Morning, everyone. My name is Jillian. I would like to welcome everyone to the JetBlue Airways third quarter 2026 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. I would now like to turn the call over to JetBlue's Director of Investor Relations, Koosh Patel. Please go ahead, sir.

Thanks, Jillian. Good morning, everyone, and thank you for joining us for our third quarter 2026 earnings call. Yesterday, we issued our earnings release and a presentation that we'll reference during this call. All of those documents are available on our website at investor.jetblue.com and on the SEC's website at www.sec.gov. In New York, to discuss our results are 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 about our outlook, strategy, and future performance. These statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our earnings release and SEC filings for information about risk factors that could cause those differences. These statements speak only as of today and we undertake no obligation to update them. We may also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable gap measures are included in our earnings materials and are available on our investor relations website. And now I'd like to turn the call over to Joanna Geraghty, JetBlue CEO.

Thank you, Koosh. Good morning, everyone, and thank you for joining us today. I want to start by reinforcing the bigger picture and the progress that we are making. Despite significant fuel headwinds and a challenging summer operation, our revenue performance is among the strongest in the industry. with unit revenue of 18.4% in the third quarter and further acceleration expected in the fourth. Customer demand remains resilient and we are seeing jet forward benefits compounding with some of our largest opportunities still ahead. Importantly, we are already expanding margins year over year despite elevated fuel prices. We remain focused on operating profitability in 2027 and see multiple paths to at least $1 in earnings per share and positive free cash flow in 2028. Importantly, our liquidity and financing flexibility provide an important bridge as these benefits build. The fuel challenges the industry faces are real, but so is our progress. JetBlue has a strong brand, a high value network, customers who are loyal to our differentiated offering, great crew members and a clear strategy to achieve sustained profitability. We are confident in our plan and focused on delivering the results that this airline is capable of achieving. Turning to the third quarter, I'm very encouraged by the strength we saw in the underlying business this quarter. Revenue materially exceeded our initial expectations and strengthened as the quarter progressed, with momentum continuing into the fourth quarter. For me, two highlights stand out from the quarter. First, demand remained resilient even as industry fares moved higher in response to elevated jet fuel costs. This revenue strength helped us recapture higher fuel faster than initially expected, and we achieved 87% recapture in the third quarter versus our initial expectation of 70 to 80%. Second, Fort Lauderdale continues to demonstrate the strength of our network strategy, delivering strong unit revenue performance even as we significantly expanded our operation. At the same time, the quarter was impacted by an unusually challenging summer operating environment. Severe weather and air traffic control constraints across our core northeast geographies reduced our completed capacity and increased our disruption and crew costs. Through it all, our crew members worked tirelessly to care for our customers and recover our operation. And I want to thank them for their tremendous dedication throughout such a demanding summer. Even with elevated fuel prices and the air traffic control pressures we faced this summer, we still expect to deliver year-over-year adjusted operating margin expansion over the second half of this year. We saw modest margin expansion in the third quarter and expect one to two points of further growth in the fourth quarter, even with fuel up 85%. We know there is still work ahead, particularly given elevated fuel prices and macroeconomic uncertainty. but our third quarter performance provides further evidence that JetForward is delivering results. We've now delivered four consecutive quarters of improving year over year RASM growth and are among the industry leaders for second half revenue expansion. We remain on track to achieve our 2026 JetForward targets with several important initiatives continuing to build into 2027 and beyond. And we are already seeing that execution translate into results in Fort Lauderdale. We expect our seat share to reach approximately 37% in the fourth quarter, up 14 points year over year, reflecting the scale that we are building as our operation expands. We're also deepening our engagement with local customers and co-brand acquisitions in Broward County increased 55% year over year in the third quarter. These actions are driving strong RASM growth in Fort Lauderdale and illustrate the early success of our strategic capacity growth. Blue First is yet another important driver of our growth and is our largest jet forward initiative. Seats are now on sale and we look forward to welcoming our first customers in early December. We're excited to offer customers a domestic first class experience at an accessible price point. At Runway, we expect Blue First to deliver nearly five points of Rasm improvement with its revenue and margin contributions building through 2028 and beyond. Turning to our financial position. We ended the quarter with $2.2 billion in liquidity and approximately $7 billion in unencumbered assets, including $2.8 billion in aircraft and engines. Together, these resources provide substantial financial flexibility and an important bridge as we execute JET Forward and move toward a stronger earnings and cash flow profile. The progress that we are seeing across our business is real. Our revenue initiatives are delivering, We are beginning to expand margins year over year and the benefits of JetForward are compounding as existing initiatives mature and new ones come online. With the financial resources to support our plan, our focus is on building on that momentum to achieve sustained operating profitability in 2027 and achieve positive free cash flow and at least $1 of earnings per share in 2028. Let me be clear, that is where our attention is and that is how we intend to create long-term value for our shareholders. With that, I will turn it over to Marty.

