JetBlue Airways Corporation

Good morning. My name is Brittany, and I would like to welcome everyone to the JetBlue Airways third quarter 2024 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, Brittany. Good morning, everyone, and thanks for joining our third quarter 2024 earnings call. This morning, we issued our earnings release in a presentation that we will reference during this call. All of those documents are available on our website at investor.jefflew.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 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 2024 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, ability to achieve operational and financial targets, business strategy, and 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 in implied statements. In these statements, please refer to our most recent earnings release, as well as our fiscal year 2023 10K and other filings for a more detailed discussion of the risks and uncertainties that could cause 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 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, nnicdc.gov. And now, I'd like to turn over the call to Joanna Garrity, JetBlue's CEO.

Thank you, Kush. Good morning, everyone, and thank you for joining us today for our third quarter 2024 earnings call. The team continues to work hard to execute on our multi-year strategy, JetForward, with encouraging early results. This summer, efforts to deliver reliable and caring service a core tenant of Jet Forward, resulted in year-over-year improvements across key reliability and customer metrics. While these investments are showing signs of traction, the results would not be possible without the dedication of our 23,000 crew members, who showed incredible resilience and professionalism throughout the busy summer travel period and in the face of Hurricane Colleen and Milton. We have thousands of crew members that live directly in the path of these storms, and even faced with uncertainty outside of work, you still showed up for your fellow crew members and customers. And for that, we all thank you. The progress we've made this year is encouraging. And in the third quarter, our operating margin improved five points year over year and five points versus our initial expectations for the quarter. We remain committed to achieving our financial targets. And for the full year, we are improving our revenue guidance midpoint by a half a point and also maintaining the ChasmX field target range we set at the beginning of the year. We are progressing toward our goals every day, but there is still significant work ahead on our path to full-year operating profitability. Now turning to slide four. Reliable and caring service drives choice, satisfaction, and cost savings, and we believe that operational performance underpins the success of JetForward. In the third quarter, we built on operational achievements from the second quarter to deliver exceptional year-over-year improvements in A14 and completion factor. Compared to last year, A14 was up over 12 points, and completion factor was up nearly two points on the quarter. Additionally, the operation was particularly resilient during both Hurricane Colleen and Milton, and returned to regular operations with minimal follow-on disruption. This quarter's improved operational performance drove a double-digit increase in Net Promoter Score year over year. A reminder that operational reliability is a key driver of customer choice and satisfaction and is essential to delivering a premium customer experience and continuing to build long-standing relationships with our customers. Revenue performance was strong in the third quarter and was bolstered by the continued success of our 2024 revenue initiative. Progress from the changes to our Blue Basic carry-on baggage policy which was announced in June and went live in September, is performing ahead of expectations. And across all initiatives, we've realized $275 million of the $300 million revenue target set at the beginning of the year. Our premium offerings between Preferred Seating, Evenmore Space, and Mint all continue to perform well. Further evidence that our customers' desire for premium offerings is healthy and growing. On the cost side, better than anticipated operational performance coupled with a shift of expenses to the fourth quarter, resulted in Chasm X Fuel beating the midpoint of our initial third quarter guidance by approximately two points. Over the quarter, we also took substantial steps to secure our financial future, raising over $3 billion of debt to allow us to retire a portion of our existing debt, pre-fund 2024 and 2025 CapEx, and provide us with the necessary runway to execute Unjet Forward. Moving to the fourth quarter, we expect the relatively improved macro backdrop and our core geographies, and especially in Latin, alongside healthy underlying demand and our own self-help capacity trimming, to continue driving positive unit revenues through the second half of the year. At the same time, we expect a large portion of our announced network initiatives to come online over the quarter. As we have previously communicated, these changes will take time to ramp. And though the RASM benefit will be modest system-wide in the fourth quarter, the redeployees are expected to mature throughout 2025. We continue to expect positive year-over-year unit revenue in the quarter, though we expect transitory events to impact our sequential year-over-year RASM progression from the third quarter. We forecast that the disruption to travel and forward bookings from Hurricane Milton, combined with pressure from the election, will negatively impact our RASM performance by about two points. As we head into 2025, we remain confident in the underlying supply and demand backdrop, especially as our Jet Forward initiatives continue to deliver more value. In the fourth quarter, our year-over-year unit costs also face transitory headwinds and are expected to take a temporary step up due primarily to timing of expenses over the year. This should not be viewed as the unit cost levels we are expecting for 2025. Long-term capacity planning continues to be challenged by Pratt & Whitney aircraft on the ground, and we remain in discussions with them over future AOG expectations and compensation. As a reminder, we expect capacity to be roughly flat year over year in 2025. Not having clear line of sight to our longer-term capacity is certainly frustrating. but we must remain focused on controlling what we can, and this is at the heart of JetForward. On slide five, you can see that we've maintained our bias toward action, and over the quarter, we've made substantial progress on our JetForward plan. Last month, we announced enhancements to our loyalty in airport experience to offer products and perks our customers value. These enhancements include the introduction of lounges at JFK's Terminal 5, opening at the end of 2025, and at Boston Logan, opening soon thereafter, as well as the introduction of a premium co-branded credit card. Today, we are announcing additional steps to better match our onboard product to what our customers value, a further differentiated premium extra leg room offering, and a more intuitive purchasing experience for that product. You will hear more from Marty on this topic. I am proud of the progress we've made on these key initiatives. all aligned with our JetForward strategy, which provides a clear roadmap to delivering value to all of our stakeholders. In many ways, we are returning to the core strengths that made JetBlue one of the industry's most beloved brands. At the same time, we are rapidly evolving to compete more effectively in a transformed competitive landscape by consistently delivering reliable service, focusing on our East Coast leader franchises, and offering compelling new product options to customers we expect to be well positioned to deliver on our mission of bringing humanity back to air travel. With that in mind, I'm excited about the future of our business, and I am confident that you'll share my enthusiasm for the next phases of JetForward, as we work toward delivering our goal of 800 to 900 million in incremental EBIT and expanding margins, all while continuing to meet the needs of our shareholders, crew members, and our customers. Now, I'll hand it over to Marty to discuss our commercial progress.

