JetBlue Airways Corporation Aktie

Good morning. My name is Krista, and I would like to welcome everyone to the JetBlue Airways Fourth 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.

Thanks, Krista. Good morning, everyone, and thanks for joining us for our first quarter 2026 earnings call. This morning, we issued our earnings release and the 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; Marty St. George, our President; and Ursula Hurley, our Chief Financial Officer.

During today's call, we will make forward-looking statements about our outlook, strategy and future performance. These statements are based on our current expectations and are subject to risks and uncertainties that cause actual results to differ materially. Please refer to our earnings release and SEC filings for information about factors that could cause those differences. We may also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are included in our earnings materials and on our website.

And now I'd like to turn the call over to Joanna Geraghty, JetBlue's CEO.

Thank you, Koosh. Good morning, and thank you for joining JetBlue's First Quarter 2026 Earnings Call.

I want to begin by thanking our crew members for their continued dedication during what has been another challenging start to the year. And I also want to recognize the TSA agents for their commitment during this shutdown. This first quarter includes multiple winter storms and TSA disruptions, but through it all, we are grateful our teams remain focused on delivering a safe and reliable service for our customers.

The conflict in the Middle East and its impact on fuel prices is the most significant headwind we faced as an industry since COVID. Given the sharp increase in the price of fuel and the expectation for elevated prices throughout this year, we are suspending our prior full year guidance, as we aggressively adjust to the evolving macro backdrop. I want to be clear. Suspending our full year guidance reflects external factors alone and not a change in the strong progress of JetForward.

We have taken immediate action to offset fuel costs, with our ultimate focus on minimizing the financial impact and preserving our liquidity position. The 3 primary levers available to us are: adjusting fares to better align with input costs, operating on productive capacity and pursuing additional cost savings opportunities. We recognize that customers expect strong value from JetBlue, and we're continuing to carefully balance our path to restoring profitability with meeting those expectations.

Importantly, demand remained strong. This backdrop allows us to recover some of the increase in fuel costs. And as such, we have adjusted fares along with the industry over the last 2 months. Bookings have remained resilient amidst these changes, which is an encouraging sign. However, the first quarter was already over 90% booked before fuel prices suddenly spiked, reducing the opportunity to immediately recapture the impact of this significant fuel increase. We expect 30% to 40% fuel recapture in the second quarter and plan to achieve 100% recapture by early 2027.

Given the broader cost environment, we've also made targeted updates to ancillary fees, such as checked bags. This allows us to better cover costs while keeping our base fares competitive. We will continue looking for additional ways to strengthen revenue performance throughout the rest of the year.

At the same time, we are aggressively reducing capacity, targeting adjustments in off-peak and shoulder periods. We've acted quickly, reducing capacity by nearly 1 point versus close-in expectations in the second quarter, with plans to reduce the second half by at least 2 to 3 points. While we are able to reduce capacity closer in, as we've done, these decisions are more beneficial when made at least 60 days in advance to take even greater advantage of cost savings opportunities. And with demand continuing to remain strong, it's important we take a flexible approach to trimming capacity as we head into the peak summer season. We plan to closely monitor market conditions and expect to reduce additional capacity after the summer peak, assuming fuel prices remain elevated.

In addition to managing capacity, we have opportunities to reduce other expenses and better align our cost profile with capacity. This includes efforts to reduce controllable spending and hiring, and in a lower capacity environment, we also expect savings on maintenance and other variable costs, such as landing fees. As we meaningfully adjust capacity to address higher fuel, we are committed to pulling all levers available to mitigate potential upward pressure on unit costs.

Alongside these efforts, we believe JetForward remains the right strategy to navigate us forward. Across each of our priority moves, reliable and caring service, best East Coast leisure networks, products and perks customers value and a secure financial future, we are seeing clear evidence that our strategy is working, and we remain on track to drive $310 million of incremental JetForward EBIT in 2026 and $850 million to $950 million in 2027. And as a reminder, we have transformational initiatives launching this year, including domestic first class, the continued implementation of our Blue Sky collaboration and our second BlueHouse, which are expected to drive significant value for years to come.

In closing, demand remains intact. Our JetForward initiatives are performing, and we are actively managing levers within our control. I remain confident we have the right strategy and the right team to navigate yet another challenging year for the sector, even in the face of these macro factors. As we gain greater visibility into fuel and its impact on the macro environment, we will plan to provide an updated view on full year expectations.

I'll now turn it over to Marty.

Thank you, Joanna, and thanks again to our crew members. We delivered strong RASM performance for positive 6.5% in the first quarter, in line with our revised guidance and exceeding the midpoint of our initial RASM range by 4.5 points. The Caribbean base closure in January and winter storms Fern and Hernando combined to reduce capacity by nearly 4 points, which benefited our RASM performance by 2 points. The remaining 2.5 points of our RASM [ beat ] is a reflection of demand strength and the effectiveness of our JetForward initiatives.

Demand trends strengthened as the quarter progressed. And importantly, that momentum is carried into the second quarter. We saw strength across the booking curve [ with ] close in demand and further out with improvements in both peak and trough periods. Premium continued to outperform core, with year-over-year premium RASM better than core by 9 points in the first quarter.

We are encouraged by improvements in core demand and RASM, which is now strongly positive year-over-year, reflecting a more balanced demand environment across our offerings relative to what we experienced last year. Delivering the differentiated JetBlue experience across each unique customer offering meant even more in core remains a priority, reinforcing our commitment to all customers, not just select segments, even as fuel costs remain elevated. Lastly, while we saw strength in both domestic and international bookings, domestic has recovered meaningfully, and year-over-year RASM outperformed international.

First quarter RASM was also benefited by about 1.5 points, a shift of upfront Easter traffic into late March. This was a historic quarter for our loyalty program, highlighting the investments we've made in our product and operations. Loyalty cash remuneration grew 19% year-over-year, driven by double-digit growth in spend on the JetBlue [ CADs ]. In addition to record levels of spend and a 45% increase in CAD acquisitions, we achieved all-time highs for TrueBlue active members and attach rates.

Blue Sky is also driving corporate sign-ups in our non-focused city geographies, reflecting the broader reach the collaboration brings to our loyalty program. We continue to add utility and value for our members in other ways this quarter, including the ability to use points for ancillary purchases, which adopts by a very strong start. We also launched Family Tiles, an industry first that allows parents to earn status faster when traveling with children.

Finally, customers are responding exceptionally well to our Blue House at JFK, with NPS trending well above expectations and driving premium credit card sign-ups beyond our initial targets. We believe the opening of our next launch in Boston later this summer, we have further catalysts for premium growth, alongside the launch of domestic first class expected in the second half. As these products and perks ramp and both new and existing members [indiscernible] now at engagement, we expect meaningful sequential growth in royalty revenue throughout the year.

Strong customer response to our strategic growth in Fort Lauderdale drove first quarter RASM growth of 5%, even with capacity growth of 23%. In late March, we announced another run of additional service from Fort Lauderdale, one new destination to Cleveland, and added frequencies on [ 9 ] routes, where customers want more choices where they fly. With the addition of Cleveland, JetBlue will have launched nonstop service to 21 cities and increased frequency on over 20 high-demand markets from Fort Lauderdale over the past year, further strengthening our investment in building depth and connectivity in Florida's biggest premium market.

Through our recent growth and competitive reductions, we've been able to take advantage of newly available gate space to build a schedule with 4 connecting banks beginning this summer, up from 2 banks previously. This provides our customers in the Northeast with significantly more opportunities to connect to our growing portfolio of destinations in the Caribbean and Latin America. We remain excited about the long-term opportunity in this focus city and continue to view it in addition to key leader destinations across state of Florida as an essential component of our network strategy. We've now grown to 11 destinations in Florida, following the launch of service to test in Fort Walton Beach from both New York and Boston in the first quarter.

Blue Sky reached a new milestone in the first quarter with the launch of interline flight sales with United. We are encouraged by the early results we are already seeing, and are excited by the new opportunities we expect this collaboration to bring to our customers. This quarter, reciprocal loyalty benefits across Mosaic and miles plus tiers are expected to turn on, in addition to sales of [ rental cars ] through our Paisly platform.

For the second quarter, we expect continued strength in RASM, supported by sustained demand trends and progress from our JetForward initiatives. This quarter is anchored by peak periods in early April, late May and June. The Easter outbound shift represents a second quarter headwind of about 1.5 points of RASM. As a result, we expect revenue to grow 7% to 11% year-over-year on 1.5% to 4.5% more capacity. Our investments in Fort Lauderdale now comprise all of our second quarter capacity growth.

We are taking a similar approach to guiding RASM as we have in the past regarding to what we see today, which points to a sustained level of strong yield and lows for the remainder of the quarter. As we progress through the quarter, we plan to monitor the demand environment for opportunities to continue optimizing yields to help offset fuel costs.

As of today, over 2/3 of the quarter's revenues on the books. And as Joanna mentioned, our second quarter RASM guidance implies to recapture 30% to 40% of the fuel cost increases versus our new plan for the quarter. We are encouraged by the demand trends we're seeing, and believe we are well positioned to generate significant RASM growth this quarter as we head into the summer peak travel season.

Now I will turn it over to Ursula.

Thank you, Marty. As Joanna mentioned, the start to 2026 was marked by a dynamic operating environment and macro backdrop. The industry climate seems to be evolving every day, and we are responding quickly to position JetBlue to achieve our financial priorities. For example, we've actioned several capacity reductions across the second quarter and plan to stay nimble in the second half of the year. At the same time, we are prioritizing capacity investments in our Fort Lauderdale focus city, where customer response has been strong, and the resulting RASM is performing extremely well.

Our underlying business is clearly improving, with a roughly 5-point spread between RASM and CASM ex expected at the midpoint of our guidance ranges this quarter. We haven't seen a gap like this in years, and it reflects strong demand for our product, better cost discipline and real momentum from our JetForward initiatives.

During the first quarter, CASM ex-fuel growth finished up 6.6%, 4 points of which was due to close-in capacity reductions from the operational disruption. Without these impacts, CASM ex would have finished up 2.5% or 2 points better than our initial midpoint. One [ point ] of this beat was due to cost-saving efforts, while one point of spend is expected to shift into the remainder of the year.

For the second quarter, we expect CASM ex fuel to increase in the range of 3% to 5% year-over-year. We continue to expect CASM ex-fuel growth to moderate down during the second half of the year, with over 2 points less unit cost growth in the first half, although this remains subject to how the price of fuel evolves in the coming months and our final capacity levels.

Average fuel price for the first quarter was $2.96, 26% higher than the midpoint of our initial guidance. We expect second quarter fuel price to be in the range of $4.13 to $4.28, with the midpoint 75% higher year-over-year, which is derived from the forward Brent curve as of April 10.

As a reminder, every $0.10 increase or decrease in fuel price is the equivalent to about $85 million of expense for the full year. To help offset a portion of fuel cost, we continue to focus on fuel efficiency programs, with 30% of our second quarter capacity powered by more fuel-efficient new engine technology, supporting a targeted 5% fuel efficiency improvement over the last 3 years.

With oil and crack spreads expected to remain elevated for a sustained period, we are actioning incremental cost reductions beyond capacity cuts to mitigate the impact. These include reducing spend across both OpEx and CapEx and slowing hiring in some work groups to better align with our capacity expectations. At the same time, we are executing on our structural cost initiatives under JetForward, including rolling out new technology and AI to support improved planning for our crew and operation, launching a sourcing center of excellence to further optimize contract spend with business partners, and implementing more efficient in-sourcing and outsourcing opportunities across the business.

Taken together, we expect our near-term cost reduction efforts and our JetForward cost initiatives to support strong cost control this year. While we did suspend our full year CASM ex-fuel guidance, we expect its historical relationship to capacity to continue this year, which implies roughly flat CASM ex-fuel on mid- to high single-digit capacity growth.

Turning to our fleet and capital expenditures. In the first quarter, capital expenditures totaled $141 million, $59 million lower than our initial guidance due to timing shift of deliveries. Looking ahead, we expect approximately $275 million of capital expenditures in the second quarter and approximately $800 million in 2026. There has been a slight shift to our A220 deliveries, and we now expect 12 total aircraft deliveries this year, down from our January guidance of 14 aircraft. And as previously discussed, we expect CapEx to remain below $1 billion annually through the end of the decade.

Shifting to our balance sheet. We believe our unencumbered asset base and liquidity help us successfully manage through industry shocks like these, and I am pleased with the runway we've built for JetBlue. We've raised over $3 billion back in 2024 to secure our financial future and give JetForward a runway to perform. And the cash we have on hand as a result is a valuable cushion in this volatile high fuel environment.

We ended the quarter with $2.4 billion of liquidity or 26% of trailing 12-month revenue, above our liquidity target of 17% to 20%. This excludes our $600 million undrawn revolving credit facility. Earlier this month, we raised $500 million secured by aircraft collateral with an accordion feature that allows us to upsize to $750 million. We plan to reassess our funding needs as the year progresses. We also recently repaid the remaining $325 million of our 2021 convertible notes. Lastly, following this month's capital raise, our unencumbered asset base remains over $6 billion, with approximately a quarter intangible collateral. Our priority remains maintaining a strong liquidity position and ensuring JetForward has the runway to perform.

To wrap up, the environment we are operating in is challenging and volatile. We are focused on taking swift action and executing on our JetForward strategy to put JetBlue in a position to restore operating profitability when the environment has normalized. We have taken meaningful action across the 3 main levers we control: fares, capacity and costs, and we are pleased with the early results of these actions. We remain encouraged by the underlying performance of the business, and are confident that JetForward is the right plan to navigate this challenging environment and deliver value for our shareholders.

With that, we will now take your questions.

[Operator Instructions] And your first question comes from Mike Linenberg with Deutsche Bank.

Two questions here. With respect to your domestic first class, have you actually started selling that for the back part of the year? And if you are, can you just give us a sense of what the initial uptake looks like?

Thanks for your question, Mike. No, we have not begun selling it yet. We want to wait until we understand fully the implementation time line. As you said, it was going to come in second half of 2026, and we're still on track for that to happen. But we will announce the over for sale date when we know the first plan to be there for sales.

It is currently going through the certification process.

Okay. Great. And then just my second question, probably to you, Joanna, there appears to be like a subset of the industry that, among other things, is requesting a suspension of the ticket tax. And given that, that is a user fee to fund the system, could we be in a situation where half the industry is, I don't know, subsidizing the use of the system for the benefit of the other? Is that even -- is something like that even possible? I'm just curious about your thoughts about that.

Yes, not entirely from maybe the fuel excise tax you're speaking about. But -- yes. No, I mean, at the end of the day, if it were to apply to one carrier, we presumably need to apply to everybody. The numbers associated with that, we looked at that early on, aren't significant. I mean every dollar counts, but it ultimately was somewhere in the area of $20 million, $25 million annually for JetBlue.

I look at what we want to add in there, which is the ticket tax, is we, as an industry view this as a very unfair tax because we way overpay versus private aviation. So I would love for it to be reformed for other reasons, but I'm not sure this is the reason.

Your next question comes from the line of Conor Cunningham with Melius Research.

I'm trying to understand the comment that you were 90% booked in 1Q when jet fuel started to move up and just what that means to sequentials? Again, I realize you expect 30% to 40% recapture. But I would think that the fact that I think there's been, what, 6 industry fare increases, that the uplift in revenue would have been a little bit better in the 2Q. So if you could just talk about what's going on there on a sequential step-up? I realize the capacity is stepping up with it, but just any thoughts?

Yes. Conor, thanks -- the question -- the comment was we're not [indiscernible] for the second quarter. So we're -- we've got another 10% of revenue to come. That was not the number -- that was not the number on March 31 or March 30 whenever the fuel spiked.

Do I have that right? Wait.

No. 1Q, we were -- 1Q, we were 90% booked because remember, fuel spiked in early March. We were 90% already booked for 1Q. So you aren't able to recapture with those fare increase, some of the bookings because they were booked in January and February at a lower price. So everybody would have been largely in the same position as us because there were already bookings that have taken place for 1Q.

So headline. I don't think there's no news there. It's just saying we aren't able in 1Q to take advantage of the fare increases because people had already bought fares at the lower prices. Going forward, once those fares started going in very different stories.

Okay. Helpful. And then Ursula, maybe you could -- I mean, I think you have $6 billion of unencumbered assets. I realize you probably don't want to touch that quite yet. But if you could just talk about the accordion that you have within that current structure? What scenarios you would see yourself looking to tap at $250 million just in general.

Thanks for the question, Conor. So extremely pleased with where we ended the quarter in terms of liquidity. Our target is the 17% to 20%. We ended the quarter at 26%. So we still have a cushion. Our original 2026 plan assumed that we would raise $500 million this year. We executed a deal in utilizing aircraft to lock that in. We've drawn on a portion of that already, and we'll draw on the second portion later this year. We obviously did build in that flexibility in the accordion. So we do have an incremental $200 million and $50 million that we can draw on. Given the magnitude of the fuel price impact that we're seeing in the business, we will most likely draw down on that in order to maintain our 17% to 20% liquidity target.

Your next question comes from the line of Dan McKenzie from Seaport Global.

Just Ursula, following up on that last question, what additional cash could potentially be raised from expecting equity from deliveries or just aircraft financing? And under what scenarios might you want to raise additional capital beyond that accordion?

Yes. Thanks for the question, Dan. So our target is 17% to 20% liquidity. So I feel comfortable staying within that range. The aircraft that we're purchasing this year, there's 12 of them that are coming. We're assuming we purchase those with cash. So if we are at risk of falling below our liquidity level, we could decide to lever up those new deliveries. But as I mentioned in my script, we also have -- we currently have a healthy unincumbered base of the $6 billion. So of the $6 billion, about 30% is incremental aircraft and engines that we currently have on property. And then we also have our slot gates and routes, we have our brands, we have incremental loyalty that we can do. So we have options. And so if we're at risk of falling below our liquidity target, we'll assess all markets and look at all of our collateral and decide what would be the most effective.

Yes. And then second question here, I think maybe for Dave or Marty, just going back to the script here, 2 points of RASM be from stronger-than-expected demand and demand that sort of accelerated at the end of the quarter. So I suspect demand at the end of the quarter was worth more than 2 points of RASM beat. But my question really is, what's driving that? How sustainable is it? And at what point would you expect demand to be more elastic?

Dan, thanks for the question. I'd say 2 things. I mean I think if you look at the fourth quarter, when we get our fourth quarter call 3 months ago, we did call out that we had [indiscernible] performance accelerating through the end of 2025. So I think what we saw in early '26 is just consistent with what we've seen in general.

With respect to the current revenue environment, I think it's clear that the revenue environment has been extremely robust even in the face of pretty high fare increases. And frankly, I think that what you see in the industry right now is that air travel is still a really, really good value. The A4A put out a document last couple of months or so, looking at price changes from 2019 until 2026. But they're looking at 20, 30 different commodities. Air travel was the only one where prices are actually down from 2019. [ Egg ] is up 96%, air travel down 3%.

And frankly, I look at this, and I realize we still offer a really good value, and especially Jet Blue, who's focused on the more lower fare part of the business. And I'll use the metaphor that we use here all the time, which is it is very common that you can fly. In fact, we just looked at a little bit ago, you could fly -- I think the first couple of weeks of June, you can fly from Orlando to JFK for cheaper than it takes to take an Uber from JFK to Midtown. So air travel is still a fantastic good value. And honestly, with the quality of JetBlue, I think demand has held up very, very well for us. So we're very happy. But back to the point I made earlier, even with the price increases, we still see economy demand strong and actually positive unit revenue in the economy cabin. I think it's actually very good for us.

Maybe I'll just add, our JetForward initiatives, we do see them contributing to this. When you think about product, loyalty and merchandising. They're driving stronger engagement and yield performance. Our co-brand acquisitions are up. So elements of the strategy are also contributing to the stronger environment specific to JetBlue.

Your next question comes from the line of Jamie Baker with JPMorgan.

So Marty, JetBlue ordinarily generates less revenue in the third quarter relative to the second quarter. And of course, there's a positive Easter benefit in this year's second quarter. So I guess that makes the comparison even tougher. But there's significant yield momentum right now, fuel recapture improves over time. What probability would you ascribe -- I'm not asking for a guide, but what probability would you ascribe the third quarter revenue being higher than that of second quarter? Or is that simply off the table? No way.

I'd say a couple of things. First of all, if you -- someone not asking for guide, you see to be asking for a guide. And you...

I'm asking for a probability. If you want to give me a number. I'm just asking for probability.

No, we've not guided third quarter. We're not going to guide third quarter. But I will say that based on what we're seeing in the demand environment right now, we remain optimistic that we will continue as the year progresses, to start recovering more and more of the increased price of fuel. Now obviously, we need to be covered more than that because so many of our other inputs have gone up. But I think we feel very optimistic of what we're seeing the demand.

Second thing is, certainly for the last month of the third quarter, we've talked about capacity cuts. I mean we've -- as far as our internal planning, we've taken 2 to 3 points out of our second half supply, very much focused and concentrated more on the September through December period. We're assuming fuel prices at the current curve. And because of that, there's certainly capacity that we think will not be economical. And I think that's also very much contributory to a good revenue environment. So I will not go as far as give you a guide or probability or any sort of percentages. But I'd say that as of now, we are very happy with the demand environment we're seeing, and not just the premium cabin but also in coach.

So you're saying there's a chance -- sorry.

And then second, Joanna, you're not an official member of this association for [ Value ] Airlines, but I've seen very impressed reports that maybe you did participate in the recent $2.5 billion bailout request. Can you just clarify and kind of bring us up to speed in general, your thoughts as to selective government bailouts?

Yes, thanks. I think maybe high level, it's no secret that, I think the last administration definitely contributed to a disadvantage in the industry, whether it's Spirit, JetBlue's purposed merger or the blocking of the NEA. And I think that's obviously contributing to a sector that is less resilient compared to some of the larger carriers. We're in a bit of a different position because we have, obviously, a very healthy unincurred asset base and strong liquidity.

So never say never. We're open to anything and everything, assuming the terms would make sense for JetBlue. But at this point, we're focused on continuing to execute that forward, continuing to control the pieces of the business that we can control to offset the impact of elevated fuel prices, and we'll watch, just like you're watching the news, and see how that shapes out the Spirit and the value of carriers and whether anything comes their way.

Your next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Maybe just a follow-up right there. Joanna, in the scenario where Spirit gets support that nobody else does, would this influence your thinking about consolidation?

No. At the end of the day -- gosh, there's enough people out there that are commenting on every little piece of the business right now. And again, we're focused on executing the plan. Even in the situation where there is a potential Spirit bail out, we're going to continue to execute our Fort Lauderdale strategy. I mean as I think was mentioned in the script, we're -- Q1, ASMs were up 23%, RASM is up 5%. Customers are clearly picking JetBlue because it's a better product, a better service, and we're going to fly. And they're not afraid flights are going to get canceled.

We've got a great plan regardless of the outcome of Spirit. I feel for their people. We're hiring a number of them to try to make sure that they have a soft landing. It's a really, really, really tough situation. And there continues to be this balance of scale in the industry. We're doing what we can with Blue Sky, but it is full steam ahead in Fort Lauderdale, and we look forward to continuing to bring the great step with the product and service there. We're now the #1 carrier for Lauderdale, bigger than when we were pre-COVID, and we look forward to continuing to grow.

And then, Marty, as you think about dialing down your schedule in the second half, what is your focus? What types of flights are most under the microscope?

That's a simple one. I mean, fundamentally, we are assuming the fuel price for the rest of the year will match what the forward curve is saying. And at that level, there are certainly a small percentage of flights that we believe will not actually be accretive during that time period. So again, the economics of reducing capacity are very much biased towards reducing it further out in advance because you can save a lot of expense when you do that.

We did do a little bit of pulling from the May schedule, and I say we do much lower for that, for example, because the crews are already bid, they're going to get paid one way or the other. But when we make decisions this early to the fall, it's actually very effective for us to save some specific expenses. So when you see where the pulls are happening, it generally is off-peak periods, Tuesday, Wednesday, stuff like that, nothing really unusual. Although we did say and we are seeing good strength in the troughs, there still troughs in comparison to the peak period. So I think it's just the math exercise rather than strategic exercise. And our goal -- always our goal is to try to get to the best top [ manager ] we can get to. So if we see stuff that will not be contributed to that, we would start and take action.

Your next question comes from the line of Savi Syth with Raymond James.

Marty, maybe just on Fort Lauderdale, given all the changes that you've done and the significance and the investment there over the last years, I was curious kind of post this summer, rebanking, where are you in kind of the innings of really building up Fort Lauderdale outside of maybe kind of the opportunity if you get more gates?

Yes. So that's a great question. I think the real question is what happens with our biggest competitor there. Now first of all, we have now added significant capacity down there. We're double the size of our next biggest competitor. We did not go into this with any expectation of Spirit going away. What we have done is we've taken advantage of availability that they rated with some of their programs. So we have been lucky enough to be able to take advantage of the gates to add more international service and have a more formal bank structure down there, which we're very excited about.

To the extent that they keep pulling down, we will backfill that capacity. And frankly, when you think about us adding a 1/4 of our capacity and still having RASM that's basically 1 point of the system RASM, that is outstanding performance. And I think what it shows is that the JetBlue value proposition resonates in South Florida. And I think, frankly, it's a market we're extremely excited about the arrival of the domestic first class product later on in 2026.

So my view is that success should breed success, and we'll absolutely continue to build Fort Lauderdale to the extent we can. I think when we first talked about Fort Lauderdale, we said we thought it would be -- our goal is to get it to the size of Boston. And I'd say, when capability happens, it will absolutely be at that point. So instead of being focused on 2 focus cities sort of holding us up, we'll have a third leg of the stool in Fort Lauderdale. But again, a lot of that is going to be predicated on datability.

Makes sense. And maybe just a follow-up. You sort of board it up, like the other focus when you kind of [indiscernible] back was really building the New England strength back up. Just where are you kind of on that front?

I mean, fundamentally, I'm very comfortable with what we've [indiscernible]. I think the addition of service in a place like [ Bradley ] Providence in addition to what we've done in Boston, I think we're really excited about and happy how the markets have responded.

We're not doing Fort Lauderdale at the expense of those markets. We do continue to have deliveries coming, which they will help fund Fort Lauderdale a lot. But frankly, I think the most important -- the most important thing to focus on is that the airplanes are going to follow whether [indiscernible]. We've been very happy with the demand that we've seen in the Northeast. We're sort of in year 2 of the ramp of these markets. And in general, more or less ahead of where we expected they would be.