Thank you, Joanna. I also want to thank our crew members for their unwavering commitment to our customers and to JetBlue throughout the summer. Their efforts helped us navigate a challenging operating environment while continuing to deliver strong commercial results. Revenue was a clear highlight in the third quarter, and we are pleased that the strikes we saw through September have carried into the fourth quarter. During Q3, RASM increased 18.4% year-over-year, roughly four points better than the midpoint of our initial guidance. That puts JetBlue among the industry leaders in year-over-year total and unit revenue growth this quarter, reinforcing the momentum that we are seeing from our commercial initiatives. Higher yields supported in part by our investments in revenue management technology, drove a majority of this outperformance. Customer volumes remained relatively resilient, and we saw no meaningful signs of elasticity despite high affairs as we responded to elevated fuel costs. Both premium and main delivered double-digit rising growth, with the strength in main particularly encouraging. Demand strength remained broad-based across both peak and off-peak travel periods, with healthy booking trends continuing into the fall. Turning to Fort Lauderdale, We've seen continued acceleration in RASM growth throughout the year, even as we've significantly expanded our operation. In the third quarter, RASM increased nearly 15% year-over-year on more than 65% capacity growth. This performance demonstrates strong customer response as we continue to rapidly build scale in the market. We're expanding travel options for Broward County residents and creating more connecting opportunities for customers throughout our network. by adding destinations and frequencies and optimizing our ruling bank schedule. With 15 new destinations and increased frequencies to others, we expect peak daily departures to exceed 150 this winter, up 39% year-over-year. We recently launched service to two new destinations in Columbia, bringing our international network from Fort Lauderdale to 18 destinations. Robust growth requires close collaboration, and I want to personally thank Matt Gale, and the team at Broward County Aviation Department for their ongoing partnership as we continue to expand our operations. While we plan to continue to grow, we believe the third quarter likely represents our peak year-over-year growth rate in Fort Lauderdale. This should support further RASM expansion as our growth moderates and new capacity matures. Turning to the first, our new domestic first-class experience is now on sale across more than 30 routes. Service begins December 8th between Boston and Fort Lauderdale and will expand to additional routes in a phased rollout. We prioritize markets with strong premium demand where Blue First can help us capture high yield bookings and improve our revenue banks. We're encouraged by the early response to Blue First, which suggests that we are tapping into pent-up demand for a domestic first class product among existing customers, particularly on leisure routes from New York and Boston. Approximately 35% of bookings so far are award redemptions and Mosaic members account for nearly a quarter of the seats booked. While still early, this engagement reinforced our confidence and Blue First's ability to capture more premium travel demand from our existing loyal customer base. We're also pleased with the progress that we're making in modernizing our revenue management technology. We've completed the transition to a new system that improves forecasting and enables more sophisticated revenue optimization across our network, including automated management of mint and connecting itineraries for the first time. Early results are ahead of our expectations and we're adding capabilities to better anticipate shifts in demand, respond more quickly to market conditions and support further unit revenue improvement over time. Loyalty continues to deliver strong sequential growth driven by our premier FCR premium and partner strategy. with revenue of 20% for the quarter, the highest level of growth since 2023. Acquisition of the Premier Card grew eightfold year-over-year in the third quarter as customers responded positively to the benefits refresh and the opening of our latest Blue House in Boston. Past spend remained robust across our co-brand portfolio, growing double digits and pulling loyalty cash remuneration solidly on track for mid-teens growth for the year. Our investments in premium products and partnerships are driving deeper Reliant loyalty and engagement with record levels of active True Blue members and elite status qualifications this quarter. Our newest Blue House launch has been met by rave reviews and outstanding NPS results since opening in August. And it's just another one of the many investments we are making in the premium customer experience. Our Blue Sky loyalty collaboration, which improves global access for True Blue members, has now passed more than 1.1 billion True Blue Points redeemed on United flights since the loyalty ambassadors launched in February. We're also seeing encouraging progress at Paisley, which delivered its strongest financial result ever in Q3. Further rental car bookings through Mileage Plus Travel have outpaced United's previous provider on a per day basis since launch. We're building on that early traction with plans to introduce additional offerings throughout 26 and the first half of 2027. Paisley is on track to deliver nearly $100 million in operating income this year, with that contribution expected to nearly double by 2028, driven by the maturation of our existing JetBlue business and the continued ramp of planned offerings in the United States. Importantly, this target does not assume any additional partners, which presents a potential source of further upside as we expand the platform. Looking forward, we expect fourth quarter RASM increased 18% to 22% year-over-year. This represents further acceleration from the third quarter, despite year-over-year comparisons that are two to three points more challenging as we begin to lap the demand improvement that started last year. This is expected to be our fifth consecutive quarter of escalating year-over-year growth, which provides further evidence that our Jet Forward initiatives are delivering results and strengthening our revenue performance. Based on what our competitors have guided so far, we expect to continue to be among industry leaders in the fourth quarter as well. For the full year, we now expect Rasmus to increase 13.5% to 14.5%. Even with this revenue momentum, we remain disciplined with our capacity deployment. Fourth quarter growth is concentrated in Fort Lauderdale, where the initial return and substantial opportunity continue to support additional investment. Capacity in the rest of the network is flat to down. for the capacity growth of three to 4% and four-year growth of 1.5 to 6.5% year-over-year. Our fourth quarter capacity guide reflects significant impact of weather and operational disruptions that reduced completed flying last year. Excluding the impact of those prior year disruptions, scheduled capacity growth is nearly two points lower. Taken together, continued revenue strength, disciplined capacity deployment, and the growing contributions from our Jet Forward initiatives give us confidence in our revenue trajectory as we close up the year and head to 2027. And with that, I'll turn it over to Ursula.