Thank you Joanna and thank you to our crew members for their service and dedication to JetBlue. Our crew members differentiate us and I'm extremely proud of the way they continue to deliver caring service in the face of challenges to our industry like hurricanes Helene and Milton. They've also managed an immense amount of network change over the past nine months as we continue to execute JetForward and build the best East Coast leisure network. As part of this network recalibration, we have announced and implemented over 50 route exits and 15 Blue City closures. Just last week, we officially left Burbank, Charlotte, Minneapolis, San Antonio, and Tallahassee. I know these actions are tough for crew members, especially crew stations in those cities, and also for customers who love our brand. But these decisions are a necessary part of our plan to return to sustained profitability. We must have profits in order to serve our mission, and we simply cannot tolerate perpetually loss-making flying. Every aircraft must continue to earn its way into the network. In total, The redeploys announced and executed this year represented over 20% of our network and have freed up aircraft to serve markets where we perform the best. Origin markets in the east flying to Florida, to the Caribbean, TransCon, and to Europe. These routes serve the large majority of our customers and our core geographies who know our brand and where we have and can build scale locally. To better serve these franchises and reinforce our deep and relevant east coast leisure network, We have announced service to seven new Blue Cities since the start of the year. Blue City openings in Manchester, New Hampshire and Islip, New York leverage our brand awareness and regional relevance in geographies where we have a loyal customer base. As we continue to adjust our network, we plan to focus our efforts on serving these and similar markets. Markets such as Providence and Hartford, where in the fourth quarter, we're operating our largest schedules ever. In Providence, we expect to be up nearly 200% in safety every year, and in Hartford, more than 30% year-over-year, further deepening our East Coast leisure network. We also remain committed to better matching our onboard product to the needs of our customers, who have increasingly asked for more premium experience. Today, we are announcing another jet-forward milestone in the priority move products and perks customer value. As we have mentioned, even more space has performed exceptionally well as interest in premium options continues to be strong. We believe that we can build on the success to attract more customers in the premium leisure segment and capture additional revenue by evolving how we merchandise and sell our Even More Space seats. Starting in mid-November, we plan to give Even More Space greater visibility in the booking process by offering it to customers directly on the flight search results page on JetBlue.com, in addition to later in the booking process where customers find it today. As we move into 2025, we plan to rebrand the offering to Even More and package new benefits and amenities with the extra legroom seat. By making it easier for customers to find and book an enhanced offering, we expect to strengthen JetBlue's competitive position in the premium leisure segment and deliver even more value to our customers. We are also working to ensure our customers have a premium experience on the ground. Our recent announcements to bring lounges to JFK's Terminal 5 and to Boston Logan and to offer a premium co-branded credit card will allow us to serve the premium leisure customer in a way we have not before and enable our loyalty and efforts experience to complement the reliable service customers expect to receive on board. Throughout the travel experience, it is clear that we are quickly moving to address gaps and serve the full spectrum of leisure customers. But we are not yet finished and we expect to make further exciting product and perk announcements over the coming months. Now turn to slide seven. to discuss third quarter revenue performance and our outlook for the fourth quarter. Reliability initiatives drove higher than expected completion factor and capacity for the period, with capacity finishing down 3.6% versus the midpoint of our initial guidance of down 4.5%. Over the third quarter, we also took self-help capacity measures that included day of week cuts during the trough, And in September, we were down nearly 100 flights Monday, Wednesday, and Saturday versus peak days, better matching our flying with customer demand. These thoughtful capacity polls, combined with an improving competitive capacity environment, healthy demand close in and during peaks, and the continued success of our 2024 revenue initiatives, support a positive year-over-year RASM of 4.3% for the quarter. Unit revenue improved across all geographies in the third quarter. So the Latin recovery was the most substantial, with the year-over-year overlapping competitive capacity in the region seven points improved versus the last quarter. Peak performance remained healthy, and as we previously announced, third quarter revenue was aided incrementally by one point from the industry-wide CrowdStrike event in July. Off-peak performance also improved relative to our expectations in September, supported by our trough capacity reductions. Preferred seeding and seasonal check bag pricing as well as our blue basic baggage policy change also contributed to the revenue progress over the quarter. Our premium segments, even more space than mint, continued to outperform, with revenue up double digits year-over-year. Great Atlantic mint performance improved over the summer peak, with prices in the third quarter up high single digits year-over-year, and nearly 90% more ASMs. We are encouraged by the ramp of these markets. but have also worked to further seasonalize our transatlantic schedule, allowing us to redeploy high ROI mid aircraft to the sun and sand when weather in Northern Europe returns. Our TrueBlue customer base continues to grow and increase their share of wallet on JetBlue flights. In the third quarter, nearly half of our customer flight revenue came from TrueBlue members. The deepened engagement and sustained strength in our co-brand portfolio contributed to an 11% growth and loyalty revenue versus last year. Improvements we've made to our True Blue and Mosaic programs over the past year now make it one of the most attractive programs for introductory elite status members, which is reflected in the record number of both our customers and our competitive customers who have chosen earned status with JetBlue this year. The True Blue value proposition continues to improve, and the addition of new partnerships, lounges, and product offerings, such as a premium card, continue to further bolster that proposition. The work the team is doing to reward and attract customers, along with continued evolution of our network to further match flying to the preferences of our True Blue customer base, leaves us excited by the trajectory and growth potential for our program. Shifting to the fourth quarter, we have made incremental trough capacity adjustments. And as a result, fourth quarter capacity is planned to be down 7% to down 4% year over year. We're also comping against near perfect completion factor in the fourth quarter of last year. While we had hoped to perform similarly this quarter, the tropical weather environment has been more challenging than last year. For the full year, capacity is planned to be down 4.5 to down 2.5%. In the fourth quarter, we expect revenue down seven to down three year over year, which implies positive unit revenue at the midpoint of our revenue and capacity ranges. Positive fourth quarter RASM is supported by trends continuing from the third quarter, healthy peak demand, an increasingly constructive industry supply backdrop, and the progress of our $300 million in revenue initiatives. When adjusting for the CrowdStrike benefit in the third quarter and the negative impacts of Hurricane Milton and the election of the fourth quarter, year-over-year RASM is expected to be consistent from the third quarter into the fourth. Our fourth quarter revenue is also in line with our historic seasonality and prior expectations. For the full year, we are raising the midpoint of our guide by a half point. and narrowing the revenue range to down 5% to down 4% for the full year. I echo Joanna's excitement for our plan and the progress made so far this year. As we look toward the fourth quarter and into the new year, I'm confident we are taking the right steps to give our customers the best experience and the best value, and in small part because of the dedication of the greatest crew in the industry. Thank you all for always putting our customers first and prioritizing a safe operation. With that, over to Ursula, who will share more on the financial status and outlook of the business.

