Jetblue Airways - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 results landed at the better end of guidance: revenue $2.32B (-1.8% YoY), diluted EPS -$0.39, RASM -2.7% YoY, and CASM ex-fuel +3.7% YoY; operating margin was -4.3%, three points better than implied by July guidance, aided by strong close-in demand and improved operational reliability.
• Versus Wall Street consensus, JetBlue modestly beat on EPS (actual -$0.39 vs -$0.42*) and was essentially in line on revenue ($2.322B vs $2.322B*); EBITDA missed (actual $87M* vs $105M*) as unit revenue and trough demand remained pressured. Values with asterisks retrieved from S&P Global.
• Guidance improved: FY25 CASM ex-fuel narrowed to +5–6% (from +5–7%), FY25 capex cut to ~$1.1B (from ~$1.2B), and FY25 interest expense trimmed to ~$590M (from ~$600M). Q4 ASMs guided to (0.75%)–2.25% YoY and RASM to (4%)–0% YoY.
• Strategic catalysts into 2026: Fort Lauderdale expansion (largest carrier, 17 new routes; early ramp may be a near-term RASM headwind), Blue Sky loyalty accrual/redemption live, interline cross-selling next, domestic first-class retrofit targeting ~25% of fleet by YE26, and lounge openings (JFK in Q4 2025).

What Went Well and What Went Wrong

What Went Well

• Strong close-in demand drove unit revenues to the better end of initial guidance; premium RASM outperformed core by six points, and TrueBlue revenue rose 12% YoY.
• Cost execution: CASM ex-fuel up 3.7% YoY, beating midpoints; operational reliability in Aug/Sep and timing shift in maintenance aided results; E190 fleet completed retirement, with A220s expected to deliver ~25% unit cost improvement vs E190.
• Management tone: “JetBlue's progress toward profitability is gaining momentum… Revenue and costs came in at the better half of their respective guidance ranges, significantly improving our financial performance” — CEO Joanna Geraghty.

What Went Wrong

• YoY pressure on RASM (-2.7%) and load factor (-150bps), reflecting lingering trough demand softness and domestic performance lag vs international.
• Maintenance costs remain a headwind into 2026 due to aging A320 fleet under time-and-material agreements; CASEM ex-fuel guided to grow modestly in Q4.
• EBITDA underperformed consensus despite improved operating metrics, reflecting lagging troughs and early-stage ramp of Fort Lauderdale capacity, which management flagged as a near-term headwind.

Transcript

Operator (participant)

Ladies and gentlemen, good morning. My name is Abby, and I would like to welcome everyone to the JetBlue Airways third quarter 2025 earnings conference call. As a reminder, today's call is being recorded. 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, Koosh Patel. Please go ahead, sir.

Koosh Patel (Director of Investor Relations)

Thanks, Abby. Good morning, everyone, and thanks for joining us for our third quarter 2025 earnings call. This morning, we issued our earnings release and a presentation that we will reference during this call. All of those documents are available on our website at investor.jetblue.com and on the SEC's website at www.sec.gov. In New York, to discuss our results, Joanna Geraghty, 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 2025 financial outlook and our future results of operations and financial position, including long-term financial targets, industry and market trends, expectations with respect to tailwinds and headwinds, our ability to achieve operational and financial targets, our business strategy, our plans for future operations, and the associated impacts on our business. All such forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in these statements. Please refer to our most recent earnings release, as well as our fiscal year 2024 10-K and other filings for a more detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from those contained in our forward-looking statements.

The statements made during this call are made only as of the date of the call, and other than as may be required by law, we undertake no obligation to update this information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation of these non-GAAP measures and a reconciliation to the corresponding GAAP measures, please refer to our earnings release, a copy of which is available on our website on www.sec.gov. I would now like to turn the call over to Joanna Geraghty, JetBlue's CEO.

Joanna Geraghty (CEO and Directot)

Thank you, Koosh. Good morning, and thank you for joining JetBlue's third quarter 2025 earnings call. As Hurricane Melissa makes landfall today, I'd like to begin by extending my thoughts to our JetBlue crew members, their families, and the communities that we serve in Jamaica. As the largest airline in Jamaica, we are focused on caring for our crew members and resuming operations when we can safely do so. Our crew members are at the heart of providing the reliable and caring service that makes the JetBlue experience so special. I’d like to thank them for their dedication throughout the challenging summer travel season. Thanks to your hard work, we are continuing to make meaningful progress on our Jet Forward plan while taking care of our customers and each other.

Throughout the year, our team has worked with urgency to adapt to the evolving demand environment, adjusting supply, implementing new revenue initiatives, and pursuing self-help measures to continue reducing costs. Our results this quarter are an outcome of these efforts. We ended the period at the better end of our guidance ranges across all metrics, including unit revenues and costs, realizing meaningful margin improvement compared to initial expectations. The whole industry took a step back this year. Despite these challenges, we are gaining momentum from Jet Forward and making progress on our plan, operating a stronger airline every day and delivering on or beating our commitments. Building on the progress since we announced Jet Forward five quarters ago, our operational metrics and customer satisfaction scores continue to improve in the quarter.

We improved completion factor and on-time performance versus last year, with A14 up two points, successfully navigating a challenging July in which air traffic control programs impacted operations nearly every day. As a result, customers are more satisfied with their JetBlue experience, as demonstrated by improvements in our Net Promoter Scores, both in the quarter and throughout the year. I’m proud of the team for achieving double-digit NPS gains year to date. Even though our operation has consistently been challenged by external factors, our results demonstrate that the investments we've made in reliability are working. This fall, airfield construction at both Boston Logan and JFK is negatively impacting on-time performance, but we expect that to improve in November when this phase of construction wraps up. Regarding the government shutdown, we have not yet seen any material impact to demand or our operation.

From TSA and air traffic control to Customs and Border Protection, it's truly a team effort. We are grateful for their dedication in keeping us safely moving, and we also thank Secretary Duffy for being a strong partner as we navigate this situation. By delivering a reliable operation and improving customer satisfaction as part of Jet Forward, we are building greater customer loyalty and generating more repeat customers. Last quarter, for example, our TrueBlue attachment rate was up 7% year over year, and our loyalty members are increasingly choosing JetBlue for multiple trips per year. At the same time, we continue to modernize our fleet to drive efficiencies across our operation and enhance the customer experience onboard. During the third quarter, we retired our remaining Embraer E190 aircraft, marking nearly two decades of service. We want to thank Embraer and GE for their partnership over the years.