Thank you, Marty. We're encouraged by the progress we're making on margins. We delivered year over year adjusted operating margin improvement in the third quarter and expect further expansion in the fourth as continued revenue strength is complemented by a meaningful step down in the growth of our chasm excluding fuel. This progression is an important step towards sustained operating profitability in 2027. We are also taking concrete steps to further enhance liquidity and maintain the financial flexibility needed to execute jet forward. On the cost side, third quarter Chasm X Fuel increased 7% year over year at the midpoint of our updated September guidance. As previously communicated, our underlying unit cost performance remained consistent with our initial 2.5% to 4.5% guidance range, excluding approximately four points of pressure from summer operating disruption. Our third quarter fuel price was $3.91 per gallon, 57% higher year over year. Looking to the fourth quarter, We expect fuel prices of approximately $4.64 per gallon, with continued revenue strength supporting further progress in recapturing higher fuel costs. Looking into the fourth quarter, we expect Kazin-X fuel between negative 1% and positive 1% year over year. This represents a meaningful step down in unit cost growth and a return to the cost trajectory we guided at the beginning of the year. For the full year, we now expect Chasm X fuel growth of 3.5% to 4.5%. Turning to profitability, we now expect a full year adjusted operating margin of negative 4.5% to 6.5%. The revision primarily reflects higher fuel prices, which created three and a half points of pressure relative to our July outlook. Stronger revenue performance has helped offset a significant portion of these headwinds. We also expect one to two points of year over year adjusted operating margin expansion in the fourth quarter, despite fuel prices expected to be 85% higher than last year. This reflects the strength of our revenue initiatives and continued improvement in our underlying cost trajectory. Turning to liquidity, our position remains strong and we continue to take a disciplined and proactive approach to managing our balance sheet. Our quarter end liquidity was $2.2 billion, including our $600 million undrawn credit facility. We also provided notice to draw the incremental $250 million available under our aircraft-backed financing accordion with funding expected in the fourth quarter. We've recently completed updated appraisals across our fleet positioning us well for potential additional aircraft-backed financing. Higher appraised values together with eight A220 aircraft purchased with cash this year through the third quarter bring the value of our fully unencumbered aircraft and engines to $2.8 billion, up from roughly $2 billion previously. This brings our total unencumbered asset base to approximately $7 billion. Importantly, our portfolio of unencumbered aircraft and engines includes a similar mix of assets as those we successfully financed earlier this year. together with our existing liquidity, our financing options give us confidence that we have the flexibility and runway to navigate a prolonged period of higher fuel prices while continuing to support our operations and advance jet forward. Turning to capital expenditures, third quarter CapEx was 189 million below our prior outlook, primarily due to the timing of one aircraft delivery and LGA slot payments shifting into the fourth quarter. Our full year CapEx outlook remains unchanged at approximately 850 million. We continue to expect annual CapEx below 1 billion through the end of the decade, supporting our path towards positive free cash flow and balance sheet improvement. Looking ahead, we expect the benefits of jet forward to continue compounding as our existing commercial initiatives mature, Blue First begins to contribute and cost efficiencies build. That growing contribution supports our goal of achieving operating profitability in 2027 and progressing towards positive free cash flow. Further out, we continue to target at least $1 of earnings per share in 2028. While the mix of drivers may differ from what we outlined in July, our strong revenue performance reinforces our confidence that there are multiple paths to achieving that target, including through stronger unit revenues that could help offset potentially higher fuel costs. Despite the challenging macro environment, we are starting to see financial progress and adjusted operating margin expansion. We still have plenty of work to do, but the path is becoming clear. We expect positive free cash flow in 2028 and believe we have the liquidity and unencumbered asset base needed to get us there. We will remain focused on disciplined execution and capital management to drive sustainable earnings growth and create long-term value for our shareholders. With that, we are happy to take your questions. Over to you, Jillian.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jamie Baker with JP Morgan. Jamie, your line is open. Please go ahead.

Oh, thank you very much. Good morning, everybody. So, Ursula, can we discuss liquidity options from here and maybe dig into what the pecking order for future raises might look like? I mean, we've been assuming that, you know, aircraft-related debt was you know probably just I don't know first in the queue but have you considered the carve out in loyalty deal that 400 million of forward mileage you know sale potential and then with the Paisley disclosure you know there's been a lot of focus on the Air Canada precedent but that that's loyalty we hadn't really thought about Paisley and how the value of that business could hypothetically exceed your equity market cap. Perhaps that's a more realistic option than issuing debt tied to True Blue. Quite a bit in here, but I'll let you run with it from there if you don't mind.

Yeah, thanks for the question, Jamie. So we believe we ended the quarter with a really healthy liquidity position at the $2.2 billion, including the revolver. As I mentioned in my script, we are looking to potentially do some incremental aircraft financing in the back half of this year. We are very focused on cost of funding. I mentioned we had our assets reappraised and we have the $2.8 billion in aircraft and engines. However, we do have other levers that can help bridge us to 2028 in terms of liquidity. and other potentials that exist. We are focused on cost of funding. So in the immediacy, we're focused on aircraft as we end 2026. And so maybe Joanna, over to you, if you have any other comments.

Yeah, I mean, I'll just add, I mean, I think Ursula did a nice job. She's laid out sort of the liquidity levers that we have on the debt side. And I think you correctly point out that we do have opportunities beyond traditional debt financing that could drive meaningful value without adding additional interest. And so I think the broader point I'd like to make is we have multiple avenues to strengthen liquidity beyond the current balance we have and the unencumbered assets to support our plan and bridge us to 2028, where we remain committed to the goal of a dollar of EPS. And that includes everything from, as you point out, Paisley, we have venture investments, other opportunities with the Cobra and credit card, you know we're just not in a position today to kind of further elaborate on those but I think you know point being we've got you know healthy liquidity balance and opportunities beyond what you see on the paper.

