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

Good morning, everyone. My name is Jillian. I would like to welcome everyone to the JetBlue Airways third quarter 2026 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. I would now like to turn the call over to JetBlue's Director of Investor Relations, Kush Patel. Please go ahead, sir. Thanks, Jillian. Good morning, everyone, and thank you for joining us for our third quarter 2026 earnings call. Yesterday, we issued our earnings release and a presentation that we'll reference during this call. All of those documents are available on our website at investor.jepplew.com and on the SEC's website at www.sec.gov. In New York to discuss our results are Joanna Garrity, our Chief Executive Officer, Marty St. George, our President, and Ursula Hurley, our Chief Financial Officer. During today's call, we'll 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 could cause actual results to differ materially. Please refer to our earnings release and SEC filings for information about risk factors that could cost those differences. These statement speak only as of today and we undertake no obligation to update them. We may also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable gap measures are included in our earnings materials and are available on our investor relations website. And now I'd like to turn the call over to Joanna Garrity, JetBlue's CEO. Thank you, Kush. Good morning, everyone, and thank you for joining us today. I want to start by reinforcing the bigger picture and the progress that we are making. Despite significant fuel headwinds and a challenging summer operation, our revenue performance is among the strongest in the industry, with unit revenue up 18.4% in the third quarter and further acceleration expected in the fourth. Customer demand remains resilient, and we are seeing JetForward's benefits compounding with some of our largest opportunities still ahead. Importantly, we are already expanding margins year-over-year despite elevated fuel prices. we remain focused on operating profitability in 2027 and see multiple paths to at least one dollar in earnings per share and positive free cash flow in 2028. importantly our liquidity and financing flexibility provide an important bridge as these benefits build the fuel challenges the industry faces are real but so is our progress jetblue has a strong brand a high value network customers who who are loyal to our differentiated offering, great crew members, and a clear strategy to achieve sustained profitability. We are confident in our plan and focused on delivering the results that this airline is capable of achieving. Turning to the third quarter, I'm very encouraged by the strength we saw in the underlying business this quarter. Revenue materially exceeded our initial expectations and strengthened as the quarter progressed, momentum continuing into the fourth quarter for me two highlights stand out from the quarter first demand remained resilient even as industry fares moved higher in response to elevated jet fuel costs this revenue strength helped us recapture higher fuel faster than initially expected and we achieved 87 percent recapture in the third quarter versus our initial expectation of 70 to 80 percent second fort lauderdale continues to demonstrate the strength of our our network strategy, delivering strong unit revenue performance even as we significantly expanded our operation. At the same time, the quarter was impacted by an unusually challenging summer operating environment. Severe weather and air traffic control constraints across our core northeast geographies reduced our completed capacity and increased our disruption in crew costs. Through it all, our crew members worked tirelessly to care for our customers and recover our operation, and I want to thank them for their tremendous dedication throughout such a demanding summer. Even with elevated fuel prices and the air traffic control pressures we faced this summer, we still expect to deliver year-over-year adjusted operating margin expansion over the second half of this year. We saw modest margin expansion in the third quarter and expect one to two points of further growth in the fourth quarter, even with fuel up 85%. We know there is still work ahead, particularly given elevated fuel prices and macroeconomic uncertainty, but our third quarter performance provides further evidence that JetForward is delivering results. We've now delivered four consecutive quarters of improving year-over-year RASM growth and are among the industry leaders for second-half revenue expansion. We remain on track to achieve our 2026 jet forward targets with several important initiatives continuing to build into 2027 and beyond. And we are already seeing that execution translate into results in Fort Lauderdale. We expect our seat share to reach approximately 37% in the fourth quarter, up 14 points year over year, reflecting the scale that we are building as our operation expands. We're also deepening our engagement with local customers and co-brand acquisitions in Broward County increased 55% year-over-year in the third quarter. These actions are driving strong RASM growth in Fort Lauderdale and illustrate the early success of our strategic capacity growth. Blue First is yet another important driver of our growth and is our largest jet forward initiative. Seats are now on sale and we look forward to welcoming our first customers in early December. We're excited to offer customers a domestic first-class experience at an accessible price point. At Runway, we expect Blue First to deliver nearly five points of RASM improvement with its revenue and margin contributions building through 2028 and beyond. Turning to our financial position, we ended the quarter with 2.2 billion in liquidity and approximately 7 billion in unencumbered assets, including 2.8 billion in aircraft and engines. Together, these resources provide substantial financial flexibility and an important bridge we execute jet forward and move toward a stronger earnings and cash flow profile the progress that we are seeing across our business is real our revenue initiatives are delivering we are beginning to expand margins year over year and the benefits of jet forward are compounding as existing initiatives mature and new ones come online with the financial resources to support our plan our focus is on building on that momentum to achieve sustained operating profitability in 2027 and achieve positive free cash flow and at least one dollar of earnings per share in 2028. Let me be clear, that is where our attention is and that is how we intend to create long-term value for our shareholders. With that, I will turn it over to Marty. Thank you, Joanna. I also want to thank our crew members for the unwavering commitment to our customers and to JetBlue throughout the summer. Their efforts helped us navigate a challenging operating environment, while continuing to deliver strong commercial results. Revenue was a clear highlight in the third quarter, and we are pleased that the strikes we saw through September