JetBlue Airways Corporation (JBLU) Earnings Call Transcript & Summary

All right. okay. Moving right along. Thanks, everybody. This will be the first of the occasional fireside formats for this morning. I'm pleased that the JetBlue team is here. Robin Hayes is joining me on stage, but several members of the team in the front row, unless I field any questions too complex that we would need the CFO, the COO or IR to weigh in. I kind of doubt that. It's -- but let's just start off, Robin, for anybody that -- and first, thank you for being here once again.

Yes. Good. Great to be back in person.

You probably didn't see our introductory remarks, but it's so satisfying for me to be able to welcome people in person since, you'll recall, ours was the first event that went virtual 2 years ago. In any event, let's start off with the guide this morning for anybody who's been too distracted, who didn't make it in front of their Bloomberg terminals. Can you give us just a recap of the first quarter update.

Sure. Thanks, Jamie. Good morning, everyone. So we maintained our ex fuel CASM guide for the quarter. We guided capacity down towards the bottom end of our original range of minus 1%. And I think the most pleasing thing about our guide was the very significant improvement in revenue that we saw. So when we initially guided at the end of January, of course, just off the back of that wave of Omicron, we guided minus 11% to minus 16% year over 3. And then we updated that this morning to a much healthier minus 6% to minus 9%. And if we think that January actually closed out at minus 20%, I think you can see the amount of improvement that underpins.

And how should investors be feeling about capacity for the full year then?

Yes. So we guided capacity for the full year. We put a broader range on it when we guided at the beginning of the year because I think we felt there's a high level of uncertainty. We have taken our May -- we took our April capacity down a few points. We took our May capacity down. We guided that down between minus 6% to minus 8%. We should continue to expect some capacity reductions as we work our way through the rest of the year. We want to take a -- whilst there's good news on fuel today, we're in a very volatile environment. And when you lock in schedules, you have to be pretty certain on what you're going to see. So we're going to continue to take a conservative view. So whilst we're not updating our capacity guide for the rest of year at this point, now I would expect us to finish at the bottom end of that range.

So would that put this year's capacity above 2019's level or closer to flat? And the reason this is going to be a segue into more succinct questions on ex fuel CASM, but it helps to understand the capacity dynamic first.

Yes. So yes, I would definitely -- even the bottom end of our range would put us around 11% up over 2019. So even if we were to sort of dip below that a little bit based on taking a more cautious view, we would still be -- at this point, plan it to be above 2019. I think what we have learned, Jamie, is to asterisk everything. We don't know if there's another wave of COVID around the corner. And if that happens, we have to be prepared to react to that.

So how do we think about JetBlue's aggregate cost structure? Because the original guide of being up relative to 2019 on capacity was accompanied, if I recall, by an ex fuel CASM increase in the low to mid-single digits. On a total cost basis, inclusive of fuel, that's going to give you a larger footprint but a total cost base that's 10%, 15% above 2019. Earlier on in the crisis, the narrative was that airlines and JetBlue in this instance would emerge with superior cost structures to that which they entered the downturn. So what went or what is going wrong? And should we relinquish those hopes longer term?

Well, I think what we, I think, have all seen across the industry, both in this sector and other sectors is some of the pressures on staffing and labor have driven up pay rates. I think we've seen that across the board. We've certainly seen that at JetBlue. In terms of overall cost, I mean, coming into COVID, I think we have done a really good job. We've spent -- we had a multiyear structural cost program. As we entered COVID, our year-on-year cost improvement was the best in the industry. And as we now come out of COVID, it's about getting the benefits of productivity as we start to grow again. I mean, I do want to remind folks that the biggest single driver of what we have sort of outlined in cost this year is the NEA. If we were -- we've guided 2 to 4 points of cost increase directly linked to the NEA. That comes from a geographic switch. So 2019, about 40% of our flights were in and out of New York. In 2022, it's going to be 60%. We know New York's airports are inherently more expensive than many other parts of the country. So if we were to strip out the 2% to 4% NEA increases and say the midpoint of that is 3%, you were to take the midpoint of our CASM guide that we gave already for 2022, that nets out as flat ex fuel CASM with some capacity increases. So I think whilst definitely, we're very focused on productivity, we're very focused on maintenance costs. We're doing a lot of benchmarking in our company at the moment to understand where we should be as we think about costs longer term, and we'll provide an update on that later in the year. Costs remain a critical part of how we drive margin.