And frankly, I'd say, Fort Lauderdale's way ahead of the ramp than we had expected. And I think that's how Fort Lauderdale can attract more supply as we go forward. We're sort of coming into the summer period, which is a somewhat lower demand period to Fort Lauderdale, but I think once we get to the fall, sort of the November time period, I think we should expect significant additional growth Fort Lauderdale to the extent that we have gates available.

Your next question comes from the line of Michael Goldie with BMO Capital Markets.

You're seeing healthy card spend in acquisitions. Can you unpack this by region? Like is this really JFK driven right now? And how does that influence your thinking for the opening of Boston and as well as how things are trending for Lauderdale?

Well, Michael, thanks for the question. I think first thing, the -- I would not say there's any significant regional differences at the card spend. There's certainly regional differences in where the cards are. And the cards are basically New York, New Jersey, New England. That's the majority of our card business.

And frankly, one of the things we're focused on for 2026 is to increase our base in South Florida. I think we've done well with the credit card, but I would say we're under indexed in South Florida versus where we should be. We already have efforts that are going on in South Florida to try to improve our card base. And frankly, I think as we've added some capacity down there, -- and then plus the addition of the United capacity into the Blue Sky redemption opportunities so that customers can fly anywhere in the world with the TrueBlue points, we're really bullish about our ability to have a really broad offering from South Florida, and that will translate into credit cards.

Clearly, given the location of the BlueHouse, you can tell that New York and Boston are the focal points for the credit card business right now. And as we said this publicly and I'll say it again, we are looking at find a fine space for a BlueHouse facility in Fort Lauderdale. For those of you who know Terminal 3, it is a tough terminal as far as finding enough space for a lounge, but we are working with our partners at [indiscernible] Airport division trying to find a place for lounge on there. No news to report because we haven't found the right solution yet that's right for everybody. But I do think that's sort of the natural next third step, and it will be a very good help for things like [indiscernible] acquisition.

And on Paisly, you continue to ramp BlueSky. Can you talk about the pipeline and initiatives to add additional partners to scale this platform?

I say patents over and above United.

Yes.

So for Paisly, we have talked to single-digit number of other entities, some airlines, some nonairline partners or actually the RFP process right now with one partner, which we're very excited about. Nothing to report now as far as details, but I think to the extent that airlines and other partners are looking at opportunities for -- looking for a partnership beyond some of the sort of traditional patterns, I think we'll certainly be there for it. We are really, really excited about the technology platform that the Paisly team has built, and I'm looking forward to finally getting our first RFP and our first evaluation after United because I think we're going to be very competitive in this marketplace.

I think it's also worth noting that we are now, just now trying to get some of the United content into Paisly. Today, you can buy JetBlue vacation package that actually has United Air in it. And we have JetBlue locations has sold packages to United destinations. We have rental cars coming very, very soon, hotels coming beginning of the third quarter, and we'll continue to go through the implementation for packages through things like that later in the year. So relationship with United has been very strong so far. They are great partners. And more than anything, we're excited to get their customer base experience the best of Paisly.

Your next question comes from the line of Tom Fitzgerald with TD Cowen.

Just wanted to stick with Blue Sky for a minute. I think it was on this call a year ago, you talked about a [ triple ] person who -- or customers who might need to be -- go to Omaha or [ Boise ] and just the value prop for them. Are you seeing the response from those type of customers that you hope for? And like what -- just like -- I know it's early days, what type of response have you seen from MileagePlus customers under your own network?

That's a great question. And we watch this very, very closely. We had put together a forecast of where we would expect United customers to book on us and exactly what we expected. It's things like L.A.-New York, Boston-New York. I see the L.A.-New York, San Fran-New York, San Fran-Boston, we've had surprisingly good results at DCA. DCA to Florida, DCA to Boston given United's large presence in [ Dallas ]. This is exactly what we were hoping for in this partnership.

The ability to have JetBlue flights within the United Distribution channel, I think, is extremely helpful for us because as strong as JetBlue is, we don't have the same sort of share of mind in places like Washington on the West Coast, places like that. So it's doing exactly what we thought it would.

We're very much looking forward to actually expanding this. We're still working on plans to create what we're calling mixed metal connections, which is special fly JetBlue into, let's just say, example, we just went back into New York-Houston, which we've been out here for a while. That will be in the United banks and customers can fly New York-Houston on JetBlue and then fly Houston to El Paso or somewhere on United going forward.

We don't have a date for that yet because that's actually a bit of a technology challenge, but we are optimistic that, that will be coming as well. Overall, at the core, this is like the other 50-something interline relationships we have with a lot of partners. It just as with a very big airline that has really great distribution strength that complements that network really well.

I'll just add, I mean the whole point is to not provide customers with any chance to choose anybody other than JetBlue, particularly in Boston, where we have a very robust schedule and network likewise in New York. And we were with an investor who was telling us the story about how he was looking to fly to Asia, would typically have chosen one of our competitors that's large in Boston for that trip. But because we have this partnership with United, he booked on JetBlue, the United flight, earn TrueBlue points and was able to fly to Asia and pick us over the competitor because we have that connectivity. So this is the goal of Blue Sky and the point about delivering more scale and a broader network to our customers given that we do have a bit of a scale challenge in the markets that we're in.

That's really helpful color. And then just as a follow-up for Ursula, just curious -- just like you guys have had -- obviously, it's been a pretty fluid environment the last few years coming out of COVID. So just like some lessons learned on pulling controllable spend out kind of last minute or closer than maybe you were expecting. And I just think some levers you're looking to pull in the second half of the year.

Yes. Thanks, Tom. I mean, this is one area where I'm just super proud of the team and the way in which they've managed controllable costs. I mean we pulled a significant amount of capacity out of the network last year given the lack of demand. And the team found $40 million that then allowed us to maintain our full year guide.

We get creative, there's everything from better aligning, hiring. We revised maintenance schedules. We reduced all discretionary spending. The team has made great progress on our fuel efficiency initiatives. We have driven 5% savings over the last 3 years. And so super proud of the team. They are in the process of also ramping up all the cost initiatives associated with JetForward. So creating a sourcing center of excellence. We're leveraging data science and AI to build tools so that we can drive better operating efficiency and put in place a more effective planning.

And as a reminder, we've gone through and simplified the fleet, right, by exiting the E190. And so we've got a multitude of levers at our disposal, and I'm confident that this year, our cost profile definitely improves in the second half of the year versus the first half. Q1 is kind of the high watermark. Obviously, it was also impacted by disruptions. But as JetForward cost initiatives ramp through the rest of the year. And as and as capacity grow slightly in the second half of the year, we'll continue to see efficiencies. So we're going to do everything we possibly can to come as close as possible to the original full year controllable cost guidance.

Your next question comes from the line of Brandon Oglenski with Barclays.

Joanna, I mean, it's another frustrating year, right, because we have volatility in oil markets and it's fifth or 6 years here of not turning a profit or potentially not turning to profit, I should say. And you mentioned it earlier, just the lack of scale versus maybe some of your larger competitors where there's objectively better balance sheet, better profitability. I mean, how do you structurally address the lack of scale in your business relative to those of your competitors that are doing better and have done better in this whole time period? Is there something you need to think about maybe strategically?

Yes. Thanks for the question. I think -- maybe let me start with -- I mean, I'll get to your question, I want to start maybe first with JetForward. And we are seeing JetForward working and driving underlying performance in the business. If you look at our operating margins for Q1 and adjust for fuel, it would have actually been 5 points better than the -- it would actually would have been 5 points better than the actual operating margin, 3 points better than [ implied guide ]. So negative 10 down to a negative 5 if you adjust with fuel, and the implied guide was actually negative 8. So some nice progress there. Year-over-year, there was a 3-point expansion when you adjust for fuel.

So as you think about sort of those early proof points, we are seeing JetForward working. We're seeing the gain from NPS. We're back to top of the industry, nice progress in Fort Lauderdale. Obviously, a 5-point RASM CASM spread in Q2 of this year, which is the most we've seen since the start of JetForward. We've got a whole series of initiatives. It's a big year for JetForward this year, including the Blue Sky implementation, [indiscernible], lounges, and the list goes on. And so the strategy is working.

Obviously, the challenge is the macro environment and these -- the volatility that we just -- we keep seeing. So while the macro factors do impact the timing of our return to profitability, the goal is when those subside, that we're going to see all the benefits of JetForward come to fruition. And so we're just going to keep executing, trying to control what we can, probably the most underused -- most overused expression lately, but control what we can and continue to execute those initiatives.

Regarding scale, we recognize the importance of scale. That's why we tried to do the NEA. That's why are we trying to do the Spirit merger. Now we've pivoted more focus on Blue Sky. And the early points we're seeing with Blue Sky are we are giving more utility and more relevance to customers and giving them a reason to choose JetBlue even though we maybe don't serve a particular destination because we're a bit smaller.

That said, we continue to raise these concerns in Washington, continue to focus on what are the things this government can do to help with that imbalance. But we're not focused on relying on the government. We're focused on what we can control, and that's where BlueSky comes. Our network and our loyalty platform and how we continue to accelerate those, deepening relevance in the places where people know them of our brand, the Northeast, Fort Lauderdale. So while scale will continue to be a challenging thing for all midsize and small carriers, we're controlling what we can. We think Blue Sky is an important part of helping with that.

And then Paisly is the other piece of the puzzle. That's a very low capital business, one that should drive nice earnings over time, and gives us sort of an independent revenue stream, that should help propel us back to profitability over time. So the hope is and the macro subside, the plan will produce and those early signs are it is producing, it's just being masked by some of these macro headwinds.

I appreciate the very thorough answer, Joanna. And Ursula, I guess as you think about capital needs, I mean, is taking potentially more debt, the right path here as well?

Yes. Listen, I'm cognizant that the balance sheet isn't where we want it to be. It's clearly been strained post-COVID. Our #1 priority is ensuring we maintain adequate liquidity to obviously navigate volatile times, such as what we're in at the moment. I acknowledge the level of interest expense is material. And so we don't take that raises, that decision lightly. We need to maintain our liquidity target of 17% to 20%, and we try to be super thoughtful and cognizant.

I mean our #1 priority, as Joanna mentioned, is continuing to execute on JetForward and get to a breakeven or better op margin. That was the goal this year. Clearly, we're now facing material headwinds, which makes that exceptionally challenging. But the goal is positive operating margin, number one. Number two is delivering free cash flow. And then number three is delevering the balance sheet. So we need to focus on the things we can control and execution. And in terms of liquidity in the back half of this year, if there's risk that we fall out of our 17% to 20% target, we will assess all markets, and we've got $6 billion of unencumbered assets. So we have some flexibility to choose how we raise on a go-forward basis.

Your next question comes from the line of Atul Maheswari with UBS.

I want to circle back on the second quarter recapture of 30% to 40%. It does seem a little lower than some of your larger peers who are, say, about 10 points ahead on the recapture. So your booking curve is probably a bit shorter than them since you have more of a domestic business. And by that, it would imply that more of the second quarter would be booked at higher fares for you? So any color on why the lower recapture rate versus the legacy peers would be helpful.

Yes. Thanks, Atul. I'm thinking about some of the things we've heard in other calls. I don't think we're dramatically lower than what I remember hearing. The one thing I would say is I think the recapture rate is different at different fare levels. And back to the point we've made about JetForward, like the biggest goal we have in JetForward is to improve our penetration in the premium market.

I'm guessing that the airlines that have the $6,000 business class fares to Asia may have a different recapture profile than we do. And again, that will be resolved or certainly gets significantly better as we finish JetForward in the next 18 months or so. But I don't look at our -- when I look at our own internal calculation to describe our recapture, they may be a slightly different shape curve, but end of '26, early '27 and sort of what we've heard from other airlines as well. So I'm not sure I agree with that.

I mean I think we think it's maybe premium and corporate mix, which we're addressing through JetForward and our first class product launching at the end of the year. So a little bit delayed, maybe relative to that, but not meaningfully.

Got it. That's helpful. And then as my second question, on the capital raise plan that you have, the [ 7 50 ] in total, what fuel recapture and demand scenarios did you use to come up with that number? That [ 7 50 ] that you have secured for now? I think just understanding that would be helpful as we try to assess whether or not you might need to raise more capital later in the year.

Yes. I mean, listen, at the highest level, our plan for 2026, our original budget had [ Brent ] at [ $63 ]. Clearly, we're in an environment where it's severely elevated. The original budget for this year assumes we would raise $500 million in liquidity to maintain our 17% to 20% liquidity target. So we locked in that $500 million. As a reminder, we have an accordion, that we can pull out accordion, and that's an incremental $250 million.

It's too early to tell given the volatility of oil in the back half of this year, what the impact is going to be. I mean this is part of the reason we pulled our full year guidance is just the volatility has been so extreme. We don't have clear line of sight in the second half of this year. So we will assess as we press forward if we need to raise more liquidity to maintain that 17% to 20% target.

I think the headline is we are planning for multiple scenarios at different fuel prices, and we're maintaining a level of flexibility so that we can tie things and take advantage of our unencumbered asset base in the most favorable way possible. But if anybody's guess where fuel is going to be for the remainder of the year into next year. So we're trying to be [indiscernible] there.

Your next question comes from the line of Chris Stathoulopoulos with SIG.

I will keep it to one question. So as we think about a response to demand, demand elasticity or potentially demand destruction, I prefer more of the former as far as terminology. But if you could perhaps frame potential resiliency around yields, you have a lot of initiatives out here at Blue House, JFK, Boston, domestic first class, of course, Blue Sky. Could you speak to that in a scenario where we do start to see some pushback or potential pressure bubbling up for more price-sensitive travelers against these initiatives that you have rolling out this year? As we think about your resiliency and things like that.

Yes. Maybe I'll start, and then I'll go over to Marty. I think just first and foremost, we're not seeing any meaningful elasticity. Demand is strong across the booking curve. We are focused on yield. This is consistent with the broader industry trends, load factor. It's holding up well. And we are focused on cutting flights that don't make economic sense with the current fuel environment.

When you think about unique things as part of JetBlue in terms of where we have resilient RV of our customers are an extremely resilient -- extremely resilient part of the franchise. And then obviously, all the things we're doing to try to increase our premium share, which remain more resilient when inflation goes up, are all the right move. So domestic first are even more base of the cabin, seeing really nice progress, really nice progress there.

And then frankly, the locations we fly. I mean, Fort Lauderdale is where we're growing. The only place we're growing right now is the largest area in Florida with the highest income book. So it's much more premium than some of the other locations that we have. So we're happy with what we're doing to try to make sure we're taking advantage of those more resilient customers. And inherently, in our model, we do have various conversion that with customers [indiscernible] do go home to their family and friends over the holidays and for vacations, and they've always been very loyal to JetBlue and a group that is resilient.

I don't know, Marty, if there's anything you want to add?

No. I think the only thing I'd mention, what Joanna said was, we've already taken action as far as reducing capacity in the second half of the year. And I'd say when we hit those windows of making significant cost commitments, we will clearly look at the market demand environment at that time. And if it makes sense for us to pull additional capacity, we certainly know. I mean, again, our #1 goal is to make sure to get op back where we want it to be. So I think being very flexible and open on capacity changes is an important part of that.

Your next question comes from the line of Catherine O'Brien with Goldman Sachs.

So a bit of a follow-up to an earlier question. You noted a really strong 45% increase in credit card acquisitions in the quarter, and it sounds like Blue House is one of the drivers of that. Can you give us some color on how much the JetBlue Premier Card growth was underling that system number? And then if you're able to share if there's a notable difference in annual credit card spend between the Premier Card and some of your other cards?

Catie, thanks. I'd say a couple of things. We don't [indiscernible] make a lot of detail, but I'll give you some color that I think should help. Our first thing is we only lapped the premier card in the first quarter. So there's really no basic -- for half quarter, there was no basic comparative. So it was really only March that we had year-over-year numbers. For the first year, we had put a -- what I would consider to be a conservative prudent forecast in knowing the launch is not open until later on in the year, and we significantly exceeded that number.

When you go to the 45%, yes, the premier card is definitely a contributor, but a lot of that is just the base plus card that we offer every single day. And I think that -- I want to go back to the point we made earlier about Blue Sky. The secret sauce of Blue Sky is utility [indiscernible] to TrueBlue. The value, you should say utility [indiscernible] point dramatically changed when you got the ability to earn and burn anywhere in the world on the United network.

And I will throw into that -- we didn't mention this in this call, but I'll throw it down here again. Later on this year, we will have full elite benefits between the 2 airlines as well. So if you're a multi-x [indiscernible] 4, you'll have an experience like you get on JetBlue when you fly on United later on this year. So our goal is to make sure that our customers feel like that the TrueBlue program will bring them anywhere in the world they might potentially want to go, which is something we have not had for a while.

So to me, when I see the acceleration like we're seeing it, there's no change in approval rate as far as credit standards. It's just a lot more interest in the JetBlue path. And then to me, that is something that really, really excites me about Blue Sky. I think people get very focused on comparing to other programs. But frankly, this ability to have worldwide access for our customers to fly places that JetBlue could never imagine flying, I think that to me is the game changer. And I think that's translating into credit card acquisitions.

I'll also mention that we're very lucky that the core of our customer base is basically New York, New Jersey, New England. And if you look at the economic status of those customers, it's generally a more affluent group and a high spending group. So having the spend up as much as it did in the base case, I think it's also huge for us as well and also better than some of the numbers to our competitors talking about spending.

That's really interesting. And maybe just final question for Ursula, appreciate with just the full year guidance, there's a lot of moving pieces. But on my math, based on the color you've given on the capacity cuts versus original land and taking into account the first quarter, it looks like your capacity will be up low single-digit territory as of now. I guess first, correct me if I'm wrong, but if that -- if that's correct, is it reasonable to assume that low single-digit capacity growth for CASM-ex will be kind of mid-single-digit range for the year based on your commentary and the relationship between capacity and CASM? And I guess anything we should be aware of when thinking about the cadence over 3Q and 4Q?

Yes. Thanks, Catie, for the question. I think the historical relationship still stands between capacity and CASM ex. So if capacity is at mid- to high single digits, CASM ex fuel would be flat. So I think your example is roughly in that ballpark.

As mentioned, in my script, we definitely expect CASM ex fuel growth to moderate down during the second half of this year. So based on what we know in pulling 2 to 3 points of capacity in the second half of the year, our unit cost will be over 2 points less in 2H versus 1H. So that's directionally where we sit today.

I mean, I do acknowledge this is all dependent on the oil backdrop. So clearly, if we start to get some relief or further pressure, we will adjust capacity as necessary. And then I mentioned earlier in the Q&A, I mean the team has done historical -- historically a great job at executing on controllable costs, and I have a lot of confidence that we can get as close as we can to the prior guide, given what we know today.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

This is Madison on for Ravi. I was just wondering if you could guys could give us some more color. I know you've talked about it, but just your thoughts on international in light of potential fuel shortages in Europe and kind of resource allocation across the company. And if there's kind of like any opportunity to cut back there? Or do you think you need to defend the slots you have?

Yes, I appreciate the question. We serve 8 different countries over in Europe. I think our frequency this summer will be about 14 daily flights. It's only 6% of our ASMs as we navigate through the summer. So the point being, it is a small part of our network.

Obviously, there continues to be supply concerns over in Europe. We're watching it very closely. We're working with A4A and our peers to advocate for certain operating procedures so that we can consume as much fuel as possible. We're also hopeful given our flying is all long haul, that, that will be more protected versus the short-haul flying. So we're watching it very closely, and we're engaged and involved, but the exposure is minimal for us.

Your next question comes from the line of John Godyn with Citigroup.

I just wanted to better understand the philosophy behind the capacity cuts in the back half. I think it's fantastic that you guys are making some changes in response to fuel. And it's not just you, but across the board, companies have been a little bit reluctant to cut to levels that seem to more directly offset what's going on in the fuel environment. What is your guiding like as you contemplate 2% to 3% being appropriate and maybe the next cut behind it? Is it trying to get to 100% pass-through? Because 2% to 3% doesn't get you there. It doesn't seem to be free cash flow because you're not -- you're targeting free cash flow positive by the end of '27. It's not margin neutrality. I'm just trying to understand like when you're running these scenarios, what is the output that you are managing to?

John, thanks for the question. I mean I would say that it kind of is to free cash flow. It's just basically the EBIT overall. Our goal is to contribute as much to a deposit and EBIT as we can with the assets we have. And to the extent that we make decisions early and we have the ability to save more of the expenses. And we think that with the fuel price that we're assuming for the rest of the year and demand we're expecting, especially in tough periods, I think it's actually very important that we take action soon to make sure that we do what we can to maximize our EBIT.

I would say that I do think I've seen -- I see a lot more talk of capacity cuts than I see in actual action in the rest of the industry. So I'm not sure that I'm as positive about what you said the other [ ones ] are doing, but I'll be clear that we are taking action. As we -- as you go back to the pre-war guide that we did, our goal is to get to positive up margin this year. We've suspended that guidance obviously, but our goal is to get -- do everything we can to make sure we get as close to that number as possible. And frankly, my view is given the fuel curve we're seeing right now, it would be imprudent to make decisions that would put -- that would not be profit maximizing.

Now we do have some constraints with our slot base at JFK. I think it's worth mentioning that this is a long-term asset for the company. And unfortunately, we probably could cancel a little bit more, if we were able to take the risk on slots, but that's actually not a risk we want to take because frankly, this is a transitory situation. And I do think we'll eventually get back to normal, and we want to make sure that we will absolutely be in a position to maintain our franchise at JFK, and I think giving up slots would be a very bad idea in the short term.

And the last issue is we are so happy with what we're seeing at Fort Lauderdale. I'd say there'd be fewer cuts in Fort Lauderdale and elsewhere, just because the demand is coming in as well as it is. But clearly, with fuel up 75% -- it's not quite 75% in the fourth quarter, but with fuel up as much as it is for the rest of the year, they are absolutely going to be flight through will not be cash contributors, and those flights have to go.

Yes. And that makes sense. But if I look at the fuel curve today, RASM numbers, it seems to imply like a 30% reduction in fuel from current spot by the end of the year. So I know that we need some basis for an estimate, and I appreciate that you guys are using the fuel curve, but you've got a very large embedded fuel tailwind kind of making the math work from here. It seems like you could hit the pass-through numbers that you're describing even if the demand environment didn't improve at all. And I'm not quite sure that that's like a reasonable framework. I don't know. It feels like you do, but maybe we can just talk about that a little bit.

I think it's a great question. And frankly, we look at the fuel curve and wonder how realistic it is during that time period. And that's one of the reasons why the comment earlier in the answer. When we hit those windows of making commitments and costs with respect to things like bidding pilots and things like that, before we get to that point, we will reevaluate the capacity plan we're offering. And it turns out the fuel curve ends up being better than we expected. Maybe we put the flights back if the fuel curve was worse than we expected. We will make sure to do the valuation when we can pull more with the goal of saving as much of the money as possible.

So my view of this is, this is just prudent business and we will continue to watch that curve. I think if you think about that time frame of 90-ish days out when we have a pretty good handle on say, some of the costs, I think we'll have a much, much better view of the fuel -- of the fuel cost 90 days out than we have right now for 6 months out.

And we're going to maintain as much flexibility as possible. And I think that's the headline. If you could tell me where fuel is going to be in September, then I could tell you closer to what my capacities look like in September. But at the end of the day, given where the demand environment is right now and the investments in Fort Lauderdale on the slot portfolio in New York, we want to be mindful, but we fully appreciate. I mean we need to be aggressive in capacity cuts, to the extent that fuel remains in a highly elevated state for the rest of the year.

Yes. I mean I follow the logic. I can't tell you where fuel prices are going to be, but it's a plausible they could just be flat from here. And it doesn't seem like that's being contemplated in a serious way.

Yes, it's possible. So thanks, but thanks. Thank you. Appreciate it.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

All right. Folks, we're a couple of minutes behind schedule. So let's kick things off with JetBlue. For those of you in the room, I'm joined here by Marty St. George as President of the company; Ursula Hurley, no stranger to this audience, JetBlue's CFO; and of course, Joanna Geraghty there at the end, oh, up at the podium, even better. Good to see you, and thank you very much. Let's kick things off. JetBlue.

Great. Thank you. Great seeing everybody. First, Mark, Jamie, thanks for having us back. We really appreciate being here. There's obviously a lot going on. We are very pleased with how JetBlue is executing under our JetForward program, but eyes are on the macro context and what that's going to look like. I first wanted to talk a little bit about our first quarter. We updated guidance this morning, reflecting accelerating demand, strength into Q1 and pleased with sort of that environment, also progress on CASM. There was some CASM impact due to the storms, Hernando and Fern, which drove some reductions. Net of the storms, however, our underlying RASM improved by 2 points and our CASM ex improved by 1 point, which I view as strong execution on the part of the team. Obviously, oil is extremely volatile right now. We don't know how long it's going to last. So the team and I are focused on controlling what we can, which seems to be the theme for the last several months, if not slightly longer.

On Slide 3, we talk a bit about the initiatives. So JetForward is absolutely working. In 2025, we delivered $305 million of incremental EBIT and really pleased with some of the underlying performance of the initiatives that we've laid out. We saw positive RASM in 2025. A number of major initiatives are planned for this year. And ultimately, we believe our overall customer offering will be among the most competitive, the most attractive and rewarding it's ever been with the goal of driving sustained RASM growth over the long term. This, coupled with our cost performance, and God willing an improving macro environment should get us towards our goal of operating profitability.

JetForward is working. We have laid out here all the initiatives and the sort of the status of where we are on delivery. With our first pillar, reliable and caring service, we've seen an 8-point improvement year-over-year in Net Promoter Score and a 17-point improvement year over 2. We are now back at the top of the industry with our Net Promoter Score number, which is really reflecting those early indicators of underlying performance. In addition, in 2025, we met every single one of our operating and on-time performance goals.

Our products and perks pillar, we've outperformed on EvenMore, the premium card, BlueHouse, our new lounge at JFK, the customer scores are second to none, and we accomplished the best business class product in J.D. Power this year. In terms of the best East Coast leisure network, 20% of our network was in ramp in year 1 and 2025. We are reclaiming our Fort Lauderdale leadership position. And Blue Sky was announced and early parts implemented in 2025.

And then finally, securing our financial future, the fourth pillar. We retired our 190s, a nice move on that front, modernize our fuel processes and then obviously seeing some nice cost savings associated with improved operational performance. 2025 delivered, as I said, $305 million of incremental EBIT. 2026, we are on track for another $310 million of EBIT, all driving a return to $850 million to $950 million of incremental EBIT through 2027.