Thank you, Marty. We ended the quarter with an adjusted operating loss of just $11 million, about $130 million better than our July expectations, or the equivalent of about a five-point margin improvement. Over three points of the improvement were driven by outcomes in our control. As Marty described, We posted better revenue performance than expected, a trend we know must continue in order to effectively offset the significant cost increases we've seen since 2020. We also saw improved operational reliability and, in turn, cost efficiencies and better customer satisfaction scores. as our jet forward reliability priority move is beginning to produce benefits that directly impact the bottom line. Fuel prices moderated down 23 cents from our initial midpoint, resulting in the remaining two points of improvement to margin over our July expectations. While fuel prices aren't in our control, we continue to manage our exposure to volatile prices through our opportunistic hedging program. Alicia Reinhard, At the end of the day, we still weren't profitable, but the progress we made this quarter is evidence that we are taking the necessary steps to get the business back to operating profitability. Alicia Reinhard, It is also indicative of our commitment to hitting our financial targets from the 300 million in revenue initiatives for 2024 which we expect to exceed to the second iteration of our structural cost Program. which we expect to achieve at the top end of our range, we have a consistent record of hitting our program targets. The groundwork is set to realize the jet forward plan and hit the EBIT targets we set out for the next three years. Turning to our third quarter results and fourth quarter outlook on slide nine. In the third quarter, Our chasm X fuel growth of 4.8% beat the better end of our initial guidance of up six to 8% driven by better operational performance and a shift in the timing of expenses to the fourth quarter. Our structural cost program has also progressed well over the year, achieving 24 million in savings in the third quarter and year to date savings of 169 million. And during the quarter, we continued our commitment to a more sustainable industry, signing an agreement alongside World Fuel Services and Valero to bring to New York the first ever ongoing supply of blended sustainable aviation fuel with initial delivery expected in 2024. Turning to the cost outlook. I am pleased we are maintaining the midpoint of our prior full year guidance of 7.5%. In the fourth quarter, we do expect Chasm X Fuel to be temporarily pressured due to a number of transitory factors, including one, 2.5 points of largely maintenance related expenses that shifted into the fourth quarter. Two, the impact of contractual wage rate step-ups worth two points. Three, the lapping of one-time credits from the fourth quarter of last year, including our 2023 Pratt & Whitney compensation worth about 1.5 points. And four, one point from comping against a near perfect completion factor in 4Q last year and the impact on capacity from Hurricane Milton cancellation. In total, these factors represent about seven points of transitory headwinds to our controllable costs, resulting in Chasm X fuel expected to be up 13 to 15% year over year for the quarter. Independent of these headwinds, Chasm X fuel would be firmly in the mid to high single digits for the quarter. I want to be clear, we've remained firmly within the full year Chasm X fuel range we shared last quarter and have now narrowed our range to up seven to 8%. As we look to next year, I would like to reiterate our previous commentary on 2025 costs. On flat capacity, which we currently expect in 2025, Our model has historically resulted in annual Chasm X fuel growth in the mid single digit range. While we will not guide 2025 metrics until the January call, these fourth quarter unit cost levels are not indicative of where we expect Chasm X fuel growth to be in 2025. Now shifting to our fleet. In the third quarter, we took delivery of six A220 aircraft, supporting the continuation of our fleet modernization program. So far, the program, which we have increased from $75 million to $100 million earlier in the year, has avoided roughly $95 million of costs to date through the continued optimization and avoidance of engine maintenance on our E-190s. The program and its benefits will continue through 2025 when our E-190 fleet is set to be fully retired. In the fourth quarter, we expect to take seven deliveries for a total of 27 aircraft deliveries this year. These deliveries make up the majority of our CAPEX forecast of about $450 million for the fourth quarter and $1.6 billion for the full year. turning to our balance sheet on slide 10. At the end of the quarter, our total liquidity, excluding our undrawn 600 million revolver, was 4.1 billion. This includes the proceeds from our 3.2 billion debt raise in August, which consisted of senior secured notes and a term loan, both backed by our True Blue loyalty program, as well as 460 million worth of new convertible notes. The proceeds from the new convertible notes were used to retire a portion of our existing 2026 convertible notes. The remaining capital is expected to pre-fund CapEx for the remainder of 2024 and through 2025 and provide ample runway for JetForward. The deal structure also gives us balance sheet flexibility with prepayment options and exposure to more floating rate debt. We expect aircraft deliveries to be funded with cash, further adding to our existing unencumbered asset base of about $5 billion. Being well capitalized allows our team to fully focus on getting the business back to profitability, improving our balance sheet, and working to eventually produce free cash flow. We firmly believe Jet Forward is the right plan to get the business back to operating profitability. and we are confident in the 800 to 900 million EBIT uplift in 2027. Jet Forward consists of initiatives that are in our control, providing reliable service even in the face of ATC challenges, building out our network, building out our leisure network in the Northeast where our brand is already well positioned to win, and offering our customers the products and perks that they desire. all the while ensuring our cost base allows us to offer more value versus our peers. Jet Forward is clear, it is actionable, and as we move through the fourth quarter and into 2025, I believe we have a solid foundation to realize its benefits and drive value for our shareholders, crew members, and customers. Thank you, we will now open it up to your questions.

Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time. Star 2. Once again, that is star and 1 if you would like to ask a question. And we'll take our first question from Savi Sip with Raymond James. Your line is now open.

Hey, good morning, everyone. I know Joanna mentioned, like, network deployments. kind of maturing in 2025, and you do have the JET Forward initiatives. I'm not sure if there's a question for Marty or David, but when should we start seeing kind of the year-over-year revenue or RASM trends, you know, as they move sequentially, kind of performing better than seasonality?

Hi, Saru. Thanks for the question. You know, it's funny. I think if you look at all of the contributors to JET Forward, there are a lot of puts and takes in here. I'll go back actually to the first $300 million we promised in 2024. The beauty of having a lot of different initiatives is that some can be above, some can be below. I think we've said already that the network changes are not among the biggest changes that we are making. Certainly things like the preferred seating program, preferred seating fees have changed even more. Some other stuff we'll be announcing soon on a relative basis will be bigger. But, you know, we really focused on the more macro elements of both the $300 million 2024 promise and the $800 to $900 million promise to jet forward. And we'll be updating you going forward about that one. But I'd say from a network perspective, we're very happy with what we're seeing so far. But I will say that if you think about the path for that to phase in, the redeployment of the capacity is going to start ramping. Now, the good news is if you look at our fourth quarter capacity, The last big trench capacity changes are coming out in the stations we just closed, the blue cities we just closed, and then being redeployed. And, you know, I'll give the example of Minneapolis. We flew to Minneapolis for 57 months, and we had phased pretty aggressively, you know, as far as revenue going up there. That plane's now flying, I think, in Islip. And we're in month one of ICELP, and yet we're still maintaining the RASM growth that we've already seen in the third quarter. So actually, I'm really, really happy with the redeployment opportunities. We're putting the airplanes in places where we already have a very, very strong frequent flyer base. In fact, ICELP is already in probably the top quartile of frequent flyer attach rates for our network. we're very, very positive about what we're seeing there, and I'm actually very much looking forward to the redeployment. So I think it's really a big part of building the depth that we need in the East Coast leisure market.

That's helpful perspective. Thanks, Marty. And if I might just ask, on the competitive capacity side, so you're doing what you can do to control that, what you can control, but it seems like industry capacity is also moderating. I wonder if you could give a little bit more color and especially on what you're seeing from Frontier and Spirit because there were some aggressive cuts this quarter?

So I don't want to go into too much detail airline by airline, but I would say on a macro level, competitive capacity, our competitive capacity is actually up fourth quarter over third quarter. And competitive capacity in our markets, it's really not being contributed to by the ULCCs, but we're seeing it from other carriers. And I'd say even with – in fact, I've got – a pretty big increase. And frankly, even among that, we're still maintaining our third quarter unit revenue. I think that just speaks to the underlying strength of the revenue performance we have right now.

