JetBlue Airways CorporationJBLUNASDAQ
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Operator: Ladies and gentlemen, good morning. My name is Abby, and I would like to welcome everyone to the JetBlue Airways Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the call over to JetBlue's Director of Investor Relations, Koosh Patel. Please go ahead, sir.
Koosh Patel: Thanks, Abby. Good morning, everyone, and thanks for joining us for our third quarter 2025 earnings call. This morning, we issued our earnings release and a presentation that we will reference during this call. All of those documents are available on our website at investor.jetblue.com and on the SEC's website at www.sec.gov. In New York to discuss our results are Joanna Geraghty, our Chief Executive Officer; Martin St. George, our President; and Ursula Hurley, our Chief Financial Officer. During today's call, we'll make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding our fourth quarter and full year 2025 financial outlook and our future results of operations and financial position, including long-term financial targets, industry and market trends, expectations with respect to tailwinds and headwinds, our ability to achieve operational and financial targets, our business strategy and our plans for future operations and the associated impacts on our business. All such forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in these statements. Please refer to our most recent earnings release as well as our fiscal year 2024 10-K and other filings for a more detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from those contained in our forward-looking statements. The statements made during this call are made only as of the date of the call, and other than as may be required by law, we undertake no obligation to update this information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation of these non-GAAP measures and a reconciliation to the corresponding GAAP measures, please refer to our earnings release, a copy of which is available on our website at www.sec.gov. And now I'd like to turn the call over to Joanna Geraghty, JetBlue's CEO.
Joanna Geraghty: Thank you, Koosh. Good morning, and thank you for joining JetBlue's Third Quarter 2025 Earnings Call. As Hurricane Melissa makes landfall today, I'd like to begin by extending my thoughts to our JetBlue crew members, their families and the communities that we serve in Jamaica. As the largest airline in Jamaica, we are focused on caring for our crew members and resuming operations when we can safely do so. Our crew members are at the heart of providing the reliable and caring service that makes the JetBlue experience so special and I'd like to thank them for their dedication throughout the challenging summer travel season. Thanks to your hard work, we are continuing to make meaningful progress on our JetForward plan while taking care of our customers and each other. Throughout the year, our team has worked with urgency to adapt to the evolving demand environment, adjusting supply, implementing new revenue initiatives and pursuing self-help measures to continue reducing costs. Our results this quarter are an outcome of these efforts. We ended the period at the better end of our guidance ranges across all metrics, including unit revenues and costs, realizing meaningful margin improvement compared to initial expectations. The whole industry took a step back this year. But despite these challenges, we are gaining momentum from JetForward and making progress on our plan, operating a stronger airline every day and delivering on or beating our commitments. Building on the progress since we've announced JetForward 5 quarters ago, our operational metrics and customer satisfaction scores continued to improve in the quarter. We improved completion factor and on-time performance versus last year with A14 up 2 points, successfully navigating a challenging July in which air traffic control programs impacted operations nearly every day. As a result, customers are more satisfied with their JetBlue experience as demonstrated by improvements in our Net Promoter Scores, both in the quarter and throughout the year, and I'm proud of the team for achieving double-digit NPS gains year-to-date. Even though our operation has consistently been challenged by external factors, our results demonstrate that the investments we've made in reliability are working. This fall, airfield construction at both Boston Logan and JFK is negatively impacting on-time performance, but we expect that to improve in November when this phase of construction wraps up. Regarding the government shutdown, we have not yet seen any material impact to demand or our operation. From TSA and air traffic control to Customs and Border Protection, it's truly a team effort. We are grateful for their dedication in keeping us safely moving, and we also thank Secretary Duffy for being a strong partner as we navigate this situation. By delivering a reliable operation and improving customer satisfaction as part of JetForward, we are building a greater customer loyalty and generating more repeat customers. Last quarter, for example, our TrueBlue attachment rate was up 7 percentage points year-over-year and our loyalty members are increasingly choosing JetBlue for multiple trips per year. At the same time, we continue to modernize our fleet to drive efficiencies across our operation and enhance the customer experience on board. During the third quarter, we retired our remaining Embraer E190 aircraft, marking nearly 2 decades of service. We want to thank Embraer and GE for their partnership over the years. This completes our transition to a more customer-friendly onboard product and cost-efficient all-Airbus fleet, allowing us to take full advantage of additional network opportunities from our East Coast focused cities. Along those lines, in support of building the best East Coast leisure network, we are taking deliberate steps to deepen our presence in Fort Lauderdale. This expansion, which mostly launches in the fourth quarter, enables us to further strengthen our position in this highly valuable focus city, adding more leisure destinations for our South Florida customers and increasing connectivity to the Caribbean and Latin America. JetBlue has deep roots in Fort Lauderdale. It's where our first revenue flight landed from New York, New York's JFK, on February 11, 2000. And now, 25 years later, the opportunity is ripe to reaffirm our leadership position there. With our far better customer experience and competitive low fares and now more destinations, we are pleased to bring even more value and choice to customers in Fort Lauderdale and across South Florida. Looking ahead to the fourth quarter, we remain optimistic that the environment will continue to improve. And as Marty will discuss further, we are pleased by the overall health of bookings. Demand for peak period travel remains strong, led by the resilience of the premium leisure segment, which aligns well with our new premier card, our plans to open our first lounge this quarter as well as domestic first class launching next year. We've built a strong foundation with JetForward and we are on track to generate a cumulative $290 million of incremental EBIT this year. Our efforts to boost reliability, recalibrate our network, enhance our products and services, supercharge our loyalty program and execute on costs have fueled transformational change, delivering double-digit NPS gains and industry-leading operational improvements. Blue Sky implementation is on track with last week's loyalty launch, marking the first major milestone of our collaboration, and domestic first class is scheduled to launch next year, both expected to be meaningful drivers of incremental earnings in 2026 and beyond. We are encouraged by the progress so far and we are confident we are on the right path to restore profitability, building a stronger JetBlue for our customers, crew members and our owners. Over to you, Marty.