And shifting to the NEA since you brought it up. Any revisions there? How are you thinking about the time line for the case in the event that there is an unfavorable outcome, what's the fallout? Can you unwind the changes that have already been made? Just sort of bring us up to speed on your NEA thinking, please?

Sure. Well, I think the difference between the NEA and sort of a traditional merger agreement is we are getting on and executing and implementing the benefit. So we've already made a significant amount of network changes. So we've never been bigger in New York than we'll be this year. We have made a lot of changes to our loyalty program. We've rolled out a significant amount of the reciprocal benefits for AAdvantage and TrueBlue members. We are having a lot of success now because of the network breadth NEA delivers with corporate accounts and putting in new corporate accounts and jointly selling those. We're investing in seamlessness. So whilst I fully recognized right now, it's not as seamless as it needs to be, I think compared to other airline partnerships over the years when they started out, we've made really rapid progress in a number of things we've done already. So we are fully away. Because I think the reason we're so confident about our ability to win the NEA argument in court is that we are delivering consumer benefits. The fact that JetBlue is 50% bigger in New York than we were before is going to have a direct impact in lower fares and more choice. And we believe those arguments are very compelling. Now if we were to lose the court case and the NEA was not allowed to proceed, what would happen? Well, one of the outcomes could be all of those slots go back to a legacy carrier. And so to me, it doesn't make any sense that, that is what competition is all about. Now clearly, I get asked a lot about the costs. So okay, 2 to 4 points of additional cost because of the NEA, where those come out if the NEA goes away. And that the answer is the vast majority of those costs would go away. The rents and landing fees would reset because our network distribution would change more flights to lower-cost airports, and the 190s that we delayed retiring, we would retire. And that has a significant good guide from a unit cost perspective. Of course, the value of the NEA overall for JetBlue is whilst it does drive higher costs, it does drive much higher revenues. And I think that's one of the reasons why our revenue guide today was probably at the higher end of what we've seen in the industry.

Would it be possible to break out the NEA contribution since you allude to that?

Yes. I mean, obviously, we understand what it is. I think that the fact -- that one of the big benefits is it's going to make us much more attractive for corporate travelers and business travelers. This was going to give us more ability to connect customers and compete with Delta and United in the Northeast. So at some point, we might give more clarity around that. Right now, at the moment, that's not something we'll break out, but I think you're going to continue to see it in our revenue results.

That was a very complicated no.

Yes.

I like that.

Not yet.

So let's talk about demand elasticity because the question that I've really struggled with in particular over the last week, is the degree to which airlines can put the higher price of fuel to their customers. Delta, if you caught the tail end of their presentation, they are modeling for 100% recovery at least during the summer peak. Given their demographic, that translates into a $10 to $15 one-way increase on average. I remember years ago on a call when David Neeleman opined that JetBlue's problem at the time, I don't recall what the margin deficit was...

That was a long time ago, Jamie.

Yes. But it was, "If we can only get $10 one-way more per customer." And I remember investors were saying, "Oh, yes, that sounds easy." And it wasn't. So sort of a 2-part question or discussion. If it's $10 to $15 on Delta's higher average ticket price, where do you put the sort of across the board incremental need at? And how do you think about demand disruption? Because that's the question I've been getting. How much can the consumer bear? And I don't have a good way to answer that. I don't have a good elasticity model that I can share. We always look at airline revenue for the industry as a percentage of nominal GDP just to make sure we're not modeling something materially different from trend. But how do you think about these factors?

Yes. So I mean, I think it's a great point. So right now, based on what we're seeing in terms of the demand environment, we're seeing extremely healthy demand. We're still dealing with pent-up travel -- pent-up demand for people that have not traveled in a couple of years. We are dealing with corporate travel that started to come back in a very significant way. And we're also dealing with some capacity headwinds in the industry driven by, in many cases, staffing, whether it's pilots or whether it's airports. And so I think all of those at the moment create quite a cautious capacity environment in a world where there is higher fuel prices, which I think is why the industry is quite bullish on recapture rates. None of us really know until you get into it. There's always a time lag beforehand. But some of the levers that would have been pulled in the past have incremental capacity come back in. And as an industry, it's hard to accomplish given some of the other things that I talked about. So I think in the short to medium term, I remain extremely bullish. When you actually look at it in terms of what does it mean for an average fare, our number is going to be a little bit lower than Delta's, but it's in the ballpark. But I think that what I think we have to be a little bit cautious about is as we go into the second half of the year, what do we think the economy is going to do. We're in a period of high inflation. I think the Fed is going to start to crank up rates here. I think there's a very narrow window where this works. And so you could easily get a point where you sort of overcorrect. The good news is we have a midterm this year. And so everyone is going to be, I think, motivated in keeping the economy and an even [ fuel ].