Helpful. Thanks, Marty. Thank you. We'll take our next question from Jamie Baker with JP Morgan. Your line is open.

Oh, yeah. Good morning, everybody. So when I think back to the murder, Joanna, You know, I always viewed your predecessor as, you know, sort of leading the charge on that. And, you know, it's water under the bridge at this point. But when I think of the international strategy, I was always, you know, of the impression that there was pretty, I don't know, widespread agreement that it made sense and, you know, the domestic network could support it and so on. So I guess that's my question. With the downsizing that's taking place and what you internally are contemplating from here. Is there still widespread logic for the transatlantic operation? And are we anywhere near the point where the domestic franchise might not be able to adequately support it?

Thanks, Jamie. Appreciate the question. I think maybe just the headline, you know, you've seen us communicate the different pillars of Jeff Ford. On a very good trajectory and I'm pleased with the direction that we are moving Obviously one of the pillars is focused on building the best East Coast leisure network But transatlantic is an important part of that as a spoke it drives nice relevance in our loyalty program but if you actually look at the underlying performance from this summer, we were really pleased with how it did and And as we think about the future, I think the team has done a nice job seasonalizing it appropriately and looking for opportunities to redeploy the fleet during those kind of long, cold winter months and focusing on the revenue that we can drive during the summer from some great leisure destinations across the Atlantic. So it's evolved since my predecessor, but I think evolved in the way it needed to as we move forward with our Jet Forward plan.

Okay, helpful. And then second, I do have to ask, can you envision any scenario where you might reengage with SPIRIT or maybe scratch that, a better way to ask the question, do any of the tenants of the original deal still stand or still appeal to you given how your balance sheet and your margins have evolved since then? Thanks in advance.

Sure, thanks for the question. To be clear, we're not interested in revisiting the SPIRIT potential acquisition. We want to really focus on improving our margins within JetBlue, delivering on JetForward, controlling what we can, and keeping the team laser focused on that. I will say that if there are opportunities that come up with assets that are reasonable, and may allow us to grow in a capitally prudent manner. Obviously we would consider and evaluate those, but of course there's a complexity there. Lease price, aircraft age, reconfiguration, and the list goes on. So headline, we're not interested in revisiting the Spirit acquisition, focusing on jet forward, laser focus on delivering sort of the organic plan for JetBlue, and then the opportunity to potentially consider things that may to the extent it makes sense for JetBlue.

Super helpful. Thank you very much.

Thank you. We'll take our next question from Daniel McKenzie with Seaport Global. Your line is now open.

Oh, hey. Good morning. Thanks. Great job on the third quarter and, you know, thanks for the commentary on 2025. It would be great to go back to that confidence in the 2025 supply demand backdrop that you guys mentioned in the script. And I know you're not going to guide to the 25 metrics, but it'd be great just to revisit the goals. And so if we could just set aside any further hiccups from Pratt and Whitney, based on what you're seeing today, is the goal of a break-even margin still a reasonable base outlook for next year? And I guess, you know, what are the moving pieces that you're watching most closely that could potentially change that?

Hi, Dan. Thanks for the question. Appreciate it. So in regards to 2025, we're just going to reiterate what we've been saying. So we're still expecting mid to high teen number of aircraft on the ground due to the GTF issue. And that is going to result in flat capacity year over year. We're in the middle of the planning process at the moment. In terms of Chasm X fuel, historically, with a flat capacity, you should expect a mid single digit Chasm X fuel number. It's still a little too early to provide guidance beyond that. So we're reiterating what we've previously said, which is building a plan with a goal to have op margin, which is break even or better. So we're pleased with the momentum that we're seeing in JetForward. And we also continue to assume that the macro backdrop continues to be constructive. So more to come in January, but we're just reiterating what we've previously said around our 2025 outlook.

Yeah, helpful. And I guess, Second question here on jet forward. I don't believe the benefits that you guys are current targeting included another large partnership, but I believe that's something that you're looking at and So I guess my question is is how quickly you know if a new partnership is announced How quickly could that be turned on and how quickly could any incremental revenue potentially fall to the bottom line?

Hi, Dan. Thanks for the question. So I I will say, there is a plug in JetForward for the concept of some level of partnership going forward. It's certainly something that we're looking at. It certainly could be with American. It could be with another carrier. I do want to remind you, we do have 52 partners right now that we work with, mostly at JFK and Boston. We understand partners well. I think we learned a lot through the NEA as far as what worked for us, what might not work for us. I'm cautiously optimistic that we might have an opportunity at some point in the future. It's not a gigantic number that's going to make this plan pivot, but I think it's certainly one of the tools that could be in the toolbox to try to achieve JET forward. Now, second thing is, with respect to speed, I think it'd be too early to say. I think it depends on what the structure of the partnership is, but we have a lot of experience at this, and it'll be the appropriate speed for whatever size partnership we choose.

Yep. Thanks, you guys.

Thank you. We'll take our next question from Duane Fessenworth with Evercore ISI. Your line is open.

Hey, thanks. Good morning. Just on the election impact, Marty, maybe for you, can you speak to the shape of bookings on the other side of the election? Are we seeing this pick up on the other side, or... Is it an expectation that booking activity will pick up when we get to the other side of it?