Turning to Fort Lauderdale for a moment. This is a generational moment for JetBlue. A great opportunity. We've already announced 20 new routes and a significant uptick in high-demand frequencies. Access to international customs has been our priority there. We've made some progress. We're going to continue to focus on that. We now have the most lie-flat seats in transcon markets out of South Florida. And when you look at Florida overall, Miami, West Palm, Fort Lauderdale, that's where we see the premium customer, and that's where JetBlue is focused. It's Florida's biggest premium market. Customers are not surprisingly responding extremely well to the JetBlue product in Fort Lauderdale. RASM is up low single digits on capacity that is up double digits.

Blue Sky. 2025, we announced Blue Sky and implemented reciprocal loyalty, and we've got a number of initiatives that we are ready to implement this year. It's going to be a big year for JetBlue and Blue Sky. Our goal with Blue Sky is to drive relevance for JetBlue. It's to help with scale. A TrueBlue customer should have little reason to go outside of the JetBlue-United partnership looking for flights. We've accomplished, as I mentioned, reciprocal earn and burn. We launched interline cross-selling about 1.5 months ago, and it is tracking better than expected. The top JetBlue markets booked in united.com are to and from United hubs, places where JetBlue has historically not had a significant footprint. So it's doing what we intended it to do.

Later this year, you'll see customer perks launch and Paisly, non-flight ancillaries will be offered through the Paisly platform on united.com. We're going to start with cars, then hotels, and we'll continue from there. This is an opportunity for JetBlue to demonstrate that the Paisly platform can work with another airline with the hopes that we can carry this through to other carriers.

Domestic first class. We are building a strong product portfolio across not just the premium customer, not just the top-end customer, but all customers. Since JetForward launched Blue Basic in 2024, we introduced the bag as part of the product offering, and you can purchase Blue Basic now with TrueBlue points. We introduced preferred seating in 2024. And EvenMore just a year ago, we launched it with new customer features. And then through 2025, we optimized it for merchandising, made it a fair option and you can purchase it with TrueBlue points.

Domestic first will launch in 2H. It will be on 20%, we expect to launch 20% through the end of the year on our non-Mint fleet. We'll be starting with the A320 fleet first, the 162-seat aircraft. And then in 2027, the vast majority of the domestic first product will be completed. Our premium exposure will go from 25% to 27%, but the seat count will remain relatively unchanged. And we've also made the recent decision to move from not just 2 to 3 rows of first-class seats, but 3 to 4 rows of first-class seats, recognizing the increasing trend for the premium customer.

To describe how we feel about just the entire suite of product offerings covering all these customers, we're extremely pleased with how they are performing and look forward to domestic first launching in the second half of the year. This all leads to what we like to call a flywheel. Strategic initiatives reinforce each other, and they ultimately should drive sustained revenue growth and loyalty. The key idea here is each improvement accelerates to the next improvement. Once the momentum builds, it becomes self-reinforcing, driving higher RASM, higher loyalty, higher customer retention and better economics over time.

In its simplest form, better operations equal happy customers. Satisfied customers become more loyal. More network relevance gives customers more reasons to fly JetBlue and our better product drives stronger revenue. Paisly ultimately means more wallet share from those customers. Customer loyalty truly becomes a growth and revenue engine for the company.

And then finally, everything culminates in our 3 financial priorities: delivering positive operating margin, restoring JetBlue to a sustained operating profit on our improved operational performance, our product, our network, all designed to improve our margins structurally.

Ultimately, generating free cash flow. We've strategically reduced our capital profile by $3 billion since 2023. Our upcoming CapEx profile is less than $1 billion annually. And then restoring the balance sheet once we achieve free cash flow.

There are ultimately 3 takeaways from this presentation. Number one, JetForward is working, and we see it working. All of those early indicators demonstrate that. Number two, strategy is compounding. It's compounding as we think about driving relevance and driving revenue benefit across the customer profile, but we need the macro backdrop to cooperate with us. We are hoping for that stability. I think we're pleased with where we saw the first quarter coming in and the acceleration through the first quarter. Demand is strong. The environment is strong. We are doing the hard work to improve the underlying business. The flywheel is in motion. And with a more stable macro environment, we should see a drive toward sustained earnings.

So with that, Jamie, maybe over to you.

Great. I appreciate it. Boy, where to start. So how do you assure us that you win in Fort Lauderdale? You have competitors that have designs on that facility, some weaker than others. But when we think about -- I take the simplistic view of the airline industry that it really comes down to real estate and dominating important markets. Where can JetBlue get in terms of an S-curve for lack of a better measure in Fort Lauderdale?

Yes. Maybe I'll start, and then Marty, feel free to chime in. So we've regained our leadership position there. We now have more flights in Fort Lauderdale than we had pre-COVID. And we continue to think there is meaningful opportunity to grow in Fort Lauderdale. There is a large terminal expansion project planned that we are very much a part of it. Our focus right now is on access international gates. Our VFR markets perform extremely well out of Fort Lauderdale. And so that's our priority. By the way, it works with our Blue Sky partnership as well and very much deliberate moves around the lie-flat product, which is very difficult for some of our competitors in the Fort Lauderdale market to match, and we see strong profitability flowing through that.

Marty, do you want to add anything?

Yes. The only thing I'll say is I think we are unique in that we very proactively and happily serve both sides of the K-shaped economy. We offer more lie-flat seats out of South Florida than our biggest competitor down in Miami. And we also compete very, very strongly with the ULCC competitor in Fort Lauderdale. And I think fundamentally, the JetBlue value proposition is unique, and it has done extremely well in Fort Lauderdale. You may remember when we guided -- we guided fourth quarter and first quarter, we originally said we were going to have a headwind because of the significant amount of capacity we added very late in the game within 90 days, and the headwind is less than half of what we thought it would be. The customers are absolutely responding. And to me, success breeds success, which is why we continue to grow, and we will continue to grow as facilities become available.

And I know you haven't -- you're not ready to give us full disclosures on the domestic first-class product. I really hope you brand it junior Mint and there's a sign field reference there.

Breaking news, we're not branding it or mini Mints.

You could have gotten like Seinfeld -- David, Alexander, you could have danced like he did with the McDLT.

You would be the only one who would recognize it.

Oh well. Other airlines have had to give away their best product before -- walk before you can run. Give it away before you can monetize. How confident are you that you could just skip that giving it away process and go right to monetization? Because that's unusual.

Yes. I mean we did that with Mint. So with Mint, when we introduced it, if you look at the other carriers, so much of their lie-flat product and first-class product were about upgrades in their loyalty program. And while we now have a component of that in our own loyalty program, the idea with Mint was we did not want to give it away because we want customers to purchase it, but we also want to have affordable fares. So that customers who might not normally be able to access a first-class lie-flat product could do so.

And I think we've been incredibly successful if you look at the Mint over the last few years. We intend to do the same thing with our first-class product, our domestic first-class product. With EvenMore customers want a better product than what we can deliver right now. We see it and what they're willing to pay for EvenMore, particularly in a number of very important markets to us. And so we're going to follow the exact same approach we followed with Mint and trying to protect that.

Well, let me push back on that a little bit because maybe you didn't give Mint away, but if I remember, $699 was -- I mean, yes, sort of did. I mean it wasn't free.

Not when the others are free though.

But it was deeply discounted relative to where...

Deeply discounted, but with the path. And I think if you look at it today, particularly during periods of high demand, it is not $699.

Okay. Yes, clearly not. And in terms of LOPA, the decision to go to 3 to 4 rows of a better product, which I assume is a 2x2 product to be near 2. Was there any consideration given to going back to 150 seats and shedding the fourth flight -- I mean, I know CASM would have naturally risen with a lower denominator, but you also would have shed ahead. Was that ever on the table?

Marty, do you want to take?

No point was that ever considered, no.

Why?

I mean, fundamentally, I mean, having done this math many times.

The revenue benefit drives as much better.

The extra 12 seats, there is benefit from the extra 12 seats. If we do the math of it as far as the cost to an incremental crew member. It tends to be once you get above like 155, 156, it does pay, and it clearly pays. So there's no -- our goal is to make sure that we try to maintain the existing unit cost performance of the airplane as best we can. And frankly, I'd say based on the success we've seen from the Mint product and we've seen in EvenMore, I think the portfolio of products we're offering, we're really excited about. And that includes having a very great coach product, too.

Listen, we've got a couple of those 150-seater still flying around today and the economics of them are very different than what we've seen in the...

Fair point. Fair point. On the demand strength that you're seeing in the first quarter, could you give a little bit more color, geographies, price points? I mean, are you seeing it across the board? Is it just the peak of peak -- over the last couple of years, we've heard so much about the peaks getting peakier and the troughs getting -- not troughier isn't the word, but weaker. Is that...

A weaker number.

You do. Okay.

No, I'd say that when we talked about our fourth quarter results, we talked about accelerating demand going through the fourth quarter. And we use that strength to guide our first quarter. And you can see with the -- absent the storms, a 2-point up guide today, that strength has actually accelerated. I think what we're most excited about is we're seeing it in peaks and troughs. And that's -- I think it's one of the reasons why I'm only speculating. I only know about JetBlue, but you've not seen a lot of aggression as far as kind of capacity right now, because this is the most strength we've seen in the troughs in a couple of years. So I think from that perspective, we obviously have contingencies laid out depending on what happens with fuel. But I think given the demand environment right now, I think we feel very good about it. And it really is across the board.

I've heard one of our competitors call out transatlantic. Our transatlantic is very small, and we're happy with how transatlantic is doing right now. I think if we are much bigger, it might be a different story. But domestically, I'd say transcon, Florida have both done well. I think they'll probably the -- if I had to put something out as a laggard, it's probably Caribbean, but it's still really good, just not as good as domestic and Florida.

Looks like somebody in the front row has a question, and can't make a him out.

Yes, I do. Okay. Ursula, Jamie and I spent last week in San Diego at ISTAT, where I had your Treasurer, Melinda on my capital markets panel, but we also met with several lessors, all of which said, you've been in the market with some -- what you had previously disclosed some plans to maybe raise some aircraft-related debt and that it had gone very well. I know you haven't announced anything there, but just what can you tell us about that base case plan to raise capital for this year? I still think there's a lot of confusion because people look at where the loyalty bonds trade and assume your next borrowing is going to be at -- well, they're at 11% right now. That's I hope not where you're borrowing money at. So maybe you can give some clarity to that, where you stood with your plan to raise capital this year, and whether or not that plan has changed because of the last couple of weeks?

Yes. No, thanks, Mark, for the question. So as a reminder, we target liquidity as a percentage of trailing 12 months to be around 17% to 20%. So in order to maintain that level of liquidity throughout this year, we're targeting as a base case to raise $500 million. Obviously, we're very focused on the cost of capital. So we have been in the market with an RFP. We're intending to use aircraft to finance that $500 million or in process at the moment. In addition to that, we are running through a multitude of different fuel scenarios. So I think it's too early to call yet as to how much more liquidity we'll need. As a reminder, we ended 2025 at 27% liquidity as a percentage of trailing 12 months. So we do have an adequate level of cash at the moment.

In addition to that, I mean, as a reminder, we do have $6.5 billion in unencumbered assets. 30% of that is aircraft and engines. About 20% is loyalty and another 20% is slots, gates and routes. So we have a lot of flexibility. I think that's important. And clearly, given our leverage metrics and our interest expense level, we're very cognizant of the type of debt that we raise and what markets we tap just given the cost of funding. So I feel good about where we're at. We're going to remain agile. We have a lot of options going forward.

And fair to say that, that in-process $500 million that the rates on that debt are hundreds of basis points inside of where your loyalty bonds.

Correct. They are much more competitive than the loyalty bond.

And you would expect if you were to raise incremental capital beyond the $500 million, that it would be at a similar cost to what you're currently raising right now?

That's the intent, yes. As a reminder, I mean, the loyalty debt raise that we did in late 2024 was to provide us a runway to get the company healthy again and to execute on JetForward. So I consider that a very unique point in time where we leveraged a great asset, obviously, not at the level -- interest rate level that we would ideally like. So that has served us well over the last 18 months in providing that runway, and we're going to try to be super thoughtful around all cost of funding as we progress forward.

And remember, we're going to pay back $800 million this year.

Yes, we do have a convertible debt maturity that comes due in April. So the intent this year was to pay down $800 million and raise $500 million. So we believe that we've hit peak debt levels as we navigate forward.

Anybody from the audience? So I have a cost question for Marty, which relates to JetBlue, but it's also sort of an industry observation, and this is something that came up during some of our panels that we held yesterday afternoon. Just the phenomenon of rising airport costs, L.A. was cited yesterday as an example, New York, obviously, very, very expensive. I'm less familiar with the expenses in Fort Lauderdale. But what seems to be happening is that the coasts are getting increasingly expensive. And I'm still trying to sort out what the future role for ultra-low-cost carriers in the United States might look like, just given the current impairment of that business model.

And I've begun to wonder if airport costs in and of themselves end up driving some of that money-losing capacity off the coasts and more towards sort of the mid-continent airports that tend to be less expensive. Maybe that's sort of where some of the more impaired franchises and JetBlue doesn't -- I'm not putting you in that category, to be clear. Maybe there's sort of a geographic migration towards the center of the country. Is that something -- is that even feasible? Is that kind of how you see things potentially playing out? And how do higher airport costs influence how you deploy your network?

Well, it's a great question.

Kind of a broad -- yes.

According to this clock, we have 11 minutes left, and I could spend all minutes talking about that. This is very -- this is a passion point for us. And I don't want to call out specific airports, but I think that in general, the airport world is less conscious of who the ultimate customer is. The ultimate customer is the person who is flying. And when an airport creates a palace with $30, $40 cost per enplanement, there is no such thing as a free lunch. That ultimately is paid by customers. That impact will ultimately come in fares and then elasticity. And frankly, we are much, much smaller at LaGuardia than we were 4 years ago because it's a $40 airport for us. And the fountain is really pretty, but I don't -- I think people would rather have low fares than a really nice fountain.

And it's funny, there's a -- for those -- because we're a low-cost airline, we go to the airport and we take the bus. And when you walk from the bus, you walk past the wishing well, that's right next to the airport for those of you who have seen it. And I'm like, I don't know who pay for the wishing well, but the answer is I paid for the wishing well, and my customers pay for the wishing well. And I don't think we need a wishing well personally.

But fundamentally, to the second half of your question about capacity, capacity goes where the demand is. And the coasts tend to be very, very strong markets. And again, back to the comment we made earlier about serving both premium customers and the bottom leg of the K, these are big populous areas. So unfortunately, that price will get paid by customers. There will be less flying because you can stimulate less, and I think that's very sad. But frankly, it's one of the reasons why we're so focused on controlling costs in so many other places. But frankly, I guarantee if you had not even a private ballot, but a public ballot from the airlines about their view of palatial airport projects, it would not go well for the airports as far as I'd vote.

If I can just add, I mean, I spend a lot of time on this topic and meeting with the different port authorities, really trying to emphasize the point that you want competition and you want whether it's low-cost or ultra-low-cost competition. And I think what Europe has done with some of the different terminals where you have sort of lower-cost carrier terminals and more full service, I think, is a model potentially that could apply in the United States.

We also have some airport authorities, Massport, being one that really works with the business to try to find creative solutions for how to protect that lower-cost carrier flying to drive competition within the airport. At JFK Terminal 5, there's not a fountain. And we're very mindful we operate that terminal. So it's a slightly different arrangement, but really focused on how do we not drive meaningful airport costs in. So that we can provide affordable fares for customers across the entire spectrum. And we've got a large base of customers that goes out of JFK and they don't care about fountains, nor to most of our customers.

Narita is another example of where they kind of wall off the discounters. Presumably, you would rather reside in the more premium of -- if we end up having a bifurcated terminal reality at any airport, you'd skip...

We want an affordable terminal. It's very difficult to pass on an incremental $30 to a customer because you've got a fountain and a cool play area.

Yes. Okay. Fair enough. Another one for Mark.

So Marty, for you maybe. And when we think about Blue Sky and the partnership with United, as your domestic product evolves to look more like their domestic product where you have true first class, where you don't have Mint, obviously, the premium economy and so forth, does that provide -- how should we think about the road map to ramping up benefits from that partnership? Is there a whole another leg up when you introduce domestic first class from the United partnership perspective? Or is that not something we should sort of be factoring into our math?

Well, I mean, we've factored all the benefits into the math that we presented in JetForward. And there will be mutual customer benefits going to be launched later this year. So I do think that is part of our vision of what we expect Blue Sky to include. But fundamentally, and I say this often, Blue Sky is fundamentally a TrueBlue partnership. And we're creating utility for JetBlue points that did not exist before. And we've had an incredible partnership with our friends at Barclays for the JetBlue credit card, extremely good growth, growth much higher than the revenue growth of the airline.

But we do see at some point in the future without improved utility for TrueBlue points, we did see threat to the thought that whether that card could continue to grow at the rate that it was. And frankly, with the partnership with United, we are now in a situation where a JetBlue customer in Boston or New York or whatever can earn or burn anywhere in the world. And frankly, I think it is a -- this partnership in so many ways is a great example of a win-win for both parties. United had something specific they wanted. We had something specific that we wanted, the math worked. And so far, we're very, very happy with how it's performing.

As a follow-up to that, can you remind the audience what you can and cannot discuss with United as part of the partnership?

Yes. I mean the Northeast Alliance with American made it pretty clear that you can't coordinate schedules and you can't share revenue. So we have a standard interline agreement, a kind of standard frequent flyer -- reciprocal frequent flyer agreement, and that's kind of the framework. And then obviously, Paisly is the other piece of it.

Have you given any thought to immunization? I mean we're in a different regulatory climate than when the NEA was broken up. I don't know the time and expense associated with that, but why not take a run for it. I mean you seem to be really enjoying the NEA while it lasted in that level of close communication.

Parts of it.

Yes. Okay. All right. Fair enough. Expand.

Yes. I mean parts of it worked. I think LaGuardia was a challenge as we thought about sort of some of the network changes we needed to make. And that, I would say, was not perhaps the smartest part of the partnership. Right now, we're focused on implementing Blue Sky as designed. Down the road, is there opportunity to think more creatively? For sure. I think -- but let's see where this current partnership takes us. I'm really pleased. We've got a number of big IT steps we need to take this year, and the team needs to stay focused on that and then delivering on the other JetForward initiatives.

Longer term, assuming you achieve breakeven this year, generating cash in 2027, what -- how do you think about earning the right to grow? I mean you've certainly moderated your growth rate considerably in the post-COVID environment. You've pushed out the order book. But longer term, if you're standing on the financial legs that you hope to, what metrics are you going to look to in determining whether you should expand your footprint.

Yes. I mean I'll start and then Urs, feel free to jump in. So I think we've done a really nice job moderating the order book, so that we are focused on getting that balance sheet back to health. Once we start paying down that debt, we're obviously going to face a decision around the order book and where -- and two, who we want to go with, because there's going to be some nice opportunities there.

Listen, Fort Lauderdale, if we had a lot of extra planes, that would be great, but we've got to source and grow Fort Lauderdale with the fleet that we have, because we are focused on trying not to drive more capital expenditures. And so it's really going to be about balance sheet metrics that will drive that decision, hopefully, over the next few years. And we think there is plenty of opportunity to grow some of the existing cities that we have, particularly those down south given the performance that we're seeing.

Okay. And back for a moment to the product that will not be called junior Mint. Is there a card kicker associated with that? I mean I think about Southwest really evolving their product offering, and there was definitely a loyalty angle to that and enhancements to the cards to carry more benefits. Once you have that better product, is your current card portfolio sufficiently suited to that?

So I don't want to make any news today about what we'll be launching with mini, junior Mint. But I will say that our goal is to make sure that this is a product that meets the needs of our customers. I think that not only will there be benefits for our own customers and our card customers, it will be benefit to United customers because that's part of what this partnership should be. Again, more news on that as we get to launch.

But fundamentally, it's very clear from us from all the research we've done and what we're seeing in the industry, there is very, very strong demand for this product. And we are really excited about it. It's why we added a row to multiple airplane types for this exact reason.

Are there any other changes to the LOPA, like do you have to add ovens back? Are you going to have hot meals or anything like? It's just a seating initiative.

It's just seating. And I think we're being very creative with how we address the additional customer offerings that will come with the first-class products.

And then last question, unless we have any from the audience, people still feeling shy.

Yes. Okay. So the last question, Delta, as expected, leaned into moats, which is something they talk about. United has been discussing that for the last year or 2. I asked Robert Isom about it. What do you really think are the differentiating qualities of your franchise that -- not that passengers should focus on, but the investors and potential investors in the room should focus on?

Yes, I think there's a few areas. Maybe I'll start first with liquidity and our unencumbered asset base, which provides JetBlue with I think something to stand on, particularly during more volatile time frames like the one we're in now. As Marty pointed out, we are on both sides of the K-curve. And I know others talk about we are focused almost singularly on that premium customer. While we are investing meaningfully in the premium customer, we are not forgetting the customer who sits in our Basic seats and who sits in our EvenMore seats. And I think that positions us uniquely because we have great loyalty among that segment. And then maybe our network, strong Northeast Florida presence with a very resilient VFR demographic. And our VFR customers, customers who travel to the Caribbean and some of the islands, they are extremely loyal to JetBlue and tend to be extremely resilient during periods of economic uncertainty.

Okay. That's great. Joanna, Ursula and Marty, thank you very much, JetBlue. Appreciate it.

Thank you.

Thank you.

All right. Good morning, everyone. Welcome again to day 2 of Barclays 43rd Annual Industrial Select Conference. I'm Brandon Oglenski, airline and transport analyst. And next up, we have JetBlue Airways. Joining us is Marty St. George, President of the company; and Ursula Hurley, Chief Financial Officer.

I know, Ursula, you have a couple of things you want to maybe talk about first, but can we just queue up the audience response questions and then we'll get right into it. And for those that have been through the firesides, you already know what this is.

So do you currently own JetBlue? Yes, overweight; 2, marketweight; 3, underweight; or 4, no. We appreciate everyone participating in this.

Can we vote?

Everyone asks and every year, we still don't get them up here. Okay. Question #2, please? What's your general bias towards JetBlue right now? Positive, negative or neutral.

All right. And then question #3 -- technical difficulties. Well, Ursula, sorry about -- okay, here we go. In your opinion, through-cycle EPS growth for JetBlue will be above peers, in line with peers or below peers? We can vote. Thank you...

It looks like rapid fire, Brandon. Wow.

Anyways. We'll get to those results. Ursula, Marty, but both of you, thank you for coming down and being in Miami, and I think you did want to open with a few...

Sure. Yes. Well, thank you to Barclays and for you, Brandon, for having us. It's always nice to be in Florida and Miami in February.

So we are really proud of the momentum that JetBlue has. We launched our JetForward plan about 1.5 years ago. And last year, we definitely focused on the things we can control, and we made good progress. So we've been steadfast focused on operational reliability. And last year, we exceeded or met all of our on-time performance metrics that we have. And that has resulted in a 17-point improvement in our NPS over a 2-year period. And we all acknowledge that NPS is one of the top customer choice drivers. And so we've been proud of the improvements that we've seen there.

On the product side, we've rolled out enhancements to EvenMore, preferred seatings performing really well. We rolled out our first lounge at JFK called the BlueHouse. And the network is evolving and definitely maturing given we changed 20% of it upwards of 18 months ago. So -- and then on the -- we are also excited about our Blue Sky agreement. We actually started selling flights on each other's websites about a week ago. So the progress there has been nice.

And so all in all, pleased we -- in our JetForward plan, we delivered $305 million of EBIT last year. As we look forward to 2026, we're going to deliver a breakeven or better operating margin. JetForward is going to deliver upwards of $310 million of value this year. We've got a really strong RASM guide and a set of initiatives underlying that at 3.5%. And that's in conjunction with a unit cost guide of 2%. And so we have a strong track record of delivering on the unit cost performance over time.

And so all in all, like super pleased with the momentum. Demand in the first quarter is really strong, which Marty will talk about, and so hitting that breakeven or better operating margin is our #1 goal. And that's really going to set us up in 2027 to deliver positive free cash flow. So all in all, like good momentum, excited to be here and happy to go deeper on any of those topics, Brandon.

That was a pretty bullish intro there, Ursula. Marty, do you want to comment maybe on the demand environment right now?

Yes. I think if you look at demand right now, it's -- we'll use a word we have not heard in the industry for a year, which is strong. The demand is strong. we obviously saw that starting in the fourth quarter. We beat our fourth quarter RASM guide by a pretty good number, and that momentum carried into the first quarter and beyond.

And I think if you look at our overall number for 2026 as far as our RASM guide, I think it shows the underlying strength of the business; the strength of the macroeconomic environment, that things seem to be picking up; I think most importantly, the strength of JetForward and the initiatives that we're following to get us back to the pre-COVID margins.

And just remind me, did you guys quantify, too, the impact from the storms that we saw, Fern, I guess, that was up and down the East Coast?

We have not quantified it, but frankly, we've done the math, and it's been de minimis. And it's certainly not going to impact our annual guide in any way whatsoever. It was -- some of the weather we've had has actually come during trough period, which has been helpful for us as far as recapturing revenue. And we do save some expense, but it had no impact on our annual numbers.

Okay. Appreciate that. And I guess if we were to unpack last year because the target was again to breakeven then. And obviously, you were not the only airline to miss guidance as well. So can you just unpack what you feel went wrong maybe in 2025 outside of, obviously, the market pulling back about this time?

Yes. So we exceeded our JetForward EBIT goal last year. And so that just really speaks to -- our JetForward program has over 200 initiatives that are built up from the bottoms up. And the team is pretty relentless in tracking those. And so execution of the team continues to be really, really strong, which is what gives us confidence to be able to deliver the breakeven or better operating margin in 2026.

Taking a step back, we've said if it weren't for the macro step-back last year, we actually would have hit our breakeven target last year, which I think, is a pretty powerful statement, right, because that speaks to -- we're executing on the things we can control, and we're progressing these initiatives at the highest level. 80% of these initiatives are top line revenue focused and 20% of them are costs.

And as we look forward to 2026, the progression throughout the year in terms of the RASM step-change really speaks to the ramp-up of the initiatives that we're rolling out. Capacity is actually growing as we navigate throughout 2026. And so that is driving unit cost efficiencies throughout the year as well.

And so that's really the combination of what is going to deliver breakeven or better op margin next year. I don't know if you have anything else to add, Marty.

Yes. The only thing I'd say is our over-performance in 2025 actually came with a pretty significant reduction in our ASM growth year-over-year, and there were a good chunk of things in JetForward that were passenger count related, bag fee increases, premium seating, things like that. And even with all that, we exceeded JetForward.

