JetBlue (JBLU) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, Oct. 27, 2026

CALL PARTICIPANTS

• Director of Investor Relations - Koosh Rohit Patel
• Chief Executive Officer - Joanna L. Geraghty
• President - Martin J. George
• Chief Financial Officer - Ursula L. Hurley

TAKEAWAYS

• Operating Revenue -- $2.8 billion, representing 21.1% growth year over year.
• Unit Revenue (RASM) -- 18.4% increase year over year, driven by higher yields and the implementation of revenue management technology.
• Adjusted Operating Margin Expansion -- 1 to 2 percentage points of growth expected in the fourth quarter.
• CASM-Ex Fuel -- 7% increase year over year, reflecting approximately 4 percentage points of pressure from summer operating disruptions.
• Liquidity -- $2.2 billion at quarter end, including a $600 million undrawn credit facility.
• Unencumbered Assets -- approximately $7 billion, including $2.8 billion in aircraft and engines.
• Fuel Price -- $3.91 per gallon, an increase of 57% year over year.
• Fort Lauderdale Capacity -- more than 65% ASM growth year over year.
• Fort Lauderdale RASM -- nearly 15% increase, demonstrating scale building in the market.
• Loyalty Revenue -- 20% growth year over year, the highest level of growth since 2023.
• Premier Card Acquisitions -- eightfold increase year over year following a card benefits refresh.
• Paisly Operating Income -- nearly $100 million projected for 2026, with a target to double this contribution by 2028.
• Full-Year CapEx -- approximately $850 million, with a commitment to keep annual capital expenditures below $1 billion through the end of the decade.
• Q4 RASM Guidance -- 18% to 22% growth year over year.
• Q4 CASM-Ex Fuel Guidance -- negative 1% to positive 1% growth year over year.
• BlueFirst RASM Impact -- nearly 5 points of improvement expected at maturity.
• TrueBlue Points Redemptions -- more than 1.1 billion points redeemed on United flights since the Blue Sky partnership launched in February.
• Full-Year ASM Guidance -- 1.5% to 2.5% growth year over year.
• Interest Expense -- approximately $590 million projected for the full year.
• Fuel Recapture -- 87% of higher fuel costs recaptured in the third quarter, exceeding initial expectations.
• Fort Lauderdale Daily Departures -- planned to exceed 150 this winter, a 39% increase year over year.
• Fort Lauderdale Seat Share -- approximately 37% expected in the fourth quarter, up 14 points year over year.
• Liquidity Target -- 17% to 20% of trailing 12-month revenue, serving as a guideline for navigating volatile fuel prices.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Joanna L. Geraghty stated, "unusually challenging summer operating environment. Severe weather and air traffic control constraints across our core Northeast geographies reduced our completed capacity and increased our disruption in crew costs," regarding third-quarter performance.
• Ursula L. Hurley noted that the full-year operating margin revision "primarily reflects higher fuel prices, which created 3.5 points of pressure relative to our July outlook."

SUMMARY

JetBlue Airways Corporation (NASDAQ:JBLU) reported its third-quarter financial results, citing its path toward sustained operating profitability in 2027 and a target of at least $1 in earnings per share by 2028. Management indicated that revenue performance was supported by higher yields and the expansion of the Fort Lauderdale hub, which is becoming a major connecting operation for the airline. The company expects margin expansion to continue into the fourth quarter, driven by the implementation of commercial initiatives under the JetForward plan and a projected decrease in non-fuel unit costs. Financial flexibility is maintained through a liquidity bridge that includes a pool of unencumbered aircraft and engines valued at approximately $2.8 billion.

• The company launched sales for BlueFirst, its new domestic first-class product, on more than 30 routes with service scheduled to begin on Dec. 8 between Boston and Fort Lauderdale.
• Martin J. George reported that approximately 35% of early BlueFirst bookings are award redemptions and Mosaic members account for nearly a quarter of seats booked.
• Management cited the completion of a transition to an upgraded revenue management system that improves forecasting for connecting itineraries and Mint products.
• Fort Lauderdale operations are expanding to include 18 international destinations, including two new routes to Colombia.
• Ursula L. Hurley indicated that the company is evaluating multiple liquidity levers, including aircraft-backed financing and non-debt opportunities like Paisly or credit card partnerships.
• The company reported eightfold growth in Premier Card acquisitions following a card refresh and the opening of the BlueHouse lounge in Boston.