Okay that's helpful thank you and then just to follow up on the exfuel chasm you know obviously fourth quarter capacity is going to be down for third quarter exfuel chasm is going to be meaningfully better I know third quarter had four points of pressure in there but you know like even if we adjust for that this is Are there any line items in particular that drive the planned outcome or is it just sort of everything? Thanks and advance.

Yeah, so extremely pleased with the guide for the fourth quarter on controllable costs. The team has been executing exceptionally well. So the team had executed over $30 million of controllable cost savings in the third quarter. We're really focused on driving efficiencies, whether that's productivity, whether that's just in the technology that we're using, or even how we source it and procure with business partners. So super proud of the team. We always knew that this was going to be the trajectory and the cadence of this CasMX fuel performance this year. As a reminder, last year we did save two points of headwinds. We had some weather, we had the government shutdown, and so those contributed last year. So that is making the comp year over year look a little better. What I will say as we enter 2027, we have provided previous guidance that if we're growing We expect to print a low single-digit controllable cost growth next year. So that just speaks to the continued execution of the team in regards to the Jet Forward Cost Initiative.

That's great. Thanks, everybody.

Thanks, Jamie.

Your next question comes from the line of Brandon Oglenski with Barclays. Brandon, your line is open. Please go ahead.

Yeah, good morning, and thanks for taking the question. Ursula, maybe if we can come back to liquidity, because I think that's been the focus here with investors recently, especially with rumors of like a creditor group forming or something here. I don't know if you can speak directly to that, but then maybe specifically as you look out, I mean, it looks like you will be burning through a pretty sizable amount of cash in the fourth quarter, and I think seasonally 1Q is a little bit soft for you as well. So what would be like the right amount of incremental capital that you'd be looking to raise here?

Yeah, appreciate the question, Brandon. So, since we launched JetForward, we've used this 17 to 20% as a percent of trailing 12 months revenue range as kind of guidance. We thought that this level would provide us the appropriate runway to execute Jet Forward through a volatile environment. So I would still use that as a reference point. I think as the business continues to improve and we get to consistent profitability, that that metric could evolve. Clearly, we're not managing the business to a percent in isolation. To your point, we're definitely managing our uses of cash, including fuel, working capital, obviously our debt obligations, and our capital spending. I do find comfort in the fact that we do have a CapEx profile that will be below a billion dollars through the end of the decade. And as I mentioned in my prepared remarks, I do believe that we have a very healthy unencumbered asset base, like 2.8 being aircraft and engines that I believe can be a really strong bridge to get us 14 months until 2028 when we're going to deliver the dollar EPS and positive free cash flow. So I feel comfortable about where we're at to get us to a point where the business is generating healthy levels of cash going forward.

I appreciate that Ursula. And maybe Joanna, maybe a bigger question here, just, you know, how much debt do you think this company can sustain long-term? And obviously JetForward appears to be working here. You guys have the bridge to get to 2028, but I guess longer term, where do you want to see, you know, Thank you.

Yeah, I mean, at this point, we're focused on driving an operating profit next year and delivering the dollar of EPS and a return to free cash flow in 2028. And there are multiple paths to that goal. I think one point just worth mentioning, you know, the fuel assumptions behind those commitments or, you know, those projections, and we assume fuel is slightly above $4 for 2027, which I think is important. and then we have some consensus for 28, which is around $3. So, you know, listen, our focus is on continued execution. We recognize we need to get to a position where we're repairing the balance sheet. You know, fuel obviously presents, you know, a challenging headwind, but again, you know, I think there's a significant disconnect between the narrative in the bond market and what our financial results are demonstrating, but also the financial flexibility we have over the foreseeable future to bridge it to that 2028 EPS goal.

Martin, I just want to say one thing. When we gave that 2028 goal, we were doing that on second quarter 26 revenues. And obviously the pricing environment has changed pretty dramatically since then. So I think what we're excited about is we have a lot of different paths to get to at least a dollar EPS in 2028. And I'll remind everybody, 2028 is 14 months away. So this is a bridge, but it's not a very long bridge.

Yeah, just the last thing I would add is When we deliver at least a dollar in EPS in 2028, we're producing positive free cash flow. The number one priority is going to be delivering the business. And I think it's important to note that we have a very manageable CapEx profile through the end of the decade, both sub a billion. So all positive free cash flow will be going to improve the leverage metrics. I would also highlight that, you know, the most important part is driving margin expansion and helping the business de-lever. And in the fourth quarter, we're expanding margins to the tune of one to two points, even with fuel up like 85%. And so what that tells you is that the underlying initiatives in Jet Forward are compounding and driving margin expansion, which is going to get us on a path where we're generating significant free cash flow so that we can de-lever and improve the credit metrics.

Thank you all.

Your next question comes from the line of Michael Linenberg with Deutsche Bank. Michael, your line is open. Please go ahead.