So when we modeled 2024, we were making an assumption for election impact, which has come true because we've seen this in previous presidential elections. And it's really two pieces of the change. The first one is depressed travel during the actual week of elections. And that's something we've seen historically. And I think we're forecasting it this year. Luckily, we had already made trough adjustments because, as we've talked about in the fourth quarter, we were much more aggressive at pulling down the troughs. So I think we had that piece recovered. The longer the I think actually slightly larger impact and a longer term impact is it's just a period of seven to 10 days where there's just not as much booking activity as you've been historically. And it's actually not that different from what we saw during Milton, which was, yes, during the hurricane, there was no flying in and out of Tampa and Sarasota and that west coast of Florida. But at the same time, there was also people who just weren't booking because they were focused on, you know, dealing with a hurricane. And I think during the election, sort of the same thing, which is there's some booking just sort of melt away because people are focused on other things. But again, this is nothing different than what we've seen historically, but we really felt the need to call it out, mostly to make sure that we could give you a clean comparison between third and fourth quarters.

Great. And then maybe just to stay with you, I wonder if you could comment on how you're seeing Caribbean RASM playing out this winter. You know, we had at least one carrier give some forward look on, you know, early 1Q, January, February yield commentary. I just wonder what sort of RASM improvement you're thinking about. Would that be a leading entity for you or would it be sort of more similar to system average? Thank you.

So Caribbean has always been above system average for us. So it's a very strong market, and it's a market where we have a strong franchise and a very strong customer following. I think it's really too soon to really talk about first quarter RASM. I will say in general, you know, we've been pretty aggressive as far as adding capacity into San Juan, and we're very happy with what we've seen so far, including putting mid-capacity in there. But, you know, this market is going to be important to us, and we have a lot of confidence about how Caribbean will shake out.

Okay, appreciate the thoughts.

Thank you. We'll take our next question from Scott Group with Wolf Research. Your line is now open.

Hey, thanks. Good morning. So on the capacity front for FLAT next year, any initial thoughts on how to think about the first half of next year? And then I think you said we're going to have mid- to high-teens aircraft on ground related to GTF. Would you expect any year any higher or lower than that mid to high teens? I just want to understand the trajectory of the GTF. Thank you.

Maybe I'll start with the fleet and then I can hand it over to Marty. So no, our expectation continues to be on average we will have mid to high teens number of aircraft on the ground next year. That's our planning assumption that we're using heading into the 2025 plan. I also want to remind everyone we've We're also in the process of extending 30 leases that were set to retire. And we're keeping those in the fleet in order to backfill some of the lost capacity due to the GTF. So we are in the process of working through those negotiations. And so that is helping the capacity outlook for next year. Maybe over to Marty, just on any more detail that you would add.

Yeah, the only detail, I mean, we're not going to, Obviously, in the fourth quarter call, we'll give better guidance as far as what to expect in the first half of 25. But based on what we know about the fleet plan right now, you see that where ASMs are negative in fourth quarter, we will still be negative in first quarter as well. And unfortunately, this fleet situation is very, very dynamic. And we continue to be very frustrated as far as the status right now, as far as being able to actually get a good handle on what's happening with Pratt.

um but um we'll give more detail about that in the fourth quarter on the fourth quarter call okay that's helpful and just secondly when we talk about the mid single digit type chasm for next year i just want to make sure are we including the sort of the the two-point hit from the wage step up i guess you'll still have that for a couple quarters next year and are we assuming anything around because I think that the extension starts to expire, I guess, early next year.

So with flat capacity, as a reminder, our historical unit cost performance would insinuate that we would be at mid-single-digit CASMX fuel next year, and that is inclusive of all labor assumptions, maintenance assumptions. I mean, that's all in. Next year, at the highest level, we'll continue to see inflationary pressures across the labor workgroups. We also will have a step up in maintenance expenses as well, just due to the nature of the V2500 fleet. But these are reasons why we also put in place the cost pillar as part of JetForward. So we have ways in which we're going to offset these pressures that we're seeing across labor and maintenance and which will result in a mid single digit number for 2025. Thank you.

Thank you. We'll take our next question from Brendan Oglenski with Barclays. Your line is open.

Hi, good morning and thank you for taking my question. Marty, if I'm hearing you right, I think the majority of the improvement you're seeing on the commercial side is really being driven by changes to product and pricing. Is that correct? And the network changes are going to maybe potentially be more impactful in 2025. Is that correct?

That's absolutely correct.

I mean, can you elaborate a little bit on what changes have been made this year though, that you're, where you're seeing, you know, that run rate of 300 million or more.