have carried into the fourth quarter. During Q3, RASM increased 18.4% year-over-year, roughly four points better than the midpoint of our initial guidance. That puts JetBlue among the industry leaders in year-to-year total and unit revenue growth this quarter reinforced the momentum that we are seeing from our commercial initiatives. Higher yields, supported in part by our investments in revenue management technology, drove a majority of this outperformance. Customer volumes remained relatively resilient, and we saw no meaningful signs of elasticity despite high fares as we responded to elevated fuel costs. Both premium and main delivered double-digit revenue growth, with the strength in main particularly encouraging. Demand strengths remain broad-based across both peak and off-peak travel periods, with healthy booking trends continuing into the fall. Turning to Fort Lauderdale, we've seen continued acceleration in RASM growth throughout the year, even as we've significantly expanded our operations. In the third quarter, RASMs increased nearly 15% year-over-year on more than 65% capacity growth. This performance demonstrates strong customer response as we continue to rapidly build scale in the market. We're expanding travel options for Broward County residents and creating more connecting opportunities for customers throughout our network by adding destinations and frequencies and optimizing our ruling bank schedule. With 15 new destinations and increased frequencies to others, we expect peak daily departures to exceed 150 this winter, up 39% year-over-year. We recently launched service to two new destinations in Columbia, bringing our international network from Fort Lauderdale to 18 destinations. Robust growth requires close collaboration, and I want to personally thank Matt Gale and the team at Broward County Aviation Department for their ongoing partnership as we continue to expand our operations. While we plan to continue to grow, we believe the third quarter likely represents our peak year-over-year growth rate in Fort Lauderdale. This should support further RASM expansion as our growth moderates and new capacity matures. Turning to Blue First, our new domestic first class experience is now on sale across more than 30 routes. Service begins December 8th between Boston and Fort Laudeerdale and will expand to additional routes in a phase rollout. We prioritize markets with strong premium demand where Blue First can help us capture higher yield bookings and improve our revenue effects. We're encouraged by the early response to Blue First, which suggests that we are tapping into pent-up demand for a domestic first-class product among existing customers, particularly on leisure routes from New York and Boston. Approximately 35% of bookings so far are award redemptions, and Mosaic members account for nearly a quarter of the seats booked. While still early, this engagement reinforcing our confidence and Blue First's ability to capture more premium travel demand from our existing loyal customer base. We're also pleased with the progress that we're making in modernizing our revenue management technology. We've completed the transition to a new system that improves forecasting and enables more sophisticated revenue oppositions across our network, including automated management of mint and connecting itineraries for the first time. Early results are ahead of our expectations, and we're adding capabilities to better anticipate shifts in demand, respond more quickly to market conditions, and support further unit revenue improvement over time. Loyalty continues to deliver strong sequential growth, driven by our premium and partner strategy, with revenue of 20% per quarter, the highest level of growth since 2023. of the premier card grew eightfold year-over-year in the third quarter as customers responded positively to the benefits refresh and the opening of our latest blue house in boston has been remained robust across our co-brand portfolio growing double digits and pulling loyalty cash remuneration solidly attract for mid-teens growth for the year our investments in premium products and partnerships are driving deeper blend loyalty and engagement with record levels of active True Blue members and elite status qualifications this quarter. Our newest Blue House launch has been met by rave reviews and outstanding NPS results this opening in August and is just another one of the many investments we are making in the premium customer experience. Our Blue Sky loyalty collaboration, which improves global access with True Blue Members, has now passed more than 1.1 billion True Blue points redeemed on UnitedFlights since the loyalty advancements launched in February. We're also seeing encouraging progress at Paisley, which delivered its strongest financial results ever in Q3. Further rental car bookings through Mileage Plus Travel have outpaced United's previous provider on a per-day basis since launch. We're building on that early traction with plans to introduce additional offerings throughout 26 and the first half of 2027. Paisley is on track to deliver nearly $100 million in operating income this year, with that contribution expected to nearly double by 2028, driven by the maturation of our existing JetBlue business and the continued ramp of planned offerings in the United States. Importantly, this target does not assume any additional partners, which presents a potential source of further upside as we expand the platform. Looking forward, we expect fourth quarter RASM to increase 18 to 22 percent year-over-year. This represents further acceleration from the third quarter, despite year-of-year comparisons that are two to three points more challenging as we begin to lap the demand improvement that started last year. This is expected to be our fifth consecutive quarter of escalating year- over-year RASP growth, which provides further evidence that our Jet Forward initiatives are delivering results and strengthening our revenue performance based on what our competitors have guided so far we expect to continue to be among industry leaders in the fourth quarter as well for the full year we now expect rasmus to increase 13 and a half to 14 and a half percent even with this revenue momentum we remain disciplined without capacity deployment fourth quarter growth is concentrated in fort lauderdale where the initial return and substantial opportunity continue to support additional investment Capacity in the rest of the network is flat to down. We expect fourth quarter capacity growth of 3 to 4 percent and four-year growth of 1.5 to 6.5 percent year-over-year. Our fourth quarter Capacity Guide reflects significant impact of weather and operational disruptions that reduced completed flying last year. Excluding the impact of those prior year disruptions, scheduled capacity growth is nearly two points lower. Taking together continued revenue strength, disciplined capacity deployment, and the growing contributions from our JetForward initiatives give us confidence in our revenue trajectory as we close out the year and head to 2027. And with