Since you brought up the midterm, do you think that has any -- I mean, technically it shouldn't. But do you think that has any influence on the NEA decision? Or the pending merger that's on the table in front of Justice coming in the form of Spirit and Frontier?

Well, in terms of the NEA, no, because we're now in front of a judge. And so we've sort of gone past the period of the DOJ review. In terms of Spirit and Frontier, I mean, look, there's no secret that this administration is much more skeptical about mergers than previous ones. It's hard to sort of handicap that and say what does that mean in terms of likely outcome. I think the reality is that we've seen an unprecedented amount of consolidation industry, ironically overseen by the Department of Justice, to create 4 very large airlines about 80% market share, which means the rest of us are looking around and say, "Okay, how can we compete longer term with this?" And so in Spirit and Frontier's case, it's a proposed merger. In JetBlue's case, it's something very creative on the NEA where we can effectively allow us to grow in the Northeast in a much quicker way than we would otherwise do. And I think you're going to continue to see the rest of the market be very creative about their competitive strategies.

Have you -- I don't know how honest of an answer I'll get, but you made a run on Virgin and the plan B was the aircraft order that you announced early thereafter. There is DOJ uncertainty around Spirit and Frontier. Have you ruled out continued participation in consolidation?

I mean, we're focused right now on the NEA and we're focused on our organic plan. We think both of those will deliver significant margin expansion over the next few years. And I think we've got our hands full with that.

Fair enough. So how about the fleet and the order book in the event fuel prices revert higher to some of the more frightening levels that we saw last week? Sort of a shock and awe moment, at least for us, on Monday in particular. What's the flexibility to defer orders? What are your current thoughts with narrow-body supply tightening up to the degree that it currently is? How should we be thinking about that in JetBlue's case?

So we're in quite a unique point in our fleet schedule, Jamie, because we have a lot of 220s coming at us over the next few years. And we really want to prioritize taking those airplanes. They are very margin-accretive in terms of the impact. If I go back to the -- one of the biggest challenges we've had with CASM over the years has really been linked to the fact that I believe we are the largest 190 operator in the world. And so we're very keen to transition those airplanes into the 220, which is a game changer from a margin perspective. We did defer about $2 billion of airplanes just after COVID. So I think we look back on that and feel that we do risk the order book by doing that. The other level we have, should we get into a position where we see higher fuel and capacity needs to come down further, we do have a number of retirements due over the next 2 or 3 years, whether that's the 190s I just talked about or some of our older 320s, 503, 504, 505. Our original -- our 220 airplanes are coming up to be sort of 23, 24 years old. So we do have a number of options there that we could retire. And that's probably what we would do. We would accelerate some of those and protect the 220 deliveries.

So what are your overall thoughts on premium demand, which -- and we touched on this in the last conference call, I think that your overall product is well skewed to capture premium demand. But it is the market of primary growth for many of your competitors. 220s, for example, can you even configure that with a mid-cabin given the range of the aircraft? I mean, how should investors think about your growth in premium supply relative to sort of traditional ASM growth?

Yes. Well, I think we've always occupied this sweet spot of premium leisure. And I think that even Mint, which is our transcon U.K. Caribbean premium product has continued to outperform really as we've kind of come through COVID. Honestly, I wish we had more, I mean, airplanes. As we go through '22 and '23, the -- all the 321s we have coming, we have a choice on what configuration we want. We are going to take those with Mint configuration. So that will allow us to add more Mint flights both frequency into new markets, even more speed -- even more space, sorry, which is our sort of extra legroom. We -- this is a very high-margin product for us. So obviously, we get the upsell from having the extra legroom, but there isn't really much cost attached to that product either. So I think that's a product that's continued to do well. And it's interesting, if you look at how Even More has performed through COVID, we've outperformed historically on markets with strong leisure demand. And we haven't done as well with markets that have traditionally had more Even More business demand, which I think reflects the -- what's happened with business and leisure travel. So we think we have actually a very strong product offering for premium leisure. We recognize that other airlines are talking about that more. But that's not new either. And I think we know how to do this, and we're going to continue to focus serving that segment really well.