Martin St. George: Thank you, Joanna, and thank you to our crew members for a strong summer. We continue to make meaningful strides on JetForward to refresh our commercial strategy and drive incremental revenue by refining our network, expanding our reach through partnerships, increasing the value and utility of our loyalty program and enhancing our products and perks. Turning to Slide 6 in the presentation. As Joanna mentioned, we have reestablished our position as the largest carrier in Fort Lauderdale, a market where our differentiated product and robust network resonate well with customers. As previously announced, we plan to launch 17 new routes and increase frequency on 12 high-demand markets, with our schedule now representing a 35% year-over-year increase for the IATA winter season. Our schedule also features over 25 daily flights touching Fort Lauderdale with our award-winning Mint service, offering more transcontinental lie-flat seats from South Florida than any other carrier. To support continued growth in premium flying, we also announced our intent to establish a Mint base for in-flight crew members in Fort Lauderdale, alongside growing the size of our overall crew base, bringing more jobs to the region. These investments reaffirm our leadership in Fort Lauderdale and leverage our caring service, differentiated product, premium Mint experience and robust network. Turning to Slide 7. Implementation of Blue Sky, our collaboration with United Airlines, is progressing as planned and has already begun delivering value to our customers. Last week, we enabled point accrual and redemption across our loyalty ecosystems, enhancing the utility of each program. We are already seeing significant customer interest. And since announcing Blue Sky at the end of May, we've seen a sustained double-digit increase in average daily card acquisition growth across geographies, particularly in non-focus city markets. We expect to continue the momentum into the first quarter as we begin cross-selling each other's flights on all digital channels. This industry standard interline agreement is expected to expand distribution reach for both airlines and provide customers with more choices to travel across the globe on our complementary networks. Loyalty reciprocity and cross-selling are 2 of the largest drivers of value from Blue Sky, and we expect the successful implementation of both to generate significant earnings momentum for JetForward. Later, in 2026, we plan to launch reciprocal loyalty benefits and Paisly integration, driving high-margin growth and additional value for the partnership. As we improve our customers' network options, we are also enhancing the customer experience on board and at the airport. In September, we became the first airline to partner with Amazon's Project Kuiper to provide faster and more reliable connectivity to our onboard Wi-Fi, furthering our leadership in onboard connectivity. JetBlue launched Fly-Fi in 2013 to become the first and still only major U.S. airline to offer free high-speed Wi-Fi on every aircraft in its fleet. The rollout is expected to begin in 2027. We continue to build on our decade-long commitment to premium and are progressing our plans to further capitalize on the demonstrated industry shift to the segment. This month, we enhanced merchandising EvenMore, and now customers can book on a single transaction through the GDS and online travel agencies. Previously, purchasing the product required 2 separate transactions on our third-party channels, and the simplicity and increased visibility is expected to support buy-ups and higher yields. In addition to EvenMore, preferred seating continues to outperform expectations. Finally, we remain on track to launch domestic first class in 2026, with the first equipped aircraft expected to begin flying in the second half of the year. The domestic first fleet modification is planned to include our entire non-Mint fleet. By the end of '26, we anticipate having approximately 25% of the retrofit complete, with the vast majority of the fleet expected to be completed by the end of 2027, over which time we expect to see meaningful EBIT contribution. On the ground, we are on track to open our first airport lounge at JFK by the end of this year, while our Boston lounge is set to open in 2026. The lounges will offer complementary access to transatlantic Mint customers, premium credit card holders, where signups have already exceeded 2025 targets, and TrueBlue Mosaic members. Passes will also be available for purchase on days where space allows. Alongside our construction of the JFK lounge, we are in the middle of a total refresh of Terminal 5, which is set to bring more than 40 new concessions and a redesigned center concourse. Moving to third quarter results. Over the summer, the demand environment continued to show signs of recovery characterized by strong close-in bookings, healthy demand for peak travel and the sustained strength in premium. As a result, unit revenues ended the quarter down 2.7% year-over-year, just above the midpoint of our revised guidance range and more than a point better than our initial guidance midpoint. Premium continued to outperform core, and year-over-year, premium RASM growth was up 6 points relative to core. Our managed corporate yields also showed strength, with yields up high single digits. And while our domestic flying saw the most sequential RASM improvement quarter-over-quarter, its relative margin performance still lagged international. We continued our string of double-digit loyalty growth in the quarter with co-brand remuneration up 16% and TrueBlue revenue up 12%. The card and TrueBlue trends are evidence of our improved customer satisfaction scores, recalibrated network of product as well as the strong benefit we are already seeing from the Blue Sky collaboration announcement. For the fourth quarter, we expect unit revenues to be between flat and down 4% year-over-year on capacity of up to 3/4 of the midpoint. Third quarter demand trends are forecasted to largely continue into the fourth with continued robust demand for premium products. Peaks are expected to remain healthy, while troughs continue to see challenges, which we have and will continue to actively manage through capacity adjustments. We are seeing the booking curve normalize, and we expect the same trend to continue throughout the fourth quarter. We expect continued macro-related tailwinds going forward in addition to the ramp of our JetForward commercial initiatives. On the network side, our capacity investment in Fort Lauderdale will be in its early stages of ramp after launching in November, December. And coupled with the step-up in domestic competitor capacity are expected to be just over a point of headwind to RASM for the quarter. Lastly, it's too early to size the impact of Hurricane Melissa on our operations in Jamaica, so our guidance does not contemplate any impact. Jamaica represents about 2.6% of our capacity in the fourth quarter. As we look ahead, we know there's still more work to do, but JetForward is the right plan. The initiatives we outline today from our Fort Lauderdale growth to Blue Sky and enhancing our premium products will be key to getting us back to sustained profitability. I'll now turn it over to Ursula to provide more detail on our cost and financial performance.