So I'm really happy with the resiliency of the team as far as adjusting. We have 200-plus initiatives in JetForward. We track them every other week. And the team is relentlessly focused on making sure that we achieve all these things that really were part of catching up from the sort of the last 2 years between the Spirit transaction and between the NEA with American, and we have a lot of catching up to do, and I think we're nailing it.

Marty, as well, it looks like industry capacity growth is more subdued, tamed this year, especially one of your direct low-cost competitors out of Fort Lauderdale. How is that helping the environment for you or creating opportunities?

It's certainly having an impact on the macro environment. I think it's actually having relatively less impact for us because as you look at that competitor, the one place that they're hanging on to most feverishly has been Fort Lauderdale. That being the case, they have still done some pulling. And frankly, the facilities that they've freed up at Lauderdale, mostly for international arrivals, has been funding a lot of our growth because the whole for us has been the lack of ability to fly more international in and out of Fort Lauderdale. So that's been very helpful for us.

And frankly, if you look at the competitive environment and look at what Spirit has announced, I think they'll end up being flat second quarter -- excuse me, third quarter and beyond. So I think if you look at where the Spirit pulls have been, it's benefited our competitors a lot more that's benefited us. But frankly, I cannot stress enough how much Fort Lauderdale has overperformed versus our expectations.

We -- I think at the right at the time of their second bankruptcy filing, we put a significant amount of capacity in for November and beyond for Fort Lauderdale, knowing our traditional results as far as ramping and the fact that we're announcing stuff on 90-days anticipation versus 120, 150, we had expected a pretty significant headwind. We called out our fourth quarter RASM performance would have a 1-point headwind just based on Fort Lauderdale growth, and it was less than half of that.

So the response from customers has been fantastic. And we're -- we continue to grow Lauderdale past that. And we're still on a trajectory as international gates become available, we will absolutely continue to grow in Fort Lauderdale.

And is there any differentiation across the network right now with the better performance that you're seeing? Is it domestic or...

Yes. It's funny. It's -- I will say -- I'm going to break one of my rules. And generally, we don't give a lot of color on that. But in this specific case, I will give color that there's no color. And we're really seeing it universally everywhere. We spent a lot of time trying to dissect what the source is of the current overperformance.

The competitive capacity environment is better than it was in '25, but not dramatically better. But I think if you look at the overall results, certainly, Lauderdale has been a very good thing for us. I do think there's just a macroeconomic good guy right now as far as people flying more.

And frankly, I would love to blame it on very cold weather in the Northeast, and we've got month-old snow banks up there that haven't really moved, and it's still very cold. But frankly, it's not just the Florida and Caribbean outperformance. We're seeing outperformance in transcontinental as well, and that's 90-something percent of our capacity between those three regions. So it's really been spread broad across the system.

Okay. Ursula, I think you mentioned even more space, the Blue Sky agreement. I don't know, what is most important on JetForward for 2026?

Yes. I would say I'm most proud of the improvement in the operational performance. I mean it goes without saying you run a good operation, your customers are happy, your crew members are happy and costs naturally come out of the business. So we've invested significantly in tools to better help the operation, whether it be in our system operations center or frontline labor or even to ensure that customers are able to self-serve when things go wrong. I'm most proud of the operational reliability improvements we've seen.

What I'm most excited about as we look at 2026 is rolling out domestic first class. This is going to be a product that is going to allow us to better compete. So I'm very much looking forward to that. That initiative rolls out most likely in the third quarter.

I am also looking forward to the continued ramp-up of our partnership with Blue Sky. Like I said, we started selling each other's flights on each other's websites about a week ago, and we're pleased with what we're seeing thus far. And then later this year, we're going to continue to roll out the ability for United customers to actually use our Paisly product to buy ancillary-type products. So those are probably the two initiatives that I'm looking forward to continuing ramp up and roll out later this year.

I want to come back to the Blue Sky partnership, but on operations and cost specifically, I think you're facing fewer aircraft on ground this year owing to the GTF. Is that right?

We are. So last year, we averaged about 9 aircraft on the ground due to the GTF engine issues, year-over-year, that is improving. So we'll have mid-single-digit number of aircraft on the ground this year. So we have hit the peak, and we are seeing improvement.

And this is allowing us to grow again. So JetBlue hasn't been in a position to be able to grow over the last few years given the engine challenges. And so just being able to grow and drive some efficiency, quite frankly, in the cost structure is really, really helpful.

And just to be clear, you were staffed for a higher level of operations, is that right? To fly...

We have been, over the last few years, I mean, we've done things to help rightsize that. We did a pilot early retirement. We've done a lot of voluntary programs across a multitude of work groups. So yes, we were carrying some excess costs and we're basically working our way to rightsizing that given the growth profile this year.

It's worth saying we're hiring our first in-flight crew members in years. So in-flight has certainly been rationalized to a point we need to grow again. We're still not there on the pilot side, but having some of these airplanes come back will certainly help.

And I guess, Marty, from a network perspective, what's the priority for expansion this year?

Priority is absolutely Fort Lauderdale. And we started adding capacity in the middle of '25 with the first bankruptcy filing. We're adding more at near the end of '25 with the second bankruptcy filing, and we'll continue to add as facilities become available.

At the same time, we are still in the mid-single-digit growth profile right now. Clearly, our #1 goal is to get back to get back to fully allocated profitability and start paying down the balance sheet. So as tempting as it may be to grow a little bit faster, we don't have the balance sheet to do that right now where we'd like to be. We're going to get there. And I feel very -- I mean, again, we're going to have positive free cash flow in '27, which is extremely important for us. And we will fund some of this growth from elsewhere in the system as we need. But obviously, the GTF airplanes coming back has been really, really helpful.

So I feel like from a timing perspective, I'm very happy with the progress we're making with Pratt, not -- we'd like more progress. But that being the case, I feel very good about the trajectory that we're following as far as where the network growth has been and where it's going.

And I don't think you've finalized an agreement with Pratt for this year. Is that right?

We are still working through the compensation negotiations with Pratt & Whitney. We're going to settle when we think we've achieved, quite frankly, what we deserve, given the magnitude of the impact on the business. Our full year guide for 2026 does assume a small benefit associated with compensation. Just given we're such a big Pratt customer, so compensation can come in various ways. And then when you layer in the accounting treatment, the impact on a 2026 annual basis ends up being minimal.

[ John, ] do you have a question?

Just a quick question, 4Q premium unit revenues were 13 points above main cabin or the core. How is that developing with the current macro you're seeing?

And then also, not that Fort Lauderdale is developing maybe a little quicker than a normal maturation curve, can you just kind of talk to that and maybe how that plays out through the year?

Great question. So with respect to the relationship between the coach cabin and the premium cabins, that relationship has stayed more or less steady. But I think the good news is we're seeing actually relatively good results in the back of the airplane, which we've not seen for a couple of years. So I think overall, that's a testimony to the fact that we do have a much better operation than we've had historically. I mean we had a tough year in '22 and '23 as far as operational metrics, and we certainly saw it in NPS.

We do subscribe to the Bain -- I can't -- Pulse, I think they call it, but they have an industry-wide NPS, and we are at the top of the industry in NPS, and we have not been at the top of the industry for a few years. So I think that does translate into strength in the back of the airplane.

With respect to Fort Lauderdale, it's funny. We recognize that this is an incredible opportunity for us to diversify this network out of the Northeast. And frankly, we've had focus -- we still have focus cities in Orlando and in Fort Lauderdale. We did a good tranche of growth in San Juan in 2024. But again, it's not that big a market. We'll continue to grow in San Juan, but it doesn't have -- it doesn't have the capability to be 100 flights anytime soon. As you look at Orlando versus Fort Lauderdale, with respect to our focus on premium customers, South Florida is the premium market in Florida, no question. And frankly, I'm very excited about the results we're seeing so far. And as long as Lauderdale continues to perform, we'll continue to add growth in there.

We mentioned a little bit earlier, our ASM growth there is in the double digits and RASM is basically flat. I mean we don't see that performance elsewhere. And frankly, I don't know what's happening with our competitor as far as what their bookings look like. They don't -- they're not in some of the databases that we use to measure things like that. But I know our numbers, and we're really happy with what we're seeing right now. And I think the long-term impact of diversifying the company more broadly away from New York and Boston will have great upside in the long term.

Marty, maybe along those lines and talking about Blue Sky, can you just give an update on where that sits today? Because I think you guys went live with selling each other's flights. Is that correct?

We did. 8 days ago, we started selling each other's flights. As you may remember, we did up-guide our JetForward numbers based on our expectations from our United relationship. And I think that this is a relationship that is very important to JetBlue in the long term, mostly because the challenge we've had over the last several years has been scale. And I think if you look at between the originally planned Spirit transaction and the relationship we have with American, they were both really focused on trying to get more scale for JetBlue. As I think we all know, reading the results of our competitors and some of their statements, the industry has recognized that the credit card programs are a really important part of a sort of a well-rounded revenue portfolio.

Now frankly, we're in the middle of the pack right now as far as percentage of our revenues that come from our friends at Barclays, who's a great partner for us. And I'm not just saying that because we're on your stage. But we are ahead of a couple of our big competitors as far as percentage of total revenue, but we recognize that the TrueBlue currency is a little bit impaired. If you want -- before the United transaction, the relationship, there are a lot of parts of the world where you could not earn or burn TrueBlue points. And with this Blue Sky program, that has finally changed, and we are extremely excited about that.

I will also say, and I know Mike was here a little bit earlier, we still remain competitors with United. And this is an industry standard interline agreement that we do with many, many airlines. This is not any sort of relationship like we have with American because the judge made it clear to us what relationship would work for JetBlue and work for our competitors. But we are really excited about what this is going to do for TrueBlue. And on top of that, the benefits of Paisly, which are going to start picking up in 2026 as we start taking over the sales of some of the United ancillaries. I think this is a really important part of JetForward and something I think is very good for long term for JetBlue.

We remain competitors. They will be flying in JFK at some point in 2027. But the overall benefits for Blue Sky are still very accretive for us, and we're really excited about it. But more than anything, we're excited about it for customers. The metaphor I use all the time is if you were trying to decide what program to align with and you were in a place like Buffalo, where we fly to Florida, we fly to New York, we fly to Boston. But if you want to fly West, you can't fly JetBlue. Like now you can actually earn and burn TrueBlue points anywhere in the world from Buffalo. And I think in some of those secondary markets, the benefits we will get for selling more credit cards is really, really important to us.

Marty, you guys were in a unique position with Spirit and the Biden administration effectively rejecting that deal. And it's pretty amazing to see how that's played out now since. But I guess, looking forward, the scale issue doesn't go away. So does M&A play a larger part for the industry going forward?

I'll say predicting what happens in Washington is way above my pay grade. We are focused on JetForward and making sure we accomplish the goals of JetForward. I think that if you look at our network and what we're building as far as up and down the East Coast being the preeminent leisure airline, we are well on path to do that.

I do think there's a parallel between us and Alaska. I mean no one's talking to Alaska about like what's your Midwestern hub going to be. People still ask this question, what's your Midwestern hub? I'm like I don't need a Midwestern hub because, frankly, they're all taken. I do think there's a very strong path for us going forward with the United relationship to sort of fill that hole for us. And there's no focus whatsoever as far as M&A here. I don't know if you want to add anything, but...

No, I totally agree. We're focused on owning our own destiny and executing JetForward, I mean our #1 priority is getting this business to consistent profitability again. And then clearly, we need to improve the balance sheet. And so we feel confident we're on the right trajectory right now, and we're super pleased with the momentum that we had coming out of 2025. And the demand environment is obviously like really, really strong.

And look, it's worth mentioning, these are not numbers that have been unseen before. If you look at the 2015, 2016 period, we did produce these margins. And our goal is to get back to where we were then. Yes, sadly, it's a decade of challenges between then. But a lot of the M&A in the industry had happened before then. So it's not like M&A has created this incredible threat for us from the big 3 or big 3.5 carriers who've gone through M&A. We can get there, and I think that's what JetForward is really focused on.

Okay. Can we queue up question #4 actually for the audience, please?

In your opinion, what should JetBlue do with excess cash? First, do M&A, then share repurchases, dividends, debt paydown or internal investment. You go ahead and vote, please. Again, we thank everyone...

I can -- we can bets on what -- I know the answer to this one. Wow.

There we go.

Question #5. In your opinion, what multiple of 2026 earnings should JetBlue trade? You can go ahead and vote, please.

And Ursula, I want to ask about CapEx and your plans this year, too.

Sure.

Okay. And then question #6. What do you see as the most significant share price headwind facing JetBlue? Core growth, margin performance, capital deployment or execution strategy?

Okay. Ursula, I think you guys guided to about -- is it $900 million of net CapEx this year? And I think you said that maybe you need about $0.5 billion more of capital. Is that right?

Correct. Yes. So we -- your numbers are spot on. So through the end of the decade, our CapEx profile is going to be sub-$1 billion. So we've laid out the order book appropriately. The quantity of deliveries, once we get to 2027, steps down to a handful per year. I mean, we did that to ensure that we have the runway to deliver positive free cash flow in 2027.

I will note the CapEx profile being at sub-$1 billion each year, we can still deliver low to mid-single-digit growth through the end of the decade. And we believe that, that's the optimal growth rate for us as we get this business back to consistent profitability. So that's a combination of the new deliveries, but also the GTF engine issue continuing to improve.

On the balance sheet front, we believe that we've hit peak debt levels. So this year, we'll pay down about $800 million in debt, and we're raising $500 million. So we believe we've got a solid runway. I mean, priority #1 is breakeven or better op margin. Priority #2 is positive free cash flow in 2027. And then #3 is starting to pay down the debt profile. We need to get in a better position in terms of our leverage metrics, and that's going to be the #1 priority once we hit that free cash flow target.

And I guess what would you call your unencumbered assets today? What are options for...

Yes. We have -- this provides us a lot of flexibility. We have over $6.5 billion of unencumbered assets. About $2 billion of that is aircraft and engines. We have more we can do in terms of levering our loyalty program. And then we have slot, gates and routes and our brands. So it provides a nice cushion for us.

So I feel good about the flexibility that we would have if we needed to raise more liquidity. Obviously, with the positive demand environment that we're seeing and the CapEx profile being sub-$1 billion, I feel good about the position we're in, in terms of liquidity balance and just the setup that we have to deliver free cash flow next year.

Also, one thing I'd add is we have hit our point of peak leverage. I mean it's -- if you look at paying off the convert, things like that, it's -- we're only going one direction. It's the right way as far as leverage right now. So I cannot stress enough how much that's a singular focus of this team is making sure we execute on results to make sure we can get the balance sheet back in good shape.

It sounds like JetForward is on track this year.

Yes. We feel good. We feel really good.

Marty and Ursula, thank you so much for coming down. We appreciate it.

Thank you. Thank you, all for coming.

Thank you for having us, Brandon, and thank you for everyone being here.

Good morning. My name is Christa, and I would like to welcome everyone to the JetBlue Airways Fourth 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.

Thanks, Christa. Good morning, everyone, and thanks for joining us for our fourth quarter 2021 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.cec.gov. In New York to discuss our results are Joanna Geraghty, our Chief Executive Officer; Marty St. George, our President; and Ursula Hurley, our Chief Financial Officer.

During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act late of 1995. Such forward-looking statements include, without limitation, statements regarding our first quarter and full year 2026 financial outlook and 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 [indiscernible] targets, our business strategy, 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 the 2024 10-K and different filings for a more detailed discussed and uncertainties that could cause actual results [indiscernible] the statements made during this call. [Audio Gap] are made as only as the date of this call. As may be required by law, we have taken the obligation to update this era Investors should not place undue [indiscernible] statements.

Also during the course of this call, we may discuss certain non-GAAP financial measures. And now I'd like to turn the call over to Joanna Geraghty, JetBlue CEO.

Koosh. Thank you. Okay. Good morning, and thank you for joining JetBlue's Fourth Quarter and Full Year 2025 Earnings Call. I want to thank our crew members for their continued dedication to running a safe operation, especially during winter storm [indiscernible]. We've canceled over 1,100 flights as a result of the storm and the industry remains in recovery mode. While today's forward-looking guidance excludes the storm's impact, given January is typically a trough period for us, we don't currently expect the impact to be material to achieving our full year earnings guidance.

Before we get to 2026, let's take a look back at 2025. In the first full calendar year of our jet Forward transformation, I am very proud of what we've accomplished. In the face of a government shutdown, macro uncertainty and related groundings disproportionately impacting JetBlue, we stayed focused and continued to work toward our goals. Operational performance has been a key proof point of our strategic transformation. In 2025, we beat all of our on-time performance targets, improved every one of these metrics versus the prior year and narrowed the gap relative to others.

What makes this even more significant is that it follows an equally strong 2024 when we also beat all of our on-time performance targets. Two consecutive years of reliability improvements are a direct result of a forward investments, smarter planning, disciplined execution and our team's daily focus on doing the basics well, all in the most challenging airspace in the world.

Our customers are recognizing these meaningful reliability improvements. I want to emphasize this. In 2025, we achieved an 8-point gain in Net Promoter Score and a 17-point gain since the beginning of 2024 and the launch of JetForward, making us once again a leader in customer satisfaction. This improved experience is driving loyalty and in turn, has increased the rate at which customers return to fly JetBlue. The progress we've made on delivering reliable and caring service not only increases customer satisfaction, it also sets a solid foundation to enable the success of our other priority moves. Our products and perks are increasingly capturing more premium revenue following the enhancement of even more than a continued outperformance of preferred seating, the release of our premium credit card, which far exceeded sign up targets last year, and the opening of our first ever lounge at JFK. And not to forget, we won the J.D. Power award for the best business class product last year.

Our network changes continued to progress well, even as we capitalize on near-term strategic opportunities in Fort Lauderdale, where customer response to our close-in schedule additions has greatly exceeded our expectations. Now underlying it all, we maintained a tight hold on costs in the face of meaningful capacity reductions. Taken together, these JetForward initiatives delivered $305 million of incremental EBIT, slightly better than our initial expectations. This outcome gives me great confidence that JetForward continues to be the right plan.

Macro uncertainty pressured industry demand last year and impacted results versus our initial full year operating margin guidance of 0% to 1%. As previously shared, we estimate this uncertainty represented more than 4 points of headwind to operating margin for the year, impeding our path to restoring operating profitability in 2025 and resulting in an adjusted operating margin of negative 3.7%.

Looking ahead to '26, we are focused on turning the progress from our JetForward initiatives into improved profitability. At a high level, our full year guidance is based upon 3.5 points of capacity growth, 3.5 points of unit revenue improvement and 2% nonfuel unit cost growth, all contributing to our forecast of breakeven operating margin or better. Our guidance assumes the macro environment continues to provide a constructive baseline for demand. Any incremental recovery in GDP or reduction in fuel prices beyond consensus estimates represents potential upside as 2026 progresses. Critically, we expect to deliver $310 million of incremental EBIT from JetForward this year for a total of $615 million in 2026. This keeps us on track to deliver $850 million to $950 million of total incremental EBIT for the full year 2027.

The incremental EBIT growth in 2026 is driven by the continued ramp of our existing initiatives and the launch of several exciting new initiatives, including rolling out the remaining key components of our Blue Sky collaboration with United, the opening of our Boston lounge and the launch of our domestic first-class products. Though it has already been a dynamic start to the year with the temporary closure of a portion of Caribbean airspace and winter storm FERN, our focus remains on controlling what we can and translating these efforts into several points of operating margin improvements in 2026. With that, I will turn it over to Marty.

Thank you, Joanna. And once again, as I said, thank you to our crew members, we stepped up to keep our operations running safely throughout 2025 and into 2026. So turning to Slide 7 of the presentation. Fourth quarter year-over-year unit revenue finished up 0.2%, over 2 points better than our guidance midpoint, and nearly 3 points better than our third quarter performance. The majority of our RASM beat was [indiscernible] first quarter bookings. We've seen a healthy recovering domestic performance, with year-over-year RASM for the fourth quarter better than that of international flying.

The booking curve further normalize throughout the quarter with strong close-in booking performance to holiday travel that was more in line with historic levels. And as we've discussed throughout the year, the fourth quarter continued to show strong peak period performance, while off-peak demand remained more pressured. Our positive RASM was propelled by premium growth with premium RASM outperforming RASM by 13 points in the quarter, reinforcing the strategic importance of our investments in net even more loyalty, lounges and coming later this year, domestic first.

To complement this addition, we are also refreshing our award-winning mid-cabins in-flight food menu later this year. We have over a decade of experience serving the premium customer, and we are excited to continue refining the premium experience, whether in mid-, full house or domestic first class.

We are also proud of the improvements we have made to our food offering [indiscernible] forward have translated into even stronger brand loyalty, and we capitalized on that in 2025. Royalty revenue grew by 8% for the full year year and a year when capacity was down 1.6%. And now CASM over 13% of total revenue, up from 11% in 2023. The introduction of our Blue Sky collaboration with United as it may JetBlue even more relevant across new geographies and combined with our loyalty programs leading customer satisfaction gives us confidence in the fourth quarter.

Our first launch [indiscernible] has been open at JFK for over a month and is generating great reviews. Since opening, we've seen lounge NPS in the mid-80s, alongside a meaningful increase in the acquisition rate of our premium co-branded credit card.

Turning to the network. In the fourth quarter, we added significant close-in capacity to our Fort Lauderdale focus center. The ramp of this strategic expansion, we have announced over 20 new non-step destinations, plus increased frequency on a dozen others is materializing faster than our initial expectations. While we initially expected a 1-point RASM headwind in the fourth quarter resulting from the close-in nature of growth, the impact was closer to 0.5 point, reflecting customers' strong response to our schedule additions and preference for our award-winning customer experience.

Fort Lauderdale represents a strong premium leisure market as both an origin and destination. We are now offering up to 26 daily mid-flight touching Fort Lauderdale this winter, offering more domestic [indiscernible] seats than any other carrier in Florida. In addition, Fort Lauderdale sits strategically between our strong foothold in the Northeast and our robust Latin and Caribbean network, making it a well-placed connection gateway for customers with significant upside potential for JetBlue. With our far better customer experience and competitive fairs and now more destinations, we are pleased to bring even more value and choice to customers in Fort Lauderdale and cross-sell [indiscernible] each priority move and the key initiatives that delivered value in the second half for 2025.

We're capitalizing on this progress and more in 2026. It will be a big year for Blue Sky as we expect to roll out the remaining key features of this collaboration with United throughout the year. We expect to active cross-selling into line flights on each other's website very soon. This will be followed by mutual elite customer loyalty benefits, turning on as the year progresses. Through the second quarter, we begin -- expect to begin selling United's non-ancillary through our [indiscernible] subsidiary. We plan to launch with car rentals, followed by hotels, cruises, vacation packages and travel insurance, with the expectation to be selling all [indiscernible] products by the end of the year.

Lastly, turning to guidance. For the first quarter, we expect capacity to be up 0.5% to 3.5% year-over-year, with unit revenue growth in the range of flat to up 4%, supported by demand momentum actually in the [ first ] quarter and a constructive competitive capacity backdrop. We estimate the closure of [indiscernible] in early January and some lingering demand impact will be a headwind to RASM of less than 1 point for the quarter, which is incorporated in our guidance. As Joanna mentioned, not incorporated in our formal guidance are the recent impacts of [indiscernible].

For the full year, we plan to deliver unit revenue growth of 2% to 5% and capacity growth of 2.5% to 4.5%, contributing to [indiscernible] initiatives ramp. Our RASM guidance is dependent on 4 key drivers highlighted on Slide 10 of our presentation. These drivers are part of JetForward and largely there control, which gives me confidence in our ability to execute. The largest driver is loyalty, driving about 1 point of year-over-year RASM. We expect to grow loyalty revenue as a percentage of total revenue by about 1 point to 14%, driven by added [indiscernible] options and the opening of [indiscernible].

Next, our product enhancements, which are expected to contribute [indiscernible] point of RASM. These enhancements help to drive yield and improve load factor as our offering evolves. Additionally, Blue Sky and Paisly are expected to drive another [ 3.25 ] a point. And we believe the maturing of our network changes and improving customer satisfaction will contribute the remaining 0.5 point to get to a full year RASM midpoint of up 3.5%. Ultimately, we expect the combination of these drivers and over 200 underlying JetForward initiatives result in a more competitive customer value proposition, translating to RASM growth exceeding CASM growth this year and supporting our path back to sustained profitability. While the environment remains [indiscernible], the progress we've made to JetForward gives us confidence that we are positioned to deliver on our commitments in 2026.

I will now turn it over to Ursula.

Thank you, Marty. I want to reiterate what Joanne has said about 2025. I am very proud of our team for controlling what we could amidst a dynamic environment to deliver on our full year cost outlook and build a strong foundation for what's next. We adjusted our business to navigate a challenging macro environment. We proactively reduced capacity by 2 points over the year as demand softened. We identified cost savings above and beyond our initial budget, and most importantly, we progressed on JetForward and delivered $305 million of incremental EBIT in the face of all these challenges.

Turning to Slide 12. The fourth quarter was marked by a high volume of unforeseen external events. Despite this, the team did an excellent job recovering from each event and moving forward under difficult circumstances. For the quarter, CASM ex-fuel was up 6.7%. Disruptions from the government shutdown, the Airbus airworthiness directive and 2 major weather events added cost, reduced capacity by nearly 2 points and drove the gap for our initial CASM ex-fuel guidance.

Fuel price was also a headwind in the quarter, with crack spreads rising sharply in late October and later moderating in conjunction with Brent, resulting in a fuel price of $2.51 versus our midpoint expectation of $2.40. For the full year, CASM ex-fuel finished up 6.2%. Given full year capacity was reduced by nearly 2 points versus our initial expectations, I am especially proud of the team for managing costs within our initial range of up 5% to 7%.

And in our first official year of JetForward, we achieved substantial cost savings, driven by initiatives like improved tooling and utilization of AI to optimize planning, better manage disruptions and enable greater self-service.

On the support center side, we strengthened efficiencies in our fixed costs. We also began modernizing fuel processes, unlocking cost savings through technology, process and operational initiatives.

Shifting to 2026. We expect full year positive ex-fuel growth of 1% to 3%, driven by several factors. We averaged 9 aircraft on ground from GTF-related issues in 2025, and we expect that number to be in the mid-single digits in 2026.