that, I'll turn it over to Ursula. Thank you, Marty. We're encouraged by the progress we're making on margins. We delivered year-over-year adjusted operating margin improvement in the third quarter and expect further expansion in the fourth. as continued revenue strength is complemented by a meaningful step down in the growth of our chasm excluding fuel. This progression is an important step towards sustained operating profitability in 2027. We are also taking concrete steps to further enhance liquidity and maintain the financial flexibility needed to execute jet forward. On the cost side, third quarter Chasm S fuel increased 7% year-over-year at the midpoint of our updated September guidance. As previously communicated, our underlying unit cost performance remained consistent with our initial 2.5% to 4.5 % guidance range, excluding approximately four points of pressure from summer operating disruption. Our third quarter fuel price was $3.91 per gallon, 57% higher year-over-year. Looking to the fourth quarter, we expect fuel prices of approximately $4.64 per gallon with continued revenue strength supporting further progress in recapturing higher fuel costs. Turning to the fourth quarter, we expect Chasm X fuel between negative 1% and positive 1% year-over-year. This represents a meaningful step down in unit cost growth and a return to the cost trajectory we guided at the beginning of the year. For the full year, we now expect Chasim X fuel growth of 3.5% to 4.5%. to profitability. We now expect a full year adjusted operating margin of negative 4.5% to 6.5%. The revision primarily reflects higher fuel prices, which created 3.5 points of pressure relative to our July outlook. Stronger revenue performance has helped offset a significant portion of these headwinds. We also expect one to two points of year-over-year adjusted operating margin expansion in the fourth quarter, despite fuel prices expected to be 85% higher than last year. This reflects the strength of our revenue initiatives and continued improvement in our underlying cost trajectory. Turning to liquidity, our position remains strong and we continue to take a disciplined and proactive approach to managing our balance sheet. Our quarter end liquidity was $2.2 billion, including our $600 million undrawn credit facility. We also provided notice to draw the incremental $250 million available under our aircraft-backed financing accordion, with funding expected in the fourth quarter. We've recently completed updated appraisals across our fleet, positioning us well for potential additional aircraft-backed financing. Higher appraised values, together with eight A220 aircraft purchased with cash this year through the third quarter, bring the value of our fully unencumbered aircraft and engines to 2.8 billion, up from roughly 2 billion previously. This brings our total unencumbered asset base to approximately $7 billion. Importantly, our portfolio of unencovered aircraft and engines includes a similar mix of assets as those we successfully financed earlier this year. Together with our existing liquidity, our financing options give us confidence that we have the flexibility and runway to navigate a prolonged period of higher fuel prices while continuing to support our operations and advance jet forward. Turning to capital expenditures, third quarter CapEx was $189 million below our prior outlook, primarily due to the timing of one aircraft delivery and LGA slot payments shifting into the fourth quarter. Our full-year CapEx outlook remains unchanged at approximately $850 million. We continue to expect annual CapEx below $1 billion through the end of the decade, supporting our path towards positive free cash flow and balance sheet improvement. Looking ahead, we expect the benefits of Jet Forward to continue compounding as our existing commercial initiatives mature, blue first begins to contribute, and cost efficiencies build. That growing contribution supports our goal of achieving operating profitability in 2027 and progressing towards positive free cash flow. Further out, we continue to target at least $1 of earnings per share in 2028. While the mix of drivers may differ from what we outlined in July, our strong revenue performance reinforces our confidence that there are multiple paths to achieving that target, including through stronger unit revenues that could help offset potentially higher fuel costs. Despite the challenging macro environment, we are starting to see financial progress and adjusted operating margin expansion. We still have plenty of work to do, but the path is becoming clear. We expect positive free cash flow in 2028 and believe we have the liquidity and unencumbered asset base needed to get us there. We will remain focused on disciplined execution and capital management to drive sustainable earnings growth and create long-term value for our shareholders. With that, we are happy to take your questions. Over to you, Jillian. Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jamie Baker with JP Morgan. Jamie, your line is open. Please go ahead. Oh, thank you very much. Good morning, everybody. So, Ursula, can we discuss liquidity options from here and maybe dig into what the pecking order for future raises might look like? I mean, we've been assuming that, you know, aircraft-related debt was, you Know, probably just, I don't know, first in the queue. But have you considered the carve-out in loyalty deal, that $400 million of forward mileage, sale potential? And then with the Paisley disclosure, there's been a lot of focus on the Air Canada precedent, but that's loyalty. We hadn't really thought about Paisley and how the value of that business could hypothetically exceed your equity market cap. Perhaps that's a more realistic option than issuing debt tied to True Blue. Quite a bit in here, but I'll let you run with it from there if you don't mind. Yeah, thanks for the question, Jamie. So we believe we ended the quarter with a really healthy liquidity position at the $2.2 billion, including the revolver. As I mentioned in my script, we are looking to potentially do some incremental aircraft financing in the back half of this year. We are very focused on cost of funding. I mentioned we had our assets reappraised and we have the $2.8 billion in aircraft and engines. However, we do have other levers that can help bridge us to 2028 in terms of liquidity. So, you know, other potentials that exist, we are focused on cost of funding. So in the immediacy, we're focused on aircraft as we end 2026. And so maybe, Joanna, over to you, if you have any other comments. Yeah, I mean, I'll just add, I think Ursula did a nice job. She's laid out sort of the liquidity levers that we have on the debt side. And I think you correctly point out that we do have opportunities beyond traditional debt financing that could drive meaningful value without adding additional interest. And so I think the broader point I'd like to make is we have multiple avenues to strengthen liquidity beyond the current balance we have and the unencumbered assets to support our plan and bridge us to 2028, where