Ursula Hurley: Thank you, Marty. We ended the quarter with an operating margin 3 points better than what was implied by our July guidance ranges, supported by a more reliable operation, greater close-in demand for our products and our team effectively controlling costs. Despite a tough air traffic control and weather environment in July, completed capacity growth of 0.9% was above the midpoint of our revised guidance. This, coupled with strong execution, helped to deliver excellent cost performance for the quarter. We ended the quarter with CASM ex fuel up 3.7% year-over-year, beating the midpoint of our initial guidance by over 1 point, marking yet another quarter of cost execution. It is clear the investments we are making in our operation are increasing efficiencies across the business. Over the year, the team has demonstrated solid cost execution, and we are improving our full year CASM ex-fuel guidance from up 5% to 7% to up 5% to 6% year-over-year, lowering the midpoint by half a point despite less capacity than initially planned. For the fourth quarter, we expect CASM ex fuel growth of up 3% to 5%. For the third quarter, fuel price came in at $2.49 in the lower half of our revised guidance range. We expect fourth quarter fuel to be between $2.33 and $2.48. Our fuel guidance is based on the forward curve as of October 10. As we work through our budgeting process for 2026, we expect our unit cost next year to be low single digits, underpinned by low to mid-single-digit capacity growth. We plan to grow capacity through new aircraft deliveries as well as the return of a sizable number of parked aircraft to service. As we get back to growing once again, we're doing so with our balance sheet in mind by adding capacity despite reducing CapEx. We expect our capital expenditures to be at or below $1 billion next year and each year through the end of the decade, supporting our balance sheet and our return to positive free cash flow over time. We ended the quarter with a healthy liquidity level of $2.9 billion in cash and marketable investments, excluding our $600 million revolver, representing 32% of trailing 12 months revenue. At the end of 2025, we expect to carry liquidity in excess of our 20% liquidity target. Looking forward to 2026, we expect to raise a modest amount of capital to maintain our liquidity target, driven by the maturity of $325 million of our 2021 convertible notes and new aircraft deliveries. I believe our healthy unencumbered asset base of over $5 billion will provide us flexibility to meet our funding needs. Finally, JetForward remains on track to hit its target of $290 million of incremental EBIT by year-end, and I am confident we are also on the path to meet our $850 million to $950 million 2027 commitment. The exciting commercial initiatives Marty detailed, including Blue Sky, domestic first and lounges are expected to drive significant earnings momentum for JetForward in 2026 and into 2027. And alongside these efforts, we plan to remain focused on cost discipline and managing our fleet to preserve liquidity and drive capital-light growth. Taken together, we are confident we have the right initiatives in place to drive meaningful profitability improvement in 2026. And while we are still in the early innings of our budget process, it is our intention to build a plan that gets us to breakeven or better operating margin for 2026. We look forward to sharing more details during our January call. We will now open it up to your questions. Back over to you, Abby.
Operator: [Operator Instructions] And our first question comes from the line of Dan McKenzie with Seaport Global.
Daniel McKenzie: Thanks for the preliminary outlook for 2026. But backing up, JetForward didn't factor in the Chapter 11 filing of one of your toughest competitors. And so I'm wondering if you can talk about what that means to the Fort Lauderdale operation and what that means to revenue upside to the JetForward plan?
Martin St. George: Dan, it's Marty. Well, I'm not going to go into detail about our competitor's action, but most important thing is our reaction. And frankly, we have been hamstrung in Fort Lauderdale because of our lack of access to international gates in the middle of the day. And it's a relatively constrained customs facility at the airport and we have multiple carriers haul trying to fly at the same time. What's worked out very well for us is that as our competitor has done some pretty significant pull-downs in Fort Lauderdale, we have seen a lot of opportunity to move flights into that custom facility at a time when it's actually good for our local customers and also very good for generating connections to markets to the north. So if you look at the growth that we have put into Fort Lauderdale, it is notwithstanding our reputation as being a Northeast airline, the growth is very much focused to markets in the Southeast and south of Fort Lauderdale. I'm actually very optimistic about the opportunity this creates. I mean I use the word generational about this. I mean our ability to get such significant growth for international services in such an important market for us is something we're absolutely going to take advantage of at the time. As I mentioned in the script, in the very short term, it's going to create a bit of a headwind in the fourth quarter, but we perform very well in Fort Lauderdale today as is shown by the fact that we have such a big Mint operation there. We compete very well against our competitor, which is probably one of the reasons why they are going through the restructuring they're going through. And we are very bullish on Fort Lauderdale. So thanks for the question. And I think it's actually one of the good parts of the story. With respect to the impact of JetForward, there are an awful lot of puts and takes in there. There was a big chunk of network rebuild in there. We have made the commitment to investors that we'll update every 6 months on JetForward. And I don't want to give an update now, but that's something we'll probably talk about at the end of the year.
Daniel McKenzie: Yes. Very good. And then if I can just kind of go back to the end of the year and kind of how we're closing out the year. It looks like the government shutdown probably cost JetBlue maybe $500 million in lost revenue. And please correct me on that. But is it right to think that this is lost revenue that comes back in 2026? And then on top of this, all of the JetForward initiatives that you've outlined? And I'm really just going back to -- well, the first quote in the release from Joanna just about the momentum into 2026, if you can just help flesh that part out a little bit more.