This completes our transition to a more customer-friendly onboard product and cost-efficient all-Airbus fleet, allowing us to take full advantage of additional network opportunities from our East Coast-focused cities. Along those lines, in support of building the best East Coast leisure network, we are taking deliberate steps to deepen our presence in Fort Lauderdale. This expansion, which mostly launches in the fourth quarter, enables us to further strengthen our position in this highly valuable focus city, adding more leisure destinations for our South Florida customers and increasing connectivity to the Caribbean and Latin America. JetBlue has deep roots in Fort Lauderdale. It's where our first revenue flight landed from New York's JFK on February 11, 2000. Now, 25 years later, the opportunity is ripe to reaffirm our leadership position there.

With our far better customer experience and competitive low fares and now more destinations, we are pleased to bring even more value and choice to customers in Fort Lauderdale and across South Florida. Looking ahead to the fourth quarter, we remain optimistic that the environment will continue to improve. As Marty will discuss further, we are pleased by the overall health of bookings. Demand for peak period travel remains strong, led by the resilience of the premium leisure segment, which aligns well with our new Premier credit card, our plans to open our first lounge this quarter, as well as domestic first class launching next year. We've built a strong foundation with Jet Forward, and we are on track to generate a cumulative $290 million of incremental EBIT this year.

Our efforts to boost reliability, recalibrate our network, enhance our products and services, supercharge our loyalty program, and execute on costs have fueled transformational change, delivering double-digit NPS gains and industry-leading operational improvements. Blue Sky implementation is on track, with last week's loyalty launch marking the first major milestone of our collaboration, and domestic first class is scheduled to launch next year, both expected to be meaningful drivers of incremental earnings in 2026 and beyond. We are encouraged by the progress so far, and we are confident we are on the right path to restore profitability, building a stronger JetBlue for our customers, crew members, and our owners. Over to you, Marty.

Marty St. George (President)

Thank you, Joanna, and thank you to our crew members for a strong summer. We continue to make meaningful strides on Jet Forward to refresh our commercial strategy and drive incremental revenue by refining our network, expanding our reach through partnerships, increasing the value and utility of our loyalty program, and enhancing our products and perks. Turning to slide six of the presentation. As Joanna mentioned, we have reestablished our position as the largest carrier in Fort Lauderdale, a market where our differentiated product and robust network resonate well with customers. As previously announced, we plan to launch 17 new routes and increase frequency on 12 high-demand markets, with our schedule now representing a 35% year-over-year increase for the IATA winter season.

Our schedule also features over 25 daily flights touching Fort Lauderdale with our award-winning Mint service, offering more transcontinental lie flat seats from South Florida than any other carrier. To support continued growth in premium flying, we also announced our intent to establish a Mint base for in-flight crew members in Fort Lauderdale, alongside growing the size of our overall crew base, bringing more jobs to the region. These investments reaffirm our leadership in Fort Lauderdale and leverage our caring service, differentiated product, premium experience, and robust network. Turn to slide seven. Implementation of Blue Sky, our collaboration with United Airlines, is progressing as planned and has already begun delivering value to our customers. Last week, we enabled point accrual and redemption across our loyalty ecosystems, enhancing the utility of each program.

We are already seeing significant customer interest, and since announcing Blue Sky at the end of May, we've seen a sustained double-digit increase in average daily acquisition growth across geographies, particularly in non-focused city markets. We expect to continue the momentum into the first quarter as we begin cross-selling each other's flights on all digital channels. This industry-standard interlinear agreement is expected to expand distribution reach for both airlines and provide customers with more choices to travel across the globe on our complementary networks. Loyalty, reciprocity, and cross-selling are two of the largest drivers of value from Blue Sky, and we expect the successful implementation of both to generate significant earnings momentum for Jet Forward. Later in 2026, we plan to launch reciprocal loyalty benefits and Paisly integration, driving high margin growth and additional value for the partnership.

As we improve our customers' network options, we are also enhancing the customer experience onboard and at the airport. In September, we became the first airline to partner with Amazon's Project Kuiper to provide faster and more reliable connectivity to our onboard Wi-Fi, furthering our leadership in onboard connectivity. JetBlue launched Wi-Fi in 2013 to become the first and still only major U.S. airline to offer free high-speed Wi-Fi on every aircraft in its fleet. The rollout is expected to begin in 2027. We continue to build on our decade-long commitment to premium and are progressing our plans to further capitalize on the demonstrated industry shift to the segment. This month, we enhanced merchandising for Even More, and now customers can book on a single transaction through the GDS and online travel agencies.

Previously, purchasing the product required two separate transactions on our third-party channels, and the simplicity and increased visibility is expected to support buy-ups and higher yields. In addition to Even More, preferred seating continues to outperform expectations. Finally, we remain on track to launch domestic first class in 2026, with the first equipped aircraft expected to begin flying in the second half of the year. The domestic first fleet modification is planned to include our entire non-Mint fleet. By the end of 2026, we anticipate having approximately 25% of the retrofit complete, with the vast majority of the fleet expected to be completed by the end of 2027, over which time we expect to see meaningful EBIT contribution. On the ground, we are on track to open our first airport lounge at JFK by the end of this year, while our Boston lounge is set to open in 2026.

The lounges will offer complimentary access to transatlantic Mint customers, Premier credit card holders, for signups that have already exceeded 2025 targets, and TrueBlue Mosaic members. Passes will also be available for purchase on days where space allows. Alongside our construction of the JFK lounge, we are in the middle of a total refresh of Terminal 5, which is set to bring more than 40 new concessions and a redesigned center concourse. Moving to third quarter results. Over the summer, the demand environment continues to show signs of recovery, characterized by strong closing bookings, healthy demand for peak travel, and the sustained strength in premium. As a result, unit revenues ended the quarter at down 2.7% year over year, just above the midpoint of our revised guidance range and more than a point better than our initial guidance midpoint.