we remain committed to the goal of a dollar of EPS. And, you know, that includes everything from, as you point out, you know, Paisley, we have venture investments. Are there opportunities with the Cobra and credit card? You know, we're just not in a position today to kind of further elaborate on those. But I think, you Know, point being, we've got, you Know, healthy liquidity balance and opportunities beyond what you see on the paper. Okay, that's helpful. Thank you. And then just to follow up on the exfuel chasm, you Know, obviously, fourth quarter capacity is going to be down to third quarter. ex-fuel chasm is going to be meaningfully better. I know third quarter had four points of pressure in there, but even if we adjust for that, the sequential change looks pretty good. I mean, are there any line items in particular that drive the planned outcome, or is it just sort of everything? Thanks in advance. Yeah, so extremely pleased with the guide for the fourth quarter on controllable costs. The team has been executing exceptionally well. So So the team had executed over $30 million of controllable cost savings in the third quarter. We're really focused on driving efficiencies, whether that's productivity, whether that's just in the technology that we're using, or even how we source it and procure with business partners. So super proud of the team. We always knew that this was going to be the trajectory and the cadence of this cosmic fuel performance this year. As a reminder, last year, we did save two points of headwinds. We had some weather, we had the government shutdown, and so those contributed last year. So that is making the comp year-over-year look a little better. What I will say, as we enter 2027, we have provided previous guidance that if we're growing mid-single digits, you know, we expect to print a low single-digit controllable cost growth next year. So that just speaks to the continued, you know, execution of the team in regards to the JetForward cost initiative. That's great. Thanks, everybody. Thanks, Jamie. Your next question comes from the line of Brandon Oglenski with Barclays. Brandon, your line is open. Please go ahead. Yeah, good morning, and thanks for taking the question. And Ursula, maybe if we can come back to liquidity, because I think that's been the focus here with investors recently, especially with rumors of like a creditor group forming or something here. I don't know if you can speak directly to that, but then maybe specifically as you look out, I mean, it looks like you will be burning through a pretty sizable amount of cash in the fourth quarter. And I think seasonally 1Q is a little bit soft for you as well. So what would be like the right amount of incremental capital that you'd be looking to raise here? Yeah. Appreciate the question, Brandon. So since we launched JetForward, we've used this 17% to 20% as a percent of trailing 12 months revenue range as kind of guidance. We thought that this level would provide us the appropriate runway to execute JetForwards through a volatile environment. So I would still use that as a reference point. I think as the business continues to improve and we get to consistent profitability, that that metric could evolve. Clearly, we're not managing the business to a percent in isolation. To your point, we are definitely managing our uses of cash, including fuel, working capital, obviously our debt obligations, and our capital spending. I mean, I do find comfort in the fact that we do have a CapEx profile that will be below a billion dollars through the end of the decade. And as I mentioned in my prepared remarks, I do believe that we have a very healthy unencumbered asset base, like 2.8 being aircraft and engines that I believe can be a really strong bridge to get us 14 months until 2028 when we're going to deliver the dollar EPX and positive free cash flow. So I feel comfortable about where we're at to get us to a point where the business is generating healthy levels of cash going forward. I appreciate that, Ursula. And maybe, Joanna, maybe a bigger question here. Just, you know, how much debt do you think this company can sustain long-term? And obviously, JetForward appears to be working here. You guys have the bridge to get to 2028. But I guess longer term, where do you want to see, you know? Leverage for this business. Thank you. Yeah, I mean, at this point, we're focused on driving an operating profit next year and delivering the dollar of EPS and a return to free cash flow in 2028. And there are multiple paths to that goal. I think one point just worth mentioning, the fuel assumptions behind those commitments or those projections, and we assume fuel is slightly above $4 for 2027, which I think is important. And then we have some consensus for 28, which is around $3. So, you know, listen, our focus is on continued execution. We recognize we need to get to a position where we're repairing the balance sheet. You know, fuel obviously presents, you Know, a challenging, a challenging headwind. But again, you know, I think there's a significant disconnect between the narrative and the bond market and what our financial results are demonstrating, but also the financial flexibility we have over the foreseeable future to bridge it to that 2028 EPS, EPS goal. I just want to say one thing. When we gave that 2028 goal, we were doing that on second quarter 26 revenues. And obviously, the pricing environment has changed pretty dramatically since then. So I think what we're excited about is we have a lot of different paths to get to at least $1 EPS in 2028. And I'll remind everybody, 2028 is 14 months away. So this is a bridge, but it's not a very long bridge. Yeah, just the last thing I would add is when we deliver at least a dollar in EPS in 2028, we're producing positive free cash flow. The number one priority is going to be delivering the business. And I think it's important to note that we have a very manageable CapEx profile through the end of the decade, both sub a billion. So all positive free hash flow will be going to improve the leverage metrics. I would also highlight that, you know, the most important part is driving margin expansion and helping the business delever. And in the fourth quarter, we're expanding margins to the tune of one to two points, even with fuel up like 85%. And so what that tells you is that the underlying initiatives in Jet Forward are compounding and driving margin expansion which is going to get us on a path where we're generating significant free cash flow so that we can de-lever and improve the credit metrics thank you all your next question comes from the line of michael linenberg with deutsche bank michael your line is open please go ahead oh yeah hey um good morning everyone um marty i earlier you mentioned that you just weren't seeing any signs of elasticity i know there was um a fair increase i believe that actually you led a day not you personally but jet blue led a day or two ago and it looked like it did not go through is is that a sign that maybe maybe the consumer is you know we're sort of at the limit i mean