Joanna Geraghty: Yes. I think first I just want to emphasize, we hit every guidance metric since April and improved 3Q margins versus internal expectations. And that was against an industry-wide setback due to volatility involving customer confidence in the airline space. And so really proud of the work the team has done to make up for some of that lost ground. JetForward, it's a multiyear plan. We remain on track to hit the $290 million of EBIT this year. We launched it 5 quarters ago. We are making excellent progress. I think when you read through the numbers, what you see is a 4-point impact to full year operating margin relative to our initial full year guidance. And our analysis shows that is squarely tied to our premium mix versus other carriers' premium mix. We've done an analysis that shows those who have more premium exposure have actually been less impacted. And when you look at JetForward, it is all about leaning into premium, and we are well on the way, whether it's the Premier Card this year, whether it's the lounges opening up, whether it's preferred seating. You pivot to next year and you look at more lounges. You've got our launch of the domestic first class. So we are squarely in the middle of execution and ramp, and I could not be more excited about the trajectory as we move into 2026. Our NPS score -- you can't have a premium customer if you don't have strong NPS scores. We're back at the top of the industry. So as we look forward to 2026, we do need to continue to see an improving macro environment, but that, coupled with JetForward and the momentum we have, that gives me a lot of confidence that we're going to build a plan, breakeven or better, get us back on track and regain that which we lost this year.
Operator: And our next question comes from the line of Savi Syth with Raymond James.
Savanthi Syth: I wonder if I could ask Dan's question in a slightly different manner. Just I was wondering if you could kind of give us an understanding of like the incremental contribution in '26, '27 from JetForward. And then what type of headwinds -- you talked about some of the tailwinds like macro that will kind of come on top of that. Just trying to understand like how to think about an EBIT bridge as you kind of look out to kind of '27 and kind of get to solidly profitable footing there?
Ursula Hurley: Yes. So we've always said that in terms of the JetForward breakout at $850 million to $950 million, it's really coming through 1/3, 1/3, 1/3 pretty equally. And that just happens to be -- I mean, there's 200-plus initiatives, but the way that they level up, it's 1/3 per year. As Joanna mentioned and what I said in my prepared remarks is next year we have a goal of building a 2026 plan with op margin breakeven or better. So we are going to make up some ground that clearly we lost this year given the macro step back. The puts and takes, I'm pleased with the progress that we're making in general across all JetForward initiatives. Obviously, the premium initiatives are performing well year-to-date. But we're also -- we have a lot more to come between lounges, the premium credit card and also domestic first next year. And I would say I'm also really excited about domestic first. I think this is going to allow us to better compete compared to where we are today. I would say at a macro level, we need the macro backdrop to continue to improve. So we do have that assumption baked into our 2026 guide. But all in all, we feel like we have a lot of good momentum and JetForward is tracking exactly where we thought it was and we look forward on delivering further details on our 2026 plan next year.
Savanthi Syth: That's helpful. And may I just –- another question for you is just kind of how are you thinking about liquidity and leverage and kind of what type of financing needs you kind of anticipate over the next 12 to 18 months?
Ursula Hurley: Yes. Listen, we did the strategic capital raise back in August of 2024. So that's really provided a strong liquidity runway for us through the end of 2025. We're projected to end the year above our 20% liquidity target. We are going to need a modest amount of capital next year just to support the new aircraft deliveries that we have coming as well as we do have a convertible debt maturity of $325 million in the April time frame. By no means will the capital raise be anywhere near the size that we did in August of 2024. In terms of what assets will we use, I mean, we're in a pretty powerful position in terms of having over $5 billion of unencumbered assets, about 40% of that $5 billion is aircraft and engines, and then the remainder includes our slots, gates and routes as well as our brand. I would say we'll look at all markets. I mean we're clearly focused on the level of interest expense and obviously the debt level that we have currently on the balance sheet. So we're going to try to be super thoughtful and strategic just given market availability with all the different types of unencumbered assets that we have.
Operator: And our next question comes from the line of Michael Linenberg with Deutsche Bank.
Shannon Doherty: This is Shannon Doherty on for Mike. Just for start, I apologize if I missed this, but can you quantify any impact that you're seeing today from the government shutdown since we're about a month in? I wouldn't typically think of JetBlue as having much government exposure, but since you called it out in the release, it's probably worth asking.
Joanna Geraghty: Sorry, I missed a little bit at the tail end of your question, but we haven't seen any meaningful impact with regard to the government shutdown. We obviously are monitoring it closely. And the longer it goes on, obviously, for the industry, I'd say there's more acute concerns. But we have not seen anything and are just really appreciative of all of the government workers showing up, doing their job and keeping the national airspace and our industry running safely.
Shannon Doherty: That's great. And maybe one for Marty. With domestic seemingly improving, do you expect domestic RASM to outperform international this quarter? Maybe you can just give us an update on demand by region?
Martin St. George: So we don't do a lot of color as far as demand by region. And what we said in general is that international is better than domestic and premium is better than the back of the airplane. And that continues to stand. I'd say if you look at our overall RASM performance and recognize that -- I mean, this is a math issue of weighted average. If international is better and domestic is worse, domestic has some ways to go. I would say, in general, the thing that gets me most excited about improving our domestic RASM is the continued introduction of premium products. As we do a competitive look at our RASM, sort of coach-to-coach, we actually do fine on RASM. The challenge is that we're missing that whole front of the airplane, which is a pretty good revenue kick to our competitors. So we do extremely well against the ULCCs of the world who have premium products that are not really premium, but we see a lot of upside for the premium products that we're adding as far as getting us up to where the legacies are -- close to where the legacies are. So it's not something I'm predicting in the fourth quarter. And again, when we go to '26, we can probably talk in more detail about that.
