm-hmm.
which we'll finalize in 2025, so we'll also have the benefits of being back to two fleet types. Whereas we're in the midst of running three temporarily, which obviously comes with some inefficiency from pilots, maintenance, things like that.
The one other thing I would add is we did communicate on the earnings call a few weeks ago that, due to a change in accounting treatment for Pratt & Whitney compensation, that adversely impacted our full year guide this year. However, you know, the team has done a great job at offsetting at least half of that. And so I think that just continues to speak to the cost journey is not stopping, and we're continuing to dig deep to offset these headwinds that we're faced with.
Any other questions?
Hey, thanks for the question here. Maybe if you could just talk about corporate travel trends in recent months. It seems to be a good part of the story here, double-digit growth in Q1. Just has that sort of continued into-
Yeah
... Q2 here?
Yeah, and it has continued. We're actually very optimistic about what we're seeing in the corporate trends. And I think obviously Mint is a big part of that. It's very, very popular from the bicoastal customer base that we have. So, yeah, we continue to see positive trends in corporate. I think we said low teens, 11, 12%, something like that, growth in our corporate accounts. Sort of, you know, apples and apples comparison, so very happy about that. Obviously, still not back to 2019 levels for the industry or us, but trends are going the right way.
Hey, Ursula, you just spoke about how you're being militant on the cost structure. Obviously, seeing some discipline on the capital spend side with the deferrals that you were talking about earlier. You know, as we think out through the GTF issues and into kind of, you know, past 25, how would you frame the right level of CapEx over the next few years?
... Yeah, listen, our number one priority at the moment is getting this business back to sustained profitability. And as a result of doing that, we've got to deliver free cash flow. That is a necessity. You know, we've got to get the business generating cash, so we can start to delever, 'cause we're clearly in a different space than we were heading into COVID in terms of our leverage metrics. I think as a reminder, right, we still are going through a fleet replacement, so we do have elevated CapEx to support that replacement, which should come to a close at the end of next year. I mean, we streamlined the order book to be about 25 aircraft a year for the next handful of years.
We've got to get free cash flow positive, so that we can support that level of growth.
I guess getting back to that more consistent level of profitability, you clearly have your cost savings programs-
Yeah.
your network strategy.
Yeah.
But how much, like, how much would you say of that? You know, what has to go right? Is it like, how much of that comes from just the good industry, like, industry backdrop remaining, right? How, how much can you do on your own, and how much are you, you know, relying upon the favorable industry backdrop?
Yeah, listen, we need to deliver a step change in terms of the revenue that we're generating per shell. Like, we have rolled out 15 revenue initiatives this year. We're evolving our network strategy, as you mentioned, and there's also opportunities for us to better merchandise to our customer base. And we've got to leverage, quite frankly, our product and our brand to actually do so. In addition to that, we need to ensure that we're maintaining our cost advantage against the legacies. And so this is gonna take time. We talked earlier about, like, this network evolution, and so this is gonna take time to mature, and for us to get to a point of consistent profitability.
You know, I'm pleased that, you know, we were profitable in the month of March, but we need to be able to deliver that consistently, and we believe that we've got a sound plan in place between top-line initiatives, maintaining, you know, our cost gap and, with a foundation of reliability behind that to get the business back to consistent profitability.
Ursula, in the last minute and a half that we have, two quick balance sheet questions. One, you have the convert maturity coming up in a couple of years. How are you thinking about addressing that? And then, two, I know the PSP loans on balance sheet. I think the rate steps up on two tranches of those next year. How do you think... You know, how do you think about those loans when the rates reset?
Sure. I mean, listen, between the convert and the government loans, I mean, these are efficient pieces of debt, just compared to the broader cost to debt portfolio that we have. So, you know, we're looking at options on how to refi the convert. But I do envision us sitting in that as long as possible, just because-
Sure
... the cost of that debt. You know, we do have a plethora of opportunities. We've got $10 billion of unencumbered assets, and one being the loyalty program, our brand, our slots, we've got aircraft and engines. So you could expect us to assess all markets and all collateral and put a funding plan together for the next few years, focused on prepayment flexibility, as well as all-in cost of debt. So more to come on the convert. I know everyone's super eager to figure out what we're gonna do, but it's also very efficient at this point in time to maintain that in the portfolio. And in terms of the payroll support loans, our intent is to stay in those, even with the slight step up.
Just compared to our weighted average cost of debt, it's still efficient. I think the new news that came out last week is the government loan warrants and those going to auction. So that is something that will occur in the next handful of weeks.
Great! Well, thank you very much. Appreciate the time.
Thanks for having us.
Great. Thank you. Thanks.