we've had i don't know somewhere between 15 and 20 fair increases since earlier this year um what what what's the appropriate read on that Hey, Mike. Thanks for the question. First of all, I will take credit for leaving fair increases because we have to get to compensatory price numbers. We are still in a situation where prices in 2026 are still lower than the real prices in 2019. We have still not gotten back to 2019 prices on a real basis. Second thing is, don't believe everything read uh i do not consider that fair increase failed um there's one airline did not come along on a relatively limited number of these uh 93 of our seats have been um subject to that fair increase so yes seven percent of the seats we actually pulled back on because one of our competitors didn't match for whatever reason um but not standing i do see resilience in pricing right now and again if you look at the inputs and let's take fuel out of it let's just talk about about rent and lending fees, let's talk about labor, let's talked about maintenance. There are a lot of costs in business that have gone up by big numbers in 2019, and we still have not caught up to those increases in real pricing. So nobody looks at the environment said that we've reached an equilibrium as far as pricing, but if you look at where cost is right now, we still haven't as an industry caught up to the cost input changes. Okay, great. And then this is my second question, Ursula, When we look at your aircraft that are delivering, I think you have a few more A220s this year than I think another seven next year, nine in 2028. Should we assume that those are all going to just be paid for out of cash? And if that's the case, at what point does your net debt peak? Is that 2028? I mean, I know you've talked about hitting free cash when deleveraging, but there's always a bit of a lag. And so I'm just trying to go through the timing here. At what point does that net debt position peak before it starts coming down? Thanks for taking my question. Yeah, so appreciate the question, Mike. So as you mentioned, that is our go-forward delivery schedule. You know, we have the 2.8 in unencumbered aircraft and engines today. That obviously is going to continue to build as we take deliveries. In regards to funding the business for 2027, it's our job to evaluate all markets, all assets, and basically run the analysis to say what is the most efficient way to finance the business. Based on where we sit today, I do believe that that's going to continue to be aircraft, but we will do the appropriate analysis at that point in time. And what I will say is that, you know, I have zero concerns about being able to finance in the market. The vintage and age of these aircraft are similar to what we financed earlier this year. And so I have all the confidence that we have a lot of flexibility and a lot of options as we go forward. But it's our job to make sure we're evaluating, you know, using the entirety of the unencumbered pool, all markets at that point in time. And Joanna also mentioned that, you know, there could be some other non-debt opportunities for us to bring cash on the balance sheet that could also help bridge us to 2028 when we're delivering positive free cash flow. Great. Thanks for that. Thanks, everyone. your next question comes from the line of savvy scythe with raymond james savvy your line is open please go ahead hey good morning uh just maybe on on blue first uh i was kind of curious um any early learnings and and then just how many aircraft a month can you you know reconfigure as you get through next year i'm just trying to figure out um how we should think about the the cadence there okay thanks abby um well first of all as far as early learnings i think by far our our favorite fact is seeing how many of the seats being sold being sold to our existing customers so like that's i think there's a lot of speculation that this is a business model that was predicated on stealing customers for our competitors and it's just not what we're seeing at all we're see our current customers flocking to fill these seats so i think that's actually a very good finding for us number one number two as far as the pace of installation um we will not be done installing until later in 28 um and frankly the issue right now is supply chain we can absolutely go faster in fact i was with collins on friday and had this exact conversation like we would love to get this heat in faster but unfortunately as is a situation with so many products in the industry right now supply chain is a critical path factor but I would gladly take seats faster if we could. But the majority of the fleet will be complete in 2027. By the end of 2027, yeah. Got it. Appreciate that. And then just, you know, you mentioned for Lauderdale, you know, that growth should peak here in the third quarter and you annualize into next year. Curious, you now, how some of your other focus cities are performing here and kind of where you'd like to see growth next year? So, we don't get into too much detail as far as performance by Focus City. I would say that I think that we are much more even as far as profitability across cities than we've had historically, and I think we've had a lot of progress as far right size capacity. We have shrunk pretty significantly in Boston, New York, and Orlando temporarily to fund Fort Lauderdale, but we're expecting a backfill of that capacity as deliveries come in. You know, overall, I would say that we love where this network has shaken out, and I go back to the original conversation of the four key initiatives from JetForward, one of which being East Coast, Best East Coast Leisure Network. We did not forecast Fort Lauderdale becoming available for a significantly larger focus city and a connecting operation when we wrote JetForwards, but at the core, it is completely consistent with what we originally said we wanted to be which is best east coast region network so we're excited we have that opportunity um i'm actually very optimistic about what we're seeing in san juan right now i think that we have a lot of opportunity across the system which you know to me is a sort of a high class problem to ask and it's one of the points i made in the script was we've reached a peak year-over-year growth in fort lauderdale um and now i think it's going to normalize towards to more uh typical growth um and i think just getting the opportunity to backfill some of the places where we had to take capacity out. Appreciate the call. Thank you. Your next question comes from the line of Atul Maheswari with UBS. Atul, your line is open. Please go ahead. Good morning. Thanks a lot for taking my question. So you have $2.2 billion in liquidity, and you mentioned about the 17 to 20 percent target of trading 12-month revenues. Your covenants have a much lower requirement. So my question is, what's the thought process on keeping liquidity at these high levels and whether it would make sense to lower the threshold internally so that you can manage through the near-term cash flow imposed by the higher jet fuel prices without raising too much