Oh, yeah. Hey, good morning, everyone. Marty, earlier you mentioned that you just weren't seeing any signs of elasticity. I know there was a fair increase, I believe, that actually you led a day, not you personally, but JetBlue led a day or two ago, and it looked like it did not go through is is that a sign that maybe maybe the consumer is you know we're sort of at the limit i mean we've had i don't know somewhere between 15 and 20 fare increases since earlier this year um what what what's the appropriate read on that uh hey mike thanks for the question first of all i will take credit for these fair increases because we have to get to compensatory price number we are still in a situation where prices into uh

prices in 2026 are still lower than the real prices in 2019. We have still not gotten back to 2019 prices on a real basis. Second thing is, don't believe everything you read. I do not consider that fair increase failed. There was one airline that did not come along on a relatively limited number of leads. 93% of our seats have been subject to that fair increase. So yes, 7% of the seats we actually pulled back on because one of our competitors didn't match for whatever reason. But notwithstanding, I do see resilience in pricing right now. And again, if you look at the inputs, and let's take fuel out of it, let's just talk about, you know, rental landing fees, let's talk about labor, let's talk about maintenance. There are a lot of cost inputs in this business that have gone up by big numbers since 2019, and we still have not caught up to those increases in real pricing. you know my nobody nobody looks at the environment said that we've reached an equilibrium as far as pricing but if you look at where cost is right now we still have not as an industry caught up to the cost input changes.

Okay great and then this is my second question Ursula when we look at your aircraft that are delivering I think you have a few more A220s this year then I think another seven next year nine in 2028 should we assume that those are all going to just be paid for out of cash And if that's the case, at what point does your net debt peak? Is that 2028? I mean, I know you've talked about hitting free cash loan deleveraging, but there's always a bit of a lag. And so I'm just trying to go through the timing here. At what point does that net debt position peak before it starts coming down? Thanks for taking my question.

Yeah, I appreciate the question, Mike. As you mentioned, that is our go-forward delivery schedule. We have the 2.8 in unencumbered aircraft and engines today that obviously is going to continue to build as we take deliveries. In regards to funding the business for 2027, it's our job to evaluate all markets, all assets, and basically run the analysis to say what is the most efficient way to finance the business. Based on where we sit today, I do believe that that's going to continue to be aircraft, but we will do the appropriate analysis at that point in time. What I will say is that I have zero concerns about being able to finance in the market. The vintage and age of these aircraft are similar to what we financed earlier this year, and so I have all the confidence that We have a lot of flexibility and a lot of options as we go forward, but it's our job to make sure we're evaluating using the entirety of the unencumbered pool, all markets at that point in time. And Joanna also mentioned that there could be some other non-debt opportunities for us to bring cash on the balance sheet that could also help bridge us to 2028 when we're delivering positive free cash flow.

Great. Thanks for that. Thanks, everyone.

Your next question comes from the line of Sabi Scythe with Raymond James. Sabi, your line is open. Please go ahead. Hey, good morning.

Just maybe on blue first, I was kind of curious, any early learnings and then just how many aircraft a month can you reconfigure as you get through next year? I'm just trying to figure out how we should think about the cadence there.

Okay, thanks, Sabi. Well, first of all, as far as early learnings, I think by far our favorite fact is seeing how many of the seats being sold to our existing customers. I think there's a lot of speculation that this is a business model that was predicated on stealing customers for our competitors. And it's just not what we're seeing at all. We're seeing our current customers flocking to fill these seats. So I think that's actually a very good finding for us, number one. Number two, as far as the pace of installation, We will not be done installing until later in 28. And frankly, the issue right now is supply chain. We can absolutely go faster. In fact, I was with Collins on Friday and had an exact conversation like we would love to get these seats in faster. But unfortunately, as is the situation with so many products in the industry right now, supply chain is a critical path factor. But I would gladly take seats faster if we could.

but the majority of the fleet will be complete in 2027.

Got it. Appreciate that. And then just, you know, you mentioned Fort Lauderdale, you know, that growth should peak here in the third quarter and you annualize into next year. Curious, you know, how some of your other focus cities are performing here and kind of where you'd like to see growth next year.

So we don't get into too much detail as far as performance by Focus City. I would say that I think that we are much more even as far as profitability across cities than we've had historically. And I think we've had a lot of progress as far as right size capacity. We have shrunk pretty significantly in Boston, New York and Orlando temporarily to fund Fort Lauderdale, but we're expecting a backfill of that capacity as deliveries come in. Overall, I would say that We love where this network has shaken out. And I go back to the original conversation of the four key initiatives from JetForward, one of which being East Coast, Best East Coast Leisure Network. We did not forecast Fort Lauderdale becoming available for a significantly larger focus city and a connecting operation when we wrote JetForward. But at the core, it is completely consistent with what we originally said we wanted to be, which is Best East Coast Leisure Network. So we're excited we had that opportunity. I'm actually very optimistic about what we're seeing in San Juan right now. I think that we have a lot of opportunity across the system, which to me is sort of a high-class problem to ask. And it's one of the points I made in the script was we've reached a peak year-over-year growth in Fort Lauderdale. And now I think it's going to normalize to more typical growth. And I think that's going to give us the opportunity to backfill some of the places where we had to take capacity out.

Appreciate the call. Thank you.

Your next question comes from the line of Atul Maheswari with UBS. Atul, your line is open. Please go ahead.

Good morning. Thanks a lot for taking my question. So you have 2.2 billion in liquidity and you mentioned about the 17 to 20% target of trading 12-month revenues. Your covenants have a much lower requirement. So my question is, what's the thought process on keeping liquidity at these high levels and whether whether it would make sense to lower the threshold internally so that you can manage through the near-term cash flow imposed by the higher jet fuel prices without raising too much more debt?