INDUSTRY GLOSSARY

• ASMs (Available Seat Miles): A measure of an airline's carrying capacity, calculated by multiplying the number of seats available by the number of miles those seats are flown.
• BlueHouse: JetBlue's branded airport lounge experience.
• Blue Sky: A loyalty collaboration between JetBlue and United Airlines that allows TrueBlue members to redeem points on United flights.
• BlueFirst: JetBlue's new domestic first-class product featuring premium seating and service.
• CASM (Cost per Available Seat Mile): A standard industry metric representing the cost to fly one seat one mile.
• CASM-Ex Fuel: Cost per available seat mile excluding aircraft fuel, other non-airline operating expenses, and special items.
• JetForward: JetBlue's multiyear strategic plan focused on network optimization, revenue growth, and cost control.
• Mint: JetBlue's premium travel experience available on select cross-country and international routes.
• Mosaic: The elite status tiers within the TrueBlue loyalty program.
• Paisly: A travel technology platform owned by JetBlue that allows customers to book cars, stays, and activities.
• RASM (Revenue per Available Seat Mile): A standard industry metric representing the revenue earned per seat flown one mile.
• TrueBlue: JetBlue's customer loyalty and rewards program.

Full Conference Call Transcript

Operator: Good morning, everyone. My name is Jillian. I would like to welcome everyone to the JetBlue Airways third quarter 2026 earnings conference call. As a reminder, today's call is being recorded. At this time, all participants are in a listen only mode. I would now like to turn the call over to JetBlue's director of investor relations, Koosh Rohit Patel. Please go ahead, sir.

Koosh Rohit Patel: Thanks, Jillian. Good morning, everyone, thank you for joining us for our third quarter 2026 earnings call. Yesterday, 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, on the SEC's website at www.sec.gov. In New York, to discuss our results are Joanna L. Geraghty, our Chief Executive Officer; Martin J. George, our president and Ursula L. Hurley, our chief financial officer. During today's call, we will 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 GAAP measures are included in our earnings materials and are available on our Investor Relations website. And now I would like to turn the call over to Joanna L. Geraghty, JetBlue's CEO.

Joanna L. Geraghty: Thank you, Kush. Good morning, everyone, and thank you for joining us today. I want to start by reinforcing the bigger picture. The progress that we are making. Despite significant fuel headwinds and a challenging summer operation, our revenue performance is among the strongest in the industry. With unit revenue up 18.4% in the third quarter and further acceleration expected in the fourth. Customer demand remains resilient. We are seeing JetForward 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 we 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 am 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, 2 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 80% 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 in crew costs.

Through it all, our crew members worked tirelessly to care for our customers and recover our operations. 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 1 to 2 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 have now delivered 4 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 target 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 are 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 are excited to offer customers a domestic first class experience at an accessible price point. At runway, we expect BlueFirst to deliver nearly 5 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 JetForward and move toward a stronger earnings and cash flow profile. The progress that we are seeing across our business is real. Our revenue initiatives are delivering. We are beginning to expand margins year-over-year, And the benefits of Jet Forward are compounding as existing initiatives mature and new ones come online.

With the financial resources to support our plan, our focus is on building on that momentum to achieve sustained operating profitability in 2027 and achieve positive free cash flow and at least $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 Martin.