Premium continued to outperform core, and year over year, premium rising growth was up six points relative to core. Our managed corporate yields also showed strength, with yields up high single digits. While our domestic flying saw the most potential rising improvement quarter over quarter, its relative launch performance still lagged internationally. We continued our string of double-digit loyalty growth in the quarter, with COBRA remuneration up 16% and TrueBlue revenue up 12%. The COBRA and TrueBlue trends are evidence of our improved customer satisfaction scores, recalibrated network and product, as well as a strong benefit we are already seeing from the Blue Sky collaboration announcement. For the fourth quarter, we expect unit revenues to be between flat and down 4% year over year on capacity of up to three quarters of a point of the midpoint.

Third quarter demand trends are forecasted to largely continue into the fourth, with continued robust demand for premium products. Peaks are expected to remain healthy, while troughs continue to see challenges, which we have and will continue to actively manage through capacity adjustments. We are seeing the booking curve normalize, and we expect the same trend to continue throughout the fourth quarter. We expect continued macro-related tailwinds going forward, in addition to the ramp of our Jet Forward commercial initiatives. On the network side, our capacity investment in Fort Lauderdale will be in its early stages of ramp after launching in November-December, and coupled with a step up in domestic competitive capacity, are expected to be just over a point of headwind to rising for the quarter.

Lastly, it's too early to size the impact of Hurricane Melissa on our operations in Jamaica, so our guidance does not contemplate any impact. Jamaica represents about 2.6% of our capacity in the fourth quarter. As we look ahead, we know there's still more work to do, but Jet Forward is the right plan. The initiatives we outlined today, from our Fort Lauderdale growth to Blue Sky and enhancing our premium products, will be key to getting us back to sustained profitability. I'll now turn it over to Ursula to provide more detail on our costs and financial performance.

Ursula Hurley (CFO)

Thank you, Marty. We ended the quarter with an operating margin 3 points better than what was implied by our July guidance ranges, supported by a more reliable operation, greater closing demand for our product, and our team effectively controlling costs. Despite a tough air traffic control and weather environment in July, completed capacity growth of 0.9% was above the midpoint of our revised guidance. This, coupled with strong execution, helped to deliver excellent cost performance for the quarter. We ended the quarter with CASEM ex-fuel up 3.7% year over year, beating the midpoint of our initial guidance by over 1 point, marking yet another quarter of cost execution. It is clear the investments we are making in our operation are increasing efficiencies across the business.

Over the year, the team has demonstrated solid cost execution, and we are improving our full-year CASEM ex-fuel guidance from up 5% to 7% to up 5% to 6% year over year, lowering the midpoint by half a point, despite less capacity than initially planned. For the fourth quarter, we expect CASEM ex-fuel growth of up 3% to 5%. For the third quarter, fuel price came in at $2.49 in the lower half of our revised guidance range. We expect fourth quarter fuel to be between $2.33 and $2.48. Our fuel guidance is based on the forward curve as of October 10. As we work through our budgeting process for 2026, we expect our unit costs next year to be low single digits, underpinned by low to mid-single digit capacity growth.

We plan to grow capacity through new aircraft deliveries, as well as the return of a sizable number of parked aircraft to service. As we get back to growing once again, we're doing so with our balance sheet in mind, by adding capacity despite reducing CapEx. We expect our capital expenditures to be at or below $1 billion next year and each year through the end of the decade, supporting our balance sheet and our return to positive free cash flow over time. We ended the quarter with a healthy liquidity level of $2.9 billion in cash and marketable investments, excluding our $600 million revolver, representing 32% of trailing 12 months' revenue. At the end of 2025, we expect to carry liquidity in excess of our 20% liquidity target.

Looking forward to 2026, we expect to raise a modest amount of capital to maintain our liquidity target, driven by the maturity of $325 million of our 2021 convertible notes and new aircraft deliveries. I believe our healthy unencumbered asset base of over $5 billion will provide us flexibility to meet our funding needs. Jet Forward remains on track to hit its target of $290 million of incremental EBIT by year-end, and I am confident we are also on the path to meet our $850 to $950 million 2027 commitment. The exciting commercial initiatives Marty St. George details, including Blue Sky, domestic first, and lounges, are expected to drive significant earnings momentum for Jet Forward in 2026 and into 2027. Alongside these efforts, we plan to remain focused on cost discipline and managing our fleet to preserve liquidity and drive capital-like growth.

Taken together, we are confident we have the right initiatives in place to drive meaningful profitability improvement in 2026. While we are still in the early innings of our budget process, it is our intention to build a plan that gets us to break even or better operating margin for 2026. We look forward to sharing more details during our January call. We will now open it up to your questions. Back over to you, Abby.

Operator (participant)

Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one if you would like to ask a question. Our first question comes from the line of Dan McKenzie with Seaport Global. Your line is open.

Dan McKenzie (Analyst)

Oh, hey, good morning, guys. Thanks for the preliminary outlook for 2026. Backing up, Jet Forward didn't factor in the Chapter 11 filing of one of your toughest competitors. I'm wondering if you can talk about what that means to the Fort Lauderdale operation and what that means to revenue upside to the Jet Forward plan.

Marty St. George (President)

Hey, Dan, it's Marty. Thanks for the question. I'm not going to go into detail about our competitors' action, but the most important thing is our reaction. Frankly, we have been hamstrung in Fort Lauderdale because of our lack of access to international gates in the middle of the day. It's a relatively constrained customs facility at the airport, and we have multiple carriers all trying to fly at the same time. What's worked out very well for us is that as our competitor has done some pretty significant pull-downs in Fort Lauderdale, we have seen a lot of opportunity to move flights into that customs facility at a time when it's actually good for our local customers and also very good for generating connections to markets to the north.

If we look at the growth that we have put into Fort Lauderdale, notwithstanding our reputation as being a Northeast airline, the growth is very much focused to markets in the southeast and south of Fort Lauderdale. I'm actually very optimistic about the opportunity this creates. I use the word generational about this. Our ability to get such significant growth for international services in such an important market for us is something we're absolutely going to take advantage of at the time. As I mentioned in the script, in the very short term, it's going to create a bit of a headwind in the fourth quarter. We perform very well in Fort Lauderdale today, as is shown by the fact that we are such a big Mint operation there.