more debt? Yeah, it's a really good question, Atul, and that's kind of what I referenced in my earlier response is we believe given the volatility in oil right now and the business is still on a path to getting to positive op margin, you know, 17 and 20 has been the target range. I think as we get the business to consistent profitability and turning out free cash flow, you could see us revise that target to be lower, especially if and when the oil environment settles down. So I think it's just a matter of time by which we adjust that target, but we've got to get the biz to a place where we're delivering the dollar EPS in 2028 and generating positive free cashflow. Okay, that makes sense. And then as a quick follow-up, you mentioned about the $2.8 billion in unencumbered aircraft and engine base that you have. Is that an end of third quarter number, and if so, what would be the unencovered asset base after you raise the additional $250 million in the fourth quarter? So the $28 billion is as of quarter close, Q3. We will obviously, that number, there are some puts and takes that will occur in the fourth quarter. So we will fund the 250 million aircraft-backed accordion in the fourth quarter, but we will also be taking four incremental aircraft deliveries within the quarter. So I expect at year end, the 2.8 to be roughly in the same ballpark that it was at the end of Q3. And another seven aircraft next year. So we're going to continue to add to that unencumbered asset base. Great, that's a very helpful color and good luck with the rest of the year. Thank you. Your next question comes from the line of Dan McKenzie with Seaport Global. Dan, your line is open. Please go ahead. Oh, hey. Thanks. Good morning, guys. Going back to the commentary and the release about meaningful runway for further growth as the the commercial initiatives that mature here just curious what percent of the network is less than 12 months mature and historically when new routes have matured can you just remind us what that rasm uplift looks like i know you guys have pulled down pretty sharply in newark and obviously the um you know 85 growth at fort lauderdale so right now great question right now for fourth quarter 26 uh four percent of the system is that um less than one year um and only five percent less than two years so it's basically a mature network right now um we're really really excited about what we're seeing in fort lauderdale as far as the pace of growth uh of rasm even with all the capacity increases which we're very excited about um yeah and i think the second issue is you know again we have hit peak growth for a lot of them so we actually think that's actually a great launching point for a continued uh increase of you know revenue going forward and fall out of them uh and then finally you know we barely scratched the surface as far as what we can do as far revenue management capabilities especially on connecting itineraries and this is something that we've only done manually for the history of jet blue it's been carried so few connections um we made this investment in revenue management system before we realized that connecting itinerary to be so important but we knew that uh we'd be in a situation where it was good to have that capability and then you know a year later spirit ends up uh creating opportunity for us and for a lot of else so uh we did prepare ourselves for this and we're just barely starting to take advantage of it very good um and then marty i noticed the basic first-class product that's out there that's competitive with um with with peers but can you just uh help us understand what percent of the revenue revenue you would characterize as as upsell and you know is that revenue pool outpacing system unit revenue trends today um i actually don't have that exact number and i'm not going to try to make one up on the spot um i you know right now we're very happy with the ability to put the the mint base product in there uh that was something we've been looking at for a while uh but we wanted to wait until we had our second lounge open to do that because we do think that the launch access is a pretty big hook as far as having people um want to get the opportunity to pay a little fair maybe not have a launch access um we just started uh with a business partner called plusgrade working on an upgrade product which we are extremely happy with and uh you know we may eventually build that product ourselves but given that it is always a constraint as far you know as we want to do more that can actually get done we're very happy to work with the business department they can do that for us uh and it's been very effective so far and we've got a lot of stuff in uh sort of in the pipeline as far as better upgrade performance obviously very important with the blue first product coming in um as far as you know trying to make sure that we optimize unit revenue of that cabin one thing that i think people are not getting much attention to is we're also using the um upgrade products to better fill the even more cabin so overall you know we recognize that it's It's very important to maximize unit revenue and premium seating, and we've got a lot of initiatives going on to make sure we get that. Thanks so much, you guys. Your next question comes from the line of Catherine O'Brien with Goldman Sachs. Catherine, your line is open. Please go ahead. Hey, good morning, everyone. Thanks for the time. Marty, can we dig in to what drove the 3Q RASM beat versus that initial July guidance? I know you noted broad-based strengths, but any particular part of the network or cabin, a bright spot in particular, and could you share some color in the geographical or cabin-level assumptions underlying your 4Q outlook? Okay. Great, Katie. Thanks. So, first of all, I think the big surprise for us in third quarter was actually the strength of the trough. Historically at JetBlue Forever, we've had a pretty big drop-off from August to September when kids go back to school. I think our original expectation was that we'd see a similar drop-off, but the results we saw in September in sort of a pricing environment where we had some pretty significant fare increases due to the spike in fuel in August, which surprised us a lot. We did not have the expectations of the moments in September we did. The one fun fact that I think we all have been very surprised by, our average fare in September was higher than our average Fair in July, which has never happened in the history of JetBlue. So I think the overall strength we're seeing, and I think it's what has resulted also in such a great fourth quarter guide, is that we're see troughs perform very, very well, which historically we have not seen. So I think that's actually a very, good sign of the underlying resilience. I will also say, we have pulled a little bit of capacity out of fourth quarter, even with strong demand at this higher fuel environment you know the marginal flying uh there's definitely module flying that's not as uh uh creative as we would like it to be so we pulled that capacity out um you know i'd say for 2027 