New deliveries will also drive capacity growth this year and provide tailwinds to labor productivity and fixed costs. Additionally, we are seeing benefits from fleet simplification efforts as we are now down to 2 fleet types. These benefits will be offset by higher rents and landing fees, investments in our customer experience and the impact of tariffs. CASM ex-fuel in the first quarter is expected to grow the most of any quarter in the range of 3.5% to 5.5%, largely due to elevated maintenance expense. CASM ex-fuel growth is expected to moderate downward over the year and especially in the second half when we expect roughly flat year-over-year CASM ex as JetForward cost savings initiatives ramp up and year-over-year capacity growth.

We estimate fuel price to be at the midpoint of our ranges, $2.34 for the first quarter and $2.27 for the full year. Encouragingly, fuel efficiency remains a tailwind this year. ASMs per gallon are expected to improve by approximately 1.5% in 2026, contributing to an approximately 5% total improvement over the last 3 years, driven by the retirement of the E190 fleet and substantial fuel savings initiatives as part of JetForward. For reference, 5% of our annual fuel cost equates to $100 million of savings in 2026.

Powered by an improving macro backdrop and $310 million of incremental JetForward EBIT, we expect RASM growth of 2% to 5% and CASM ex-fuel growth of 1% to 3% will drive breakeven or better operating profitability this year.

Turning to capital allocation and our financial priorities on Slide 13. In 2025, we invested $1.1 billion in capital expenditures, primarily consisting of 20 aircraft deliveries. For 2026, we expect capital expenditures of approximately $900 million, driven by 14 aircraft deliveries and the start of domestic first-class retrofits. Since the start of JetForward, we've worked to secure our financial future by cutting in half our planned 2026 through 2029 capital spending from $6 billion to $3 billion. As a result of these efforts, CapEx is expected to remain below $1 billion annually through the end of the decade, enabling low to mid-single-digit [indiscernible] capacity growth while also accelerating our return to positive free cash flow.

We ended the year with $2.5 billion of liquidity, excluding our undrawn $600 million revolving credit facility. This year, we expect to repay approximately $800 million applicable throughout the year, including $325 million outstanding on our 2021 convertible notes, which matures this April.

To address cash needs, we intend to raise approximately $500 million in new financing, supported by roughly $6.5 billion of unencumbered assets. We are focused on aircraft tax structures and are evaluating all available markets as we prioritize securing low-cost capital.

For the year, we expect gross interest expense of approximately $580 million. We know there is still much work to do on our balance sheet, but I am encouraged by steps in the right direction. Gross debt peaked last year. And in 2026, we expect our leverage profile, measured by net debt to EBITDA, to begin to improve and benefits from JetForward actually grow our EBITDA and help us reach our goal of restoring full year operating profitability.

As we look ahead, our priorities remain the same: getting back to sustained operating profitability, followed by generating positive free cash flow and restoring the health of our balance sheet. We believe there is a path to generating free cash flow by the end of 2027.

In closing, while 2025 brought unexpected challenges, it also marked a year of meaningful progress that strengthened JetForward foundation and reinforced our confidence that JetForward is working. We entered 2026 focused, energized and committed to returning to breakeven, profitability or better. The macro backdrop is improving, we're excited to be booking again, our operation is performing at a level we haven't seen in years and our commercial initiatives continue to ramp with new initiatives rolling out from Blue Sky to the launch of domestic first class and the opening of our second lounge in my hometown in Boston. At the same time, we are returning to disciplined low single-digit cost growth. With these elements coming together, we believe we are well positioned to restore profitability, and I am eager for what comes next for JetBlue.

With that, Christa, we'll open the call for questions.

[Operator Instructions] And your first question comes from Dan McKenzie with Seaport Global.

So the premium is clearly outperforming leisure today. So my first question really starts there. And that is that premium seats today, I guess, are 25% of the total flying. But I'm wondering what percent of revenue they comprise? And what you would expect that to be when you exit 2027? So I'm thinking it's probably 30% plus today, and the question becomes, could it be over -- could premium revenue be over 40% of revenue in 2027?

I'll take that, Dan. Thanks for the question. So we generally have not released that number. And I think as premium becomes a bigger and bigger part, we'll pick up to think about how we want to manage that in the future. The one thing I do want to stress is that with the introduction of the domestic first class product later on this year, the total percentage of premium seats is not going up dramatically. That product is basically being funded from reduction in the even more cabin. However, the quality of the seats actually goes way up and as does the yield. So it is absolutely accretive. The benefit of the best first class is clearly in the products and perks [indiscernible] under JetForward, and we're really excited about just continued momentum we've seen for premium products, whether it's lounges, Mint, even more. We have a really great track record as far as being able to deliver premium products to our customers. Our customers love them, and we are really excited to use first class later this year domestically.

Yes, yes. Second question here just ties to leisure revenue and the recovery glide path at the current guide in beds. And I'm thinking leisure fares so far this month are largely flat year-over-year. And I'm just wondering if that full year guide embeds sort of the flattish revenue leisure component or what that recovery -- the shape of that recovery could look like?

So it's a great question. And I will start with the line I use pretty much every college as we guide what we see. And the trajectory of 2026 unit revenue is fundamentally based on fourth quarter performance and first quarter bookings. So you will hear us use a word today that we generally haven't used in well over a year, which is strong. Bookings are strong right now. And I think what I'm especially excited about is we've seen a nice recovery of leisure customers. And frankly, I cannot talk enough about how pleasant surprised we've been with the speed of the adoption of our new capacity in Fort Lauderdale. That's been a very nice contributor. But overall, when you look at our operational improvements, you look at the improvements in loyalty program, the resulting increase in NPS, I think we sort of have a flywheel of goodness going on right now that's resulting in great unit revenue. There are no big assumptions of a GDP snapback quickly, a significant changes in competitive [indiscernible]. Basically, we're sort of forecasting based on what we see right now.

Your next question comes from the line of Duane Pfennigwerth with Evercore Partners.

Marty, that word demand strength, which you haven't used in a while, what is different about the trends that you're seeing now? Maybe you could speak to changes in the booking curve? And then for my follow-up, which I'll state right up front, to what extent is competitive capacity in the first half contributing to that?

Duane, so let me start with the -- a little more color on what we mean by the word strong. I think that the thing that has been most interesting to us is the recovery in the domestic coach market. I made a comment in the remarks about how domestic and international performance has been converging, which I think we're very optimistic about. I'll also say the booking curve looks very normal. I think if you go back to the middle of 2025, what you would have heard us say in calls was the bookings are coming, they're coming very close in. And there was a little bit of apprehension of your sort of sitting here with beta breath waiting to make sure that bookings actually came. That's really not what we're seeing now. We're seeing a very normal booking curve, with the exception of the Caribbean, for the first couple of weeks of January, where we did see a bit of a drop, which, by the way, we're back to positive year or and the Caribbean. So that was a blip that's been temporal and much better now. It just looks like a normal demand year, which I'm very, very optimistic about.

With respect to competitive capacity, yes, and we're in a relatively good competitive capacity environment right now. We have had our biggest competitor in Fort Lauderdale pulled down dramatically. We have not made any assumptions about any further pull downs or any significant changes compared to the capacity. I will say that the first quarter is very clear as far as what's out there right now. I think second quarter still has some time to settle down. We're still selling more in second quarter than we're probably going to fly. But that's generally what you see in the time periods when you've got strong peaks and weak troughs where it appears that there's a sort of a big net strategy and then you win it down a little bit closer in. But there is no -- I want to make it really clear on this call. There's no magic cap with a rabbit in it of some sort of a big surprise that's going to make these numbers. This is just execution of the JetForward plan on top of the existing strength in industry unit revenue right now. That's one of the reasons we're so optimistic about 2026.

Your next question comes from the line of Savi Syth with Raymond James.

I was wondering, Marty, just to follow-up on Fort Lauderdale. Could you talk about just how Fort Lauderdale might be changing under kind of the current strategy other than just getting bigger? Like are the connections going to be bigger as a result in terms of total system? Just how should we think about Fort Lauderdale once this is kind of fully baked in versus kind of the strategy of set up 2, 3 years ago?

Thanks, Savi. First thing I would say is, I think we should acknowledge Fort Lauderdale is our very first destination. The original jet was light flu from JP from Fort Lauderdale. So we have -- the history of JetBlue -- Fort Lauderdale is as a history of JetBlue. And we've had a lot of growth in Fort Lane over the years. I think if you go back 10 years or so, we announced publicly this concept we call later Fort Lauderdale 140, which was growing Fort Lauderdale to about 140 flights a day. We had trouble executing that mostly because of gate resources in the airport. It is a relatively constrained airport, especially constrained for international gates. And if you look at the opportunities to grow, we have a pretty solid slate of destination for the north of Fort Lauderdale. Our challenges are really to Caribbean, Central and South America. And for that reason, the lack of international gates has been a problem for us.

I'd say with the pull down that we've seen from Spirit in Fort Lauderdale, gate resources have become available. And we've wanted this for many, many years. So when the opportunity came up, we jumped on it very, very quickly to make sure that we could backfill because this is an aspiration we've had for a long time. And I would say that starting with crew members and also investors, we have continually gotten the feedback of you need to diversify beyond the Northeast. And I think if you look at diversification beyond the Northeast, this is it. And Fort Lauderdale is a great premium market, South Florida, a great premium market, the best premium market in Florida. And obviously, we have a very premium heavy strategy going forward. Number two, geographically, it is a perfect location between North and South. So I think given the franchise that we already have in South Florida, the opportunity to grow there, we're really bullish on Fort Lauderdale.

Specifically, yes, we have more of a bank structure Fort Lauderdale than we had historically for connectivity, and as these become available, we'll continue to emphasize to enhance that. And in fact, we are currently in the process of expanding our banking plans there.

We don't really want to become a legacy hub-and-spoke airline. So it's not going to that extent. But the extent to which we can create casual connections at good departure times in Fort Lauderdale, we will have to take advantage of it. And so far, it's performed very, very well from a connect perspective. I think for those customers who have connected in Miami versus connecting at Fort Lauderdale, I think I know which 1 everybody would pick. And it seems like customers are picking it and Fort Lauderdale has done very well for that.

That's helpful. If I might, just quickly a follow-up for Ursula. Just on the $500 million that you plan to raise this year, is that reflected in the interest expense guide? Is that kind of potentially increase to the interest expense assumption?

Savi, yes, the interest expense is included in the $580 million guide. I will note the $500 million that we're anticipating raising, we'll probably dual tranche it. So there would be a portion of that raise, which happens early in the year to support the convertible debt paydown that is due in April and then the second tranche of the financing most likely will happen in the back half of the year.

Your next question comes from the line of Tom Fitzgerald with TD Cowen.

It's good to see the premium credit card sign-ups are exceeding your expectations. I was wondering if that's primarily in the New York area, just given the lounge, or if you're seeing that kind of throughout the network or in new geographies? Or any details you'd want to expand on there?

It's really throughout the system. And I think it's because the premium credit card itself actually has a great value proposition. And frankly, a lot of our customers touch New York. So even if you don't live in New York, it's generally an important destination. And I think when we get New York and Boston both up, we're really bullish about the premium credit card. It's also -- it also has lower annual fees than other airlines and the premium credit cards. And I sort of mentioned this in the script and you put this in the release, but didn't put it in the script. Our friend at Bain, who do like industry-level NPS scores have now given us a permisison. We could say that JetBlue has the highest NPS of any loyalty program of any airline in the U.S.

So I think, again, back to the concept of the flywheel success sort of breeds success. So we're very excited with the kind our partnership with [indiscernible] is absolutely fantastic, and I'm really optimistic about the lounge as a contributor. We are, and back to Savi's point about Fort Lauderdale, we are exploring whether we can make a launch of Fort Lauderdale work. It's a pretty constrained airport so we're not as sure that we have space for it. But if we can make it work and provide a great customer experience, it's certainly something we'll be talking about later on in 2026.

I'll just add on Marty's comment regarding Barclays. I think what's unique about our program is we're not competing with a bank's proprietary card. This is fully dedicated Barclays card for JetBlue. And so when you think about the depth of the relationship and 2 entities really rowing in the same direction, that's very much what you see with the JetBlue Card.

Okay. Great. That's really helpful. And then just as a follow-up on Blue Sky, I was just kind of curious, do you see upside potential to that 75 points of RASM expansion? And then just within the various buckets, do you see the wider funnel from the -- being on their distribution website driving a lot of the gains? Or do you see it kind of split evenly or Paisly? Just wonder if you could kind of break out the different drivers within the Blue Sky and Paisly?

Thanks, Tom. Honestly, all those things are important. We obviously pay is very, very important. What we love the most about the Paisly upside is that first, we have really built a beams trap with the Paisly platform. And especially important for us is that Paisly is an extremely capital-light way to grow earnings. The only capital there is based IT capital, and it's de minimis compared to our overall capital expenditure. With respect to the other [indiscernible], I do fundamentally believe that the benefit -- excuse me, to Blue Sky. I do fundamentally believe that the benefits of Blue Sky are focused in TrueBlue. As you look at TrueBlue destinations [indiscernible] through this partnership with United, we finally plug that hole. And I think the utility with [indiscernible] has skyrocketed in the last 6 months with the addition of this program.

We're also relatively early along in the game. So I think it's -- we'll see how that works with customers, but I love the value proposition of TrueBlue, and I very much appreciate this relationship with the United to make this possible. I do also believe that the mutual distribution is going to be important. I think about places where we offer services United doesn't. JFK at the West Coast, even when they do eventually enter JFK and we're not sure whether they would go, but sometime in 2027, they'll be in today, if you want to earn mileage plus points from anywhere in New York to the -- from this Hudson to the West Coast, we're really the only option. I love having those on .com. And even though United may not have the same direct penetration that JetBlue does. It is a significantly big airline. We don't really know the track to their website, other than what we can pull publicly, but I love the thought of all the JetBlue flights getting the eyeballs all the United customers running United.com all the time. And frankly, I will remind you, we have a very high NPS. So I think when United customers actually get the JetBlue, their reaction is going to be, "Hey, this is great." I can have a great customer experience, and I can also earn my mile-plus point. So we're really excited about that as well.

Your next question comes from the line of Mike Linenberg with Deutsche Bank.

Just 2 here. First a lot, just on -- you called out the $6.5 billion of unencumbered assets. And I just -- that seems a little bit higher than maybe what you shared in the past. I thought it was more like $5 billion. And so maybe it reflects some debt pay down or maybe you reappraised, I don't know, a pool of spare engines. Has that changed at all?

It did. Good catch, Mike. So the previous number that we publicly quoted was $5 billion. As we were assessing our liquidity needs for 2026, we did go through an update on all of our appraisals on the unencumbered assets. So as a reminder, we purchased our aircraft deliveries last year with cash. So those were added into the pool. In addition to that, there's still incremental value on our loyalty program as well. So those were really the 2 main drivers of the increase.

And as a reminder, as we look at the unencumbered asset base, the breakdown is about 30% of other aircraft and engines, about 20% of it is loyalty, and then obviously, the remainder is [indiscernible] gates [indiscernible] in our brand. So yes, we're really pleased to continue to have cushion and the cushion is a really healthy culmination of assets.

Great. And then just, Marty, you talked about the [indiscernible] changes with the rollout of first class. When actually do you start selling that first, first Class seats? And how long is that rollout going to take before you get to all of your domestic flights with first class?

So Mike, we're expecting the first airplane to roll out in the third quarter. We're right now in the middle certification, so we're not ready to pay the date down yet as far as one that will be. And the implementation is actually relatively quick. We'll have 20-something of the fleet done by the end of this year. The overwhelming majority of what we've done by the end of '27, but not all of it, and the rest comes in to '28. And the benefits, it's obviously an important part of the products and perks initiative in JetForward. It will not be fully [indiscernible] later on this year.

Okay. Did you say 20% or 27% by year end?

20%.

Your next question comes from the line of Catherine O'Brien with Goldman Sachs.

So Marty, you talked about the Fort Lauderdale capacity [indiscernible] expected less of a drag to fourth quarter. Would you say that's more a function of improving overall demand? Did you see faster-than-expected share shift? Was the competitive response better than you expected? Just can you talk about how Fort Lauderdale RASM is performing versus the system? And then higher level, like as you're thinking about the additional capacity in the Mint ads, how do you expect that to impact the medium-term hub profitability versus system profitability in Fort Lauderdale?

Thanks, Catie. And I'll say 2 things. First of all, we have multiple databases that help us measure share shift. The one that is the most close in actually does not participate in. So right now, I cannot tell you if the fourth quarter upside has been share shift or a has [indiscernible] have the real data. I do know that we're certainly carrying a lot more customers than we expected and at higher yields than expected. So whether it came from Spirit or from people coming after couches, I'm happy to have it either way.

With respect to profitability, we do expect Fort Lauderdale to be accretive to our overall system profitability. And frankly, I feel like with the change of the competitive environment down there and also the ability to compete with a tough customer experience in Miami with one of our competitors, just Fort Lauderdale is a very easy airport. It's only located in the region. We would not be doing this if we did not think that Fort Lauderdale would be a significant upside contributor to the system. Obviously, we could put airplanes anywhere where specifically [indiscernible] to put in Fort Lauderdale for a reason.

Got it. Makes sense. Maybe, Ursula, one for you. You mentioned your thinking this year's financing needs will be about $500 million. How sensitive is that to your 2026 profitability outlook? [indiscernible] help offset fund raising requirements this year, if at all?

Catie, thanks for the question. So the first one is, we're targeting [indiscernible] to be anywhere between 17% and 20% of trailing 12 months revenue. So obviously, that excludes our revolver as well. So -- and there's a little bit of buffer there just in regards to the operating performance of the business. So I will say, I feel really confident based on what we know today and the team's ability to execute on the breakeven or better operating margin. And so as the [indiscernible] was to be, like I said, we'll target that 17% to 20% range.

We'll pivot if we have to. Obviously, we have the very healthy unencumbered asset base to choose from if we do need more liquidity. I'm pleased that I believe that we've hit peak [indiscernible] levels last [indiscernible], so really leaning [indiscernible] into the EBITDA growth driven by JetForward help improve the leverage metrics. We also took advantage of some market opportunities in regards to -- and sale leasebacks. And as we look at 2026, we do have about 0.5 point of controllable comp benefit baked into the full year guide. That's really driven by the remaining sales of the E190. So we have about 8 aircraft that we will be selling in the first half of this year. And we'll continue to monitor the markets as well in terms of sale-leaseback opportunities. I hope that answers your question.

Your next question comes from the line of Jamie Baker with JPMorgan.

So Marty, I wanted to go back to the question you were answering before Savi's question. You mentioned the rabbit. Can I just confirm, there are no specific assumptions in your full year guide as to what potentially happens with any of your competitors that might be facing, shall we say, a precarious situation at the moment? Is that correct interpretation?

Yes, and I'll give you a little more clarity on that, Jamie. There has been capacity added by some other airlines to Fort Lauderdale with the reduction of Spirit ASMs. Those ASMs are there, and they're not going away. So that growth is still there. We're not assuming that, that was temporal. We are also not assuming that Spirit goes to any significant shrink versus where they are right now. I mean, our view is, we're [indiscernible]. There's certainly probably more rumors than they have airplanes, but I don't think there's any upside for us to try to make any assumptions on that.

But I will say, Jamie, we do have multiple plans in place depending on the outcome of Fort Lauderdale and Spirit. So we're ready for a number of scenarios to ensure that customers are protected and that we bring the JetBlue product and the offering to more folks in South Florida and beyond.

Excellent. I appreciate that clarification, the view. And then just round numbers, JetForward contribution was about [ $350 million ] last year, but total EBIT went down about $250 million year-on-year. So that implies simplistically that your core was down $550 million. Now last year was obviously a [indiscernible] for JetBlue in the industry. Do you attribute that entire $550 million entirely to the macro as opposed to any idiosyncratic challenges your franchise was facing?

Yes, Jamie. So I'll take that. Yes, we attribute it entirely to the macro. And as we look back at '25, we've been able to isolate out the JetForward initiatives and the value that they've driven. And if not with a macro, we're quite confident we would have hit our full year guide of -- our full year operating margin guidance. So we're actually very excited about '26. This is going to be our year. If you think about the initiatives that we continue to execute in 2025, whether it was operational performance and improved NPS, our premium loyalty benefits like the JFK lounge, even more changes -- the Blue Sky partnership and our network changes, these are all initiatives that are built to ramp over time. And as Marty mentioned, these initiatives create a flywheel effect where operational reliability and NPS will enable premium growth, which will then strengthen loyalty and revenue and then you layer in network optimization amplifying that impact.

So we really are excited that this really sets us up for continued acceleration and upside in '26 as we then add things like the lounge, domestic first and the full implementation of Blue Sky. So that's behind our guide for this year. Last year was definitely a step back for JetBlue, but also the industry as a whole, and this team continue to execute, and we look forward to taking advantage of all that execution and more in '26.

Your next question comes from the line of Conor Cunningham with Melius Research.

More rumors than aircraft, I'm going to potentially steal that one. The bridge in the deck was interesting to me. I just -- the 50-basis-point macro or industry setup, I think that you got or that you have there is, I think it feels really conservative. If you could just frame up what you assume there? Like are you assuming that there's some sort of competitive fallout from the Chicago situation? Just any thoughts on thought process on how you got there.

No. Yes. So I mean the 0.5 point of base RASM growth is tied to the demand trends we're seeing exiting Q4 into Q1 and beyond and then obviously, normal GDP and macro inputs. And so to the extent that there's upside, the upside of common macro the upside in terms of incremental 3 points of RASM growth for JetForward could come in things like improvements in Fort Lauderdale beyond what we've assumed, premium ramping faster, sort of a flywheel effect really kicking in. So I think as you look at the guide, we guide what we see, and we do not assume any kind of snapback on macro.

I just want to add one thing, Conor. And it's something that I think as Jet Forward has progressed, we started to feel the tension between the base airline and the JetForward numbers because, honestly, it's kind of the same thing to a certain extent. There's a lot of interaction between those 2 numbers. When we laid out the $900 million proposal for jetForward, a lot of those things at other airlines would be normal course of business. So when you say like this is what the base airline is doing versus what JetForward is doing, it's getting to the point we almost can't make those dissections because there's so much relation between the 2 of them. We're very, very proud of all the initiatives, and it was a lot of change in a year. But I think that it's tougher and tougher to measure it, I think, as we go forward because the individual jetForward initiatives, other doing them when it's in their base. So it's just a little bit tough to do apples-and-apples comparison through RASM, [indiscernible] JetForward and their RASM without any sort of branded program.

But to be clear, if you think there's upside on macro, that's upside to the JetBlue plan?

Got it. Okay. Helpful. And I realize that you're not guiding including the impact of burn, but I mean, the feedback I've gotten this morning that it kind of derails your 1Q already. So just any thoughts like is -- are the ranges wide enough to assume that you can wither like -- I mean you canceled 1,200 flights. So just I'm just trying to understand that the risk to the 1Q outlook already given the weather events events already happened?

Yes, sure. I mean we can sell just over 1,100 flights. We didn't cancel some of the numbers that other carriers are coasting. So I think that's an important distinction. And the impact will be proportional to those cancels. So we'll definitely see some pressure on CASM. We'll see some pressure in ASMs. But this hit us, we want to be clear, during a trough. So when you think about the time it could not have come. We never asked for these things. We never want these things, but it could not have come at a better time. And so really proud of the team is executing and getting us back on track. If you see the cancellations today, the number is much, much, much lower. Others still have the impact lingering. And I'm confident that as we move through the week, we'll be back up and running fully.

And I would just add, Conor, like this is -- we're still going to hit our full year guide. I mean this is something that obviously can be weathered within the full year context.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

Apologies if I missed this. You guys did quantify the impact of the Caribbean shutdown of air space in the first week of January. But some of your peers have noted that kind of warnings or the restrictions kind of -- on kind of flight activity issued a couple of weekends ago, that's had somewhat of a chilling impact on bookings and then the forward curve in the Caribbean. Are you guys seeing any of that as well for the forward view?

Ravi, good question. Thank you. We certainly saw an impact for a couple of weeks. And there's no question that the -- it was a tough time. It was a peak day when we had the disruption. It's New Year's return, so it was an incredibly poorly timed event for us. And we did see a couple of weeks of booking depression, but nowhere near what we heard other airlines say. I will say that our Caribbean is actually very, very diversified. When you think about the size of the operations in [indiscernible] Republic, Puerto Rico, we have a lot of markets that were not affected. Yes, we certainly saw an impact in places like Aruba, Curaca for a couple of weeks, but those have both regrounded, and we're back to normal course of business. There is -- I keep you in this [indiscernible], and I'm not sure that's the right word. We still have a bit of an impact in the first quarter, but for forward-looking bookings, that will be fine. We were actually not worried about it at all.

Understood. And maybe as a follow-up, just on the lounges. Can you just share early feedback in the JFK lounge so far? Kind of are you seeing any kind of loyalty or any measurable impact from opening that? And also, you said that you're looking at the potential for Fort Lauderdale. Is that just like a one-off given your strength there? Or do you think that there's opportunity for having a network of domestic lounges over time?

Yes. So Ravi, we're not -- we've been going on like a network lounges, but we're not there. I mean we are -- JFK has been great, as Marty mentioned in his prepared remarks, 80-plus percent NPS. We're seeing it absolutely drives sign-ups for the premium card. We're excited to bring Boston online later next year. As we think about Fort Lauderdale, we think it's got a great premium base that could lend itself to a lounge. We haven't announced anything yet. But we're really focused on if it makes sense for a particular market, we will evaluate it, but it has to have a strong return and it has to be tied to driving our JetForward initiatives around premium customer.

Yes. Clear, on the Boston lounges this year.

Yes. Sorry, I would say like, yes, later this year sorry about that. Later.

I will say 1 thing. As we mentioned when we announced this, the #1 thing we're worried about is reacting to the customer feedback of their [indiscernible] lines. We do have a picture floating round of the first line outside the lounge. And it was a line of people who are signing up for instant approval the premiere because they wanted to get in. So it's doing exactly what we want to do, and we're really, really bullish about it. That being the case, it's a big CapEx investment. We work with Barkley to make sure the math works or something like this. But I think the -- given how our network works, which is we have a handful of cities above 30 something like today, this is not something we're expecting to have in 20 cities.

Your next question comes from the line of Scott Group with Wolfe Research.

Marty, your answer on JetForward versus core earnings, couple of questions go totally fair. But so you might not like the spirit of the question, but I do have a follow-up. So if I just take the guidance for this year, you're saying the bridge has $310 million of jetForward benefits. And I think if we're doing like -- I think that implies like flat core earnings. So I guess my question is like, if base RASM is up 0.5 point and CASM is up 2, what are the offsets there that keep core earnings more flat? Or what are the upside and downside risk to that core earnings being flat?