Operator: And our next question comes from the line of Jamie Baker with JPMorgan.
Jamie Baker: So Ursula, building on Savi's question earlier, modest cash raises next year. Can you -- where do you think the incremental cost of debt is today? And if we do accept that aircraft debt is typically the lowest, are you leaning more towards sale leasebacks or just borrowing against aircraft?
Ursula Hurley: Yes. Listen, I think the benefit of the assets that we have unencumbered is that we can look at all markets and hone in on what is, quite frankly, most cost effective. I think the other priority we look at is building in prepayment flexibility. I mean our #1 priority is getting the business back to consistent operating margin positive. Then it's delivering free cash flow so that we can start to delever. Clearly, the most cost-effective money you can raise right now is with aircraft. So given we are focused on the level of interest expense, that could be a likely path. So how we do the aircraft, it will be what's the most attractive market. Is it bilateral bank loans? Is it capital markets? Is it sale leaseback? We'll look at everything.
Jamie Baker: Okay. Fair enough. And following up on that, if memory serves, it was this call last year that I remember first hearing you reference approaching breakeven from a forward year operating margin basis. And look, 2025 kind of went off the rails. I'm not going to hold that against you. But here we are a year later and you're reintroducing that narrative. So I guess the question is for you or -- Marty's color would be appreciated as well. But compared to how you were thinking this time last year, do you think that industry fundamentals are more or less aligned with getting JetBlue back on track? After all, given what you shared on capacity and cost for next year, it's a really high RASM hurdle to get you to breakeven or better.
Joanna Geraghty: Jamie, let me take that. So we think industry fundamentals are more aligned with where we're headed. And I fully recognize that it feels a little bit like Groundhog Day and that we were sitting in this room last year around this time with the same commitment. Thanks for recognizing the industry took a step back, and we're all now trying to recover out of that. But leaning into the premium customer is absolutely the right strategy. We've been doing this for 10 years with Mint. We see it in our Mint performance. And we're a year later and we've actually launched a number of initiatives already that support that. And so the progress we made since last year is actually execution on JetForward and continuing to make sure we remain laser-focused on delivering the initiatives we laid out so that as the economy recovers we can take full advantage of those in a later stage of ramp, whether it's the preferred seating, whether it's the even more space changes, launching the JFK lounge this December. We've got Boston next year. We're that much closer to launching the domestic first class. And then as I mentioned in the first question, our analysis this year showed that carriers who have greater exposure to premium had less of a margin impact from the step back. And so that reconfirms that JetForward is the right path. And we're excited about getting closer to profitability and continuing this momentum. And so that's -- from my perspective, the industry fundamentals actually support where we're going and excited to see that come to fruition this year.
Operator: And our next question comes from the line of Duane Pfennigwerth with Evercore ISI.
Duane Pfennigwerth: Just on the GTF impacts, do you have any update on the grounded aircraft and the forecast for next year embedded in your preliminary '26 comments? And can you remind us, is there any compensation that's actually baked into the results this year?
Ursula Hurley: Sure. So the GTF challenges has improved. So if you recall, back in January, we thought we would have mid to high teens number of aircraft on the ground. The average for 2025 is going to be 9. We currently have 6 on the ground today. 2025 is the peak in terms of AOG. So that number will come down next year. So the projected AOG that we'll have on the ground in 2026 is low- to mid-single digits. So this is going to position us to actually be able to grow again, which we mentioned in our prepared remarks. In regards to our 2025 full year controllable cost guidance, it does not assume any Pratt & Whitney compensation. We continue to be in constructive conversations with Pratt. And just given the magnitude of impact it's had on our business, we will settle when we get to the right place. I would say the other last comment from me is this is putting us in a position where we're growing in a capital-light way. So obviously, we've previously paid for these aircraft with the GTF engines, and having them return to service is great. This is definitely a tailwind for us and we're happy with where we're at in terms of getting these aircraft back up in the air.
Duane Pfennigwerth: And then maybe just for the follow-up, can you remind us for your domestic business class or first class -- or I forget what you're calling it. Can you just remind us of the implementation timing of that? Like where will you be from a kind of year-end '26 and when you expect to complete that?
Ursula Hurley: Sure. So just to give you some context. So we are outfitting all of the non-Mint aircraft that we have. So it's about 250 airplanes. Marty mentioned in his prepared remarks that by the end of 2026, we'll have about 25% of the fleet complete. And then by the end of 2027, we'll have the overwhelming majority complete. So very much looking forward to rolling out the first aircraft in the back half of next year.
Operator: And our next question comes from the line of Atul Maheswari with UBS.
Atul Maheswari: We are getting pushback that profit decline ex JetForward is accelerating just based on the fourth quarter guidance. So why do you think that is the case? And what needs to happen for the portion of profits not touched by JetForward to start improving again such that JetForward can truly be all incremental?
Ursula Hurley: Yes. Listen, as we look at the fourth quarter, we do see an improvement in fuel year-over-year. But you have to remember, we're still operating from a much lower base in terms of the overarching demand environment. While it's improving, and we've seen that along with the rest of the industry, we're still operating way below where we had anticipated this year. We are showing RASM progression from Q3 to Q4. Our JetForward initiatives continue to ramp up. And you've heard us in our prepared remarks as well as in the Q&A highlight all of these premium initiatives that are coming to market. So we are seeing progress. I will remind you yet again, like if it were not for the macro setback earlier this year, which was 4-point impact to JetBlue, we would have hit our full year breakeven or better operating margin. So we believe we're on track and we've got solid momentum as we head into 2026.