Martin J. George: Thank you, Joanna. I also want to thank our crew members for their unwavering commitment to our customers and to JetBlue throughout some. Efforts helped us navigate a challenging operating environment while continuing to deliver strong commercial results. Revenue was a clear highlight in the third quarter. We are pleased that the strikes we saw through September has carried into the fourth quarter. During Q3, RASM increased 18.4% year-over-year, Roughly 4 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 have seen with 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 elasticity despite higher fares. As we responded to elevated fuel costs. Both premium and main delivered double digit RASM growth. With the strength in Maine 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 see continued acceleration in RASM growth throughout the year, even as we 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 are 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 bank schedule. With 15 new destinations, increased frequencies to others, we expect peak daily departures to exceed 150 this winter. Up 39% year-over-year, We recently launched service to 2 new destinations in Colombia, bringing our international network from Fort Lauderdale to 18 destinations. Robust growth requires close collaboration. 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. Transitioning to BlueFirst, our new domestic first class experience is now on sale across more than 30 routes. Service begins December 8 between Boston and Fort Lauderdale. And will expand to additional routes in a phased rollout. We prioritize markets with strong premium demand. Where BlueFirst can help us capture high yield bookings and improve our revenue mix. We are encouraged by the early response to BlueFirst.

Which suggests that we are capping independent 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 reinforces our confidence in BlueFirst's ability to capture more premium travel demand. From our existing loyal customer base. We are also pleased with the progress that we are making in modernizing our revenue management technology. We have completed the transition to a new system that improves forecasting, and enables more sophisticated revenue optimization across our network. Including automated management of MIP and connecting itineraries for the first time.

Early results are ahead of our expectations, and we are adding capabilities to better anticipate shifts in demand. Respond more quickly to market conditions, support further unit revenue improvement over time. Our loyalty to deliver strong sequential growth. Driven by a premier. I see our premium and partners strategy. Revenue up 20% for the quarter, our highest level of growth since 2023. Acquisitions of the Premier Card, grew 8-fold 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. Card 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 brand loyalty and engagement, record levels of active TrueBlue members and elite status qualifications this quarter. Our newest Blue House launch has been met by rave reviews, outstanding NPS results since opening in August. And it is just another 1 of the many investments we are making in the premium customer experience. Our Blue Sky Loyalty Collaboration which improves global access with TrueBlue members, has now passed more than 1.1 billion TrueBlue points redeemed on United flights since the loyalty assets launched in February. We are also seeing encouraging progress at Paisly. Delivered its strongest financial result ever in Q3.

Further, rental car bookings through MileagePlus travel have outpaced United's previous provider on a per day basis since launch. We are building on that early traction with plans to introduce additional offerings throughout 2026 and the first half of 27. 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 United. Importantly, this target does not assume any additional partners which presents a potential source of further upside as we expand the platform.

Looking forward, we expect fourth quarter RASM to increase 18% to 22% year-over-year, This represents further acceleration from the third quarter. Despite year-over-year comparisons that are 2 to 3 points more challenging as we begin to lap the demand improvement that started late last year. This is expected to be our fifth consecutive quarter of escalating year-over-year RASM growth. Which provides further evidence that our JetForward 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 RASM 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, with initial return and substantial opportunity to continue to support additional investment. Capacity in the rest of the network is flat to down. We expect fourth quarter capacity growth of 3% to 4%. And full year growth of 1.5% to 6.5% year-over-year, Our fourth quarter capacity guide reflects the 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 2 points lower.

Taken together, continued revenue strength, disciplined capacity deployment, and the growing contributions from our JetForward initiatives give us confidence in our revenue trajectory as we close out the year and head into 2027. And with that, I will turn it over to Ursula.

Ursula L. Hurley: Thank you, Martin. We are encouraged by the progress we are 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 CASM 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 JetForward. On the cost side, third quarter CASM-ex 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 4 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 to the fourth quarter, we expect CASM-ex 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 CASM-ex 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 3.5 points of pressure relative to our July outlook. Stronger revenue performance has helped offset a significant portion of these headwinds. We also expect 1 to 2 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 have recently completed updated appraisals across our fleet, positioning us well for potential additional aircraft backed financing. Higher appraised values together with 8 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 JetForward. Turning to capital expenditures. Third quarter CapEx was $189 million below our prior outlook primarily due to the timing of 1 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 JetForward to continue compounding as our existing commercial initiatives mature, BlueFirst begins to contribute and cost efficiencies build. That growing contribution supports our goal of achieving operating profitability in 2027 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.

Operator: Thank you. We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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 JPMorgan. Jamie, your line is open. Please go ahead.