Yeah, it's a really good question, Atul, and that's kind of what I referenced in my earlier response is we believe given the volatility in oil right now and the business is still on a path to getting to positive op margins, and, you know, 17 and 20 has been the target range. I think as we get the business to consistent profitability and turning out free cash flow, you could see us revise that target to be lower, especially if and when the oil environment settles down. So I think it's just a matter of time by which we adjust that target, but we got to get the business to a place where we're delivering the dollar EPS in 2028 and generating positive free cash flow.

Okay, that makes sense. And then as a quick follow-up, you mentioned about the 2.8 billion in unencumbered aircraft and engine base that you have. Is that an end of third quarter number? And if so, what would be the unencumbered asset base after you raise the additional 250 million in fourth quarter?

So the $2.8 billion is as of quarter close, Q3. We will obviously, that number, there are some puts and takes that will occur in the fourth quarter. So we will fund the $250 million aircraft backed accordion in the fourth quarter. But we will also be taking four incremental aircraft deliveries within the quarter. So I expect at year end, the 2.8 to be roughly in the same ballpark that it was at the end of Q3 and another seven aircraft next year.

So we're going to continue to add to that unencumbered asset base.

Great. That's a very helpful color and good luck with the rest of the year.

Thank you. Your next question comes from the line of Dan McKenzie with Seaport Global. Dan, your line is open. Please go ahead.

Oh, hey, thanks. Good morning, guys. Going back to the commentary and the release about meaningful runway for further growth as the commercial initiatives mature here. Just curious, what percent of the network is less than 12 months mature and historically when new routes have matured? Can you just remind us what that RASM uplift looks like? I know you guys have pulled down pretty sharply in Newark and obviously the 85% growth at Fort Lauderdale.

So right now, great question, right now for fourth quarter 26, 4% of the system is at less than one year and only 5% less than two years. So it's basically a mature network right now. We are really, really excited about what we're seeing in Fort Lauderdale as far as the pace of growth of RASM, even with all the capacity increases, which we're really excited about. And I think the second issue is, You know, again, we have had peak growth in Fort Lauderdale, so we actually think that's actually a great launching point for continued increase of, you know, revenue going forward in Fort Lauderdale. And then finally, you know, we barely scratched the surface as far as what we can do as far as revenue management capabilities, especially on connecting itineraries. And this is something that we've only done manually for the history of JetBlue. It's been carried so few connections. We made this investment in revenue management system Before we realized that connecting itineraries would be so important, but we knew that we'd be in a situation where it's good to have that capability. And then, you know, a year later, Spirit ends up creating opportunity for us and for a lot of else. So we did prepare ourselves for this and we're just barely starting to take advantage of it.

Very good. And then Marty, I noticed the basic first class product that's out there that's competitive with peers. But can you just help us understand what percent of the revenue you would characterize as upsell? And is that revenue pool outpacing system unit revenue trends today?

I actually don't have that exact number, and I'm not going to try to make one up on the spot. Right now, we're very happy with the ability to put the mint-based product in there. That was something we've been looking at for a while, but we wanted to wait until we had our second lounge open to do that because we do think that the lounge access is a pretty big hook as far as having people want to get the opportunity to pay a little fare, maybe not have a lounge access. We just started with a business partner called Plus Grade working on an upgrade product, which we are extremely happy with. and you know we may eventually build that product ourselves but given that IT is always a constraint as far as you know we want to do more than can actually get done we're very happy to work with a business partner that can do that for us and it's been very effective so far and we've got a lot of stuff in sort of in the pipeline as far as better upgrade performance obviously very important with the Blue First product coming in as far as you know trying to make sure that we optimize unit revenue of that cabin one thing that I think people are not getting much attention to is were also using the upgrade products to better fill the even more cabin. So overall, we recognize that it's very important to maximize unit revenue of premium seating, and we've got a lot of initiatives going on to make sure we get there.

Thanks so much, you guys.

Your next question comes from the line of Catherine O'Brien with Goldman Sachs. Catherine, your line is open. Please go ahead.

Hey, good morning, everyone. Thanks for the time. Marty, can we dig in to what drove the 3Q RASM beat versus that initial July guidance? I know you noted broad-based strengths, but any particular part of the network or cabin, a bright spot in particular? And could you share some color in the geographical or cabin-level assumptions underlying your 4Q outlook?

Okay, great, Katie. Thanks. So first of all, I think the big surprise for us in third quarter was actually the strength of the trough. historically at JetBlue forever we've had a pretty big drop off from August to September when kids go back to school and I think our original expectation was that we see a similar drop off but the results we saw in September in the in sort of a pricing environment where we had some pretty significant fare increases due to the spike in fuel in August uh which surprised us a lot uh we did not have the expectations of the performance in September we did and the one fun fact that I think we all have um have been very surprised by. Our average fare in September was higher than our average fare in July, which has never happened in the history of JetBlue. So I think the overall strength we're seeing, and I think it's what has resulted also in such a great fourth quarter guide, is that we're seeing troughs perform very, very well, which historically we have not seen. So I think that's actually a very, very good sign of the underlying resilience. I will also say, you know, we have pulled a little bit of capacity out of fourth quarter. even with strong demand at this higher fuel environment, you know, the marginal flying, there's definitely marginal flying that's not as accretive as we would like it to be. So we pulled that capacity out. You know, I'd say for 2027, we gave a guide of flow to mid single digits. Now we're not guiding 27 in this call, that'll be next call. But I think you'd expect that number to be more to the low end than the high end of that guide. But again, we'll talk about that three months from now. Yeah, but overall, I think that the The way that the pricing environment has reacted and the customer demand environment has basically not significantly dropped, I think it's giving us an incredible amount of optimism. I would say that we've seen a marginally better performance in international than domestic, but it is, you know, double visit basis point. It's not that big. I think part of that is that Fort Lauderdale has been so incredibly strong and that may be biasing a little bit because Fort Lauderdale International has been outstanding. but overall you know if this is very broad-based the strength we're seeing right now.