Joanna Geraghty: Atul, if I can also mention, we've announced very close-in capacity and launch for Fort Lauderdale in Q4. So that's pressuring RASM a bit. Hence, the 1-point step forward in RASM. But that's a really great opportunity for JetBlue and absolutely the right long-term decision for this company because of the opportunity to really reclaim Fort Lauderdale as the third leg of our stool.
Atul Maheswari: Right. That makes sense. And just as my quick follow-up on the fourth quarter guidance, can you share some color on booked yields quarter-to-date or some color on what portion of fourth quarter is booked and what's your yield assumption for the portion that is unbooked?
Martin St. George: So as far as booking levels, we're about 90% booked for our forecast in October, 55-ish or so for November and I think 35%, 38%, something like that for December. So very, very focused around peaks for November, December. We don't really guide specifically the difference between yield and load factor, but I think the guidance we laid out is based on what we're seeing right now. I think that to give you some more color, if you look at the demand environment as it exists right now, the booking curve is not fully back to sort of 2024 distribution as far as advanced purchase dates, but it's very, very close. And the trend of peak versus trough has really continued. We have very good strength in the peaks and still challenges in the trough. So to me, that is the last piece of the puzzle. That I think when that comes back, we'll be in a much better spot to recover sort of the 2024 demand levels. But again, the line we use is people are still taking that one vacation at Thanksgiving and Christmas. They're not all taking the second vacation. They may take. And I think that's sort of what we're seeing in general.
Atul Maheswari: Good luck for the rest of the fourth quarter.
Operator: And our next question comes from the line of Catherine O'Brien with Goldman Sachs.
Catherine O'Brien: So I realize it's still early, but can you speak to how the impact of Fort Lauderdale adds is shaping up for 1Q? Guessing since you add that capacity so close into year-end should be less of a drag in the first quarter. And then maybe a bigger picture, a bit of a follow-up to Savi's question earlier. Could you just walk us through high level what the biggest tailwind from JetForward to be in '26? Blue Sky kicks in a more meaningful way, domestic first on 25% of the fleet by year-end. Just trying to get a sense of what the unique JetBlue revenue tailwinds are into next year, like as you see them in the biggest buckets.
Martin St. George: Okay. First of all, with respect to the Fort Lauderdale, if you look at a lot of the capacity we added, it is going to be good first quarter capacity. I mean a lot of beach destinations. I think seasonality is our friend. Again, we'd like to have the full 300 days booking window, but we're going to be more at that point more like 130, 140 booking day window for that period. So I don't think the sort of headwind will be gone, but I think we're -- certainly seasonality is our friend at this point. I will also say that the -- again, with the ability to add more international arrivals in the peak in Fort Lauderdale, we are going to have a lot of opportunities for customers to connect from the north into the Caribbean and Latin America. And actually, we're really excited about that because I think -- again, we're a low-cost airline, we don't really build hubs, true hub-and-spoke networks, but we certainly carry internal connections. And I think based on the sort of the local timing of when flights are good for Fort Lauderdale and then when they've been good for the beach markets, we're actually getting a lot of good connectivity opportunities. So we're actually very bullish about this. I know historically we talked about a 3-year ramp. We are not in any way forecasting anything close to a 3-year ramp.
Joanna Geraghty: And maybe I'll take the second part of your question, Catie. So there are several key and big initiatives ramping into next year. I'd say Blue Sky is probably one of the biggest, all the significant drivers. So we just announced, obviously, earn and burn, so reciprocity loyalty for JetBlue and United last week. We've got Interline sales launching next year, Paisly launching next year and then recognition of loyalty launching next year. So that's -- all of those will be delivered -- implemented and delivering value in 2026. The network continues to ramp. I mean we've moved 20% of the network around. Most of those changes went in about a year ago. And so given the ramp time frame, those will continue to ramp into 2026. We're returning to growth next year. So that's going to be, I think, a nice tailwind for JetBlue, buttressing our cost control. And then when you think about operational reliability, lounges, domestic first, we're really trying to create this flywheel for that premium customer where they want to come back to JetBlue because we have the full product offering that they would like. And that's underpinned by this fantastic improvement in our operations, specifically around Net Promoter Score and winning the hearts and minds of customers again. Marty touched on Fort Lauderdale and that ramping into '26. But those are the big buckets.
Catherine O'Brien: That's really helpful. May I just ask one quick follow-up on Mint? You're adding the new Mint crew base in Fort Lauderdale and some new flights to the West Coast. Can you talk about where you think there are further opportunities to add more Mint flying, if any, just given the focus on adding premium products? And can you just remind us the margin uplift of the Mint versus non-Mint flight or RASM, however you want to talk about it?
Martin St. George: Okay. So first of all, we are coming to the end of the line of Mint delivered –- of airplanes with Mint on them. I think '26 and '27 really focus on domestic first class. We have a few more Mint airplanes coming. But in general, we're out of the Airbus 321 business until 2030 or 2031. So we're going to reach a plateau for Mint flying. I think what's been the most exciting for us about Fort Lauderdale is how incredibly helpful it is as far as being counter seasonal. We have very good results across the Atlantic in the summer. Frankly, we could probably use some more lift in the summertime if we can get it. But obviously, you need to fly the airplane 12 months a year. And where Fort Lauderdale has really come into its own is with fantastic demand in the winter. So having airplanes in markets like Dublin and Edinburgh, which are great summer markets, maybe not so great in the winter, and having those airplanes move to Fort Lauderdale is a major, major win for us. And frankly, I don't think any of us expected to see that good -– the demand that strong in Mint out of Fort Lauderdale, but it's been a very happy surprise for us. And then obviously, the demand goes down in the summertime because it's hot down there, and that's a very good time for the planes to move across the Atlantic. So we love the ability to swing these airplanes back and forth. And frankly, we will get a nice little cost benefit by having a Mint base down there as far as having -- not having to have Boston and New York crews fly the Fort Lauderdale West Coast services. So we're really bullish about that. With respect to Mint overall, it continues to be extremely successful. And I think the combination of quality, fantastic service delivery by our crews and really good prices has been a great winning formula for us. The 321 has proven to be a very good low-cost airplane platform for us. So I think it's worked out extremely well for us. We haven't really gotten into individual profitability numbers, but certainly the Mint network is the best of our domestic network right now. I think I'll leave it at that.