Sure. So there's a bunch of changes we've made already. I think the most impactful ones so far have been the, um, preferred seating program where for the non-even more seating that's in the front of the airplane, we are charging a fee to get into those seats. Now, to be clear, we have not taken away free seat assignments. We still offer free seat assignments even up with basic customers. But you will be – if you want to sit in the front of the airplane, there will be a fee for that. That has been above our expectations. We just recently, in September, announced a change to Blue Basic, where we are now offering a free carrying bag for Blue Basic customers. Also, it's formed well above expectations. We're quite happy with that and how that's gone. With respect to the change to Even More, we are actually very excited about that with respect to how we'll hopefully be able to better merchandise that product and make it a little bit more attractive product. And we'll be announcing some product changes as we go forward. Let's see. Oh, we've also put in variable pricing for check baggage during peak periods. Again, in the fourth quarter call, as we close out 2024, we're going to give a full accounting of the $300 million we promised and some little more detail as far as where the benefits have come. But again, this is the point of having a multifaceted approach. You know, some things can be above forecast, some things can be at, some things can be low. can be below, but the goal we have as a leadership team is to make sure that we make a commitment to our investors and we deliver on that commitment, if not more. So that's why we actually really enjoy having a basket. And the last thing I want to mention, and Joanna mentioned it in the script, but I can't stress it enough. Our crew members have really stepped up as far as delivering a fantastic product, whether it's our airport folks and flight and in-flight crews as far as improving on-site performance, whether it's maintenance, getting airplanes in tip-top shape. You know, having our on-top performance go up by 12 points and the improvement of MPS, I can't stress enough how important that is. So, again, I should give a thanks to all of our crew members for their hard work because we're really seeing it in some of our numbers. I think we're definitely seeing the benefit of an improved customer experience.

I appreciate all that, Marty. And maybe if I can give you one last thing for Joanna. I mean, if If things aren't turning towards profitability next year, and I know you guys don't want to provide guidance right now, but what are incremental levers you can pull to get the business, you know, in the black solidly?

Yes, so I think it's jet forward. And if you look at what we laid out, you know, the goal is to get us back on the trajectory towards profitability. So as we think about next year, you know, we're building a plan with the goal to get to op margin break even or better. And that's the first step. And then, you know, we'll continue after that. But all of these pillars contribute to that, some of which, as you know, we've announced, but there's more to come down the pipeline. Even more space is obviously the announcement today, but we've actually got a number of additional announcements coming. Obviously, this is all against a macro backdrop of, you know, cooperative fuel, other airline capacity, and then obviously managing through our own AOG issues. If those improve in any meaningful way, that will be tailwinds on the plan.

Thank you.

Thank you. We'll take our next question from Andrew DeDora with Bank of America. Your line is open.

Hi, good morning, everyone. So, Ursula, just kind of going back to GTF, you know, I know it's very fluid, but do you have any thoughts on what 2026 could look like, maybe relative to 2025 in terms of AOGs? And then I guess for next year, any, you know, kind of framework on how we should think about potential, what any potential compensation from Pratt could look like?

Good morning, Andrew. Thanks for the question. We don't have clear line of sight beyond 2025. We're continuing to work constructively with Pratt & Whitney, both on our aircraft on the ground forecast as well as compensation. So both are a work in progress.

Okay, got it. And then maybe just a follow-up for Marty just on the election impact. Just curious, you know, are there any particular markets where you see an outsized, you know, impact or is it pretty broad-based? Just curious your thoughts there. Thank you.

It is actually broad-based. There's no specific markets we see it.

Thank you. We'll take our next question from Steven Trent with Citi. Your line is open.

Thanks very much, everyone, and I appreciate you taking my question. I'm sort of curious, when you think about your focus on premium leisure customers, do you anticipate any movement or adjustments in how you think about your frequent flyer program?

I see, and thanks for the question. Actually, I think if you look at how we've structured TrueBlue right now, It is already more friendly for leisure customers that we see in competitive programs. And frankly, we've had a great year in true blue, uh, even in the world when, you know, we're, we're, you know, flat or down in capacity, you know, our, uh, credit card spend is up, uh, in the low teens. Uh, you know, we're actually, uh, I think almost, I think we released a number. We've had a major growth in mosaic customers. Um, we've got a program out there for, um, for, you know, for, uh, elite customers from other airlines to come over to JetBlue and earn an elite status here. I think it's actually worked extremely well with respect to what we've done in True Blue. And I think the beauty of this is, and it's funny, if you think about the customer target for us, and one of the phrases I like to use is, every single person who flies is a leisure customer. There's a subset of them who are both leisure and business customers. So being focused on leisure customers actually, I think, is an opportunity for us. And frankly, if you look at I think we're one of the very first programs in the country to have dollar-based earning and dollar-based burning, which we did at least 10, 12 years ago. Our value proposition is fantastic. So we're very happy with how TrueBlue is structured, and I'm very optimistic about the ability of that team to continue to shift more share.

Yeah, if I could just add on top of that, I think this all ladders back, not to sound like a broken record, but ladders back to our Jet Forward plan and delivering the things that customers value. And if you look at our loyalty program, whether it's the lounges or some of the improvements to Mosaic that we're rolling out, including the premium card, that all plays to the premium customer. You know, we've launched a business card down in Puerto Rico. We've got a great status match with ABIS for Mosaics. And so the list goes on and on. So as we think about loyalty in particular and how we design the program, as Marty pointed out, it's very much designed with the leisure customer in mind. but we also are being very thoughtful and deliberate about how we drive more stickiness with our mosaics and really make them feel important to JetBlue. You know, there's this vast amount of people who fly a good amount every year who are lost by some of the bigger programs, and we see a real opportunity with them.

Appreciate it. If I may just follow up real quickly on that, you know, when you think about the growth of True Blue, for example? Any sort of high-level idea of what portion of that growth is attrition from other carriers?