Jamie Baker: Oh, thank you very much. Good morning, everybody. So Ursula, can we discuss liquidity options from here and maybe dig in to what the pecking order for future raises might look like? I mean, we have been assuming that aircraft-related debt was probably just, I do not know, first in the queue. Have you considered the carve out in the loyalty deal that $400 million of forward mileage, sale potential? And then with the Paisley disclosure, there is been a lot of focus on the Air Canada precedent, but that is loyalty.

We had not really thought about Paisley and how the value of that business could, hypothetically exceed your equity market cap perhaps that is a more realistic option than issuing debt tied to TrueBlue I packed quite a bit in here, but I will let you run with it from there if you do not mind.

Ursula L. Hurley: Yeah. Thanks for the question, Jamie. So we are we believe we ended the quarter with a really healthy liquidity position at the $2.2 billion including the revolver. And As I mentioned in my script, we are looking to potentially do some incremental aircraft financing in the back half of this year. We are very focused on cost of funding. I mentioned we had our assets reappraised, and we have the 2.8 billion in aircraft and engines. However, we do have other levers that can help bridge us to 2028 in terms of liquidity. So, you know, other potentials that exist. We are focused on cost of funding.

So in the immediacy, we are focused on aircraft as we end 2026. And so maybe, Joanna, over to you if you have any other comments.

Joanna L. Geraghty: Yeah. I mean, I will just add a 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 would 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 $1 of EPS. And that includes everything from, as you point out, Paisly, we have venture investments.

Are there opportunities with the COBRA and credit card? You know, we are just not in a position today to further elaborate on those. Okay. But I think, you point being, we have got, you a healthy liquidity balance and opportunities beyond what you see on the paper.

Jamie Baker: Okay. that is helpful. Thank you. And then just a follow-up on the ex fuel CASM. Obviously, fourth quarter capacity is going to be down from third quarter. Ex fuel CASM is gonna be meaningfully better. I know third quarter had 4 points of pressure in there, but yeah, even if we adjust for that, this sequential change looks pretty good. I mean, are there any line items in particular that drive the planned outcome, or is it just sort of everything? Thanks in advance.

Ursula L. Hurley: 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 are really focused on driving efficiencies, whether that is productivity, whether that is just in the technology that we are using, or even how we source and procure with business partners. So super proud of the team. We always knew that this was gonna be the trajectory and the cadence of this CASM-ex fuel performance this year. As a reminder, last year, we did face 2 points of headwinds We had some weather. We had the government shutdown.

And so those contributed last year. So that is just making the comp, year-over-year look a little better. What I will say is we enter 2027, we have provided previous guidance that if we are growing mid single digits, we expect low-single-digit controllable cost growth next year. So that just speaks to the continued execution of the team in regards to the JetForward cost initiatives.

Joanna L. Geraghty: that is great. Thanks, everybody.

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

Brandon Oglenski: Yeah. Good morning, and thanks for taking the question. Ursula, maybe if we can come back to liquidity because I think that is been the focus here with investors recently, with, you know, rumors of, a creditor group forming or something here. I do not know if you can speak directly to that. But then maybe, specifically, as you look out, I mean, looks like you will be burning through pretty sizable amount of cash in the fourth quarter. And I think seasonally, 1 q is a little bit soft for you as well. So what would be, the right amount of incremental capital that you would be looking to raise here.

Ursula L. Hurley: Yeah. Appreciate the question, Brandon. So since we launched JetForward, we have used it 17% to 20% as a percent of trailing 12 month revenue range as kind of guidance. We thought that this level would provide us the appropriate runway to execute JetForward 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 metric could evolve. Clearly, we are not managing the business to a percent in isolation. To your point, we are definitely managing our uses of cash, including fuel, working capital, obviously, our debt, all of our obligations, and our capital spending.

I mean, I do find comfort in the fact that we do have a CapEx profile that will be below $1 billion. 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, $2.8 billion in aircraft and engines that I believe can be a really strong bridge to get us in 14 months until 2028 when we are gonna deliver the $1 EPS positive free cash flow. So I feel comfortable about where we are at to get us to a point where the business is generating healthy levels of cash going forward.