We can compete very well against our competitor, which is probably one of the reasons why they are going through the restructuring they're going through. We are very bullish on Fort Lauderdale. Thanks for the question. I think it's actually one of the good parts of the story. With respect to the impact on Jet Forward, there are an awful lot of puts and takes in there. There was a big chunk of network rebuild in there. We have made the commitment to investors that we update every six months on Jet Forward. I don't want to give an update now, but that's something we'll probably talk about at the end of the year.

Dan McKenzie (Analyst)

Very good. If I can just kind of go back to the beginning of the year and kind of how we're closing out the year, it looks like the government shutdown probably cost JetBlue Airways maybe $500 million in lost revenue. Please correct me on that, but is it right to think that this is lost revenue that comes back in 2026? On top of this, all of the Jet Forward initiatives that you've outlined. I'm really just going back to the first quote in the release from Joanna Geraghty just about the momentum into 2026. If you can just help flesh that part out a little bit more.

Joanna Geraghty (CEO and Directot)

Yeah, thanks. Thanks for the question, Dan. I think first, I just want to emphasize we hit every guidance metric since April and improved three key margins versus internal expectations. That was against an industry-wide setback due to volatility involving customer confidence in the airline space. I am really proud of the work the team has done to make up for some of that lost ground. Jet Forward, it's a multi-year plan. We remain on track to hit the $290 million of EBIT this year. We launched it five quarters ago. We are making excellent progress. I think when you read through the numbers, what you see is a four-point impact to full-year operating margin relative to our initial full-year guidance. Our analysis shows that it's squarely tied to our premium mix versus other carriers' premium mix.

We've done an analysis that shows those who have more premium exposure have actually been less impacted. When you look at Jet Forward, it is all about leaning into premium, and we are well on the way. Whether it's the Premier credit card this year, whether it's the lounges opening up, whether it's preferred seating, you pivot to next year and you look at more lounges, you've got our launch of the domestic first class. We are squarely in the middle of execution and ramp, and I could not be more excited about the trajectory as we move into 2026. Our Net Promoter Score, you can't have a premium customer who doesn't have strong Net Promoter Scores. We're back to the top of the industry. As we look forward to 2026, we do need to continue to see an improving macro environment.

That, coupled with Jet Forward and the momentum we have, gives me a lot of confidence that we're going to build a plan, break even or better, get us back on track and regain that which we lost this year.

Dan McKenzie (Analyst)

Thanks so much, you guys.

Operator (participant)

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

Savi Syth (Analyst)

Hey, good morning. I wonder if I could ask Dan's question in a slightly different manner. I was wondering if you could kind of give us an understanding of the incremental contribution in 2026, 2027 from Jet Forward, and then what type of headwinds you talked about, some of the tailwinds like macro that will kind of come on top of that. Just trying to understand how to think about an EBIT bridge as you look out to 2027 and get to solidly profitable footing there.

Ursula Hurley (CFO)

Yeah, thanks for the question, Fabi. We've always said that in terms of the Jet Forward breakout of $850 to $950, it's really coming through a third, a third, a third, pretty equally. That just happens to be, I mean, there's 200 plus initiatives, but the way that they level up, it's a third per year. As Joanna mentioned, and what I said in my prepared remarks is, next year we have a goal of building a 2026 plan with operating margin break even or better. We are going to make up some ground that clearly we lost this year given the macro step back. The puts and takes, I'm pleased with the progress that we're making in general across all Jet Forward initiatives.

Obviously, the premium initiatives are performing well year to date, but we also have a lot more to come between lounges, the premium credit card, and also domestic first next year. I would say I'm also really excited about domestic first. I think this is going to allow us to better compete compared to where we are today. I would say at a macro level, we need the macro backdrop to continue to improve. We do have that assumption baked into our 2026 guide. All in all, we feel like we have a lot of good momentum, and Jet Forward is tracking exactly where we thought it was, and we look forward to delivering further details on our 2026 plan next year.

Savi Syth (Analyst)

That's helpful. Thanks, Ursula. May I just ask another question for you? How are you thinking about liquidity and leverage, and what type of financing needs you anticipate over the next 12 to 18 months?

Ursula Hurley (CFO)

Yeah, listen, we did the strategic capital raise back in August of 2024. That's really provided a strong liquidity runway for us through the end of 2025. We're projected to end the year above our 20% liquidity target. We are going to need a modest amount of capital next year just to support the new aircraft deliveries that we have coming, as well as we do have a convertible debt maturity of $325 million in the April timeframe. By no means will the capital raise be anywhere near the size that we did in August of 2024. In terms of what assets will we use, we're in a pretty powerful position in terms of having over $5 billion of unencumbered assets. About 40% of that $5 billion is aircraft and engines, and then the remainder includes our slots, gates, and routes, as well as our brand.

I would say we'll look at all markets. We're clearly focused on the level of interest expense and obviously the debt level that we have currently on the balance sheet. We're going to try to be super thoughtful and strategic just given market availability with all the different types of unencumbered assets that we have.

Savi Syth (Analyst)

Appreciate that call. Thank you.

Operator (participant)

Our next question comes from the line of Michael Lindenberg with Deutsche Bank. Your line is open.

Shannon Doherty (Equity Research Analyst)

Oh, hi. This is Shannon Doherty on for Mike. Thank you for taking my question. Just for starters, I apologize if I missed this, but can you quantify any impact that you're seeing today from the government shutdown since we're about a month in? I wouldn't typically think of JetBlue as having much government exposure, but since you called out in the release, it's probably worth asking.

Joanna Geraghty (CEO and Directot)

Sorry, I missed a little bit at the tail end of your question, but we haven't seen any meaningful impact with regard to the government shutdown. We obviously are monitoring it closely. The longer it goes on, obviously for the industry, I'd say there's, you know, more acute concerns, but we have not seen anything and are just really appreciative of all of the government workers showing up, doing their job, and keeping the national airspace and our industry running safely.

Shannon Doherty (Equity Research Analyst)

That's great. Thanks. Maybe one for Marty. You know, with domestic seemingly improving, do you expect domestic routing to outperform international this quarter? You know, maybe you can just give us an update on demand by region.