So we don't have that number. We can circle back with you on it. Some of it is clearly that, but at the end of the day, that's not how we're thinking about True Blue. It's not about necessarily trying to see others attrit out. It's trying to demonstrate we've got a program that people want to be a part of because it drives value for JetBlue, value for the customers on JetBlue, and frankly, a unique approach to loyalty. So perks that you care about and perks that you want. Marty?

Yeah, the one thing I would add is I think that for us, TrueBlue represents, on a relative basis, a somewhat better opportunity than you'll see from some other carriers. You know, the example I'll give is, you know, if you're a frequent flyer in an OA hub, you know, whether you're in, you know, Paul Cecala, Minneapolis or Dallas or whatever um there's not a lot of share to shift, you know we tend to be in very competitive markets, you know South Florida there's you know to other airlines having in South Florida. Paul Cecala, we've got multiple airlines having a metro New York to airlines having in Boston having a use the phrase loosely but. Paul Cecala, You know we're in very competitive market so as a relatively low share wallet airline I think we actually have a lot of upside that you know you would not have if you were. you know, a Delta customer in Minneapolis where they probably have all that share wallet already.

Okay. Appreciate the time. Thank you.

Thank you. We'll take our next question from Thomas Fitzgerald with TD Cowan. Your line is open.

Thanks so much for the time. Just curious how the adding Adding the carry-on bag to Blue Basic has performed versus your expectations, as well as some of the seasonal mint flying you're rotating out of Transatlantic this winter.

Hi, Todd. Great questions. First of all, with respect to the carry-on bag, it is above what we've expected. And, you know, I think as we've seen, I think during the peak, we were able to be competitive without having that product against our biggest competitor. But clearly in the trop season, we really suffer from it. And frankly, we've seen more upside than we had originally forecasted. So that's been a great program for us. With respect to the rotation of the seasonal mint services, I almost jumped in when Joanna finished her comment to Jamie about the transatlantic. But I think we have really found a fantastic formula with being able to shift airplanes between the Atlantic in the summer and some of the seasonal mint markets in the wintertime. So historically, I think this summer we had 13 or 14 daily round trips across the Atlantic. This winter, we're down to six. Those airplanes are being redeployed into domestic markets that are actually very strong in the winter. I'll give one example. We've got, I think, three or four airplanes that are in Phoenix, both from Fort Lauderdale, Boston, and New York. The Mint bookings have actually been fantastic on that. I think we just started that service this week, in fact. uh that looks to be a rousing success as far as the ability to shift airplanes back and forth now back to a line that's in the script every airplane has to earn its way into the network you know when you talk about the international strategy when jd used that phrase uh you know 2019 when we started talking about with the atlantic i said it is a spoke and the atlantic still is a spoke and this summer it's been a profitable spoke so i think actually we have a really good combination and it's a testimony to how good the mint product is because I mean, we just had this week a customer who did a mint review that was published. We've had a couple of emails from customers who had come over to JetBlue. It is a fantastic product, and it's been a great, great profit generator for us.

That's super helpful. Thanks so much for that call, Marty. Just curious as a follow-up, there's been reports in the press about cutting off hot food on transatlantic and basic economy. I'm just kind of curious on the broader strategy of how you – just driving a revenue premium while also being really judicious on cost. So I'd love to hear more on the thinking there. Thanks again for the time.

Thanks so much for the question. We have a fantastic core product across the transatlantic, whether it's cold or it's hot. I personally sat through an entire food tasting process with DIG, and it is second to none. So I would put it up against any other hot product currently flying the transatlantic. So I think there's not much to see there, frankly. It's a fantastic product. We moved it to cold because we think that there's an opportunity there to save some costs, but it's still a far superior product to what you've got flying transatlantic in coach currently. So really proud of what we're delivering there.

Thank you. And we will take our final question from Connor Cunningham with Mollie S. Your line is open.

Hi, everyone. Thank you. You know, just back to the network for a second. I realize a lot of the changes that you've made have been added up to RASM and returns and all that stuff, and that's great. But when you think about relevancy as you've made those changes, are you finding that you're growing the pie of people that are coming towards JetBlue? Uh, like point being is like, do the, do the network adjustments really drive more dependence for, for people that are using your product overall? Thanks.

Hi, uh, thanks for the question. The answer is absolutely yes. I'd say based on the numbers we're seeing in places like Providence, Bradley, uh, Manchester, I slip, we are absolutely pulling customers towards JetBlue. I will note that all four of those markets had competitors, both ULCC competitors and full service competitors. our legacy competitors, I guess. I'm not sure we can call Southwest full service, but we have a lot of Southwest stuff there as well. And we are actually doing a very good job of pulling these customers over. And frankly, you know, in these markets, in New York State, in New England, you know, we are sort of the default carrier for leisure. And I don't want to be in a situation where we have customers who would like to fly JetBlue, who do not have the opportunity in a market that we forecast we can do profitably. This is not the end of the growth we're going to see in those markets, and it's because customers respond to it extremely well.

Okay. I'll just keep it going. Thank you, guys.

Thank you, Annette. We have no further questions in the queue at this time. I'll turn the program back over to Mr. Kush Patel for any additional or closing remarks.

Thanks, everyone. That concludes our third quarter 2020 for earnings conference call. Have a great day.

And again, this That will conclude today's conference. Thank you for your participation.