So now that you've got several months of London operation under your belt, how are you feeling about -- I imagine it was maybe not gut-wrenching, but a difficult decision to achieve to push into the North Atlantic based on the early results and recognizing that they were struck against the backdrop of the downturn. Do you feel you've made the right decision? Do you think it was too early? Do you think you need more? Where are you with the transatlantic ambition?

Well, first of all, we would not be in Heathrow if it wasn't for COVID. So are we pleased? Yes.

Fair point.

And are we going to stay in Heathrow? Absolutely, yes. So I think that was a transformational opportunity for us. We'll look back on 5 and 10 years and say the timing was excellent. So that's how to answer your timing question. I would like to also thank Her Majesty's government with the announcement yesterday that the last vestiges of COVID restrictions, the passenger locator form is disappearing as of 4 a.m. U.K. time on Friday morning. And so we are already seeing a spectacular return to demand between the U.K. and U.S. And we expect to be making some additional Boston, London announcements in the not-too-distant future.

Okay. All right. Let's shift for a moment to your thoughts on ESG. To JetBlue's credit, they were the only airline that was willing to attend JPMorgan's ESG conference, which was subsequently scuttled by COVID. But it certainly raised some eyebrows just given some of the grief that airlines in particular, are under given the ESG mandate, the fact that you had the courage and the interest to come and present, I'm sorry that it didn't happen. Hopefully, it will in the future. So where are your ambitions now in that regard? And how should investors be thinking about this and the impact going forward?

No, I think before COVID broke out, I think we were certain of the view that this was the largest issue facing our industry. And that we felt very strongly that both as a company, as an industry, we needed to get ahead of it. We've started to see what was happening in Europe in terms of some of the demand impact, some of the regulatory risk. And whilst we didn't believe that was an immediate issue here in the U.S., it's something that we have to give a lot of thought to. And I think over time and generationally, views on this are going to change. And so right now, I would say, for the next 10 years, there's 3 things that we are focused on. One, you mentioned sustainable aviation fuel. So we have a plan to aim for 10% of our fuel needs being met by sustainable aviation fuel by 2030. There's a lot of scale up that has to happen in the industry to accomplish that. Secondly, by investing in new airplanes and new fleets, which is why we want to keep the 220s coming and retire some of the older airplanes early, if that's what we need to do. And then thirdly, and this is something the government can do, we've all invested in ADS-B equipment on airplanes. We've invested in datacom technology. We have to start accelerating the rollout of these. It makes a material difference. And if we were, I think, across the U.S., using this technology in full, we could be looking at up to 6% to 8% less fuel burn and lower carbon emissions. And so it's got to be an industry government partnership, but we have to focus on all those 3 things. Because some of the longer-term technology solutions, the alternative fuel types and stuff, that's a much longer time horizon on that.

Shifting to loyalty. And Mark and I have always debated, loyalty really does seem to be a business where size and scale matters. It will be interesting with the Spirit-Frontier merger to see, now that they are moving into the fourth or fifth largest domestic position, whether there's a loyalty kicker there just given a broad network. Is JetBlue large enough that you can generate the same type of loyalty returns that the big 3 can? And what control do you have over that as you think about how you work with partners going down the road?

Yes. No, it's a good point. And there's -- I think we are the first to acknowledge that we're sort of coming from behind on loyalty in terms of the percentage of revenue that drives. I'm very pleased with the progress that we continue to make. Again, one of the other benefits of the NEA and being 50% bigger in New York than we were 3 years ago is, as you know, Jamie, network really matters. I mean, it's the point that you just made. And so we are a very credible credit card to now have in your wallet. We continue to see spectacular growth. We...

Did it inflect as the NEA got...

Well, we had a -- we saw -- as we said last year, we had a point of revenue linked to better economics with the card. And then we are seeing -- and on top of that, but that didn't assume any volume increase. And then we're now seeing -- we continue to see significant volume growth. So we're still catching up. We'll be catching up for a number of years. But my sense is that we are going to continue to close the gap. The other thing I wanted to mention because I think this is something we've done a really good job with is our JetBlue Travel Products offering. At our Investor Day in 2018, we said...