Marty St. George (President)

We do not do a lot of column size demand by region. What we said in general is that, you know, international is better than domestic and premium is better than the back of the airplane. That continues to stand. I'd say if you look at our overall routes performance and recognize that this is a math issue, but rated average, you know, if international is better and domestic is worse, domestic has a ways to go. I would say in general, the thing that gets me most excited about improving our domestic routing is the continued introduction of premium products. As we do a competitive look at our routing, sort of coach to coach, we actually do fine on routing. The challenge is that we're missing that whole front of the airplane, which is a pretty good revenue kick to our competitors.

We do extremely well against the ULCCs of the world who have premium products and are not really premium, but we see a lot of upside for the premium products that we're adding as far as getting us up to where the legacies are, closer to where the legacies are. It is not something I'm predicting in the fourth quarter. When we go into 2026, we can probably talk in more detail about that.

Operator (participant)

Our next question comes from the line of Jamie Baker with JP Morgan. Your line is open.

Jamie Baker (Analyst)

Oh, hey, good morning. Ursula, building on Savi's question earlier, modest cash raises next year. Can you, where do you think the incremental cost of debt is today? If we do accept that aircraft debt is typically the lowest, are you leaning more towards, say, leasebacks or just borrowing against aircraft? Thanks.

Ursula Hurley (CFO)

Yeah, listen, I think the benefit of the assets that we have unencumbered is that we can look at all markets and hone in on what is, quite frankly, most cost-effective. I think the other priority we look at is building in prepayment flexibility. I mean, our number one priority is getting the business back to consistent operating margins, positive. Then it's delivering free cash flow so that we can start to delever. You know, clearly the most cost-effective money you can raise right now is with aircraft. Given we are focused on the level of interest expense, that could be a likely path. How we do the aircraft, it will be what's the most attractive market. Is it bilateral bank loans? Is it capital markets? Is it, say, a leaseback? We'll look at everything.

Jamie Baker (Analyst)

Okay, fair enough. Following up on that, if memory serves, it was this call last year that I remember first hearing you reference approaching break even from a forward-year operating margin basis. Look, 2025 kind of went off the rails. We're not going to hold that against you. Here we are a year later and you're reintroducing that narrative. I guess the question is for you, or Marty's color would be appreciated as well. Compared to how you were thinking this time last year, do you think that industry fundamentals are more or less aligned with getting JetBlue back on track? After all, given what you shared on capacity and cost for next year, it's a really high routing hurdle to get you to break even or better.

Joanna Geraghty (CEO and Directot)

Hey, Jamie, let me take that. We think industry fundamentals are more aligned with where we're headed. I fully recognize that it feels a little bit like Groundhog Day and that we were sitting in this room last year around this time with the same commitment. Thanks for recognizing the industry took a step back and, you know, we're all now trying to recover out of that. Leaning into the premium customer is absolutely the right strategy. We've been doing this for 10 years with Mint. We see it in our Mint performance. We're a year later and we've actually launched a number of initiatives already that support that.

The progress we made since last year is actually execution on Jet Forward and continuing to make sure we remain laser-focused on delivering the initiatives we laid out so that as the economy recovers, we can take full advantage of those in a later stage of ramp, whether it's the preferred seating, whether it's the even more space changes, launching the JFK lounge this December. We've got Boston next year. We're that much closer to launching the domestic first class. As I mentioned in the first question, our analysis this year showed that carriers who have greater exposure to premium had less of a margin impact from the step back. That reconfirms that Jet Forward is the right path. We're excited about getting closer to profitability and continuing this momentum.

From my perspective, the industry fundamentals actually support where we're going and I'm excited to see that come to fruition this year.

Jamie Baker (Analyst)

Good answer, great color. Thank you.

Operator (participant)

Our next question comes from the line of Duane Fenningworth with Evercore ISI. Your line is open.

Duane Fenningworth (Analyst)

Hey, thanks. Just on the GTF impacts, do you have any update on the grounded aircraft and the forecast for next year embedded in your preliminary 2026 comments? Can you remind us, is there any compensation that's actually baked into the results this year?

Ursula Hurley (CFO)

Sure, thanks for the question, Duane. The GTF challenges have improved. If you recall back in January, we thought we would have mid to high teens number of aircraft on the ground. The average for 2025 is going to be nine. We currently have six on the ground today. 2025 is the peak in terms of AOG. That number will come down next year. The projected AOG that we'll have on the ground in 2026 is low to mid single digits. This is going to position us to actually be able to grow again, which we mentioned in our prepared remarks. In regards to our 2025 full-year controllable cost guidance, it does not assume any Pratt and Whitney compensation. We continue to be in constructive conversations with Pratt and just given the magnitude of impact it's had on our business, we will settle when we get to the right place.

I would say the other last comment from me is, you know, this is putting us in a position where we're growing in a capital light way. Obviously, we've previously paid for these aircraft with the GTF engines and having them return to service is great. This is definitely a tailwind for us and we're happy with where we're at in terms of getting these aircraft back up in the air.

Dan McKenzie (Analyst)

Thanks. Maybe just for the follow-up, can you remind us for your domestic business class or first class, or I forget what you're calling it, can you just remind us of the implementation timing of that? Where will you be from a kind of year-end 2026 and when you expect to complete that?

Ursula Hurley (CFO)

Sure. Just to give you some context, we are outfitting all of the non-Mint aircraft that we have. It's about 250 airplanes. Marty mentioned in his prepared remarks that by the end of 2026, we'll have about 25% of the fleet complete. By the end of 2027, we'll have the overwhelming majority complete. Very much looking forward to rolling out the first aircraft in the back half of next year.

Duane Fenningworth (Analyst)

Thank you.

Operator (participant)

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

Atul Maheswari (Equity Research Analyst)

Good morning. Thanks a lot for taking my question. We are getting pushback that profit decline ex Jet Forward is accelerating just based on the fourth quarter guidance. Why do you think that is the case? What needs to happen for the portion of profits not touched by Jet Forward to start improving again such that Jet Forward can truly be all incremental?