Okay. I'm writing this down. I need to go through that math and try and we should get back to the I want to make sure I understand the exact question. I mean, at the core, overall industry RASM is on a very good trend right now, and that's driving a big chunk of 2026 -- the 2026 guide that we laid out there. And again, back on this issue of what's core for us and what's core for the competitors, there's a lot of stuff as in JetForward that will be core for our competitors. So it is very difficult to do an apple-to-apple comparison when you look at what other airlines are doing with things like how they price their extra legroom seats or how they price things like their domestic long-haul premium products. So I think that it's actually much, much tougher than you think to actually split those 2 things upon it.

I'm really focused on the top level guide, which is the high-level guide for our RASM this year. And remember, it's -- 2.5% is our range, and that's on 2.5% to 4.5% in RASM growth. So I think if you look at the combination of those 2 things, we're really excited about this guide. And I think it's the ability to produce that level of RASM growth with this amount of ASM growth, I think is a testimony to the strength of the franchise and of the positive output we're seeing from all the changes we've made in Jetforward.

Okay. That's -- I think that's fair. So your point is don't get too caught up in the individual bridge. Like look at the whole -- like, look at the big picture, ASM up, RASM up, it's working kind of thing?

Yes.

Yes. I mean listen, Scott, at the highest level, right, we're projected to grow our op margin by over 4 points, right? Like the majority of that is driven by JetForward. We are, as a company, growing again, which is fantastic. The AOG outlook has improved. And so when you take the powerful combination of the revenue initiatives, growth the efficiency and execution on the controllable cost structure, I mean, we believe that this is a material step forward in terms of margin progression. And right now, what we're seeing in the demand environment is strong, the macro is constructive. And so that's why we're super confident in being able to hit this and get on a path to sustain profitability.

I mean that number [ too ] is free cash flow, and we have a path to deliver positive free cash flow at the end of '27. And then we'll turn to improving the health of the balance sheet. So we feel good about 2026 and our ability to execute. We're in execution mode.

Your next question comes from the line of Chris Stathoulopoulos with SIG.

Ursula, for whatever reason, there's a macro downtick, seasonal underperformance, unanticipated seat growth in New York or other markets, what are some of the levers you can pull to still get to the breakeven margins? I realize that there's some -- or perhaps a lot of leverage here in the fleet in areas like maintenance and fuel efficiency, but what are some of the other, I guess, cost buckets we should consider should macro or see growth moving on anticipated...

I'll take that. I mean I think if you look back at 2025 and what we did in '25 when we did see that macro step back, I mean, first, we matched the final demand in the trough period, we pulled 2 points of capacity, I mean, after it -- and we still hit our annual cost guidance, which I think is a true testament to the team. And then we ultimately made some really hard decisions around discretionary expenses, leadership structure and then other budget cuts. So if you think about '26, if there were a macro step back, we're going to focus on controlling what we can. We're going to continue to execute on JetForward. And then we will pull some of those levers if need be as we move forward. Obviously, capital expenditures, we would we look at that list. So this team is one that has a track record of hitting the cost targets because that is something that we control more so than obviously revenue. And so you'll continue to see us lean into that if there's a macro step back as we did in 2025.

Okay. And then on free cash flow, I think I heard you're targeting positive year-end '27. If you could maybe size that. So assuming you hit all your targets in JetForward, you move within the CapEx profile you outlined earlier. What exactly does that positive look like?

Yes, maybe I'll take that. We're not going out with any guide or specific numbers. But if you think as earnings grow and CapEx moderates, this is going to enable a path for JetBlue to deliver positive free cash flow and ultimately delever the balance sheet over the next couple of years. So first, we need to deliver positive operating margin in 2026. We've got a great plan to do that. That plan takes advantage of everything we built this year and then all the additional initiatives that are layering on in '26. And then that should, hopefully, as we think about exiting '25, allow us to generate free cash flow by the end of '27. And then ultimately, beyond that, restoring our balance sheet health in '28 and beyond.

Your next question comes from the line of Brandon Oglenski with Barclays.

Joanna, maybe to follow up on that. I mean I know, it's been a difficult couple of years here and been targeting breakeven for a while, and there's been some macro setbacks for sure. But how do you think about longer-term profitability of JetBlue once you get to free cash flow and things like that and delevering? Can you get back to ROIC in excess of your cost of capital? Or do you see fundamentally, there's issues of scale here that a lot of airline CEOs will talk about just given how important rewards programs have become?

Yes. No, we absolutely see a pass back. This is all about improving our operating margin. When you think about scale, I mean, there's 2 ways to look at it. One is scale within the markets that you're in. And we continue, as we're growing this year again in Fort Lauderdale, but we continue to focus on trying to ensure that we have strong franchises in our core geographies. And then the Blue Sky partnership is really designed to provide scale to our loyalty program and scale beyond JetBlue for our customers. And so that's our approach.

And I think we look at the initiatives we're delivering, the fact that customers are coming back to us because we've improved operational performance and NPS, we've got a full series of initiatives we executed last year that are fully in ramp this year and then layering on our first-class product, bringing Blue Sky further to life and then obviously, domestic first. So we're really bullish about the next few years. We will absolutely get it back on a path and delivering more than positive free cash flow and restoring the balance sheet in the longer term. And taking 1 year at a time. The last year was a pretty big challenge for the industry. And so we're being cautious about how we step into this year with a guide that we think is very achievable given the initiatives we have laid out for the plan and looking forward to hitting that breakeven number this year.

And I know it's been a long call, but, Ursula, you brought up AOG and the GTF issues, which I think is impacting you less now. Can you talk through the financial impact there in '26, and maybe any recourse you're getting from Pratt?

Sure. Yes. So we're pleased that the AOG situation has improved year-over-year. So we had 9 aircraft on the ground last year. We're expecting mid-single digits this year. It did take over the last few weeks of slight backwards. We thought we would be in low single-digit land in terms of aircraft on the ground this year. We've got a recent update from Pratt. They continue to struggle on the A321 fleet type with supply chain and shock capacity. So we're not getting through it. It clearly continues to be a dynamic environment for the A320 fleet type. We are still working through with Pratt & Whitney the compensation or focused on getting what we believe we deserve.

We are -- given we're such a large customer of Pratt, there could be many forms in which compensation comes through, and in light of accounting treatment. While the settlement is important to us, the amount is not meaningful to whether or not we achieve our full year guidance for 2026. But in the end, improvement year-over-year, allowing us to grow again, we're pleased.

And that concludes our question-and-answer session. I will now turn it over to Joanna Geraghty for closing remarks.

Great. Appreciate all the questions. As you can tell, this group is very excited to deliver on breakeven or better operating margin this year, underpinned by we see as a strengthening macro backdrop, returning to growth, I have to emphasize that, very excited about that. Constructive capacity backdrop and then all of the JetForward initiatives really coming into a really nice place for 2026 and beyond. So thanks for the call today. And then I'll just end with congrats to the New England Patriots as the official airline sponsor of the path. This is your year, too. Thanks.

Ladies and gentlemen, this does conclude today's call. Thank you all for joining, and you may now disconnect.

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.

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.

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.

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.

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 Instructions] And our first question comes from the line of Dan McKenzie with Seaport Global.

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?

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.

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.

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.

And our next question comes from the line of Savi Syth with Raymond James.

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?

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.

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?

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.

And our next question comes from the line of Michael Linenberg with Deutsche Bank.

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.

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.

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?

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.

And our next question comes from the line of Jamie Baker with JPMorgan.

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?

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.

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.

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.

And our next question comes from the line of Duane Pfennigwerth with Evercore ISI.

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?

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.

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?

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.

And our next question comes from the line of Atul Maheswari with UBS.

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?

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.

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.

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?

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.

Good luck for the rest of the fourth quarter.

And our next question comes from the line of Catherine O'Brien with Goldman Sachs.

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.

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.

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.

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?

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.

And our next question comes from the line of Tom Fitzgerald with TD Cowen.

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?

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.

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?

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.

And our next question comes from the line of Scott Group with Wolfe Research.

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?

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.

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.

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.

And our next question comes from the line of Brandon Oglenski with Barclays.

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?

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.

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?

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.

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.

And our next question comes from the line of Ravi Shanker with Morgan Stanley.

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?

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.

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?

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.

And our final question comes from the line of Conor Cunningham with Melius Research.

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.

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...

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.

And ladies and gentlemen, that will conclude today's conference and we thank you for your participation. You may now disconnect.

Great. So back to the airline track here. Next up, we have JetBlue and very happy to have with us Marty St. George, President; and Ursula Hurley, CFO. Thanks so much for being here.

Thank you.

Yes. Thanks for having us.

So yes, fun times in the airline space, and I think that you guys did have an update that you put out this -- or on a slide deck. So I don't know if you want to open up with some prepared remarks.

Sure. Yes, happy to open up. So we actually had a guidance update last week on the third quarter. We actually tightened our range on capacity. We had really good weather in the August time frame. We then improved the midpoint of our revenue guide by one point in a quarter and we also improved the midpoint of our controllable cost guide. So all in all, the quarter is performing very well. Marty, you'll talk a little bit about the demand environment, but things have been strong and working well.

Second of all, I just want to highlight our progress on Jet Forward. So thus far, since the launch of the program last July, we've achieved $180 million in EBIT contribution. The ultimate goal is to deliver $850 million to $950 million in EBIT by the end of 2027. We have four priority moves that are performing really well, and we're seeing good proof points that the strategy is working and delivering earnings contribution.

Our operational reliability has significantly improved. We were actually the airline that got most improved in terms of the Wall Street Journal rankings. And as a result, our customer NPS has been up double digits in the first half of this year.

In terms of our network, we changed 20% of our network last year. That is in ramp-up mode. We also had a very exciting Fort Lauderdale announcement, which Marty will talk about in a moment.

And then in terms of our products and perks, we continue to roll out customer-friendly options to get people to pay more to drive top line revenue. So we're rolling out lounges later this year. We have domestic first coming out next year. And we've also seen great progress in terms of preferred seating and are even more seating improvements.

And then the last priority move is obviously the cost structure. And we've got about 100 initiatives across the board that really lean into AI, data science, tools, and so the teams are doing really well in execution. We've obviously had 7 quarters of unit cost beats or hits across the last 7 quarters, so really pleased with the progress. So all in all, $180 million since the launch of the program we've achieved and by the end of this year, we hope to achieve $290 million. So good progress.

And maybe I'll hand it over to Marty just to talk about Fort Lauderdale.

Yes. So I think you have a QR code that will take you to our deck for those of you who haven't seen it, but the last page of the deck does show and as what we made this week about additional growth in Fort Lauderdale. Long story short, we had -- before COVID made an announcement about getting Lauderdale to 150 flights a day. And then between COVID, NEA, various other things, we sort of took a pause on that. We've also had some pretty significant gate-constrained problems in Fort Lauderdale. But as our biggest competitor there has started to pull down and luckily open up some gate capacity for us, we're taking advantage of it. So we're going to have, I think, our biggest schedule ever in Lauderdale this winter. 113 flights a day, 49 cities served. I think this is our the third tranche of growth we've announced there. The first two were announced earlier this summer, and we're actually very bullish on the market.

One of the things that I think is feedback we've gotten a lot as a company, especially when we talk about things like the Wall Street Journal ranking is very, very overexposed to the Northeastern U.S. with the two biggest focus cities, Boston and New York. And we're actually optimistic that Fort Lauderdale could actually be the third sort of tent pole operation for us at 140, 150 a day and counting. So we're actually very positive about the opportunity there, and we think it's going to be a good move for future diversification of the revenue streams.

Got it. Great I have follow-ups on both those topics. But before we get there, maybe you can just summarize your update from last week, which is obviously, as you said, kind of raising the revenue guide, was it just weather was better than expected? Or are you seeing any improvement in the actual underlying demand patterns as well?

So I think if you go back to our second quarter earnings call, where we overachieved pretty significantly from our guide, we made it clear that we had seen close-in demand strength really from Memorial Day forward. And I think if you listen to any of the leisure-focused airlines, you will hear us all talk about the dynamics between peak and trough. And in general, peaks are doing well and troughs are not. And I think that's very typical of this type of demand environment. As everybody knows, we took a pretty big demand set back in early 2025 after Liberation Day. And the industry is still recovering from that. We're still definitely not back to where we were in 2024. We did see the close in demand coming in during the peak. And really, the summer represents a continual peak, whether from Memorial Day until the third week of August. It's a pretty strong peak period.

I think when we guided the third quarter, we were cautious about what we should expect for September. We certainly saw this close-in strength starting in the peak and really right from Memorial Day peak. We weren't sure this is going to continue this September as it turns out as that continued past Labor Day. So from that perspective, we are comfortable taking the guide up. And I think in a lot of ways, the guide is very much consistent with the overall strength we've seen in the revenue performance for the last 18 months or so. Couple of blips, certainly, first quarter was a tough revenue period. But in general, I think we're feeling very optimistic as far as what we're seeing in the revenue side.

Got it. And any sense on the result from here kind of October, maybe even into holiday season to the extent that you can see kind of any sense of whether that continues or accelerates?

So it's a little early for us now. We're about 25% booked for the fourth quarter. And even that 25% is pretty heavily booked in the first 6 to 8 weeks of the quarter versus next year and Christmas. So a little bit early to say.

I think in general, what we've seen since COVID is a compression of the advanced booking period to be a little bit closer in. And then even with the strength that we've seen since May, it's been even more closer than before. So again, we're not ready to give a fourth quarter guide at this point. We'll do that in our third quarter earnings call. But certainly, if you look at what we're seeing in the third quarter, we're seeing the close end strength persist.

Got it. Can you just remind us about from a comp perspective, both sequential and year-over-year strike last year as well as any Newark benefits in 2Q? Kind of how does that trend and the same...

Sure. So we did get some good CrowdStrike benefit this year, and we called it out on the second quarter call -- excuse me, Newark benefits this year. I think you did call that out. It was pretty transient, and that went away relatively quickly. We had a very good CrowdStrike benefit last year, which -- when we did our adjusted sequential -- second and the third quarter, we did call that out specifically. And that's one of the reasons why we're somewhat cautious as far as what to expect in third quarter because we knew we were up against a tough comp. But I think third quarter certainly performed better than we had hoped, and I think we're actually very positive about what we're seeing right now.

Got it. So you said something very important, which is when you guys gave your guide, kind of your 4Q appeared to be a lot I won't say more conservative as much as I'd say less optimistic than some of your domestic peers in terms of the ramp that you expect in the 4Q. So a, how much of that is you guys being conservative? And how much of that is you guys having a tougher comp?

Well, to be clear, we did not give a 4Q guide, we did not give an annual guide. We did give an ASM guidance and the ASM guide to me is consistent with what we're seeing from the industry overall. And I know my competitors said this, too, because it's been reported to us during the one-on-ones, they're seeing good premium revenues and tough revenue in the back of the bus. And frankly, that's what we're seeing as well. And when you see low revenue performance at the back of the airplane, the #1 driver for that is capacity. So our view of the world is where well under 10% of the industry capacity, but we only control what we control. And from that perspective, we wanted the conservative capacity because we do recognize that we are still negative year-over-year RASM third quarter number and nobody wants to be there. So from that perspective, I can't speak for how the rest of the world is guiding in the fourth quarter. We've certainly seen some pretty aggressive guide out there, and we'll see how those play out. That was not the way we wanted to manage fourth quarter.

Got it. But also speaking of how you want to manage the fourth quarter, how are you guys on your capacity is going to -- that ASM guide kind of is that loaded, finalized, locked? And kind of what do you think for the rest of the industry?

I mean I'd say the guide we have right now matches pretty well what's selling in the OAG. I know there'll be some tweaks out there, but the wholesale changes have really happened. And obviously, we'll be giving better guidance on the third quarter call for all the stats.

But do you think the industry needs to come out more?

It's not my place to tell the industry how to run their businesses.

But if you could?

I would not want to take any legal risk for someone making a call like that. I will say, and I've said this a couple of one-on-ones, there's some hockey sticks out there, performance that -- we'll see how that shakes out. And I think based on what we're seeing, I would be surprised to see if those would have come true.

Understood. Just one more follow-up. You and your peers noted that close-in obviously collapsed in Feb and March and has accelerated again since then. Does it feel like this is now the new normal? Or does it feel like that's something that will still ebb and flow with macro or other issues?

That's a great question, and we ask that question every single week when we look at our bookings. And it's going to be continue as long as it continues. I mean, it's very clear that in the post-COVID world, booking growth have changed pretty dramatically. And our view is to best reflect what the consumers do, not change it. If it's not consumers want to book, that's fine.

If you notice in our results, we're still slightly down in load factor year-over-year. Now we're catching up on the revenue side because the close in revenues coming in. Personally, from a guidance perspective, I wish they'd book further out. But from a revenue perspective, booking closer in is good because we get higher fares for it so it's a trade-off. But I -- my only assumption is when people are consciously paying more money to book closer in. It's because of uncertainty and concern. And hopefully, things will settle down to the acceptance of where the economic situation is and that we may see things revert to the mean a little bit more, but I'm not predicting it. I'm just recognizing that we're off that trend right now.

Got it. So just going back to your opening comments, kind of Fort Lauderdale, obviously very opportunistic there given your competitors' issues. Any other opportunities, any other routes or regions out there that you think you can do the same thing?

Well, I mean, given our growth portfolio, actually, our capacity portfolio, we don't have a lot of other opportunities. We have to make a couple of reasonably big bets. The bet we've made in Lauderdale is a pretty big bet. And we have more stuff to come after what we've announced recently. So from that perspective, I think what you see is what you get.

If you go back to Jet forward, we've done some pretty dramatic adjustments to the network. We basically canceled and redeployed 20% -- a little more than 20% of the network in 2024. And that's not still playing out in 2025. So we're still in a period of some pretty significant change. I think we have gotten to the new normal in general. I'd say what we have done to the transatlantic has been absolutely outstanding. We continue to do very, very well in the summer and even in the fourth quarter in the Atlantic, and that capacity is very nicely redeployed into mostly Florida West Coast, a little bit of ski markets and Bozeman and things like that in the winter and that balance of good sun markets in the winter and then the European markets in the summer and fall has made for a very, very good profit portfolio for us. So we're very, very bullish about how the Atlantic is done and how it has led us sort of swap capacity back and forth.

I think it's actually one of the major benefits of our Atlantic strategy being focused on narrow-bodies because it is -- if we were to be flying wide-bodies and there are wide-bodies out there that have lower capital costs than a standard A321LR. But if we were to do that, it would be much tougher to do that swap winter to summer than we were doing historically. I think it's also worth noting that we only have two more airplanes coming that is transatlantic capable until 2031, I think. So we're just about reaching the first plateau of translating growth.

Understood. So no more new destinations and kind of potentially moving capacity around? Or do you think there's a wait and see?

I did not say no more -- I did not say no to...

You're playing your cards very close to your chests.

Never say never.

I just know any time I give any telegraphing of what we're going to do, one of our competitors are doing it before us. So it's better to be quiet.

Understood. We had Delta this morning kind of point to weakness in the back of the bus in transatlantic as well. Just given -- I don't know, have you done any work on what your customer profile transatlantic is relative to a mainline carrier? And are you more -- is there more overlap between who flies JetBlue versus who flies maybe in the back of the bus at a Delta and kind of how is that macro looking right now?

So on a macro level, I stop by saying we are flying the transatlantic with narrow-bodies. And these are 130, 150 seat airplanes. So we are in a much better position to have to worry about filling all the seats versus a 350-seat airplane. So I'm very happy with the fleet decision that we made, number one.

Number two, if you look at the profile of the airplane, the back of the plane looks very similar to the back of the plane on legacy airlines, I think the front of the plan looks different. I think we're much more focused on premium leisure than we see like the corporate business travel, which to a certain extent, I think it's an opportunity because that is not what we see on transcontinental Mint. In Boston, West Coast, New York West Coast, we have a very good corporate business there. So slowly but surely, I'd like to get more of them on our Atlantic. One of the things that we struggle with is we are very, very slot limited as far as our frequency specifically in London, both New York and in Boston as far as our time of day and our coverage during the day. I would love to be able to have more slots there at Heathrow. Unfortunately, we've not been -- has not worked out like we'd like it to. But even with that, I think we do very well in the premium leisure front and are certainly very profitable.

Got it. What does it take to crack into transatlantic corporate? Is it distribution? Or is it slots?

I think the slots will help a lot. I think London, Boston leaves like 8:30 in the morning, the flight out of Boston leaves at like 6 p.m. gets in at 5:50, something like that. So it's not the deferred business time supply and slowly materially, we will do what we can to try to get more slot access into the airport.

Understood. And maybe last question here, kind of we are seeing people like Alaska kind of start to do long on international as well. We had Southwest this morning saying kind of that's on their radar. Is there room to have multiple non-legacy carriers kind of do this?

I'm happy to have a small airplane. I really don't worry about what they're going to do. I was very surprised by the decision upgauge Alaska's order from Dash 9 to Dash 10s before they took their first flight. I'd say in my previous airline, I'm a massive fan of the 787. I think it's an absolute game changer airplane but 400 seats in the winter, that's a challenge for anybody. So God bless them.

Understood. Maybe we'll switch gears here and talk about some of the idiosyncratic initiatives. And so obviously, great progress with Jet Forward kind of what you've done so far? Maybe kind of a little bit of a report card kind of what's been easier and expected? What's been harder than expected?

Yes. Great question. I think what I'm most proud of in terms of the team's execution is the improvements in the operation. We really struggled with that when you look back two years ago being on the bottom of the Wall Street Journal, and we've made various strategic, thoughtful investments, whether that be in tools or technology or just the way we make decisions and actually fundamentally like how we plan the airline. So that continues to pay dividends. As a result, our cost performance has been exceptional, and that's a testament to running a good operation, right, because you're avoiding customer disruption costs as well as labor premiums. So despite us pulling down capacity by 1.5 points in the trough this year, we're still maintaining the unit cost guide that we gave back in January. So that just speaks to the magnitude that the operation is positively impacting the financial results, but also the team's execution on the 100-plus cost initiatives across the board.

I would say what we're most excited about is definitely continuing to lean into the premium sector, right, and rolling out domestic first class next year, but also rolling out the Blue Sky United partnership. Those are both two very impactful and material initiatives that heavily are going to contribute to EBIT in the years to come. So we are hands down focused on execution of both of those initiatives, and I feel really good about the progress, and we're hitting the time lines we committed to.

I also want to say that the operational improvement has had one fantastic benefit, which was customer satisfaction. We are now back again at the top of the industry, our Net Promoter Score. And we owe a great debt of gratitude to our frontline crew members who are delivering a great service. The decision to make the changes we made in the operation were difficult. I used this phrase before, it's like jumping between two moving trains. We've had a model from the very beginning of JetBlue of high utilization, lower costs and basically be willing to run really late and fly the wings off the airplanes. And it wasn't working for our customers, fundamentally. So we made the very difficult decision to reduce utilization, take more risk on cost and put more pressure on the team for execution. We did it. We came off the bottom of the Wall Street Journal rankings for Best Airline and hopefully, we'll move up even more if we get lucky for the rest of the year and continue to execute. But ultimately, when we get the customer feedback of best NPS, again. Admittedly, it's a pack of three of us at the top, so it's multiple airlines at the top. But we've not been at the top for a few years. So we're actually really excited about that.

And then I mentioned we won a couple of JD Power awards. It's like the quality that JetBlue has been known for, for years, I think it's a lot more tied to the brand than it has been for the last couple.

Got it. Great to see that recovery there. So maybe just talk about Blue Sky for a few minutes. Can you just talk about how that is different versus the NEA, not just in terms of structure and regulatory but also in terms of revenue and kind of what you choose to get out of it. And obviously, you raised your contribution in Jet Forward from that program. Kind of what was the incremental benefit?

So I'd say a couple of things. First of all, I was not at JetBlue for the NEA, but I was a fan of the program. I thought it was a good plan. I think it helped problems at both American and JetBlue had in the Northeast, and it was very complementary. Unfortunately, the judge disagreed but I think there were a lot of learnings from the program.

I think the things that were most problematic legally for the NEA was the revenue-sharing relationship and a belief kind of I wasn't here for it, I can't speak to it. I believe that there was a level of coordination that was happening, which I don't know if that's true or not. But if you look at the JetBlue United relationship, as we're now calling it Blue Sky, it actually does not include either of those really big elements. It does not include revenue sharing and does not include any sort of coordination. So if you look at the ruling that Judge Young wrote in turning down the NEA, that was basically the road map for us writing what Blue Sky would look like.

So one of the things we recognize is that JetBlue struggles in the battle against the legacies in that we have a loyalty program that doesn't really give you the full utility that you could get by aligning yourself with one of the big three programs. So we have some loyalty partners, but the metaphor I use all the time is if you're a college kid who's moving from -- you pick a school, you're moving from the University of Arizona, you're moving to Boston, your first job, you're moving to New York and you get to decide whether you want to take a JetBlue credit card or a Delta credit card, it's a tough decision because the Delta points, although they're devalued, so they're not worth as much as we hear from customers constantly, you can fly anywhere in the world. And that's not true of the JetBlue program. Your points are worth more, but a lot of places we can't take you. So I think the relationship with United really creates the best of all worlds, which is we continue to maintain our program our credit card relationship with Barclays, which is fantastic, but also we can offer our customers access to the entire world. So we're very, very excited about it. Again, we learned a lot from the NEA and there are some pieces of that, that were really good. We wanted to make sure we duplicate it.

Got it. What are any potential opportunities on time line here? Obviously, it's going to take a while to put us in place. I mean you said full benefits in 2028. Any opportunities to pull that forward?

Well, let's talk about the critical path. The #1 critical path was with DOJ. And I'm not going to lie, it was a difficult process with them. They ask some very, very aggressive questions. They clearly wanted to make sure that this checked on the boxes from a legal perspective. There were some modifications made to the original agreement based on their feedback. And we have great respect for the DOJ. We want to keep them happy. So we first had to get through that. That was resolved a couple of weeks ago. At that point, we took all the paper plans and started actually spending money in implementing. Biggest critical path items now are really IT related. We actually have some experience doing programs like this. So [ the pieces of this ] we're actually in a better spot than United is. But between the two of us. I think we're hoping that we will have some customer benefits by the end of 2025. It all depends on how quickly we can implement the IT front.

