JetBlue Airways Third Quarter 2026 Earnings Conference Call - JETBLUE AIRWAYS CORP

Explicit Guidance:

• Full-Year 2026: Adjusted operating margin expected to be -4.5% to -6.5% (revised due to higher fuel prices); RASM growth expected between 13.5% and 14.5%; ex-fuel CASM growth expected between 3.5% and 4.5%; total capacity growth of 1.5% to 6.5% year-over-year.
• Fourth Quarter 2026: RASM growth expected between 18% and 22% year-over-year; capacity growth expected between 3% and 4% year-over-year; adjusted operating margin expected to expand 1 to 2 percentage points year-over-year despite fuel costs 85% higher than prior year; ex-fuel CASM expected to decline 1% to increase 1% year-over-year; fuel price assumed at approximately $4.64 per gallon.
• 2027 Outlook: Targeting low-single-digit capacity growth; assuming average fuel prices slightly above $4.00 per gallon; focusing on achieving sustained operating profitability; ex-fuel CASM growth expected in the low single-digit range.
• 2028 Outlook: Targeting at least $1.00 in earnings per share (EPS) and positive free cash flow; fuel price assumption around $3.00 per gallon.
• Capital Expenditures (CapEx): Full-year 2026 CapEx remains at approximately $850 million; annual CapEx expected to remain below $1 billion through the end of the decade.

Business-Segment Outlook:

• Fort Lauderdale: Seat share expected to reach approximately 37% in Q4 2026; peak year-over-year growth rate expected to occur in Q3 2026, with growth moderating in 2027; expected to exceed 150 peak daily departures in winter (up 39% YoY); RASM growth remains strong despite significant capacity expansion.
• Blue First Product: Service launching December 8, 2026 (Boston to Fort Lauderdale initially), expanding via phased rollout; revenue and margin contributions expected to build through 2028 and beyond; projected to deliver nearly 5 points of RASM improvement; fleet conversion expected to be majority complete by end of 2027, with full completion later in 2028.
• Paisley (Rental Car): Targeting nearly $100 million in operating income for 2026; expected contribution to nearly double by 2028; additional offerings planned for late 2026 and first half of 2027; target assumes no additional partners.
• Revenue Management: Transition to new forecasting technology complete; capabilities to automate management of Mint and connecting itineraries now live; expected to support further unit revenue improvement over time.
• Loyalty: Revenue growth of 20% per quarter (highest since 2023); co-brand portfolio growing double digits; True Blue points redeemed via Blue Sky partnership exceeded 1.1 billion.

Market and Competitive Outlook:

• Demand Trends: Customer demand described as resilient with no meaningful signs of fare elasticity despite industry fare increases; "trough" performance in September stronger than historical norms (average fare higher than July).
• Pricing Power: Management confident in 100% fuel cost recapture by 2027; industry pricing environment described as constructive with no signs of reaching equilibrium due to costs still above 2019 real price levels.
• Capacity Discipline: Capacity in non-Fort Lauderdale network expected to be flat to down in Q4 2026; focus on deploying capacity only where returns are strongest; competitive supply environment viewed as constructive overall.
• Share Shifts: Fort Lauderdale operations seeing strong response; Blue First booking data shows 35% award redemptions and nearly 25% from Mosaic members, indicating capture of existing loyal demand rather than stealing from competitors.

Macro / Industry Outlook:

• Fuel Costs: Significant headwinds from elevated jet fuel prices; 2026 Q3 fuel price at $3.91/gallon (up 57% YoY); 2026 Q4 assumed at $4.64/gallon; long-term view assumes fuel remains volatile but manageable via revenue strength.
• Economic Environment: Management acknowledges macroeconomic uncertainty but notes pricing power remains intact; real prices (adjusted for inflation) still below 2019 levels.
• Operational Environment: Anticipated improvement in operating environment with reduced weather and ATC disruption impacts in Q4 compared to the challenging summer of 2026.

Strategic Initiatives:

• JetForward Strategy: Progress compounding; multiple paths identified to achieve 2028 targets (including unit revenue growth offsetting fuel).
• Asset Base: Liquidity at $2.2 billion; unencumbered assets valued at $7 billion (including $2.8 billion in aircraft and engines); plan to draw $250 million under aircraft-backed financing accordion in Q4 2026.
• Fleet: Eight A220 aircraft purchased with cash in Q3 2026; deliveries of seven more A220s planned for 2027 and nine for 2028.
• Liquidity Management: Monitoring 17% to 20% of trailing 12-month revenue as a liquidity target; exploring non-debt financing avenues (venture investments, co-brand credit cards) to bridge to 2028.

Risks and Headwinds to Outlook:

• Fuel Volatility: Elevated and unpredictable fuel prices remain a primary headwind.
• Operational Disruptions: Summer 2026 saw severe weather and air traffic control constraints; similar disruptions could impact capacity and costs.
• Supply Chain: A320neo and cabin conversion supply chains cited as critical path factors potentially slowing Blue First rollout.
• Macroeconomic Uncertainty: Broader economic conditions could impact demand elasticity, though current data suggests resilience.

Management Tone on the Future:

• Confidence Level: High confidence in the "JetForward" strategy and the ability to achieve sustained profitability in 2027 and $1 EPS in 2028; management describes the financial progress as "real" and the path as "becoming clear."
• Strategic Outlook: Optimistic regarding revenue initiatives; believes the disconnect between bond market narratives and actual financial flexibility is significant; emphasizes that 2028 is only 14 months away from the current date.
• Discipline: Reiterated commitment to capital discipline and avoiding dramatic capacity cuts outside of high-return markets like Fort Lauderdale.

Miscellaneous:

• Liquidity Pecking Order: Primary focus on aircraft-backed financing for near-term needs; non-debt options (loyalty monetization, Paisley) considered as secondary levers for bridge to 2028.
• Network Maturity: 96% of the network is more than one year mature; low capacity deployment in 4Q 2026 reflects disciplined approach rather than lack of demand.