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Robin Hayes Address to International Aviation Club Washington | October 9, 2015

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Robin Hayes Address to International Aviation Club Washington | October 9, 2015 ROBIN HAYES ADDRESS TO INTERNATIONAL AVIATION CLUB WASHINGTON | OCTOBER 9, 2015 As prepared, not necessarily as delivered INTRODUCTION Thank you, Ken, and all of the Board of the International Aviation Club for the opportunity to address you today. It’s great to see so many familiar faces from across our industry and to be in Washington. I’ve been spending a tremendous amount of time here in recent months with so many pressing issues – whether it’s ATC reform, excessive taxation, PFCs, Open Skies…the list goes on and on. Before I dive into some of these areas, let me first share a bit about JetBlue—how we started, where we are today, and what we wish to accomplish in the future. The JetBlue story is all about people. And before I start, let me recognize, with great pride, the JetBlue Crewmembers in the audience who make our airline the success it is today. JETBLUE TODAY – A CHANGED INDUSTRY This year marks a special milestone for JetBlue. It’s the 15th anniversary of our first low-fare flight— Flight 1 from Kennedy Airport to Fort Lauderdale. Over these 15 years here in the US, JetBlue has grown up and made a place for itself in a fiercely competitive industry, against a backdrop of incredible change both domestically and abroad. Here in the US, countless airline brands have disappeared through bankruptcy, shutdown, or consolidation – icons like TWA, Continental and Northwest, upstarts like America West and AirTran, and before that, Eastern, Pan Am and Braniff. It’s been almost Darwinian – survival of the fittest – and JetBlue emerged not only a survivor but a winner. In just 15 years, we’ve gone from start-up known as ‘JetWho?’ to a Fortune 500 company with a brand recognized globally and hundreds of customer service accolades under our belt. The airline shakeout of the past decade has had a profound effect on the structure of the US industry. We now only have three hub-and-spoke megacarriers; Southwest following its acquisition of AirTran; and a handful of other low cost competitors like JetBlue and Alaska. The three big legacy airlines combine to control about 60% of the US market nationwide – which results in even higher concentration in some cities. Add in Southwest and that figure jumps to 80%. JetBlue, by contrast, is just a 5% player. Yet as an innovator and a market disruptor, JetBlue plays a critical role in ensuring the US airline industry remains competitive despite the consolidation of market share and market power in the hands of just four big players. Since 2000, JetBlue has created more than 18,000 jobs across our network. This year alone, we’ll add more than 2,000 new jobs. This past spring, we were recognized by Forbes as one of the Top 20 Best Places to Work in America. Our crewmembers’ engagement, passion, and focus on our customers sets JetBlue apart from competitors and explains the success of our unique model. While I’m here, I do want to clear up a bit of a misconception about JetBlue that I often hear. Many people still think of JetBlue as the airline you take from the Northeast to Florida. While that remains an important part of our network, JetBlue has rapidly evolved over the past decade and is today a leading international airline. Our model has always been about entering markets where the incumbents charge high fares, offer poor service, or both, and then stimulating traffic with affordable prices and best-in-class service. We discovered that a lot of international markets fit this bill perfectly. -1- In fact, we now fly to 20 nations across North, South and Central America. Last week we announced plans to add our 21st country, Ecuador, and we also launched service to Mexico City. Caribbean and Latin American flying now represents about one-third of our route system. So, as you can see, we’ve come a long way since Flight #1 to Fort Lauderdale. OPEN SKIES JetBlue’s successful international growth has been enabled in large part by Open Skies, the aviation policy pioneered by the United States. The access Open Skies affords JetBlue to international markets – both directly and through our 44 codeshare and interline agreements – has been a boon to our ability to expand and create those 18,000 jobs both here and abroad. It’s also been a critical tool for us to be able to compete against the mega-carriers I mentioned earlier. Like other small airlines who have a big stake in preserving America’s Open Skies policy, we’ve spent an awful lot of time this year countering the barrage of rhetoric and misinformation our legacy competitors have been trying to advance as they take aim at the