we gave a guy to float amid single digits now we're not guiding 27 of this call that'll be next call but i think you'd expect that number to be more to the low end to the high than the high end of that guide but again we'll talk about that pretty much from now yeah but overall i think that the the way that the pricing environment has reacted uh and the customer management environment has basically not significantly dropped i think it's giving us an incredible amount of optimism i would say that we've seen a marginally better performance in international than domestic but it is you know double visit basis points it's not that big i think part of that is that for a lot of that has been so incredibly strong and that may be biasing a little bit because a lot of the the international has been outstanding. But overall, you know, this is very broad-based, the strength we're seeing right now. I'll just add a plug for JetForward as well. So, I mean, yes, broad-base strength across the network, demand remains resilient, industry pricing is constructive. But at the end of the day, we've also been at JetForword for two years, working on a series of initiatives, as you know that we believe are now driving the compounding effect, with, by the way, Blue First really still yet to come. I mean we just went out for sale two weeks ago, I think. So whether it's Fort Lauderdale, the new revenue management system, our loyalty program with lounges and the premier card, I mean, you know, Cobran signups in South Florida are up 55%. Paisley, you Know, we just launched cars with mileage plus, we've got all of that yet to come. Just really proud that, you Now, this is not just, you know, industry phenomenon. This is JetBlue's strategy working underneath all of this and beginning to deliver tangible, tangible benefits with a lot still yet to come? Yeah, I would call it the fourth quarter. We are basically at the top of the industry guidance as far as unit revenue. The other airline in there is Southwest. Southwest is still lapping the change in bags and seats. We're producing those numbers without having done bags and seats year over year. I think that's a real testament to the dress lower. Next question comes from the line of John Godin with Citigroup. John, your line is open. Please go ahead i was just hoping to have a broader dialogue about capacity growth um can we revisit what like sort of the pros and cons are of a more substantial adjustment to your capacity outlook versus kind of what's stopping you from reducing capacity more dramatically um you know in order to improve profitability uh i guess i'll take those twenty seconds let me let me start we're deploying capacity where the returns are the strongest and if you look at where we are today you know all the growth is Fort Lauderdale which is a generational opportunity for us and so that's where the focus is we're not actually growing really elsewhere outside of Fort Lauderdale but at the end of the day as you think about you know an elevated fuel environment we're always managing capacity for you know the strongest returns so you know we're pleased with where demand is we are pleased with our revenue performance you know if you look at 4Q and into next year the competitive supply environment is constructive overall and you know will continue to manage our capacity for for profit. We're growing slower than the rest of the industry by a pretty good number. So I think I'm sort of surprised at the question. I think if you look at the network as it's as it develops, I think we've actually gotten to the point where we've got a very rounded, very well rounded network, especially with the opportunity to take advantage of in Fort Lauderdale. So, you know, obviously, we'll continue to adjust the network supply based on the fuel price and the revenue environment. But I look at our unit revenue right now, look at the revenue environment in general, you know, I don't think we're in a situation where significant, you know, hacks at the growth plan would make any sense. Sounds good. That's helpful. Thank you. And then just kind of as a follow-up, just kind of tapping into the loyalty a little bit, you mentioned that, you know, this was the highest level of revenue growth you've seen this quarter since 2023. You know, you saw growth across, you know, revenue, Coburn's brand, and Premier Card acquisitions. I just wanted to kind of, you double click on that here's some you know the puts and takes of that um across the loyalty and any any um insight into the longer term strategy there um that you can provide but appreciate that thanks yeah thanks sean so i'll say a couple of things first of all if you look at the percentage of our revenue that we're getting from loyalty um versus our competitors you know we're actually above multiple of our competitors as far as how much revenue we're generating we have a very very uh well-placed loyalty program as far as its contribution to the entire picture of jet blue um what we're most excited about as far at williamson develops are two first is the premier card and what the launchers are doing for us uh that's an important part of jet forward and we're really happy with them we're seeing so far with respect to the premier card he gave some stats about from a cat earlier and the second is blue sky um we're now in a situation where uh the jet blue credit card for you know a resident in any one of our cities it will take you anywhere you want to go in the world with our partnership with united that has been a shortcoming of the program historically and i think even with that shortcoming um we have in multiple quarters had um revenue contribution higher than deltas even though that is a very competitive credit card now that we've taken that um the blue sky capabilities of getting customers access worldwide into the cards we're really positive about the future growth going forward um you know we could not be happy with barclays as a partner i think we do benefit by having a partner that does not have their own proprietary credit card uh because we are fully aligned as far as our objectives versus their objectives so we're actually very proposed on loyalty uh it's been a strong contributor to jet forward and i think as you know as you knows every other quarter we update jet forward uh and i Think we'll be talking more about back to you going forward uh in our our next update. Great. Thank you, guys. Thanks. Your next question comes from the line of Michael Goldie with Bank of Montreal Capital Markets. Michael, your line is open. Please go ahead. Morning, and thank you for the question. System load factors came off 150 basis points year over year. Can you discuss how much of that reflects the broader environment where we're seeing some airlines trade loads for yield versus the impact of Fort Lauderdale and Florida, and if you exclude Fort Laudeerdale, what does that look like? It's a great question, Michael, and first of all, I think, yes, there has been – and we said there's been no meaningful increase in elasticity. We have seen a little bit of reductions, and I think the