Brandon Oglenski: I appreciate that, Ursula. Maybe, Joanna, maybe a bigger question here. Just, you know, how much debt do you think this company can sustain long term? And obviously, JetFord 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 leverage for this business? Thank you.

Joanna L. Geraghty: Yes. I mean, at this point, we are 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 1 point just worth mentioning, you know, the fuel assumptions behind those commitments are those projections, and we assume fuel is slightly above $4 for 2027, which I think is important. And then we assume consensus for 2028, which is around $3. So, listen, our focus is on continued We recognize we need to get to a position where we are repairing the balance sheet.

Fuel obviously presents a challenging headwind, but again, you know, I think there is a significant disconnect between the narrative and the bond market. And what our financial results are demonstrating, but also the financial flexibility we have over the foreseeable future to bridge us to that 2028 EPS goal.

Martin J. George: Martin, I just want to say 1 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 are excited about is we have a lot of different paths to get to at least $1 EPS in 2028. And I will remind everybody, 2028 is 14 months away. So this is this is a bridge, but it is not a very long bridge.

Joanna L. Geraghty: Just the last thing I would add is when we deliver at least $1 in EPS in 2028, we are producing positive free cash flow. The number 1 priority is going to be delevering the business. And I think it is important to note that we have a very manageable CapEx profile through the end of the decade, both sub-$1 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 delever. And the fourth quarter, we are expanding margins to the tune of 1 to 2 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 gonna get us on a path where we are generating significant free cash flow so that we can delever and improve the credit metrics.

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

Michael Linenberg: Oh, yeah. Hey. Good morning, everyone. Martin, I. Earlier, you mentioned that you just were not seeing any signs of The US 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 2 ago, and it looked like it did not go through. Is that a sign that maybe the consumer is, we are sort of at the limit? I mean, we have had, I do not know, somewhere between 15 and 20 fare increases since earlier this year. what is the appropriate read on that?

Martin J. George: Hey, Mike. Thanks for the question. First of all, I will take credit for leading fare increases because we have to get to compensatory prices. We are still in a situation where prices-- prices in 2026 are still lower than the real prices in 39. We have still not gotten back to 2029 actually, 2019 prices on a real basis. Second thing is Not-- do not believe everything you read. I do not consider that fair increase failed. This 1 airline did not come along on a relatively limited number of these. 93% of our seats have been subject to that fair increase.

So, yes, 7% of the seats we actually pulled back on because 1 of our competitors did not 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 a few out of it and just talk about rent and landing fees. Let's talk about labor. Let's talk about maintenance. There are a lot of costs in the business that have gone up by big numbers since 2019, and we still have not caught up to those increases in real pricing. So you know, my-- nobody looks at the environment and says that we have reached an equilibrium as far as pricing.

But if you look at where costs are right now, still have not, as an industry, caught up to the cost input changes.

Michael Linenberg: Okay. Great. And then just 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 7 next year, 9 in 2028. Should we assume that those are all gonna just be paid for out of cash And if that is the case, at what point does your net debt peak? Is that in 2028? I mean, I know you have talked about hitting free cash flow and deleveraging, there is always a bit of a lag. And so I am just trying to go through the timing here at what point does that net debt position peak before it starts coming down?

Ursula L. Hurley: Yeah. So appreciate the question, Mike. So as you mentioned, that is our go forward delivery schedule. You know, we have the $2.8 billion in unencumbered aircraft and engines today. That obviously is gonna continue to build. As we take deliveries. In regards to funding the business for 2027, it is 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 is gonna continue to be aircraft, but we will do the appropriate analysis at that point in time.

What I will say is that, you know, I have zero concerns about being able to finance in the market. The vintage and age of these aircraft are similar to what we financed earlier this year, and so I have all the confidence that we have a lot of flexibility and a lot of options as we go forward, but it is our job to make sure we are evaluating using the entirety of the unencumbered pool. all markets at that point in time.

And Joanna also mentioned that, you know, there could be some other nondebt opportunities for us to bring cash on the balance sheet that could also help bridge us to 2028 when we are delivering positive free cash flow.