Operator: And our next question comes from the line of Tom Fitzgerald with TD Cowen.
Thomas Fitzgerald: I was just wondering if you could speak to what you're seeing in terms of reliability and time on wing on your A220 fleet and how you're thinking about that as you go into 2026 planning?
Ursula Hurley: Yes. So starting high level, we provided capacity indications for 2026 being in the low to mid-single digits next year. I would say that's really driven by 2 things. Number one, the number of new deliveries that we have coming next year in terms of the 220. And then the second driver is really all of these aircraft returning from AOG. So I mentioned going from an average of 9 this year to low to mid-single digits next year. We do have some reliability challenges on the A220 that we're working collaboratively with Airbus Canada on. But it is impacting us. It's just the materiality when you look at the capacity growth next year isn't as large. It's really the new deliveries and the return from AOGs.
Thomas Fitzgerald: Okay. That's really helpful. And then -- so I'm kind of curious how you're thinking about -- I know the technology was a big part of how you -- the operational and reliability improvements. I'm just wondering how you're thinking about that on the distribution side and any levers to drive more direct channel sales?
Martin St. George: First I'll start by saying we are 3/4 direct booked right now. So we've got very, very strong penetration in direct channels. And we have -- we've taken a different strategy with OTAs than some of our competitors. We do not work with all the OTAs. We work with a very select number, and we've got very preferential distribution relationships with them. So I think the benefit of some of the technology solutions is not quite the same for us as it is for others. That being the case, we are in the process of adding NDC as a technology for JetBlue and we expect to -- I don't think we've given a date for it, but the team is working on that right now. And frankly, I think the thing that I'm most excited about is the potential it has for continuous pricing. It's very clear that airlines pricing 26 letters or 26 buckets or 26 booking codes is a technology of the 70s. And I think with what we have seen elsewhere in the world as far as the benefits of continuous pricing, I think is a great opportunity for us, and you really need NDC to make that happen. So nothing to report yet, but hopefully when we have some more firm dates, we'll come back and talk about it a little bit. And frankly, I'm having -- used continuous pricing in my previous place. I think it's going to be a great opportunity for our customers. I think there's a stereotype that continuous pricing is a trick to have price increases. When I did this before, half the prices were price cuts and half the prices were price increases. All you're really doing is trying to benefit the demand curve. And it will absolutely include lower prices as much as it could include higher prices. So we're very bullish on it. No date to report yet, but it's very much on our radar.
Operator: And our next question comes from the line of Scott Group with Wolfe Research.
Scott Group: So we've got lower CapEx starting next year. Any other puts and takes to be thinking about with free cash flow? I guess if we're getting back to operating income breakeven, do you think we can get back to positive free cash flow in '27? Is that the right way to think about it?
Ursula Hurley: Yes, it is. As you recall, we did a $3 billion aircraft deferral last year. Really we did that in order to give us the runway to deliver free cash flow. Priority #1 is positive op margin. Priority #2 is free cash flow. And I still believe that there is a path to achieve that at the culmination of this JetForward program in 2027. We're making good progress. I'm pleased with the momentum across the initiatives. And once we hit free cash flow, priority #1 is going to be improving the balance sheet and delevering where we can because we still want to get our metrics, quite frankly, back down to pre-COVID like levels. Like that is a priority of this leadership team. And so I feel good about the path that we're on.
Scott Group: Okay. And then, Marty, maybe it's way too early to ask, but any –- and we're just getting launched with Blue Sky, but what are you seeing so far, if anything? Anything different than you would have thought? Just any kind of color.
Martin St. George: First of all, I'd say it's pretty much acting the way we expected it to. We've seen redemptions go both directions as far as JetBlue customers redeeming on United, United customers redeeming on us. If you look at the Os and Ds where they're doing it, I'd say, in general, it is more or less what we had expected. I will say our first redemption on United was Denver-Las Vegas from Mosaic in Denver. So that was a bit of a surprise. But to me, that's actually a good thing. And I'm happy that our customer in Denver, who's in Mosaic, is now getting utility of United. And to me, that is the fundamental goal for this, which is making sure that customers who align with TrueBlue have a full assortment of places where they can earn and burn. So as much as -- nobody had Denver-Vegas on the bingo card. I think I was really happy that that's who it was, because you have a customer who has raised his or her hand in Denver, has flown up till Mosaic, who now is getting some great utility. So to me, it's a big win. And I actually love this and this is exactly why we did this program.
Operator: And our next question comes from the line of Brandon Oglenski with Barclays.
Brandon Oglenski: And I don't mean to be too critical here, Ursula, but when you said modest capital next year and then in relation to the way you answered Scott's question there, maybe breakeven free cash flow by '27, I don't know -- I mean, is modest like maybe $1 billion, $1.5 billion ballpark, like the incremental capital you need to get there?