Ursula Hurley (CFO)

Yeah, listen, as we look at the fourth quarter, we do see an improvement in fuel year over year. You have to remember, we're still operating from a much lower base in terms of the overarching demand environment. While it's improving, and we've seen that along with the rest of the industry, we're still operating way below where we had anticipated this year. We are showing routing progression from Q3 to Q4. Our Jet Forward initiatives continue to ramp up, and you've heard us in our prepared remarks as well as in the Q&A highlight all of these premium initiatives that are coming to market. We are seeing progress. I will remind you yet again, if it were not for the macro setback earlier this year, which was 4% impact to JetBlue, we would have hit our full-year break even or better operating margin.

We believe we're on track, and we've got solid momentum as we head into 2026.

Joanna Geraghty (CEO and Directot)

If I can also mention, you know, we've announced very close-end capacity and launch for Fort Lauderdale in Q4. That's pressuring routing a bit, hence the one-point step forward in routing. That's a really great opportunity for JetBlue Airways and absolutely the right long-term decision for this company because of the opportunity to really reclaim Fort Lauderdale as the third leg of our stool.

Atul Maheswari (Equity Research Analyst)

Right, that makes sense. Just as my quick follow-up on the fourth quarter guidance, can you share some color on booked yields quarter to date or some color on what portion of fourth quarter is booked, and what's your yield assumption for the portion that is unbooked?

Marty St. George (President)

As far as booking levels, we're about 90% booked for our forecast in October, 55% or so for November, and I think 35%, 38%, something like that for December. It is really very focused around peaks for November and December. We don't really guide specifically the difference between yield and load factor, but I think the guidance we laid out is based on what we're seeing right now. To give you some more color, if you look at the demand environment as it exists right now, the booking curve is not fully back to sort of 2024 distribution as far as advanced purchase dates, but it's very, very close. The trend of peaks versus trough has really continued. We have very good strength in the peaks and still challenges in the troughs.

To me, that is the last piece of the puzzle that I think when that comes back, we'll have been in a much better spot to recover sort of the 2024 demand levels. The line we use is, you know, people are still taking that one vacation at, you know, Thanksgiving or Christmas. They're not all taking the second vacation they may take. I think that's sort of what we're seeing in general.

Atul Maheswari (Equity Research Analyst)

Got it. That's great color. Thanks for that, and good luck with the rest of the fourth quarter.

Operator (participant)

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

Catherine O'Brien (Lead U.S. Airline and Aircraft Lessor Equity Research Analyst)

Hey, good morning everyone. Thanks so much for the time. I realize this is still early, but can you speak to how the impact of Fort Lauderdale adds is shaping up for Q1? Guessing since you add that capacity so close into year-end, it should be less of a drag in the first quarter. Maybe a bigger picture, a bit of a follow-up to Sabi's question earlier. Could you just walk us through high level what the biggest tailwinds from Jet Forward should be in 2026? Blue Sky kicks in in a more meaningful way, domestic first on 25% of the fleet by year-end. Just trying to get a sense of what the unique JetBlue revenue tailwinds are into next year, like as you see them in the biggest buckets.

Marty St. George (President)

Okay, thanks, Katie. First of all, with respect to Fort Lauderdale, if you look at a lot of the capacity we added, it is going to be good first quarter capacity. I mean, a lot of beach destinations, I think seasonality is our friend. We'd like to have the full 300 days booking window, but you know, we're going to be more at that point, more like 130, 140 booking day window for that period. I don't think that the sort of headwind will be gone, but I think we're certain the seasonality is our friend at this point. I will also say that with the ability to add more international arrivals in the peak in Fort Lauderdale, we are going to have a lot of opportunities for customers to connect from the north into the Caribbean and Latin America.

Actually, we're really excited about that because I think we're a low-cost airline. We don't really build hubs, you know, true hub-and-spoke networks, but we certainly carry incidental connections. I think based on the sort of the local timing of when flights are good for Fort Lauderdale and then when they've been good for the beach markets, we're actually going to get a lot of good connected opportunities. We're actually very bullish about this. I know historically we talk about a three-year ramp. We are not in any way forecasting anything close to a three-year ramp.

Joanna Geraghty (CEO and Directot)

I'll take the second part of your question, Katie. There are several key and big initiatives ramping into next year. I'd say Blue Sky is probably one of the biggest, all of the significant drivers. We just announced, obviously, Earn and Burn sort of reciprocity loyalty for JetBlue and United last week. We've got interline sales launching next year, easily launching next year, and then recognition of loyalty launching next year. All of those will be delivered, implemented, and delivering value in 2026. The network continues to ramp. We've moved 20% of the network around. Most of those changes went in about a year ago, and given the ramp timeframe, those will continue to ramp into 2026. We're returning to growth next year. That's going to be, I think, a nice tailwind for JetBlue, buttressing our cost control.

When you think about operational reliability, lounges, domestic first, we're really trying to create this flywheel for that premium customer where they want to come back to JetBlue because we have the full product offering that they would like. That's underpinned by this fantastic improvement in our operations, specifically around Net Promoter Score and winning the hearts and minds of customers. Customers again. Marty touched on Fort Lauderdale on that ramping into 2026, but those are the big buckets.

Catherine O'Brien (Lead U.S. Airline and Aircraft Lessor Equity Research Analyst)

That's really helpful. Maybe I just ask one quick follow-up on Mint. You're adding the new Mint crew base in Fort Lauderdale and some new flights to the West Coast. Can you talk about where you think there are further opportunities to add more Mint flying, if any, given the focus on adding premium products? Can you just remind us the margin uplift of a Mint versus non-Mint flight or routing, however you want to talk about it?

Marty St. George (President)

Okay, thanks. First of all, we are coming to the end of the line of Mint delivered airplanes with Mint on them. I think 2026 and 2027 are really focused on domestic first class. We have a few more Mint airplanes coming, but in general, we're out of the Airbus 321 business until 2030 or 2031. We're going to reach a plateau for Mint flying. I think what's been the most exciting for us about Fort Lauderdale is how incredibly helpful it is as far as being counter-seasonal. We have very good results across the Atlantic in the summer. Frankly, we probably could use some more lift in the summertime if we could get it, but obviously, you need to fly the airplane 12 months a year. Where Fort Lauderdale has really come into its own is with fantastic demand in the winter.

