Dan McKenzie

Dan McKenzie asked if the $8 EPS guidance for 2026 embeds a full or partial recovery of the 5 percentage points of RASM lost in 2025, and if the lowest leisure demand segments are still missing due to the K-shaped economic recovery. He also inquired if the airline can maintain mid-teens operating margins throughout the cycle if that demand segment doesn't return. He then asked about the benchmarks and focus areas for the "next phase" of the credit card program to drive revenue upside.

Answer

Chief Commercial Officer Drew Wells clarified that the $8 EPS guidance does not plug in a full recovery of the 2025 RASM deficiency, leaving upside. He noted Allegiant's customer mix is on the "top part of that K-shape," and the model's value allows for stimulation with price and schedule flexibility. CEO Greg Anderson reiterated the model's design to protect margins and the strengthened foundation. Chief Commercial Officer Drew Wells highlighted strong new card acquisition and spend, with over 600,000 cardholders, and sees meaningful runway to increase remuneration above the 5% seen in 2025, potentially adding 2-3 points.

Dan McKenzie asked about the 50% of tickets sold with a buy-up feature, specifically what percentage of revenue this accounts for and what it's expected to account for at maturity. He also inquired if corporate bookings are displacing the $39 fare and if the CapEx guide embeds new lounges.

Answer

COO Andrew Watterson stated that the specific revenue percentage from buy-ups is still being worked out and will become clearer over time. He noted that corporate customers generally avoided the basic fare, and sales efforts are configuring tools to optimize corporate revenues. CEO Bob Jordan confirmed that assumptions for potential lounges are built into the existing guides and are not incremental.

Dan McKenzie asked what percentage of total revenue is accounted for by the 50% of tickets sold with a buy-up feature, and what that percentage is expected to be at maturity. He also inquired if corporate bookings, if up high single or double digits, are displacing the $39 fare, and if the CapEx guide embeds new lounges.

Answer

COO Andrew Watterson stated that specific buy-up revenue details are still being worked out and are not ready for disclosure. He noted that corporate customers did not want the basic fare, and sales efforts helped configure tools accordingly, anticipating further benefits from ancillaries. President and CEO Bob Jordan confirmed that any lounge assumptions are built into existing guides, not incremental.

Dan McKenzie inquired about the current and projected percentage of JetBlue's total revenue derived from premium seats, specifically asking if it could exceed 40% by 2027, given that premium seats currently constitute 25% of total flying. He also asked about the recovery glide path for leisure revenue and if the full-year guidance embeds a flattish leisure component.

Answer

President Marty St. George stated that JetBlue does not typically release specific premium revenue percentages but noted that the introduction of the domestic first-class product would enhance seat quality and yield without dramatically increasing total premium seat percentage. CEO Joanna Geraghty emphasized the success of premium products under Jet Forward. Marty St. George added that the full-year guidance is based on current strong bookings, particularly in domestic coach and Fort Lauderdale, with no significant assumptions about GDP snapback or competitive ASMs.

Dan McKenzie inquired about the current and projected contribution of premium seats to JetBlue's total revenue, specifically asking if premium revenue could exceed 40% by 2027, and also questioned the leisure revenue recovery glide path embedded in the full-year guidance.

Answer

Marty St. George, President, stated that JetBlue does not typically release specific premium revenue percentages but emphasized that the domestic first-class product, while not dramatically increasing total premium seats, significantly enhances seat quality and yield. He also noted strong current bookings and a healthy recovery in leisure customers, particularly in Fort Lauderdale, with no major assumptions for GDP snapback or competitive ASM changes.

Dan McKenzie with Seaport Global Securities LLC inquired about the impact of a competitor's Chapter 11 filing on JetBlue's Fort Lauderdale operations and potential revenue upside for the Jet Forward plan. He also asked about the potential for lost revenue from the government shutdown in 2025 to return in 2026, and how Jet Forward initiatives contribute to the company's momentum.

Answer

Marty St. George, President of JetBlue Airways, explained that competitor pull-downs in Fort Lauderdale created a "generational" opportunity for JetBlue to expand international services, particularly to the southeast and south, by gaining access to constrained customs facilities. He noted a short-term Q4 headwind but expressed strong optimism for the long-term strategic advantage. Joanna Geraghty, CEO of JetBlue Airways, confirmed no material impact from the government shutdown. She highlighted JetBlue's consistent achievement of guidance metrics and the $290 million EBIT target for Jet Forward in 2025. Geraghty emphasized the strategic pivot to premium products (Premier credit card, lounges, domestic first class) as crucial for recovery and achieving a break-even or better operating margin in 2026, noting that carriers with higher premium exposure experienced less margin impact.

Dan McKenzie questioned American's confidence in Chicago returning to a profitable hub, contrasting it with competitor messaging, and asked if the 20% AAdvantage enrollment improvement is sufficient to close the margin gap by 2026 or 2027.

Answer

Robert Isom, CEO, affirmed that Chicago can support two hub carriers, as it has for almost 100 years, and American will continue to invest in it as its third-largest hub with over 500 departures. He also addressed the $1 billion labor cost disadvantage, stating it's a 'rate' issue that should not persist. He expressed confidence in American's positioning for 2026, citing labor cost certainty, the new Citi deal (expected to significantly improve net income), and strong sales and distribution efforts (14% better corporate revenue YoY). He believes domestic supply and demand are rebalancing, benefiting American.

Dan McKenzie asked about American's confidence in Chicago returning to its position as a major hub, questioning if the airport can support two strong competitors long-term and if the 20% enrollment improvement is sufficient to close the margin gap by 2026 or 2027.

Answer

Robert Isom, CEO, affirmed that Chicago can support two hub carriers, citing American's nearly 100-year presence and plans for it to be their third-largest hub with over 500 departures. He also addressed the $1 billion labor disadvantage, stating that competitors' labor cost advantages are not sustainable long-term. He expressed confidence in American's positioning for 2026, driven by market-rate labor contracts, the new Citi deal, sales and distribution improvements (14% YoY corporate revenue growth), and a rebalanced domestic supply/demand environment.

Asked about the scope and timeline of the network reconfiguration needed for profitability and whether the positive margin outlook includes Pratt & Whitney compensation.

Answer

The necessary network changes are being implemented now and should be largely complete by the end of H1 2024. The positive margin outlook for Q2, Q3, and Q4 does include an estimate for P&W compensation, but this compensation only partially offsets the full financial drag from the grounded aircraft.