Michael Linenberg: Great. Thanks for that. Thanks, everyone.

Operator: Your next question comes from the line of Savanthi Syth with Raymond James. Ravi, your line is open. Please go ahead.

Savanthi Syth: Hey. Good morning. Just maybe on BlueFirst. I was kind of curious, any early learnings? And then just how many aircraft a month can you, you know, reconfigure as you get through next year? I am just trying to figure out how we should think about, like, the cadence there.

Martin J. George: Okay. Thanks, Ravi. 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 are being sold to our existing customers. Like, that is I think there is a lot of speculation that this is a business model that was predicated on stealing customers for our competitors. And it is just not what we are seeing at all. We are seeing our current our current customers flocking to fill these seats. So I think that is actually a very good finding for us, number 1. Number 2, as far as the pace of installation, we will not be done installing until later in 2028.

And, frankly, the issue right now is supply chain. We can absolutely go faster In fact, I was with Colin on Friday and had an exact conversation. Like, 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.

Joanna L. Geraghty: But the majority of the fleet will be complete in-- yeah. By the end of 2027. 2020. Yeah.

Savanthi Syth: 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 to know how your. Some of your other focus cities are performing here and kind of where you would like to see growth next year?

Martin J. George: So we do not get into too much detail as far as performance by FocusCity. I would say that I think that we are much more even as far as profitability across cities than we have had historically. And I think we have 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 expecting to backfill a lot of that capacity as deliveries come in. You know, overall, I would say that we love where this network is shaping out. And I go back to the original conversation of the 4 key initiatives from Jet Forward, 1 of which being East Coast.

Best East Coast leisure network. We did not forecast Fort Lauderdale becoming available as a significantly larger focused city and a-- and a connecting operation when we wrote Jet Forward. But at the core, it is completely consistent with what we originally said we wanted to be, which is the best East Coast. Leisure network. So we are excited we had that opportunity. I am actually very optimistic about what we are seeing in San Juan right now.

I think that we have a lot of opportunity across the system, which, you know, to me is a sort of high class problem to ask. it is 1 of the points I made in the script was we reached a peak year over year growth in Fort Lauderdale. And now I think it is gonna normalize to more to a more typical growth. And I think that is gonna give us the opportunity to backfill some of the places where we had to take capacity out.

Savanthi Syth: Appreciate the color. Thank you.

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

Atul Maheswari: 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 trailing 12 month revenues. Your covenants have a much lower requirement. So my question is, what is the thought process on keeping liquidity at these high levels and whether it would make sense to lower the threshold internally so that you can manage through the near term cash burn posed by, the higher jet fuel prices without raising too much more debt.

Ursula L. Hurley: Yeah. it is a really good question, Atul, and that is kind of what I referenced in my earlier response is we believe given the volatility in oil right now and the business is still on a path to getting to positive op margin. You know, 17% to 20% have been the target range. I think as we get the business to consistent profitability, and turning out positive 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 is just a matter of time, by which we adjust that target, but we got to get the business to a place where we are delivering $1 EPS in 2028 and generating positive free cash flow.

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

Ursula L. Hurley: 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 will also be taking 4 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 7 aircraft next year. So we are gonna continue to add to that unencumbered asset base.

Atul Maheswari: Great. that is very helpful color, and good luck with the rest of the year. Thank you.

Operator: Your next question comes from the line of Daniel McKenzie with Seaport Global. Daniel, your line is open. Please go ahead.

Daniel McKenzie: Oh, hey. Thanks. Good morning, guys. Going back to the commentary in 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, 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, you know, 85% growth at Fort Lauderdale.

Martin J. George: So right now. Great question. Right now, for fourth quarter 26, 4% of the system is at less than 1 year. And only 5% less than 2 years. So it is basically a mature network right now. We are really, really excited about what we are seeing in Fort Lauderdale as far as the pace of growth of RASM even with all the capacity increases, which we are really excited about. Yeah. As far as the I think the second issue is you know, again, we have hit peak growth for Fort Lauderdale now.