That's the next question.

There you go.

Incremental revenue initiatives.

Everyone's going to think -- everyone thinks you're going to send me the question in advance. I've just been coming a long time to this conference. But in 2018, we said this business is going to deliver $100 million of EBIT in 2022. For the record in 2019, this business delivered $15 million of EBIT. We're going to deliver $100 million of EBIT in travel products this year. So even where we've been through COVID, we're on track. We think that is an area where -- so whilst we're still playing catch-up on loyalty, Travel Products is now where I believe we overperform versus the industry. And we have a great trajectory to continue to grow that. We go from $15 million to $100 million in 3 years in the middle of COVID, I mean, it gives me great confidence that we can continue to grow this business at a very significant level going forward.

Going forward and fast forwarding to 2024, if the industry's pretax margin is x, where should we structurally assume JetBlue's pretax margin is, higher or lower or in line with X?

X plus.

X-plus. And what drives you there?

I think continuing to deliver on revenue drivers that we've talked about. I think that's why we're so focused on loyalty. That's why we're so focused on travel products, things beyond just the core fare. The NEA is going to be a big driver because we're going to be much more relevant to business travelers and deliver business travelers lower fares, and a focus on our costs to make sure that we continue to make sure that we are running our company as a low-cost carrier, maintaining a cost advantage over the legacy carriers. And we believe those 2 things combined will deliver margins above industry average.

Okay. And before we turn it over to Q&A, and Mark probably has a balance sheet question or 4.

I'm ready for it.

We discussed -- so Robin and I spent some time together last fall, was it?

Yes.

Time moves quickly. And we were just sort of debating our views on the future of the airline industry. And one point that I made at the time, and if you don't mind me sharing this, was...

I don't know.

I'm building up to it. Well, I felt that the industry's labor cost challenges going forward would be surmountable because many of the double-digit date of signing wage increases that we had seen over the last couple of decades were intended to restore wage rates to the trajectory that they would have remained on had September 11 not happened. And that was and still continues to be my thesis. You pushed back or just took me aside at one point and said, "Jamie, I think you're being a little too dismissive on the challenges the industry might face from a labor CASM perspective." And mind you, this was before we entered the real inflationary airport hiring challenging peak that we are currently in. I hope you don't mind me sharing this conversation.

Yes.

But would you care to opine on that? Because I definitely appreciated your pushback.

Yes. And I wasn't doing my fortune teller impersonation at the time. No, I mean, I think we came out on our July call, I think we signaled some of the cost pressures into this year. We always try and be as transparent as we can in terms of what we're seeing, even if we don't have all of the answers. I think the reality in our industry is that it's -- the good news is it's going to grow. I think it's a great career. But when we look at some of the specific challenges that are out there, so if we take pilots for example, I think that when we get into COVID, a lot of the legacy airlines, a number of pilots early retired. We had -- I mean, I don't -- can't remember any JetBlue pilots ever early retiring. And then we had a number during COVID, although we obviously on average a lot of younger workforce. And you're now to starting to definitely see pilot supply issues. And so that will drive up pilot costs. It's a function of supply and demand. Pilot costs for us are about 1/2, 50% of our total labor cost, so it's a very significant cost item. So that's at one end. In areas like IT, which obviously is a smaller part of the total, we get caught up in some very significant pay increases that you're seeing across the IT sector, which drives up there. And then some of our teams that work in airports, either our ground operations or the airport, so there has been a massive expansion of opportunities for careers in this area, in other sectors, too. So I think all of those together, I think, drives across a significant portion of our labor cost pay pressure. Now what can you do about it? Well, obviously, focusing on automation and technology, and I think some of those things were important, but also creating career paths. I mean one of the things I'm most proud about our team that we've continued to work is create pathways for frontline crew members, whether you're working in in-flight or airports, as a path to become a pilot, as a path to become a maintenance technician, as a path to what our corporate support functions. A few weeks ago, we rolled out a pilot career path for our families of our crew members as well. So it's no longer just a crew member but all their family members. And we started this pilot, we call it the pilot gateway program. We started this 4 or 5 years ago. And it takes about 3, 4 years for all pilots to come through this part. And so we're now already seeing a significant numbers of pilots come through these programs. And so I think that is what we do. We have to create career trajectory for our crew members to say, "Okay. The reason I want to come and work at Kennedy for 2 or 3 years isn't just because I love my job and I love this industry. There's a pathway here to other jobs in the future." And that's what we're very focused on.