Ursula Hurley: No, the number is not going to be that large. I mean I think I mentioned in one of the Q&A responses, we're not anywhere in the realm of the raise that we did in 2024 in terms of quantum. I think what I highlighted in my prepared remarks is we do have 10-plus deliveries next year, then we do have a convertible debt paydown of $325 million. So modest is much lower than what you foreshadowed. I will call out, clearly, we've seen fuel spike in the last 5 days. It's just something to be aware of. We are watching that closely, as well as the more general like macro like demand environment. But I still believe that we have a path, and we're trying to be very thoughtful about when and how we raise any level of debt just given where the balance sheet is today.
Brandon Oglenski: Okay. I appreciate that clarity. And then on the outlook for growth next year, I get it, like you're getting AOGs back in the air. But is the cost structure already in place, meaning you've just been inefficient for the past 18 months and you're putting that back to good use? Or do you need to incrementally scale up crews and other infrastructure?
Ursula Hurley: No, I would say that the capacity growth next year is going to be efficient for us. We've done a great job managing the cost structure as we've navigated this year, but we're not going to find ourselves in a position where we need to hire excessively to support next year's growth trajectory. So I think this is -- from a unit cost perspective, the growth next year is definitely a tailwind for us.
Joanna Geraghty: And I'll just add maybe. I mean, our crew members have been great over the last year taking voluntary programs, agreeing to reduce hours. So we've really done a good job trying to reduce the costs we've had because of the grounded fleet as much as possible. And when we think about growth in general, it's really about making sure we grow responsibly. We will continue to manage the peaks and the troughs. As Ursula has mentioned, it's focused on capital preservation and capital-light growth. We're managing for returns and then obviously ensuring our unit costs remain in check. And so at the end of the day, I think we've navigated a very challenging period with these aircraft on the ground and we've navigated it as well as one can and our crew members have been a hugely important part of that. And we're looking forward to growing next year because that's ultimately going to get us back on the right path to sustained profitability.
Operator: And our next question comes from the line of Ravi Shanker with Morgan Stanley.
Ravi Shanker: Marty, you said that troughs continue to be challenging. Obviously, that's very understandable given the macro. But do you feel like that's cyclical or structural? And if it is more structural, then how are you thinking about 2026 capacity planning especially in 1Q, which tends to have more trough periods? And do you think you need to be more aggressive on taking out capacity there?
Martin St. George: Ravi, a good question. I mean, here's what I would say. Troughs are always challenging as a leisure-focused airline. This is not new. I would say that having looked at previous economic slowdowns or I'm not sure what you want to call the 2025 situation, but previous times where revenue has gone down, this is a very, very common change and nothing that we were unprepared for when the time came. I think that we'll sort of be able to finally call this change in demand done when we see troughs get back to a little bit more normal level. But they will always be a challenge for us and that's just the status of being a leisure airline in general.
Ravi Shanker: Understood. That's helpful color. And maybe a quick follow-up. Can you just expand on your corporate comments? I think you said that yield was pretty strong. What are you seeing in the East Coast in particular? I think there's some optimism about a pickup in activity clearly in that?
Martin St. George: So just to be clear, Delta corporate business is a very small part of our business, I think very much given our network. And year-over-year -- Joanna talked about the changes we made to the network in 2024 and very early '25. That really pretty significantly reduced our presence in corporate markets. I mean, at a point in time, we had 50-something flights to LaGuardia. We're now in the teens. So a lot of our corporate supply has actually gone away. And frankly, I've been very, very happy with what we've seen on yields. I mean, yields up double digits in our Delta corporate markets. I think it's very clear to say, just to scale this, our total sales team, I can count on 2 hands. We don't have the incredible breadth of corporate contracts. And it's basically -- it's really based on our network. In New York, LaGuardia is the preferred airport. We have some good corporate customers in Boston and Fort Lauderdale. I'd say, by far, our biggest attractiveness for corporate has been Mint and our pricing. And I think overall, it will always be a part of our network, but leisure will still be the bread and butter for us.
Operator: And our final question comes from the line of Conor Cunningham with Melius Research.
Conor Cunningham: Just 2, if I may. Just on the RASM outlook for 4Q. Can you maybe parse out the -- what you're seeing on the U.S. domestic side versus Latin and transatlantic? And then I'll just squeeze my second question in. On maintenance next year, it seems like you have –- your maintenance is up 30-something percent this year. The E190s are gone. I think that there's a huge tailwind into 2026. Just trying to understand how that all flows through.
Martin St. George: All right. Conor, I'll take the first half on the RASM. In general what we're seeing in RASM is -- from a regional perspective is more -- it is pretty consistent is what we're seeing overall, which is better numbers in international than domestic. So I don't think there's anything -- there's sort of no dramatic news there as far as any significant change in trend. And frankly, I think that what we're seeing as far as changes in capacity from the ULCCs will ultimately help that. It's very clear that as capacity has come out overall, that should put less pressure on the back of the airplane. But I think it's a little bit early to call that trend right now. And I'll leave the maintenance comment to...
Ursula Hurley: Yes. Just on maintenance, Conor, I would say when you look across all the P&L cost line items, maintenance is still going to be a headwind next year. I mean, about half of our fleet is the A320. And that fleet is aging. It's not on a flight hour agreement. It's on a time and material agreement. So it is still going to be a headwind. Obviously, that's going to be offset by all of the JetForward cost initiatives, I think technology, I think productivity. So maintenance will be the one headwind. But as I mentioned in my prepared remarks, we are targeting a low single-digit CASM ex fuel next year. So I'm pleased with the overarching like trajectory and the team's ability as we navigated through this year to execute to the cost performance. We improved the midpoint of our full year guide, and that's really attributable to the teams. And that's despite a 1 point pull in capacity. So super pleased with the execution, and that's going to continue as we navigate through 2026.
Operator: And ladies and gentlemen, that will conclude today's conference and we thank you for your participation. You may now disconnect.