Having airplanes in markets like Dublin and Edinburgh, which are great summer markets, maybe not so great in the winter, and having those airplanes move to Fort Lauderdale is a major, major win for us. Frankly, I don't think any of us expected to see that good demand that strong in Mint out of Fort Lauderdale, but it's been a very happy surprise for us. Demand goes down in the summertime because it's hot down there, and that's a very good time for planes to move across the Atlantic. We love the ability to swing these airplanes back and forth. Frankly, we will get a nice little cost benefit by having a Mint base down there as far as not having to have Boston and New York crews fly the Fort Lauderdale West Coast services. We're really bullish about that.

With respect to Mint overall, it continues to be extremely successful. I think the combination of quality, fantastic service delivery by our crews, and really good prices has been a very winning formula for us. The 321 has proven to be a very good low-cost airplane platform for us. I think it's worked out extremely well for us. We haven't really gotten into individual profitability numbers, but certainly the Mint network is the best of our domestic network right now. I think I'll leave it at that.

Catherine O'Brien (Lead U.S. Airline and Aircraft Lessor Equity Research Analyst)

Thanks so much for that.

Operator (participant)

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

Tom Fitzgerald (Analyst)

All right, thanks so much. I'm just wondering if you could speak to what you're seeing in terms of reliability and time on wing on your A220 fleet, and how you're thinking about that as you go into 2026 planning.

Ursula Hurley (CFO)

Yeah, thanks for the question, Tom. Starting high level, we provided capacity indications for 2026 being in the low to mid-single digits next year. I would say that's really driven by two things. Number one, the number of new deliveries that we have coming next year in terms of the 220. The second driver is really all of these aircraft returning from AOG. I mentioned going from an average of nine this year to low to mid-single digits next year. We do have some reliability challenges on the A220 that we're working collaboratively with Airbus Canada on, but it is impacting us. It's just the materiality when you look at the capacity growth next year isn't as large. It's really the new deliveries and the return from AOGs.

Tom Fitzgerald (Analyst)

Okay, thanks so much. That's really helpful. I'm kind of curious how you're thinking about, I know technology was a big part of how you, you know, the operational and reliability improvements. I'm just wondering how you're thinking about that on the distribution side and any levers to drive more direct channel sales. Thanks again for the time.

Marty St. George (President)

Thanks, Tom. First, I'll start by saying, you know, we are three quarters direct booked right now. We've got very, very strong penetration in direct channels. We've taken a different strategy with OTAs than some of our competitors. We do not work with all the OTAs. We work with a very select number, and we've got very preferential distribution relationships with them. I think the benefit of some of the technology solutions is not quite the same for us as it is for others. That being the case, we are in the process of adding NDC as a technology for JetBlue Airways. We expect to, I don't think we've given a date for it, but the team's working on that right now. Frankly, I think the thing that I'm most excited about is the potential it has for continuous pricing.

It's very clear that airlines, you know, pricing, 26 letters or 26 buckets or 26 booking codes is a technology of the 1970s. I think with what we have seen elsewhere in the world as far as the benefits of continuous pricing, I think it's a great opportunity for us. You really need NDC to make that happen. Not that a report yet, but hopefully when we have some more firm dates, we'll come back and talk about it a little bit. Frankly, I'm, you know, having used continuous pricing in my previous place, I think it's going to be a great opportunity for our customers. I think there's a stereotype that continuous pricing is a trick to have price increases. When I did this before, half the prices were price cuts and half the prices were price increases.

All you're really doing is trying to benefit the demand curve, and it will absolutely include lower prices as much as it could include higher prices. We're very bullish on it. No dates to report yet, but it's very much on our radar.

Operator (participant)

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

Scott Group (Managing Director and Senior Analyst)

Thank you. Good morning. We've got lower CapEx starting next year. Any other puts and takes to be thinking about with free cash flow? I guess if we're getting back to operating income break even, do you think we can get back to positive free cash flow in 2027? Is that the right way to think about it?

Ursula Hurley (CFO)

Yes, it is. As you recall, we did a $3 billion aircraft deferral last year. We did that in order to give us a runway to deliver free cash flow. Priority number one is positive operating margin. Priority number two is free cash flow. I still believe that there's a path to achieve that at the culmination of this Jet Forward program in 2027. We're making good progress. I'm pleased with the momentum across the initiatives. Once we hit free cash flow, priority number one is going to be improving the balance sheet and delivering where we can because we still want to get our metrics, quite frankly, back down to pre-COVID-like levels. That is a priority of this leadership team. I feel good about the path that we're on.

Scott Group (Managing Director and Senior Analyst)

Okay. Marty, maybe it's way too early to ask, but with just getting launched with Blue Sky, what are you seeing so far, if anything? Anything different than you would have thought, just any kind of color?

Marty St. George (President)

Hey, Scott, thanks for the question. First of all, I'd say it's pretty much acting the way we expected it to. We've seen redemptions go both directions as far as, you know, JetBlue customers redeeming on United, United customers redeeming on us. If you look at the O's and D's where they're doing it, I'd say in general, it is more or less what we'd expected. I will say our first redemption on United was Denver-Las Vegas from Mosaic in Denver. That was a bit of a surprise, but to me, that's actually a good thing. I'm happy that, you know, that our customer in Denver, who's in Mosaic, is now getting a utility of United. To me, that is the fundamental goal for this, which is making sure that customers who align with TrueBlue have a full assortment of places where they can earn and burn.

As much as, you know, nobody had Denver-Vegas on the bingo card, I think I was really happy that that's what it was because we have a customer who has raised his or her hand in Denver, has flown up to come to Mosaic, who now is getting some great utility. To me, it's a big win. I actually love this, and this is exactly why we did this program.

Scott Group (Managing Director and Senior Analyst)

Thank you.

Operator (participant)

Our next question comes from the line of Brandon Oglendski with Barclays. Your line is open.

Brandon Oglenski (Analyst)

Good morning, and thanks for taking the question. I don't mean to be too critical here, Ursula, but when you said modest capital next year, and then in relation to the way you answered Scott's question there, maybe, you know, break even free cash flow by 2027, I don't know. Is modest like maybe $1 billion, $1.5 billion ballpark, like the incremental capital you need to get there?