Okay. Understood. We've got a few minutes left, so we can take some audience questions, if they're out there. So don't be shy. Yes, we'll start the gentleman with the yellow tie in front.

I don't have 4 questions, just a couple. So Robin, one of the fallouts I think, from the situation in Russia with the lessors is that the U.S. airlines are probably going to be even higher up on the preferred customer list for the leasing company. So I'm wondering how are you thinking about financing aircraft? I know you've been paying cash for some. You obviously have the full menu available. But are your thoughts evolving in terms of how you're going to fund the fleet?

Well, I mean for us, it's always a cost of ownership decision. So we've always believed for the most part that buying the airplanes ourselves was the lowest path of ownership. We had the cash. If we need to borrow, interest rates were low. We'll see what leasing companies could offer. We always remain an open mind for a great deal. But right now, our assumption is largely to buy -- continue to buy airplanes.

Then just how are you thinking about the balance sheet in general? Because I think you didn't necessarily have the same degree of balance sheet triage that some of your competitors had during the crisis. And now that you sort of think about where you're sort of headed with the balance sheet and with leverage and just sort of the mix of how you're going to fund yourself, right? You can still do some loyalty, round of financing if you want, or you can move more towards an unsecured model or just pay leverage down and just try to be less leveraged than the peer set and so forth. How are you sort of thinking about it? And does it tie into -- do you have aspirations to try to get to investment grade? Because you're probably closer than a lot of your peers right now.

Well, I would say we were before, actually, pre-COVID. We didn't technically have it, but I think we have it. So we've targeted a sort of debt to cap historically of 30% to 40%. We want to get back to that. We sort of closed out the year 52%, 53%. So we've got some work to do there. In terms of liquidity, we've created before COVID [ outlook ], we look for liquidity in the $1 billion to $1.5 billion range. We're currently now targeting a floor, about $1 billion above that. And we'll see what happens. And then currently about $1 billion above that, too, if you kind of factor in a revolver. So we've got plenty of liquidity cover. We've got plenty of cash. And our goal really is to get our balance sheet back to that 30% to 40% "investment grade" metrics. I mean, coming into COVID, whilst we had the same anxieties as other airlines, we knew we came into it in a very strong position, and we want to get back to that as quickly as we can.

And then just one last one for me on the cash side. I didn't check the details of your guide for this. But did you say anything about ATL or cash inflow? Because Delta mentioned a $2 billion number, obviously, a different magnitude for you. But a surge in bookings as the curve builds back up, are you seeing the same thing?

Yes.

And just wondering if you can talk about maybe sort of the duration of that build, if you will, or that forward booking curve and how it's evolving.

No, I mean, it's evolving very quickly. I mean, as I said, we -- I don't want to get into this monthly traffic because we kind of used to do that and it didn't always go very well. But January, I will share with you, January, we finished minus 20. So when we set the guide at the end of late January for the call, we had a minus 11% to minus 16% revenue target. That's dollars versus over 3%. And we knew January was about minus 20%. So in January, it came in at minus 20%. We've upgraded today to minus 6% to minus 9%, really based on the last part of -- very last part of February and March. So you can see the momentum. And when I look at April already and if I compare April to 3 years ago, Easter is on the third Sunday. So it's 4 days different, but in terms of the sequence of the month, it's very close. We're seeing unit revenues ahead of what we were seeing in 2019 on higher capacity for April. So without sort of breaking down exactly the numbers on the ATL, what we're seeing, we're seeing incredible revenue momentum.

I think we had a question in the rear.

Let's see, with the Northeast alliance, can it be expanded beyond the Northeast? And in this agreement you have with American, are there any rights of first refusal if they want to buy the whole airline?

So it's not a merger agreement. There's nothing in the agreement that talks to a merger agreement. In terms of the Northeast alliance, then no, it's very much focused on the 3 New York airports and Boston and no plans to expand that.

Anybody else? All right. I guess we can wrap there, robin.

Thank you very much, Mr. Baker. Thank you.