One of the other areas where we are very excited is the Paisly relationship. We've talked a little bit about Paisly publicly. We gave, I think, in 2023, we gave one number for Paisly EBIT. We believe, and I think it's proven out to be true. We believe we are the best in the world at ancillary products. And honestly, I did not believe that when I got here. But as we've done some surveying of competitors and seeing what others have said publicly, we think we're extremely good at this. When we were meeting with all the partners we talked to, and it was multiple airlines before we settled on United, we said we think there's also an opportunity for us to take over your ancillary products all the airlines, I think we're interested. I looked at it and compared the results that we have produced, again, public data results that we have produced versus what they were doing and they recognize that this actually could be a great accretive opportunity for both of us.

So I'm really bullish about Paisley. Right now, we're working through mostly the notice period for the current relationships United has. But I'm really bullish that we can do better with Paisley than was originally forecasted.

Got it. What is the future of Paisley? I guess, is this potentially a stand-alone business that gets spun off at some point or?

Well, I mean, honestly, I'd like to leave it right now. My #1 goal is to improve earnings, get back to positive free cash flow, stop paying down the debt. And the Paisley results, it's -- I guess we haven't really reported some of the...

Yes. More regular disclosure maybe on...

Yes. We haven't really disclosed a ton about it other than the EBIT number we did in 2023, but I am extremely excited about Paisley. We are talking to other airlines beside United. I think there's almost 10 airlines right now on the [ chat ], at least airlines we have talked to and give presentations to. I think the biggest challenge we're going to have is bandwidth as far as implementation. But what we love about Paisley is that it is very high margin and extremely low capital. And right now, that's a lot better business than the airline business, sadly. So from that perspective, given where we stand as far as free cash flow, the thought of a great EBIT business with both capital needs makes us all very, very excited.

Understood. Any questions from the audience.

Can you just talk about the competitive environment you're seeing in the Fort Lauderdale market and maybe what will draw customers to book on JetBlue rather than maybe some of your other peers?

Well, I mean, we have the second biggest airline in Fort Lauderdale. We've been the biggest in the past. So we've got a really good franchise there already. With respect to the competitive environment, I think if you look at the public data about our performance in Fort Lauderdale versus our biggest competitor, which is Spirit. We've outperformed them pretty handily for a long time. The biggest impendent we've had to growth has been gate access, especially for international flying because we really want to add some more international flying.

The beauty of South Florida is and as someone who lived in Latin America for 4 years, it is the capital of Latin America. And there are a lot of places south of Lauderdale we'd like to fly. You note in the announcement that's in the deck that you've got today, we've added multiple cities south and there'll be more to come hopefully as soon as we get gate access. So from a competitive perspective, I think we're very optimistic. I think the ULCCs in general have struggled when you look at the pricing environment they're in right now and the value proposition that they offer and JetBlue is extremely well positioned and has a long history of strong performance. We most recently had a pretty significant competitive incursion in San Juan from ULCC, and they've pulled almost half their growth has been pulled up already because we compete extremely well against them.

Understood. Any other questions?

I know you guys talked about rolling out domestic first class in 2026. Just wondering what markets you guys are thinking about prioritizing with this product?

That's a great question. And it's really funny because as we talk to our customers as far as where they haven't just invested first class, it really is everywhere. It's been shocking. I don't think we're ready to say exactly which markets, but I think we know where we want to put the planes first that we think has the biggest upside. Frankly, I think connecting to the transatlantic is going to be very helpful because as you look at the price environment, in general, in the U.S., the prices to the gateways, sort of New York, Boston, Washington, tend to be a -- probably New York and Boston more than Washington. Certainly, New York and Boston, the prices of their gateways tend to be lower, but the price of the interior tend to be really high. So if you're connecting through the Buffalo or Detroit or places like that, so the ability to offer first-class product in conjunction with the transatlantic business class and offer that product all the way. We think it's going to be very rich accretive. So I would love to get more Atlantic connectivity as quick as I can. And just as a reminder, domestic first class should show up late second, early third quarter of '26.

If not -- so the clarity on GTF was lifted a huge overhang for you guys. Do you feel like that's kind of locked and in the buy? And kind of what does that give you in terms of optionality for like future scheduling?

Yes. Really good question. So the GTF has probably been our biggest impediment over the last few years, we have not been able to grow. When we entered 2025, we initially thought we were going to have mid- to high teens number of aircraft on the ground. That has materially improved. So we're actually going to average less than 10 throughout 2025. 2025 is actually going to be the peak AOGs that we have on the ground. So that will step change down as we enter 2026 and then will be fully resolved by the end of 2027. So next year, we'll actually be able to grow again. So we're pretty excited about that. That will be very beneficial from a unit cost efficiency perspective.

The contributors to the improvement of the GTF has been we've induced a significant amount of self-help. So we are about 3 to 4x over spared. We have sourced those engines on our own. Pratt & Whitney is seeing improvement in their supply chain and a slight improvement in their turnaround times. We've also seen engines staying on wing longer. So some of the interval extensions have occurred. So all in all, super pleased with the level of improvement and it definitely sets us up on a path to be growing again, which we're extremely pleased with.

Got it. So obviously, Jet Forward takes you out to 2028 and probably not much in terms of like cash return or anything else until that point. So how do you think of the balance sheet between now and then kind of managing liquidity and kind of the options ahead of you until you get to that point?

Yes. So Jet Forward is obviously a multiyear program. We executed an aircraft deferral last year to ensure that we have a runway deliver free cash flow at the culmination of Jet Forward in 2027. So we're definitely on a path to #1 goal is positive operating margin. Number two, is positive free cash flow; and number 3 is going to be delevering the balance sheet. So definitely a multiyear journey. We just kicked off our 2026 planning process. And our aspiration is to hopefully build a plan that gets us at least to breakeven. So that's the operation. We need a lot of -- we need the macro backdrop to be constructive and the setup to be able to help us deliver that. But again, I'm extremely pleased with the team's execution of the Jet Forward initiatives and excited about the opportunity in front of us as we navigate into 2026.

Got it. We haven't had much chance to talk about this and maybe I'll ask you about this, just the regulatory environment in the U.S. right now, kind of when you think about the initiatives to finally modernize ATC, which looks like it's kind of concrete actions taking place there. I think there was a ruling -- was it last week about some of the fees kind of being reversed from the previous administration era. What does that mean to you guys? It feels like given your Northeast exposure, like you might be one of the biggest beneficiaries of ATC capacity improving and potentially kind of these features as well. So how do you think about that like being almost a back pocket driver for...

There is no question that in this market, nobody benefits more from air traffic control reform that we do -- and I have to be honest, the government, the new administrator, the Secretary of transportation, everyone is saying the right things. I'm feeling very optimistic that we may finally see some movement on air traffic control reform. So money is being allocated, it seems to be a design philosophy. So we're actually very bullish about this. It will also take many, many years. So we are not counting on this as being any part of our coverage until -- yes, it's going to be 5 to 10, I think, for this to really come. But I'm very bullish about it.

With respect to the regulatory changes, I think we were hurt actually on a relative basis from regulatory changes more than others because the customer care side of managing disruptions. We've always been more liberal than our competitors. So we offered a better value proposition than they did. And then all of a sudden, it's regulated that everyone has to go up more towards JetBlue's level. So it's like one of my distinction goes away. So from that perspective, I think it's good for this to change.

I will say also the previous administration, it was a very unusual and somewhat unevenly distributed level of focus on what was important and what was not important. Again, we've -- being based in the Northeast, we've spent a lot of time dealing with disruptions and we know the levers. And I think it was the regulatory environment was not a great one before. So knock on wood, I think we're feeling very good about the situation we're in right now.

Understood. So maybe just to kind of quickly wrap up obviously, lots going on. But in terms of the pure catalyst kind of -- how much are you guys focused on Jet Forward initiatives versus kind of dealing with everything else out there in the macro?

I mean, listen, underneath, we still are focused on the mission and values of the company. The great advantages to travel, our 5 values, nothing changes that. Jet Forward is going to be an important tool to get us back to financial performance. We recognize that it's a slower process than we would like and then investors would like. But frankly, every single of those initiatives has real money tied to it. And we're very happy with how we're executing to this so far. But it is clear that Jet Forward is the recipe to go forward for us.

That being the case, I think we all recognize that this is Jet Forward 1. We're going to have Jet Forward 2, Jet Forward 3. This is -- it's not the old line, "It's just a marathon, not a sprint". It's not a sprint, it's not a marathon, it's a marathon that never ends. So we're clearly not going to rest on this. And we'll continue to look for the next level of initiatives that are going to bring our owners the return they expect.

Very good. Marty, Ursula, thanks so much for being here.

Pleasure. Thanks for having us.

Ladies and gentlemen, good morning. My name is Abbey and I would like to welcome everyone to the JetBlue Airways Second Quarter 2025 Earnings Conference Call. As a remainder, 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.

Thanks, Abbey. Good morning, everyone, and thanks for joining us for our second 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 at 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; Marty St. George, our President; and Ursula Hurley, our Chief Financial Officer.

During today's call, we will 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 third 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 plans for future operations and the associated impacts on our businesses.

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 the information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may reference certain non-GAAP financial measures for an explanation of these non-GAAP measures and a reconciliation of the corresponding GAAP measures, please refer to our earnings release, a copy of which is available on our website and at sec.gov.

And now, I'd like to turn the call over to Joanna Geraghty, JetBlue's CEO.

Good morning, and thank you for joining JetBlue's second quarter earnings call.

During the second quarter, we made meaningful progress with JetForward and met or exceeded guidance across all key metrics. Despite facing an uncertain macro backdrop, I am pleased that we produced a modest operating profit. We ran a strong operation and once again saw significant gains in customer satisfaction, with second quarter Net Promoter Score up double digits year-over-year.

I want to take a moment to thank our These results are a reflection of all of their hard work. As we entered the second quarter of demand stabilized and then accelerated as the quarter progressed, this resulted in a higher mix of close-in bookings. I'm encouraged that we also saw strength carry forward into July.

However, I will note that weather and ATC-related disruption throughout the month of July have impacted operations. In May, we marked another JetForward milestone, introducing Blue Sky, our collaboration with United Airlines. I'm pleased to say that we received confirmation that the Department of Transportation has completed their review and we are now able to begin implementing Blue Sky. We'd like to thank Secretary Duffy, Assistant Secretary Edward and the entire team at DoT for their engagement and thoughtful review of Blue Sky.

As a reminder, this collaboration will benefit customers, increase the utility of TrueBlue and further strengthen each airline loyalty program. Blue Sky will enable JetBlue to sell nearly all of its flight on united.com via traditional interline agreements and vice versa with the opportunity to earn and redeem loyalty points across each other's networks.

United will also transition its distribution of non-flight ancillaries such as hotels, rental cars and more to our travel product subsidiary Paisly turbocharging its high-margin growth. Blue Sky links 2 complementary networks with industry-leading products and services to increase customer choice and benefits while promoting healthy competition.

The collaboration is expected to contribute an incremental $50 million in EBIT through 2027, accelerating JetForward. Including the benefit from Blue Sky, we are increasing our target for JetForward EBIT to a range of $850 million to $950 million through 2027.

Marty will share more details on the individual drivers, but we are excited that Blue Sky will build on the tremendous progress we've made to date.

We are also pleased to report that our aircraft on the ground forecast due to the Pratt & Whitney GTF issue has improved, and we now expect the cycle through grounding much faster as a result. The revised forecast enables us to begin growing capacity again in 2026 through the end of the decade and achieve a more favorable unit cost growth trajectory. Ultimately, this will support our path back to restoring profitability.

Turning to Page 4 of the earnings presentation. In 2024, we had a strong start to JetForward and realized $90 million of EBIT early due to success of revenue initiatives launched last year that ramped faster than we anticipated including preferred seating and enhancements to our Blue Basic offering.

In the first half of 2025, we've continued building on that momentum, realizing an additional $90 million in EBIT across our 4 priority moves, despite a far more challenging macro environment. Cumulatively, we've achieved $180 million EBIT to date and remain on track to reach $290 million in JetForward EBIT benefit by year-end.

Our efforts to drive a more reliable operations, part of our reliable and caring service priority move, have brought significant operational improvements in the first half of 2025. Our on-time performance was up 3 points year-over-year and completion factor was up 0.5 point, both industry-leading improvements.

These improvements are also reflected in our customer satisfaction scores. And for the first half of 2025, our Net Promoter Score was up double digits year-over-year, building on improvements made in 2024. In all, efforts to run a more reliable operation have contributed approximately $15 million of incremental EBIT benefit over the first half of 2025.

We realized cost benefits from reduced disruption-related spend such as lower overtime pay and fewer customer reaccommodation. Additionally, we are seeing indications that customers are choosing us more often, proof that the investments we are making in our operations, such as implementing increased schedule buffers and launching new tools to enable customer self-service are having a positive impact.

We believe that on-time performance and customer satisfaction are leading indicators for improved financial performance and that running a strong operation is essential. These investments are especially important when we face disruptive weather, which is often compounded by air traffic control challenges as we have experienced across our network in July. Our efforts to adjust the network to our strengths and build the best East Coast leisure network are also maturing nicely.

As you recall, in 2024, we closed 15 Blue Cities and redeployed over 20% of our network, as we realigned to serve our core customer. These changes are ramping and are showing signs of relative improvement. For example, newer markets in secondary Northeast cities are exceeding expectations and are showing positive early traction.

Overall, network optimization represents $15 million of incremental EBIT over the first half of the year. As part of our products in first priority move, preferred seating continues to outpace expectations and our new premium credit card is on track to double full year projections for acquisitions, highlighting the tremendous amount of demand by customers for our premium products.

Lounges slated to open in JFK during the fourth quarter and in Boston Logan in 2026, remain on track and will complement our premium car to enhance the overall value proposition of TrueBlue. We are also updating our onboard experience to better serve our premium customers. This includes the enhancement EvenMore launched earlier this year, and we also remain on track to begin rolling out domestic first class in 2026.

At the same time, we are reinvesting in our brands and living to fund value. 25 for 25 JetBlue's 25th birthday promotion, our partnership with Bad Bunny and our newly released Dunkin and Super Mario delivery are driving excitement and reinforced our unique style and brands. Altogether, products and perks have generated $35 million of incremental EBIT during the first half of 2025.

Lastly, our cost transformation is underway to secure our financial future with around 100 initiatives focused on technology enhancements throughout our business, supporting customer self-service, disruption management and fuel savings.

In total, cost savings have driven $25 million in EBIT and have contributed to our controllable cost outperformance with the second quarter marking our seventh consecutive quarterly cost beat.

JetForward is a comprehensive multiyear transformation, and we are making meaningful progress. Our operation is improving. We are building on our industry-leading in-flight experience, and we are getting reigniting JetBlue's spirit of innovation and disruption. We know there's more work ahead, but the momentum we've built gives us confidence that JetForward is the right plan, supported by the best crew members in the industry and a leadership team that is acting with urgency to meet the demands of a dynamic operating environment.

With that, over to you, Marty.

Thank you, Joanna, and thank you all of our crew members. As Joanna noted, improvements to our operational performance and customer satisfaction are true testament to the work that you do day in and day out. It does not go unnoticed.

I'm thrilled to share that during the quarter, JetBlue was recognized by J.D. Power as the top airline for first and business class customer satisfaction and the 2025 North America Airline satisfaction study.

Our core experience also rose 3 spot to second place in the economy and basic economy segments and 2 spots to the second place in the premium economy segment compared to 2024.

JetForward and [indiscernible] plan are driving real results and recognition. Over the quarter, we saw encouraging signs of an improving demand environment as the number of bookings accelerated as the quarter progressed.

Before we review quarterly results, I want to take a moment to talk more about BlueSky. I'm very excited we announced this new collaboration with United. As we evolve our network, it is even more important to provide customers with more choices to earn and redeem TrueBlue points.

BlueSky features 3 primary value drivers. First, it will greatly increase choice for TrueBlue members through the implementation of our traditional interline agreement, which expands our distribution reach and customer choice by cross-merchandising flights on one of those websites and apps.

Second, the collaboration promotes the growth of our loyalty business by offering reciprocal earn and burn between programs and status recognition, increasing utility of our points and the breadth and value of our program.

Lastly, the collaboration will supercharge as high-margin, high-growth and capital-light Paisly business, which is JetBlue's white label platform for the distribution of hotels, railcars, cruises, travel insurance and packages on the brands such as United and others.

These EBIT benefits are split between our network priority move for interline benefits and a product priority move for loyalty and Paisly benefits. BlueSky is accelerating our transformation while bringing demonstrable benefits to customers across our system.

Further, while the partnership is expected to begin generating value as soon as the fourth quarter, we are already seeing promising early traction. Since announcing BlueSky end of May, new credit card sign-ups accelerated in June. In fact, we have seen a double-digit increase in average daily card acquisitions in geographies outside JetBlue's core markets.

This is the early evidence that the collaboration is increasing our relevance and making the TrueBlue program more attractive.

On Slides 8 and 9, we discuss the details of our second quarter revenue results and our unit revenue progression in the third quarter. We ran a strong operation during the second quarter and achieved a completion factor of 99.6%. Weather was generally favorable during the quarter despite the typical conductive weather challenges we saw during the back half of June.

We ended the second quarter with capacity down 1.5% year-over-year towards the better end of our initial range of down 3.5% to 0.5%. Demand trends for the first quarter continued into the second with bookings characterized by strong feeds and relatively weaker troughs.

As the quarter progressed, we saw a significant strength in bookings within 14 days of travel. The closing bookings were especially apparent for peak travel In addition to closing strength, our second quarter RASM results were supported by actually the better match supply with demand.

Early in the quarter, we took significant capacity action in the troughs, and we removed almost 8 points of capacity for May and 3 points in June compared to the plan at the beginning of the year. Both the Easter and Memorial day perform well.

The Easter shift added almost 1.5 points to the second quarter RASM. Peak RASM for the quarter was positive on more capacity year-over-year. We also experienced nearly 1 point on RASM benefit from Newark book away. Asia traffic disruptions caused customers to temporarily shift travel to alternate airports and multiple states. That benefit was transitory, as the runway reopened in early June.

Overall, unit revenue declined 1.5% year-over-year in the second quarter, 2 points above the top end of our guidance range. The close bookings may forecast challenging, even within the quarter. And in May and June, revenue generated within 14 days travel increased 7% year-over-year.

Premium Cabin, Loyalty and Transatlantic continue to demonstrate resilience. Premium unit revenues were up mid-single digits year-over-year during the quarter and royalty remunerations were up 9% year-over-year.

International continued to perform well with Transatlantic unit revenues up low single digits for the quarter. As you look to the third quarter, we have seen the closest strength carry into July, including the 4th of July holiday peak. We expect year-over-year unit revenue to be down between 6% and down 2% on ASMs ranging between down 1% and up 2%.

As Joanna mentioned, we had to face more weather challenges than usual and elevated air traffic control delays throughout July, which have pressured in the operation and [indiscernible] far in the third quarter.

Our third quarter capacity guidance assumes a more typical operating environment for August and September, and we'll continue to monitor our operations closely as the quarter progresses. We anticipate a similar demand environment in the third quarter compared to the second with a continuation of strong peaks, elevated close-in bookings and weaker troughs.

Notably, while demand is improving, there are a few onetime considerations that are impacting our sequential RASM progression. In the second quarter, we benefited from both the Easter shift and Newark, representing roughly 2 points of RASM uplift. During the third quarter, we will be lapping 1 point of CrowdStrike benefit or unlike many of our peers, we realized a revenue gain from during the event last year. Additionally, the midpoint of our guidance for the third quarter translates to a roughly 2-point sequential increase in year-over-year capacity. Adjusting for these considerations, our third quarter RASM guidance implies continued demand and unit revenue improvement as we head into the second half of the year.

Further out at the end of the fourth quarter, we are optimistic that demand will continue to improve, and we're using this as our overarching planning assumption. However, revenue forecast remains challenging given elevated levels of close-in bookings and an improving but still choppy macro environment. Therefore, we will not be providing revenue guidance beyond Q3. Thank you. And now over to Ursula for an update on our balance sheet and cost outlook.

Thank you, Marty. During the second quarter, we generated a modest operating profit, a small step on our road to sustain profitability. We also adjusted our fleet plan, remain disciplined with our balance sheet and continued executing on our cost goals. These actions are grounded in our overarching objectives to enable capital-efficient long-term growth, drive profitability and generate free cash flow. Turning to Slide 11 for an update on our fleet. At the onset of the year, we shared that our Pratt & Whitney GTF-related aircraft groundings were expected to average mid- to high teens for the duration of 2025 and to peak 1 to 2 years into the future. I'm very pleased to announce that the forecast for aircraft on the ground has improved materially, and we now expect to average fewer than 10 AOGs this year and believe that 2025 represents the peak with the number set to reduce as we progress into 2026 and fully resolve by the end of 2027.

The improved AOG forecast is primarily driven by the extension of required maintenance intervals due to better-than-expected GTF durability performance and aggressive self-help we have undertaken to source spare engines. As a result of geared turbofan challenges, we have not grown capacity since 2023, which has put meaningful pressure on unit costs and significantly impacted profitability. The revised forecast now positions us to return to long-term capacity growth beginning next year. Since these aircraft are returning to service and are not new deliveries, they represent an extremely capital-light source of growth.

This will allow us to return to a more favorable unit cost growth trajectory, supporting our return to profitability and free cash flow generation. Growing sustainably is important to our Jet Forward strategy, and we have pursued various initiatives to balance growth, optimize earnings and preserve capital across our fleet types. With our A320 fleet, we had planned to resile all 10 of our remaining A320 classes to mitigate AOG capacity pressure. Given the improved AOG forecast, we have decided to pause the restyling of 4 aircraft and will instead park them after the summer peak as previously communicated to our crew members.

As we manage growth and balance sheet health, we have also decided to sell our 2 upcoming XLR deliveries. As a reminder, last year, we deferred roughly $3 billion worth of aircraft deliveries into the 2030s, including the majority of our A321 order book. Inducting these XLR deliveries would result in a costly orphan fleet of 2 aircraft for the remainder of the decade. Lastly, as previously announced, we officially end E190 flying at the end of this summer, simplifying our fleet from 3 to 2 types, the Airbus A220 and A320 families.

The A220 replaces our E190s and offers higher gauge with 90% greater premium seat exposure and better fuel efficiency, resulting in a 25% to 30% improvement in direct operating cost per seat. We took delivery of our 50th A220 earlier this month, and the fleet type represents the majority of our order book through [Audio Gap] our liquidity in the short term. And in the second quarter, we ended with $3.4 billion in liquidity, excluding our $600 million undrawn revolver. This represents 37% of trailing 12 months revenue compared to our liquidity target of approximately 20%, and we remain on track to end 2025 in excess of our target.

Turning to Slide 12 for our second quarter cost results and third quarter outlook. The second quarter was another strong quarter for cost performance, driven by our operational execution and the progress of our JetForward cost transformation program, the team successfully mitigated pressures from closing capacity adjustments to end the quarter with CASM ex fuel up 6% year-over-year, better than our initial guidance of up 6.5% to 8.5%.

This marks the seventh consecutive quarter we have achieved or beat our cost guidance. The beat is primarily from a better-than-expected completion factor for the quarter as well as timing shifts and fleet transactions. In addition to reducing capacity, we assess our organizational structure and combined or restructured certain roles for greater efficiency at the leadership level.

We also implemented across-the-board project reductions at support centers and are closely assessing all spending. A portion of the beat was attributable to these cost actions during the quarter, as we took steps to respond to the evolving demand environment.

As part of our efforts to return focus to our core business, we also announced the sale of assets from JetBlue Ventures to Sky Leasing. This unique transaction allows us to retain the upside of the investment portfolio and other benefits, including continued access to cutting-edge companies with greatly reduced costs.

We expect to begin realizing these savings over the second half of this year. For the third quarter, we expect CASM ex fuel to be up 4% to 6%, with approximately 3 points driven by maintenance and roughly 2 points from crew member wages, as we fully lap the pilot wage increase from last August.

Additionally, our third quarter CASM ex has been pressured by a difficult operation in July, representing a 1-point CASM ex headwind from overtime premium wages and other disruption related expenses. Our guidance assumes a more typical operating environment for August and September. Also for the third quarter, there are roughly 2 points of CASM ex benefit driven by fleet transactions, the majority of which is the gain on sale from a portion of our A190s. We expect jet fuel to be in the range of $2.50 to $2.65 per gallon over the quarter, and we currently have no fuel hedges in place.

For the full year, we remain focused on controlling what and I'm pleased to announce we expect full year CASM ex fuel of up 5% to 7% year-over-year on 1.5 fewer points of at the midpoint of our guidance. This reinstates our initial unit cost guidance from the onset of the year despite lower capacity, illustrating the benefits of our strong operation a cost reduction program.

At the same time, our full year interest expense remains unchanged at $600 million, and our new capital expenditure forecast for 2025 is $1.2 billion, down slightly from our prior guidance.

We are working tirelessly to deliver value to our owners, customers and crew members. And we remain confident that JetForward is the right plan to get us there. We have the team, the strategy and the runway in place to drive transformational change, and we're already seeing clear tangible results in our operations and customer satisfaction and in our pass back to profitability.

Thank you, and we will now open it up for questions. Back to you, Abbey.

[Operator Instructions]. And our first question comes from the line of Dan McKenzie with Seaport Global.

Great job on the second quarter. A couple of questions here. If I could just start with growth from diminishing AOG starting in 2026. Wondering if you can just help us size the pace of that growth that we should expect? And just related to this, how much larger could JetBlue be today without adding pilot headcount?

Thanks for the question. Given all the puts and takes with the fleet, we tried to lay out all the transactions that essentially are delivering us to be able to grow low single digits starting in 2026 through the end of the decade. So we're extremely pleased with the improvement in the AOG forecast, which we will complete and be through by the end of 2027.

And then we've been trying to optimize the rest of the fleet, whether it be retiring E190s and simplifying it by selling the 2 XLRs and then deferring just some resales. So we landed on this low single digit. Obviously, we're willing and able to respond to the macro backdrop over that time frame and increase capacity slightly or decrease capacity to better match the outlook based on the demand environment.

So that's the trajectory. Obviously, we're extremely pleased to be able to see the light at the end of the tunnel in terms of the AOGs because this has been a material headwinds on JetBlue. And I do believe that when the macro environment continues to improve, this will be a tailwind for us.

If I could just add the pilot question, we have a sufficient number of crew. We've been managing the challenges with AOG through a series of voluntary programs across both our pilots and our in our airports. And so the benefit of voluntary program is that because we knew the AOG issue was transient in nature, we will be able to sort of adjust our staffing levels appropriately as these aircraft come back into service.