Ursula Hurley (CFO)

No, the number is not going to be that large. I mean, I think I mentioned in one of the Q&A responses, you know, we're not anywhere in the realm of the raise that we did in 2024 in terms of quantum. I think what I highlighted in my prepared remarks is, you know, we do have 10-plus deliveries next year, and we do have a convertible debt paydown of $325 million. Modest is much lower than what you foreshadowed. I will call out, clearly, we've seen fuel spike in the last five days. It's just something to be aware of. We are watching that closely, as well as the more general macro demand environment. I still believe that we have a path, and we're trying to be very thoughtful about when and how we raise at any level of debt, just given where the balance sheet is today.

Brandon Oglenski (Analyst)

Okay, I appreciate that clarity. On the outlook for growth next year, I get it, like you're getting AOGs back in the air, but is the cost structure already in place, meaning you've just been inefficient for the past 18 months, and you're putting that back to good use? Do you need to incrementally scale up crews and other infrastructure? Thank you.

Ursula Hurley (CFO)

No, I would say that the capacity growth next year is going to be efficient for us. We've done a great job managing the cost structure as we've navigated this year, but we're not going to find ourselves in a position where we need to hire excessively to support next year's growth trajectory. I think this is, from a unit cost perspective, the growth next year is definitely a tailwind for us.

Joanna Geraghty (CEO and Directot)

I’ll just add, maybe, our crew members have been great over the last year, taking voluntary programs, agreeing to reduced hours. We’ve really done a good job trying to reduce the costs we’ve had because of the grounded fleet as much as possible. When we think about growth in general, it’s really about making sure we grow responsibly. We will continue to manage the peaks and the troughs. As Ursula has mentioned, it’s focused on capital preservation and capital-light growth. We’re managing for returns and then obviously ensuring our unit costs remain in check. At the end of the day, I think we’ve navigated a very challenging period with these aircraft on the ground, and I think we’ve navigated it as well as one can, and our crew members have been a hugely important part of that.

We’re looking forward to growing next year because that’s ultimately going to get us back on the right path to sustained profitability.

Brandon Oglenski (Analyst)

Thank you both.

Operator (participant)

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

Ravi Shanker (Analyst)

Great, thanks. Morning, everyone. Marty, you said that troughs continue to be challenging. Obviously, that's very understandable given the macro. Do you feel like that's cyclical or structural? If it is more structural, kind of how are you thinking about 2026 capacity planning, especially in Q1, which tends to have more trough periods? Do you think you need to be more aggressive on picking out capacity there?

Marty St. George (President)

Hey, Ravi, good question. Here's what I would say. Troughs are always challenging as a leisure-focused airline. This is not new. I would say that we looked at previous economic slowdowns, or much of what you want to call the 2025 situation, but previous times where revenues have gone down, this is a very, very common change and nothing that we were unprepared for when the time came. I think that we'll sort of be able to finally call this change in demand done when we see troughs get back to a little bit more normal level, but they will always be a challenge for us. That's just the status of being a leisure airline in general.

Ravi Shanker (Analyst)

Understood. That's helpful to color. Maybe as a quick follow-up, can you just expand on your corporate comments? I think you said that yield goes pretty strong. What are you seeing in the East Coast in particular? I think there's some optimism about a pickup in activity, clearly in finance.

Marty St. George (President)

To be clear, Delta's corporate business is a very small part of our business, I think very much given our network. Year over year, Joanna talked about the changes we made to the network in 2024 and very early 2025. That really pretty significantly reduced our presence in corporate markets. There was a point in time we had 50-something flights to LaGuardia and we're now in the teens. A lot of our corporate supply has actually gone away. Frankly, I've been very, very happy with what we've seen on yields. We've got yields up double digits in our Delta corporate markets. I think it's very clear to say, just to scale this, our total sales team, I can count on two hands. We don't have the incredible breadth of corporate contracts. It's really based on our network. In New York, LaGuardia is the preferred airport.

We have some good corporate customers in Boston and Fort Lauderdale. I'd say by far our biggest attractiveness for corporate has been Mint and our pricing. I think overall, it will always be a part of our network, but leisure will still be the bread and butter for us.

Ravi Shanker (Analyst)

Understood. Thank you.

Operator (participant)

Our final question comes from the line of Connor Cunningham with Melius Research. Your line is open.

Connor Cunningham (Travel and Transports Analyst)

Hi, everyone. Thanks for squeezing me in. Just two, if I may. Just on the routing outlook for Q4, can you maybe parse out what you're seeing on the U.S. domestic side versus Latin and Transatlantic? I'll just squeeze my second question in. On maintenance next year, it seems like you have your maintenance is up 30% this year. The E190s are gone. I think that there's a huge tailwind into 2026. Just trying to understand how that all flows through. Thank you.

Marty St. George (President)

Hi, Connor. I'll take the first half on the routing. In general, what we're seeing in routing is, from a regional perspective, it's pretty consistent with what we're seeing overall, which is better numbers in international than domestic. I don't think there's anything, there's sort of no dramatic news there as far as any significant change in trend. Frankly, I think that what we're seeing as far as changes in capacity from the ULCCs will ultimately help that. It's very clear that its capacity has come out overall. That should put less pressure on the back of the airplane, but I think it's a little bit early to call that to trend right now. I'll let the maintenance comment go to her.

Ursula Hurley (CFO)

Yeah, just on maintenance, Connor, I would say when you look across all the P&L cost line items, maintenance is still going to be a headwind next year. I mean, about half of our fleet is the A320, and that fleet is aging. It's not on a flight hour agreement. It's on a time and material agreement. It is still going to be a headwind. Obviously, that's going to be offset by all of the Jet Forward cost initiatives, you know, think technology, think productivity. Maintenance will be the one headwind. As I mentioned in my prepared remarks, we are targeting a low single-digit CASEM ex-fuel next year. I'm pleased with the overarching trajectory and the team's ability as we navigated through this year to execute to the cost performance. We improved the midpoint of our full-year guide, and that's really attributable to the teams.

That's despite a one-point pull in capacity. Super pleased with the execution, and that's going to continue as we navigate through 2026.

Connor Cunningham (Travel and Transports Analyst)

Great, thank you.

Operator (participant)

Ladies and gentlemen, that will conclude today's conference. Thank you for your participation. You may now disconnect.