So we actually think that is actually a great launching point for continued increase of unit 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. I mean, this is something that we have only done manually for the history of JetBlue because we have carried so few connections. We made this investment in revenue management system before we realized that connecting itineraries to be so important, but we knew that we would be in a situation where it is good to have that capability.

And then, you know, a year later, Spirit ends up creating opportunity for us in Fort Lauderdale. So we did prepare ourselves for this, and we are just barely starting to take advantage of it.

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

Martin J. George: I do not have that exact number, and I am not gonna try to make 1 up on the spot. I mean, you know, right now, we are very happy with the ability to put the mint based product in there. That was something we have 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 lower fare, maybe not have a lounge access.

We just started with a business partner called Plus Grade, where 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, we want to do more than we can actually get done. Very happy to work with the business partner that can do that for us, and it is been very effective so far. And we have got a lot of stuff in the pipeline as far as better upgrade performance. Obviously, very important with the BlueFirst product coming in. As far as, you know, trying to make sure that we optimize unit revenue that we can.

1 thing that I think people are not giving much attention to is we are also using the upgrade products to better fill the even more cabin. So you know, overall, you know, we recognize that it is very important to maximize unit revenue premium seating, and we have got a lot of initiatives going on to make sure we get that.

Daniel McKenzie: Great. Thanks so much, you guys.

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

Catherine O'Brien: Hey. Good morning, everyone. Thanks for the time. Martin, can we dig in to what drove the 3Q RASM beat versus that initial July guidance? I know you noted broad based strength, but any particular part of the network or cabin were bright spot in particular, and could you share some color on the geographical or cap level assumptions underlying your 4Q outlook?

Martin J. George: Okay. Great, Catherine. Thanks. So first of all, I think the big surprise for us in the third quarter was actually the strength of the trough. Historically, at JetBlue forever, we have had a pretty big drop off from August to September when kids go back to school. I think our original expectation was that we would see a similar drop off. But results we saw in September in the-- in sort of a pricing environment we had some pretty significant fare increases due to the spike in fuel in August. Which surprised us a lot. We did not have the expectations of the fall off into September that we did.

And the 1 fun fact that I think we all 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 are seeing, and, yeah, I think it is what has resulted also in such a great fourth quarter guide. Is that we are seeing troughs perform very, very well, which historically we have not seen. So I think that is 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 is definitely marginal flying that is not as accretive as we would like it to be, so we pulled that capacity out. You know, I would say for 2027, we gave a guide of low- to mid-single-digits single digits. Now we are not guiding 2027 on this call. That will be next call. But I think you would expect that number to be more to the low end to the high than the high end of that guide. But, again, we will talk about that 3 months from now.

But overall, I think that the way that the pricing environment has reacted and the customer demand environment has basically not significantly dropped, think it is giving us an incredible amount of optimism. I would say that we have seen a marginally better performance in international than domestic, but it is, you know, double digit basis points. it is it is not that big. I think part of that is that Fort Lauderdale has been so incredibly strong that may be biased me a little bit because Fort Lauderdale International has been outstanding. But overall, you know, this is very broad based, the strength we are seeing right now.

Joanna L. Geraghty: I will 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 have also been at Jet Forward for 2 years working on a series of initiatives, as you know, that we believe are now driving a compounding effect which by the way, Blue First really still yet to come. I mean, we just went out for sale 2 weeks ago, I think. So whether it is Fort Lauderdale, the new revenue management system, our loyalty program with lounges and the Premier card, I mean, Co-brand signups in South Florida are up 55%.

Paisly, you know, we just launched cars with MileagePlus. We have got all of that yet to come. Just really proud that this is not just an industry phenomenon. This is JetBlue's strategy work underneath all of this and beginning to deliver tangible benefits with a lot still yet to come.

Martin J. George: Yeah. It is about in the fourth quarter, you know, we are basically at the top of the industry guidance as far as our unit revenue. The other airline in there is Southwest. You know, Southwest is still lapping the change in bag fees. We are producing those numbers without having done bags and seats year-over-year, Think that is a real testimony to JetForward.

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

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.