Middle East airlines. We don’t speak for the Gulf carriers who have responded in great detail to these allegations, but nations around the world have long taken steps to support their industry in different ways. For example, here in the US, the airline industry has received tens of billions of dollars in assistance through things like the Fly America Act, Chapter 11 protection, the Air Transportation Safety and Stabilization Act, tax credits, incentives for flights to cities and to move jobs, and also to open maintenance hangars, to name just a few. If you pore through the legacy carriers’ filings with a critical eye, it’s clear many of their arguments against the Gulf carriers don’t pass the straight face test. What is indisputable is that legacies have failed to prove that they’ve suffered harm, much less that there’s been any breach of our Open Skies agreements with the UAE and Qatar. That’s why you hear so many people, so many travel and consumer organizations, and so many US passenger and cargo airlines and their employees challenging the legacy opinion, saying ‘this just doesn’t add up!’ Open Skies works because countries abide by their commitments and refrain from restricting airline traffic. Open Skies creates a balance of opportunities and encourages competition; it does not guarantee each side a set cut of the benefits. What the legacy airlines are asking for would give other countries the green light to come here, open consultations with us, and seek to throttle the growth of US airlines to protect the market share of their flag carriers. It could also have a profound effect on the ability of US cargo carriers to compete as countries would seek to amend agreements to favor their national airlines. I am convinced that the risk is significant – many of the US Open Skies agreements could start to unravel. For younger, pro-customer airlines like JetBlue who are still growing and rely on these treaties to expand, that sort of risk is unacceptable. Part of me wonders when the Big Three says they favor Open Skies whether it’s really true. Surely now they have all they need, their interests are best served in rolling up the drawbridge and going back to a more protectionist era of high fares and limited choice. The administration now faces a choice: it can choose to go back on its Open Skies commitments and protect the legacy airlines from the competition of the Gulf carriers; or it can stand with US consumers, businesses and cities across the country, as well as the passenger and cargo airlines in our coalition that depend on our network of Open Skies agreements to help them grow. Our airlines rely on these Open Skies agreements to grow US jobs, despite assertions to the contrary that Open Skies flying kills US jobs. -2- JOINT VENTURES We believe the real motive for the legacy carriers’ assault is about maintaining their significant share of the US market, together with their European joint venture partners, by limiting new entrants and new competition. US airlines have almost completely ignored the fast growing regions of the world that the Gulf carriers serve. The only overlap with the US carriers consists of precisely two nonstop city-pairs: Washington to Dubai and New York to Milan, both of which are JetBlue codeshare routes, by the way. That Milan service, a so-called fifth freedom route, sometimes seems to be the biggest bone of contention among the legacies, and it’s rather odd when you consider that fifth freedom flying is commonplace across the globe. The legacy carriers conveniently ignore the fact that US airlines have long operated fifth-freedom hubs at Tokyo Narita. It really boggles the mind how a single route from Milan to New York – which has grown the market and stimulated traffic on US carriers flying the route, as well – is being mischaracterized as the downfall of an entire industry. As envisioned by Open Skies, fifth-freedom service has expanded the number of flights, improved the quality of service, and lowered fares. Long before this JFK-Milan route was in the spotlight, you could fly: A US airline from either Tokyo to Seoul or from Amsterdam to Bombay, A Hong Kong airline from New York to Vancouver, A Canadian airline from Santiago to Buenos Aires, An Egyptian carrier from Bangkok to Kuala Lumpur, A Kuwaiti airline from New York to London, An Indian airline from New York to Paris, A German airline from Singapore to Jakarta The point is, this is not something as sneaky as it has been made out to be. And of course let’s not forget how critical fifth-freedom rights are for our cargo airlines to ply their global trade. What’s clear is that grants of antitrust immunity, coupled with metal-neutrality, have created a perverse incentive for the legacies to prop up flying by their European partners.
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