Yes. Very good. Marty, if I could go to JetBlue's 51 Partners. I remember when JetBlue first began adding partners, the stat you would share with us all was that these partnerships were filling the equivalent at equivalent of 2 to 3 planes per day. I'm just wondering, where is that stat today? And then related to that, is there less international inbound today that you would expect to come back in 2026 and '27. And roughly how many percentage points of RASM can that increase connectivity typically drive?

Okay. Well, a lot of questions, Dan. Thanks. Let me start with this. We have 51 partners today. And we're -- we feed multiple focus cities, and we're really happy with the partner portfolio that we have. Obviously, the United partnership is going to be very, very important for us, and we're really excited about adding United into the portfolio, not just from a perspective of feed, but also what it's going to do for TrueBlue, what it does Paisly, et cetera. So I feel a lot of upside as far as how that goes.

I remember also the comments about a 1 airplane, 2 airplanes. And I think that was back when there was a lot of skepticism about well-cost airlines doing partnerships, now it seems like everybody is talking about partnerships, including ultra low-cost carriers. So I think we sort of don't even look at that way anymore because our view is this is and we've proven the partnerships are very effective for us.

The thing we have going for us is that if you're an international interline that wants access into the interior of the country, and you're not a member of Sky team, obviously, because you've got the Sky team airline with a very big operation in New York and Boston, like your best way to get access into the interior U.S. is JetBlue.

And I think a lot of our partnerships -- a lot of partners and partnerships are tied to that presence we have in this marketplace. I will also say not just adding United to the mix, but we're looking forward to working with Star Alliance partners, who we think will also appreciate the ability to get connectivity into the East through New York and Boston. But overall, I feel like there's so many things about the JetBlue model.

And again, I came here in 2006 for the first time. thinks about the JetBlue model people question when we first did the that are now basically accepted as normal course of business for low-cost airlines. And I think it's just another example. We're very proud of the partnerships we've done. We love working with the partners that we do, and I see a lot of upside going forward.

Our next question comes from the line of Tom Fitzgerald with TD Cowen.

I'm just kind of curious, just looking at the different buckets for JetForward, the 4 priorities. Are you able to provide any color about how as you go from the 180 to the 290, which are the 4 buckets, what you expect the contributions to be?

Yes. I can take that. I think, in general, it's kind of spread evenly across the 4 buckets. I think as you think about the back half of the year, network ramping continues to be a meaningful driver. Most of the change we made in the network relapsed Q3 last year, and they're nicely in ramp, but we've got a ways to go.

So pleased with the progress. As we mentioned, we've realized $180 million of EBIT cumulatively $90 million 1H. We'll see another $110 million through the year-end for a total of $290 million by the end of this year. And we have very clear proof points across each one of the priority moves that JetForward is working. But it is a multiyear plan, and it's going to take some time to realize the full benefits of it.

Okay. Great. That's really helpful. And then just as a follow-up, I'm just wondering if you mind providing any more color on just kind of customer trends like by the different segments over the course of 2Q and then just quarter-to-date when you have kind of on the books, whether by core leisure, VFR, TrueBlue loyalty members, corporate?

Tom, I'll take that one. Thanks for the question. As far as what we're seeing, a lot of what we're seeing is similar to what we've heard from other airlines in their calls, definitely doing better for international than domestic, definitely doing better for a premium versus the basic-type customers.

So I think we're sort of consistent with what we're seeing. We continue to see good numbers at TrueBlue. And we talked about some of the numbers as far as the growth of the credit card, our remuneration. I think overall, the trends are actually good. I think the most important trend is one that I give all the credit to our crew members for is our Net Promoter Score.

The last report we had done for Net Promoter Score, we were at the top of the industry for NPS. And frankly, we've come a long way in the last 3 years. So from that perspective, I sort of look at that as -- so the the drink so to speak, if we can use the baseball analogy. Because without a great customer experience, we can get these customers on board once or they may not come back.

But I had a great gratitude for our crew members providing just amazing service so that the customers who do fly JetBlue are really happy and hopefully come back. And frankly, I'm looking forward to having our partnership customers, whether United or Lufthansa or whoever ends up being a partner, I'll come to fly JetBlue because, again, I feel like once you try it once she'll recognize how much better JetBlue is, and well you very much appreciate the JetBlue experience and look for us in the future.

I should mention, you asked about business customers. In general, we have -- year-over-year, we've taken a pretty big hit to our business customer network because we've closed a lot of their business routes we flew notwithstanding our business revenue is basically flat quarter over -- year-over-year for the quarter. So I actually see it as a very good sign.

And our next question comes from the line of Jamie Baker with JPMorgan.

Marty, a question on JetBlue. Do you have a view on where they fly with their 7 daily frequencies? I mean, I'm assuming it's transcon as opposed to, I don't know, flying at Dallas or something like that from JFK. So if it is transcon flying, have you modeled for that increased competition as part of your overall Blue Sky estimate?

Jamie, this is Joanna. I'll take that. So as you know, it will be illegal for us to discuss with our partner where they may intend to fly the JFK slot. So we have not had those conversations, nor do we intend to. Obviously, we've made certain assumptions in our model as to what the impact of United flying those swaps may be and that is included in the value of the overall deal.

There's obviously a series of puts and takes. United was obviously addressed in the slots and there is an impact to JetBlue if they operate those slots to a variety of different markets. At the same time, selling the JetBlue network over United.com has a very important revenue benefit for JetBlue. Likewise, the utility of the TrueBlue program and giving our customers global access as you know, we sort of focused our own network on trying to drive scale in the Northeast. This is about trying to give scale to our customers to a global network. And then pale is sort of the real upside here in terms of the unique opportunity for us to basically provide a white label platform for United to sell its nonair ancillaries in the future.

Okay. Perfect. And then maybe, Marty, this is one for you. And maybe it's too early to ask this question, but you're obviously aware that certain struggling discounters are trying to lean into premium I mean it's more of a leg room exercise really. But in any case, in overlap markets, have any of those new products that have begun being sold by your competitors having any impact on your results?

Jamie, great question. And I will tell you, we have seen no impact whatsoever from any of these so-called premium products that are competing against us. I think if you look at our 15 years -- or actually 20 years of experience, including even more legroom of premium products. We have great, great credibility with our customers that we can offer a great, great premium products.

And I feel like you can try to do that in a ULCC environment, but I really don't feel like it's kind of come close to what we've been offering for 20 years. So from that perspective, I think I'll paraphrase Harry Truman when the customer is choosing between a real premium product and a fake premium product, the real ones are going to win.

And fundamentally, that's what we're seeing right now. And if you look at -- we just went through our recent announcement of some growth in Fort Lauderdale where our biggest competitor is ULCC. And frankly, I feel like that is an example of how well we are doing in that market. I mean we really are the only non-ULCC option in Fort Lauderdale, and we're very competitive with the Hub Airport down a couple of miles down the beach. But even with all that, I think it's also worth mentioning bringing us back to JetForward, we continue to evolve our premium products.

We relaunched EvenMore with enhanced customer experience. And like most importantly, we announced the domestic first class product that's coming out next year. So even as well as we've done in premium and as well as the revenue results have been, we're not resting on our laurels. We'll continue to do more exciting products.

We could not be more excited about the domestic first-class product. And frankly, I think our timing is great for it because we're really seeing that, I keep using the phrase, the of a lot of the manage to bottom and a lot of the top and we are really well positioned to capture that demand at the top of the demand curve.

I appreciate that. It actually was some of those Fort Lauderdale ads that you announced that actually got me wondering about it. And I obviously share your skepticism.

Well, again, you might be don't matter, it's a customer. It's [indiscernible] going with their feet like always.

[indiscernible] maybe a customer sometimes.

It's just refreshing for me to agree with the management on anything these days, it seems, so yes, I was just [indiscernible].

[indiscernible] maybe we'll let you into the lounge [indiscernible].

And our next question comes from the line of Savi Syth with Raymond James.

if I might follow up on Dan's earlier question on the capacity growth in 2026, a little bit more. Just how much of that growth is coming from reversals of AOG and even in 2027? I'm just trying to get a sense of just how much of this, at least the very near-term growth in the next couple of years might be highly efficient from a cost perspective?

Yes. Thanks for the question, Savi. I mean the majority of the projected growth is driven by the improvements in AOGs. I mean if you take a step back, our original guidance for this year was that we have mid- to high teens number of aircraft on the ground, and we're now trending lower than 10% on average for the full year. We believe that this year is the peak.

So as we navigate through 2026, that will come down over time and be complete by the end I think 1 of the major benefits here is gaining some efficiency on the unit cost growth trajectory. Obviously, we've been pressured in not being able to grow over the last 2 years. And so this should give us a level of efficiency on the cost side of the equation.

So again, I'm hopeful that the macro backdrop is going to continue to improve. And when that does, this is going to be a tailwind for us, not only on the growth side, the cost side, but just from a true profitability perspective.

Appreciate that. And if I might, I wonder if you could -- and I don't know if this is a question for Marty perhaps, like just talk a little bit about what you're seeing on the competitive landscape and is like this current environment is causing any kind of change of behavior among any of your competitors?

It's a good question. I mean, honestly, I don't think -- I would not call it anything unusual in the competitive landscape right now. The 1 thing that I would say is we're obviously watching very closely the pull downs we're seeing in the ULCC world, and we've reacted to that with some of the growth reported recently. I think another thing that is important to be on the list is just trying to understand what the likely trajectory is going to be of capacity for the industry because I would think we're still not exactly clear what the rest of the year is going to look like as far as growth rate, and that's obviously going to be very important to try us understanding what we should be expecting for the rest of the year.

But overall, I'm not looking at any significant sort of noteworthy change in behavior that I would call out. I don't know, Joanna, if you see something like...

No.

I think we're we're focused on the changes that we were putting forward in the original JetForward, all the network changes that we went through, and that's -- we're really sort of heads down on that right now.

And our next question comes from the line of Mike Linenberg with Deutsche Bank.

I want to go back to your comment just about the higher mix of close-in bookings, this acceleration. Is this temporary? Is this structural? I sort of think as JetBlue rolls out a first-class product next year, I mean you're probably going to get -- you're going to rebuild your share of corporate. I mean, are we on to something here?

Mike, great question. And trust me, it's a question we ask ourselves every single day, we look at the booking report, at least since we started to see the strength. I don't think any of us are ready to call this to be a permanent change. And it's one of the reasons why we're relatively cautious as far as our guidance.

I do think based on the research that we have done, I do believe a big chunk of it is just consumer sentiment and customers being cautious because of bigger uncertainty with all the stuff going on with tariffs and who knows what other stuff. I'm not sure I understand the core drivers of it, but it certainly has the feeling of the, I'm going to wait a while before I made my booking. I think the reason I mentioned that is because we really didn't see it in April, so much into any measure.

It really was, I would say, middle of May, when we started seeing Memorial Day bookings pick up. We had a fantastic Memorial Day, much better than forecast, and that really carried into June. But it does have the feeling of people just waited a long time to make the final decisions. And then when they decided, they made their bookings. But I don't -- I would not call this something that we expected to be a permanent fixture over change for the booking patterns.

Okay. Great. And then just my second, I know -- I think, Joanna, you called out the $50 million sort of incremental EBIT because of the United partnership. What was the placeholder amount that you had for partnerships in the original get forward plan? Just trying to get a total advise of the United contribution.

Yes, thanks, Mike. Yes, we haven't broken out the total amount. As we've said before and JetForward, there's a number of puts and takes that were only focus on kind of the contribution of each of the priority moves as a whole. So the $15 million incremental EBIT that's largely associated with the benefits from Paisly as part of the United partnership, but we haven't broken it out. You should expect kind of full run rate 2028 for BlueSky. It takes some time to implement it, and it will be staged with benefits coming over the course of the next couple of years.

And our next question comes from the line of Catherine O'Brien with Goldman Sachs.

Marty, maybe just one more on the revenue environment. Can you just talk about RASM between the months of the second quarter? And then what's underlying the monthly progression for the third quarter guide? Anything you can provide on book yields or loads? And with bookings fairly close in, as you've been talking about, how are you going about your September forecast?

Katy, thanks for the questions. Good questions, too. As far as the progression, I think we really start accelerating. We don't generally give a lot of monthly feedback, but I'll just give a little bit right now. We really saw progression sort of Memorial Day forward, and it was pretty hefty progression.

I mean, as you saw, we had a pretty big beat for the second quarter. I think if you asked the exact question on April 30, no one would have predicted a beat like that. But really, when we get to the the middle of May, we really started to see things turn on and continue.

And that is continuing through July and August and -- excuse me June, July and August, and I think the real issue is that this is one of the only prolonged peak periods of the calendar year. And 1 of e things that every airline has been calling out, including some of the biggest of legacies is that there's a pretty significant difference between peak and trough demand.

Now clearly, we still have troughs. Our load factor will be down in the third quarter versus third quarter 2024, and the troughs are weaker than the peaks. But in general, this is a period of really good peak demand. specifically with September, we've done a lot of self-help in September as far as pulling down ASMs. We pulled a lot of off-peak capacity. And again, thanks to some of the programs that Joanna mentioned with respect to voluntary leaves, we're doing the best we can to control our costs during September.

And frankly, I think the fact that we continue to meet our cost guide, and we have met it for 7 -- 6 to 7 quarters, I think 7 quarters consecutively, even in light of all these changes, just shows how well we are doing as far as managing our costs even with relatively close in schedule changes.

So I look at this and I feel like we will be well set up for the third quarter guide that we laid out. As of right now, I think with the work we done in September, September actually has the highest year-over-year RES increase of the 3 months in the third quarter. So I think it just shows how well we've managed September through capacity. So actually very positive about that.

That's great. Maybe one for you, Ursula. With all the fleet updates driving low single-digit growth through the end of the decade, how should we be thinking about your historical comments on low single-digit growth, driving mid-single-digit CASM ex. Should that be better over the next couple of years as JetForward ramp?

Yes. Thanks for the question. Yes, previously, we've highlighted mid- to high single-digit growth will result in a flattish CASM ex fuel. So if you just triangulate low single-digit growth rate. Obviously, the unit cost performance will be higher than flattish. I'm extremely I'm pleased with the cost performance that the team has been executing to.

I mean, at the highest level, we've maintained the unit cost growth guide that we gave last in January despite pulling capacity over 1.5 points. So we're finding ways to take cost out of the business and some of these decisions have not been easy, between divesting the JetBlue Tech Ventures as well as additional budget targets and going through a corporate headcount support center review, like these are tough decisions, but we need to continue to deliver on cost. We've executed for 7 quarters in a row. And I do think the AOG outlook will provide us the improvements that we're seeing here on the AOG outlook will provide us further efficiencies as we build a unit cost growth target for 2026 and beyond.

And our next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Just on the Travel Products business or Paisly business, can you expand on how you kind of generate a margin in that business on your own bundle, what shape does that take? Is it commission based? Is it kind of a third-party clearing house? Do you have negotiated agreements on room inventory. And then maybe you could contrast again, high-level broad strokes the margin you make on one of your own customers versus the margin you'd make on a third-party airline customer like United?

Duane, thanks for the question. Great question, by the way. And I love talking about Paisly because, a, it's been a fantastic product for us and a great product for our customers; and b, as you saw from our guide up for JetForward, it's going to be an important part of our recovery program going forward and an important part of BlueSky.

So as far as how the math works, it's actually very simple. Just as a reminder for those who don't understand what we do through Paisly, selling all of our nonair ancillary products. So that includes hotel packages under JetBlue vacations brand, it includes stand-alone has an hotels, it includes travel insurance, it includes cruises.

We actually have like theme pack tickets, like all sorts of things that customers use that are tied to a flight booking. Interesting enough, we see customers who will book Paisly were not tied to flight booking. We sold cruises originating in Asia, for example, because they like the prices that we have and the ability to earn TrueBlue points. So Paisly has actually been great for our customers.

We basically earn on commissions. So we get commissions from the hotels, from the rental car company, insurance, et cetera. We've negotiated -- we don't really the exact number, but we're in the 4 digits of the number of hotels with whom we have contracts in addition to a great exclusive deal right now with Airbus for rental cars.

And overall, it's been a great profit generator for us. The EBIT margin for Paisly is in the 50s and climbing into the 60s. It's also a very low capital business. The only capital we spend is basically a little bit of IT CapEx.

And frankly, what we're most excited about is that we can scale this product up with the addition of access to United customers. And the way we describe it is basically it's the leads business. We bring them 40 million leads -- excuse me, the airline brings 40 million leads a year into Paisly, and now we're going to add 9 digits of leads from United customers.

We don't actually know what United's margins are for their current relationships because that's not something that we would share. But when you look at what we're producing and what we believe we can produce United, they made the independent decision that we would do a better job of generating profit for them than their current partners. We are splitting the commissions.

We're not releasing that split publicly. So unfortunately, I can't give you that amount of detail. But we're really excited about it. I know this is something that we are extremely good at. We have a group of people who are red ring from JetBlue, separate IT systems, separate everything. They're in Fort Lauderdale. They're not in New York.

And this has really been set up to be a white label for multiple brands. We are talking to additional airlines over and above United. And in fact, we're talking to some non-airlines. And this group is very, very good at the job, and we're really excited about its ability to contribute to our profitability going forward.

Our next question comes from the line of Atul Maheswari with UBS.

On fourth quarter -- I know you're not providing RASM guidance yet, but assuming demand stays at current levels, should RASM improve versus the third quarter, again on a year-over-year basis, so fourth quarter year-over-year versus third quarter year-over-year, does that improve in the fourth quarter if demand stays at current levels or does it take a step back given you lap some of the December strength from last year? So just some directional color using your third quarter guidance as a marker would be helpful assuming that the fourth quarter demand is in line with what you've assumed for the third quarter.

Okay. Atul, thanks for the question. I'm not going to come close to approximately on the guide. So I'm going to answer your question very carefully because we've deliberately chosen not to guide fourth quarter. And there's really 2 reasons. One of them is that when so much of the strength we're seeing in the third quarter is coming from close-end bookings, which is a new pattern for us, I don't know that we want to call that as a permanent change in the booking curve, number one.

Number two, there's a lot of uncertainty as far as the ASMs that are going to be out there in the industry. I think if you look at what airlines have reported their growth was, that would give you one assumption on RASM. If you look at what's actually out there loaded and what practice has been as far as people are actually flying, that would give you a different number.

And frankly, we are still offering a little bit too many ASMs in the fourth quarter. If you look at our annual guide for ASMs and look what out there selling, it's very easy to do the math that we have probably a little [indiscernible] point of ASMs to pull in the fourth quarter. They're still out there selling. So I think with the lack of visibility on both the pace on how permanent this change in booking patterns will be and also on whether the capacity cuts in the fourth quarter will go forward for the rest of the industry.

I think it's too early to tell. That being the case, I think that what we've seen as far as the bigger performance in second quarter and then on top of that, the progression in the third quarter, we're feeling very confident about where the revenue environment is as far as recovery. But I think it's way too soon to call the specifics of what you're asking for fourth quarter.

Yes. We have less than 20% booked for Q4. And so as we get a bit closer, we'll be in a position to provide an update.

Okay. Fair enough. And then as my follow-up, as you return to growth next year, where will this growth be concentrated, like what markets, geographies that you believe you're underserving today that could benefit from this growth? And related to that, how do you ensure that this growth does not cause any meaningful RASM dilution next year that could maybe offset some of the CASM ex benefit that you might get?

Yes. Thanks for the question. So we're not going to open the playbook and tell our competitors where we're flying next year. So I think we'll keep that close to the vest until we're ready to communicate more carefully what we're going to be doing with that flying.

I think in terms of your second question around around how we're thinking about ensuring that the growth doesn't erode random and/or impact sort of that low single-digit cost trajectory. A few things, the growth is very capital-efficient. We already own these aircraft that are coming back into service.

So there's very small costs associated with that, as we think about it. if the environment doesn't improve or further degrades, we have a number of different levers we can pull to manage that growth. And I think if you look at what we've been doing this year, we've been doing just that. So we've reduced capacity, we've looked at making actions with the fleet, so we've taken 4 of our 10 classics and we're not going to be restyling those.

We've also sold 2 XLRs and then we can obviously adjust utilization up and down as the case may be. So I think we've got a track record of being pretty aggressive with the fleet to manage the demand environment, whether it's the sales that we've done or as we think about going forward, needing to manage capacity closer in. So we'll adjust as we need to. But the goal is this is very efficient growth because we already own these aircraft, and it should drive improvements to unit costs.

And our next question comes from the line of Ravi Shanker with Morgan Stanley.

Just a couple of follow-ups here. I think you said earlier in the call that you expect BlueSky to be implemented in stages. So how do you think about that kind of ramping in the next 2, 3 years? Is that going to be pretty lumpy? And kind of if you could give us some color on kind of when the next is going in? Or is it still going to be pretty linear?

Yes, maybe I'll just grab at a high level. So we're still working on the implementation plan with United. So I don't want to get into a ton of specifics. I will say the NEA has set us up pretty well, the Northeast Latin America and the technology we did behind that has set us up pretty well from a technology perspective.

So you'll start seeing kind of earn and burn and interline sales come sooner. There's very little contemplated this year. Those will kind of layer in into '26 and then Paisly would come after that. There's some more technology needed to implement Paisly. ultimately, we will not achieve, as I mentioned, kind of full year run rate until 2028.

Understood. And Marty, I think you were talking about next quarter and kind of how a lot of capacity has come out and you've taken a lot of trough capacity. But again, just going back to the kind of a little bit of a blind sight the industry got in February and March and a lot of that came from closing weakness. Is that a risk that after a pretty decent kind of peak season with summer that close in continues to kind of resume that drop off, if you will, in the third quarter? And if so, do you think the industry is taking

Ravi, I think the answer is we know what historical patterns have looked like as far as seasonality. I think the only question is do we think economic sentiment, customer sentiment will take a step back, and I don't see any indication that that's going to be coming. Again, we do find the nature of this to be a little bit different, which is why we're a little bit apprehensive, but I don't think we're looking at this like waiting for a shoe to drop.

If you look -- we've gone back and looked at our 4 or 5 relatively big step backs in demand, whether it's world financial crisis, 9/11, dotcom bust, things like that. And they follow a relatively predictable pattern. And frankly, we had said that fourth quarter was when we thought there'd be an inflection as far as demand coming back up because that's what we've seen historically in situations like this, and we actually see it in the third quarter.

So from this point, I don't see any reason to be too cautious about it, but I'm probably more worried about the capacity situation than the demand situation. But obviously, we watch it very closely. We do have a good base in the books for the fourth quarter, but we have a lot of bookings to go. So I wouldn't want to get too ahead of myself on that.

Yes, if I could just add. I mean I think we were the first it this year when we saw it, and we made very, very quick steps to try to drive cost savings out of the business and reduce capacity. And so we've got a playbook so that we can try to make the business as flexible as possible when we do see step backs in demand. And so I think if you look at what we did in kind of Q1 and into Q2 around reducing capacity, reducing discretionary spending and other cost savings measures, I think we're always focused on how we can try to keep the business as agile as possible in an industry that is more difficult to pull some of those costs out closer in.

And our final question comes from the line of Conor Cunningham with Melius Research.

Just on -- maybe sticking with the -- I mean I appreciate that you're not giving fourth quarter guidance because it's obviously very dynamic. But I'm just -- what I think -- I'd love to get your thoughts just on the capacity set up for 4Q in general because last year was particularly strange for the election and so on.

And when I think about how the progression of last year kind of played out October and November were particularly weak and then really, really strong in December of last year post election. So can you -- I think the biggest fear that a lot of folks have right now is that there's going to be too much supply come to fall given the fact that RASM is inflecting a little bit here. So if you could just talk about the setup in terms of supply into the end of this year, just how you think it all unfolds in general?

All right. Thanks, Conor. And yes, obviously, this is one of our biggest concerns with calling in the fourth quarter. But I can only talk about my view of the world. I can't talk about what our competitors are going to do because I really don't know. I know what they've said, and we'll see what they actually do because those tend to have been different at some points.

We're pretty consistent with what we say and what we do and things like this. We have -- right now, we do have a little bit more capacity selling in the fourth quarter, that capacity coming out relatively soon. We've given a guide for ASMs for the year and which you can calculate the fourth quarter number out of that, and that's where we're going to fly.

I mean, absent some significant change in demand, we do the ASM planning based on what we see demand to be. I think we have made incredible steps in this network in the last year as far as all the changes we made tied to JetForward and then followed that up with some very aggressive sculpting of peak versus trough.

And frankly, I go back to the thing which I am eternally grateful for is how well this company has risen to the occasion and continue to meet our cost guide while we were doing some pretty aggressive ASM pulls on the Tuesday, Wednesday, Saturdays of the world. So I think we're at the point now where we feel relatively free to do these margin-accretive activities knowing that we'll get the cost out, and we'll continue to do that.

Fourth quarter is a pretty heavily trough quarter. I mean, certainly, October, half of November, half of December, it definitely trough. And we're going to be pretty aggressive as far as filling capacity during those periods. Again, this is not -- I'm not telegraphing you, you always see it out there already in what we've loaded that we pulled the troughs down pretty well. And I look forward, if we see this peak demand coming in like it is right now, I look forward to seeing that in the fourth quarter.

But frankly, we are a small airline in this business. Our ASMs are not going to drive significant impact industry RASM like the big 4 are and like let's -- I think we'll have to see what they do before we can make a call on that.

Okay. That's super helpful. And then just a point of clarification. Ursula, the 2-point benefit to CASM ex from the fleet changes, is that a sale -- like are you booking a gain that's going to ultimately be a contract expense? I'm just trying to understand the bridge as we move from third quarter to fourth quarter. My guess is there's just some sort of simplification benefit as well, but just any thoughts there, that would be helpful.

Yes. So here's some color on the fleet transaction. So on a full year basis, we're actually going to have a gain across all these asset sales to the tune of 1.25 points of CASM ex benefit on a full year basis, okay? And so then you back up.

And in the second quarter, we actually outperformed on the CASM ex guidance and about 0.5 point was driven by a gain on sale of these assets. So when I say assets, we got a multitude of different assets that we've been selling, right? It sees XLR 2 aircraft, it's the E190s. And then we've also been doing some sale leasebacks on engines as well.

So quite frankly, those assets are being pretty well received by the market. And so we're hence booking gains above and beyond what we had anticipated. So it was 0.5 points in the second quarter, we've obviously got 2 points in the third quarter. And then on a full year basis, to round it out, at 1.25 points.

And ladies and gentlemen, that will conclude today's call, and we thank you for your participation. You may now disconnect.