industry has reacted by pulling down capacity, and we pulled down capacity in fourth quarter versus what we had originally lower than first quarter. So I think the reaction has been very appropriate with what we're seeing. It is very clear that a truly price-sensitive $39, $49 customers on Spirit, a lot of them have disappeared as prices have gone up. I remind you that Spirit had a negative 40%, 50% margin. So those are prices that are nowhere near compensatory with the cost environment of industry right now so we actually look at the um the trade-off right now as far as price versus demand and supply uh is actually pretty well in equilibrium uh we'll continue to adjust our capacity going forward uh based on customer demand but so far you know i'd say that with again with prices lower than you know real 20 uh real prices lower then 2019 uh i i don't look at the pricing environment right now is being uh specifically problematic and i appreciate we're in a period of just exceptional volatility but can you share some thoughts about fuel hedging and is this something you would ever revisit again yeah it's a it's a good question we revisit that question often um internally and and we debate it um obviously um no one in the u.s um actually in terms of our competitors um hedge um so just one consideration as being at a disadvantage or an advantage, I guess. Number two, you know, right now it's very costly to enter the fuel hedge market. So, you know, we'll continue to evaluate. If it's a tool in the toolkit, we want to start utilizing again to mitigate volatility going forward. Thank you. Your next question comes from the line of Catherine O'Brien with Goldman Sachs. Catherine, your line is open. Please go ahead. Hey, I will try not to take personally that you cut off in my question, but glad we're back. It was all me, I know. And also, I was on hold for a little bit, so I apologize if this has already been asked, but I just had a follow-up to the response we were talking about earlier on the 27 guide. You know, you've said you're assuming fuel is over four dollars a gallon in that which i'm guessing is higher than when you first guided back in july and then i think it's absolutely prudent to be thinking lower end of capacity at these fuel prices but thinking that might drive some incremental unit cost pressure versus your earlier plan can you just walk us through high level how your revenue outlook has changed to maintain that break even operating outlook like is that rolling forward the 4q pricing environment that you know assumes incremental fare hikes from here or just just how should we think about it Hi, Katie. Thanks for the question. So we didn't – we gave a very high-level guide for 27. We really didn't guide in too much detail. We gave a much better guide for 28. So I'm going to answer the 28 question and then back into the 27. When we originally guided 2028, we were guiding at Consensus Fuel, and we're also guiding with the pricing environment that we saw in the second quarter of 2026. Obviously, the pricing environment has changed dramatically. And this is one of the reasons why, if you look at 2028, we don't know what fuel or the pricing environment are going to be in 2028. But I think if you looked at the various paths that we have to get to the $1 EPS, we still remain very confident that we have multiple paths to get there. I think, if we look at what we laid out, as far as expectation, as far industry capacity, GDP, fuel, for 2028. Those numbers have certainly changed, but no matter how we look at it, we feel very good about getting the dollar EPS. And I think that's because we are in a very good pricing environment now with respect to the increased fuel, number one. Number two, you know, we have had very, very resilient customer response to the pricing as it exists. Again, I'm going to keep saying this because people don't fully get it. We do continue to have prices that are real prices are lower than 2019 still so given the current pricing environment um obviously when you know i think when we get to the to the um next quarter we get into a full 27 guide and we get uh update to 2028 we'll give more details obviously the uh unit revenue increases from second quarter 26 are obsolete uh but fundamentally looking at consensus for 2028 and the current regular environment you know we feel much more confident about the dollar than we even did then and we felt great at the of time. So I think we feel very good as far as where we stand right now. With respect to 27, we're going to react to the environment as we see it right now and the pricing environment. We know we can get to a positive, I imagine, in 2027, even with fuel over $4. So we feel very good about that. And we're gonna give you a better guide for that next quarter as we normally would, a regular cadence for the upcoming year guide. But we are extremely bullish. And I think it's one of the things that, as we looked at the foolishness of the last week, we just got much more confused, because we look at the underlying business and say, we feel like we're in a fantastic spot. Okay, great. Thanks, Marty. As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Ravi Shankar with Morgan Stanley. Ravi, your line is open. Please go ahead. Great. Thanks for morning, everyone. Apologies if I missed this with the gap in the call, but just on fuel recovery, I think you said you had recaptured 87% of fuel in the third quarter. And Marty, you had mentioned about how in the most recent round, maybe one of your peers in follow. Are you still confident that you can recover 100% of jet in 27 if fuel stays here? Yeah, we are absolutely confident getting there in 27. I'd say even early 27. Frankly, if you look at the original path for fourth quarter 26, I think the biggest challenge was we had a big fuel increase in August, and we had A lot of revenue on the books. And one of the things I think, as an industry, we are quite aware of, and I think as analysts, you're aware of too now, there's a pretty big lag when you have big spikes in fuel prices, because everything you have on the book was priced at the previous fuel. So I don't look at this delay as being anything other than an issue of timing and spikes so we still feel very confident you know I think you've heard earlier the last fair increase didn't go through with the exception of one airline which is relative limited overlap with us so we actually very good very very confident about the environment as it exists right now and getting 100% next year again we'll have more detail on that in the in our fourth quarter call got it and just to follow up is the current focus on liquidity impacting any jet forward initiatives either in terms of order of investment or if you're putting anything out you got a double no on that I love it pretty emphatic thank you for that no and I will say again referent to Collins if they can get a seat faster we'll take them. We're very bullish about food first. This concludes our question and answer session and concludes today's conference. Thank you for your participation. You may now disconnect.