I'll just add a plug for JetForward as well so I mean yes broad-based strength across the network demand remains resilient industry pricing is constructive but at the end of the day we've also been at JetForward for two years working on a series of initiatives as you know that we believe are now driving a compounding effect with by the way Blue First really still yet to come I mean we just went out for sale two weeks ago I think so whether it's Fort Lauderdale the new revenue management system, our loyalty program with lounges in the premier card. I mean, you know, co-brand signups in South Florida are up 55%. Paisley, you know, we just launched cars with Mileage Plus. We've got all of that yet to come. Just really proud that, you know, this is not just, you know, industry phenomenon. This is JetBlue's strategy working underneath all of this and beginning to deliver tangible, tangible benefits with a lot still yet to come.

Yeah, I was on the fourth quarter. You know, we are basically at the top of the industry guidance as far as unit revenue. The other airline in there is Southwest. You know, Southwest is still lapping the change in bags and seats. You know, we're producing those numbers without having done bags and seats year over year. I think that's a real testimony to Jeff Lower.

Hello.

Apologies, ladies and gentlemen. We will be pausing the broadcast. There is a brief technical difficulty. Please stand by.

Thank you everyone for your patience.

We will now resume our call. Catherine, you are still on the line. We will resume with your question.

Sorry about that, Katie. Sorry, everyone. Thank you for your patience. Over to you, Katie.

Your next question comes from the line of Duane Fenningvert with Evercore ISI. Duane, your line is open. Please go ahead.

We can't hear Duane.

Your next question comes from the line of John Godin with Citigroup. John, your line is open. Please go ahead.

I was just hoping to have a broader dialogue about capacity growth. Can we revisit what the pros and cons are of a more substantial adjustment to your capacity outlook versus what's stopping you from reducing capacity more dramatically in order to improve profitability?

I guess I'll take those.

Let me start. We're deploying capacity where the returns are the strongest. And if you look at where we are today, all the growth is Fort Lauderdale, which is a generational opportunity for us. And so that's where the focus is. We're not actually growing really elsewhere outside of Fort Lauderdale. But at the end of the day, as you think about an elevated fuel environment, we're always managing capacity for the strongest returns. So we're pleased with where demand is. We're pleased with our revenue performance. If you look at 4Q and into next year, the competitive supply environment is constructive overall, and we'll continue to manage our capacity for profit.

We are growing slower than the rest of the industry by a pretty good number, so I'm sort of surprised I had a question. I think if you look at the network as it's developed, I think we've actually gotten to the point where we've got a very well-rounded network, especially with the opportunity we've taken advantage of in Fort Lauderdale. You know, obviously we'll continue to adjust the network supply based on the fuel price and the revenue environment. But I look at our unit revenue right now, look at the revenue environment in general. You know, I don't think we're in a situation where significant, you know, hacks at the growth plan would make any sense.

Sounds good. That's helpful. Thank you. And then just kind of as a follow up, just kind of tapping into loyalty a little bit. You mentioned that, you know, this was the highest level of revenue growth you've seen this quarter. Since 2023, you saw growth across revenue, co-brands, brand, and premier card acquisitions. I just wanted to double-click on that. Here's some of the puts and takes of that across the loyalty and any insight into the longer-term strategy there that you can provide. I appreciate that. Thanks.

Thanks, Sean. I'll say a couple of things. First of all, if you look at the percentage of revenue that we're getting from loyalty, versus our competitors. You know, we're actually above multiple of our competitors as far as how much revenue we're generating. We have a very, very well-placed loyalty program as far as its contribution to the entire picture of JetBlue. What we're most excited about as far as loyalty develops are two. First is the premier card and what the launchers are doing for us. That's an important part of JetForward, and we're really happy with what we're seeing so far with respect to the premier card. We gave some stats about premier card earlier. and the second is Blue Sky. We are now in a situation where the JetBlue credit card for a resident in any one of our cities, it will take you anywhere you want to go in the world with our partnership with United. That has been a shortcoming of the program historically. And I think even with that shortcoming, we have in multiple quarters had revenue contribution higher than Delta's, even though that is a very competitive credit card. Now that we've taken the blue sky capabilities of getting customers access worldwide into the card, we're really positive about the future growth going forward. We could not be happier with Barclays as a partner. I think we do benefit by having a partner that does not have their own proprietary credit card because we are fully aligned as far as our objectives versus their objectives. So we're actually very bullish on loyalty. It's been a strong contributor to JetForward. And I think, as you know, every other quarter we update JetForward. and I think we'll be talking more about factors going forward in our next update.

Great.

Thank you guys. Thanks.

Your next question comes from the line of Michael Goldie with Bank of Montreal Capital Markets. Michael, your line is open. Please go ahead.

Morning and thank you for the question. System load factors came off 150 basis points year-over-year. Can you discuss how much of that reflects The broader environment where we're seeing some airlines trade loads for yield versus the impact of Fort Lauderdale and Florida. And if you exclude Fort Lauderdale, what does that look like?

It's a great question, Michael. And first of all, I think, yes, there has been, we said there's been no meaningful increase in elasticity. We have seen a little bit of reductions, and I think the industry has reacted by pulling down capacity, and we pulled down capacity in fourth quarter. versus what we had originally loaded in the first quarter. So I think the reaction has been very appropriate with what we're seeing. It is very clear that a truly price sensitive, the $39, $49 customers on Spirit, a lot of them have disappeared as prices have gone up. I remind you that Spirit had a negative 40, 50% margin. So those are prices that are nowhere near compensatory with the cost environment of the industry right now. So we actually look at the... The trade-off right now as far as price versus demand and supply is actually pretty well in equilibrium. We'll continue to adjust our capacity going forward based on customer demand. But so far, I'd say that, again, with real prices lower than 2019, I don't look at the pricing environment right now as being specifically problematic.

And I appreciate we're in a period of just a exceptional volatility, but can you share some thoughts about fuel hedging and is this something you would ever revisit again?

Yeah, it's a good question. We revisit that question often internally and we debate it. Obviously, no one in the U.S. actually in terms of our competitors hedge. So just one consideration is being at A disadvantage or an advantage, I guess. Number two, you know, right now it's very costly to enter the fuel hedge market. So, you know, we'll continue to evaluate if it's a tool in the toolkit we want to start utilizing again to mitigate volatility going forward.

Thank you.

Your next question comes from the line of Catherine O'Brien with Goldman Sachs. Catherine, your line is open. Please go ahead.

Hey, I will try not to take personally that you cut off at my question, but glad we're back. It was all me, I know. So, and also I was on hold for a little bit, so I apologize if this has already been asked, but I just had a follow up to the response we were talking about earlier on the 27 guide. you know you've said you're assuming fuel is over four dollars a gallon in that which I'm guessing is higher than when you first guided back in July and then I think it's absolutely prudent to be thinking lower end of capacity at these fuel prices but thinking that might drive some incremental unit cost pressure versus your earlier plan can you just walk us through high level how your revenue outlook has changed to maintain that break even operating outlook like is that rolling forward the 4q pricing environment that you know assumes some incremental fare hikes from here or just just how should we think about it

Hi Katie, thanks for the question. So we didn't, you know, we gave a very high level guide for 27. We really didn't guide in too much detail. We gave a much better guide for 28. So I'm going to answer the 28 question and then back into 27. When we originally guided 2028, we were guiding at Consensus Fuel and also guiding with the pricing environment that we saw in second quarter of 2026. Obviously the pricing environment has changed dramatically. and this is one of the reasons why if you look at 2028, we don't know what fuel or the pricing environment are gonna be in 2028, but I think if you look at the various paths that we have to get to the $1 EPS, we still remain very confident that we have multiple paths to get there. I think if you look at what we laid out as far as expectation, as far as industry capacity, GDP, fuel, et cetera, for 2028, Those numbers have certainly changed, but no matter how we look at it, we feel very good about getting the dollar EPS. And I think that's because we are in a very good pricing environment now with respect to the increased fuel, number one. Number two, we have had very, very resilient customer response to the pricing as it exists. Again, I'm going to keep saying this because people don't fully get it. We do continue to have... Real prices that are lower than 2019 still. So given the current pricing environment, obviously I think when we get to the next quarter, we get into a full 27 guide and we update to 2028. We'll give more details. Obviously the unit revenue increases from second quarter 26 are obsolete. but fundamentally looking at consensus for 2028 and the current regular environment, we feel much more confident about the dollar than we even did then and we felt great at the time. So I think we feel very good as far as where we stand right now. As respect to 2027, we're going to react to the environment as we see it right now and the pricing environment. We know we can get to a positive, I imagine, in 2027, even with fuel over $4. So we feel very good about that, and we're going to give you a better guide for that next quarter, as we normally would, our regular cadence for the upcoming year guide. But we are extremely bullish, and I think it's one of the things that, if you look at the foolishness of the last week, we just get that much more confused, because we look at the underlying business and say, we feel like we're in a fantastic spot.

Okay, great.

Thanks, Marty.

As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Ravi Shankar with Morgan Stanley. Ravi, your line is open. Please go ahead.

Great. Thanks, everyone. Apologies if I missed this with the gap in the call, but just on fuel recovery, I think you said you had recaptured 87% of fuel in the third quarter. and Marty, you mentioned about how in the most recent round, maybe one of your peers in fallout, are you still confident that you can recover 100% of jet in 27 if fuel stays here?

Yeah, we are absolutely confident of getting there in 27. I'd say even early 27. Frankly, if you look at the original path for fourth quarter 26, I think the biggest challenge was we had a big fuel increase in August and we had a lot of revenue on the books. And one of the things I think as an industry we are quite aware of, and I think as analysts you're aware of too now, there's a pretty big lag when you have big spike in fuel prices because everything you have on the books was priced at the previous fuel. So I don't look at this delay as being anything other than an issue of timing and spikes. So we still feel very confident. I think you heard earlier, The last fair increase did go through with the exception of one airline, which is relatively limited overlap with us. So we're actually very confident about the environment as it exists right now and getting 100% next year. And again, we'll have more detail on that in our fourth quarter call.

Got it. And just to follow up, is the current focus on liquidity impacting any jet forward initiatives, either in terms of order of investment or if you're putting anything out?

Absolutely not. You got a double no on that one.

I love it. Pretty emphatic. Thank you for that.

No, and I will say again to our friends at Collins, if they can get us seats faster, we'll take them. We're very bullish about food first.

This concludes our question and answer session and concludes today's conference. Thank you for your participation. You may now disconnect.