JBLU - NASDAQ

Good morning. My name is Christa, and I will be your conference operator today. I would like to welcome everyone to the JetBlue Airways Fourth Quarter 2024 Earnings Conference Call. As a reminder, today's call is being recorded. And at this time, all participants are in a listen-only mode. I will now like to turn the conference over to JetBlue's Director of Investor Relations, Koosh Patel. Please go ahead, sir.

Thanks, Christa. Good morning, everyone, and thanks for joining us for our fourth quarter 2024 earnings call. This morning, we issued our earnings release and the presentation that we will reference during this call. All of those documents are available on our website at investor.jetblue.com and on the SEC's website at www.sec.gov. In New York to discuss our results are Joanna Geraghty, our Chief Executive Officer; Marty St. George, our President; and Ursula Hurley, our Chief Financial Officer. During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding our first quarter and full-year 2025 financial outlook and our future results of operations and financial position, including long-term financial targets, industry and market trends, expectations with respect to tailwinds and headwinds, our ability to achieve operational and financial targets, our business strategy and our plans for future operations and the associated impact on our business. All such forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in these statements. Please refer to our most recent earnings release as well as our fiscal year 2023 10-K and other financial -- and other filings for a more detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from those contained in our forward-looking statements. The statements made during this call are made only as of the date of the call, and other than as may be required by law, we undertake no obligation to update the information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation of these non-GAAP measures and a reconciliation to the corresponding GAAP measures, please refer to our earnings release, a copy of which is available on our website and on sec.gov. And now I'd like to turn the call over to Joanna Geraghty, JetBlue's CEO.

Good morning, and thank you for joining JetBlue's fourth quarter 2024 earnings call. Before I begin, I want to take a moment to express our sympathy and support to those affected by the devastating wildfires in Los Angeles, especially several of our crew members who have experienced tremendous loss. We ended the year with momentum, and I am pleased to announce, for the fourth quarter, we generated a positive adjusted operating margin of 0.8%, over 2 points better than in 2023. 2024 was a period of transition for JetBlue. And at the onset of the year, we introduced a new leadership team who worked expeditiously to launch our stand-alone strategic plan, JetForward, last July. This plan is fundamental to achieving our goal of returning to sustained profitability. Though we weren't profitable for the year, we made progress in 2024, with operating margin expansion during the second half of the year. I'm very proud of the achievements so far, and believe that the early results bear evidence that we are taking the right steps towards profitability. Turning to Pages 4 and 5 of the earnings presentation. At the start of 2024, we knew we had big challenges to tackle, including evolved customer preferences, ongoing issues with Pratt & Whitney, air traffic control and costs growing faster than revenues. JetForward was designed to leverage our strengths to combat these challenges and put us back on a path to profitability. With great urgency, we announced and implemented over a dozen different strategic initiatives and made progress in every facet of our business, including customer satisfaction, crew member engagement and operational performance. We launched a multiyear investment to improve operational reliability, and we are seeing benefits across nearly all the metrics that we track. For example, on-time performance was 6 points better in 2024 than in 2023. Net Promoter Score improved by nearly 10 points. And we ranked 6th place overall in Wall Street Journal's 2024 Airline Rankings, improving three spots from last place overall in 2023. We closed 15 Blue Cities and redeployed over 20% of our network, realigning our network into our core strengths on the East Coast. We refocused our LAX footprint and boosted flying across New England and the Caribbean. We reinvested in our core Florida franchises and expanded our San Juan focus city, with the addition of a crew base and more flying. We also further seasonalized our transatlantic line in the winter, creating new destinations for Mint aircraft. Many of these changes are now in their early stages of ramp. We also announced and implemented a variety of changes to our products and perks to ensure we are evolving our offering to deliver the experience our customers want. We rolled out preferred seating, added multiple loyalty and distribution partners and enhanced our Blue Basic offering by adding back a complimentary carry-on bag. This initiative has outperformed our expectations, and our data shows we are attracting incremental customers to JetBlue. To secure our financial future, we deferred $3 billion of capital expenditures to 2030 and beyond, and raised significant strategic financing to provide runway for JetForward. These moves strengthened our liquidity position and will ensure we have the runway in place to achieve the benefits of JetForward. Alongside implementing these changes, we announced additional initiatives, which launched this year and next, such as EvenMore, domestic first class, lounges, a premium co-branded credit card and a new cost transformation program. JetBlue has gone through immense change, and feedback from our customers has been positive. Crew member sentiment on the strategy has also been encouraging, with crew member engagement scores up year-over-year, demonstrating better alignment across the organization in support of executing JetForward. Importantly, even as we take steps to evolve our offerings to meet the needs of customers today, I'm proud that our core product offering was once again rated best in the industry. In 2024, we were awarded the Best Economy Class across U.S. Airlines by The Points Guy for the fifth time, boosted by our changes to Blue Basic and the personalization efforts we've implemented. The progress we made during 2024 combined with robust fourth quarter results strengthens the confidence we have and our ability to deliver on our commitments in 2025. Now shifting to Slide 6 to review fourth quarter performance. For the fourth quarter, we outperformed across all metrics relative to our updated guidance, enabling us to generate adjusted operating income of $18 million. We saw benefits from our continued investments in reliability as we persevered through and quickly recovered from inclement weather and ATC challenges over the holiday period. The operation delivered a completion factor of 99% in the quarter, and on-time performance improved 5 points year-over-year despite navigating more air traffic control programs than in the fourth quarter of 2023. The improved operational performance also benefited our fourth quarter CASM ex fuel growth, which finished better than the low end of our revised guidance range. Revenue beat our revised guidance midpoint by 1.4 points, aided by a healthy November and December holiday season and the performance of our 2024 revenue initiatives. These initiatives drove $395 million of revenue for the year, $95 million over our target of $300 million. Encouragingly, this was quicker ramp than we anticipated, and was originally part of the forecast we expect for JetForward in 2025. As a result, we are pleased to say we've already captured $90 million of our $800 million to $900 million target for incremental EBIT through 2027. Going forward, we plan to provide biannual updates on the progress of JetForward, with our next update scheduled for our July 2025 earnings call. We finished 2024 with a higher operating margin than we expected in July when we launched JetForward. This strong performance, combined with benefits from lower fuel, resulted in 2024 operating margin 3.5 points higher than what was implied by our July guidance. Turning to Page 7. In 2025, we plan to build an even more reliable and resilient operation as we continue refining our schedules to further improve on-time performance, enhancing the tool set in our system operations center and investing in technical dispatch reliability to reduce controllable cancels. Marty and Ursula will provide more detail on what to expect from our other priority moves this year. In all, we believe JetForward is on track to deliver about $200 million of incremental EBIT contribution in 2025. As a result, we expect to achieve a full-year positive adjusted operating margin ranging from 0% to 1%. We recognize, however, there is still significant room to grow and close the gap to our industry peers. The Pratt & Whitney aircraft groundings have been and will continue to be a significant impediment to margins in the near term. We believe the groundings had a direct negative impact on operating margin of approximately 2.5 points in 2024, and we estimate that direct impact will grow to 3 points in 2025, as AOGs are expected to increase to the mid- to high teens. Ursula will expand on the breakdown of this impact. This is a pivotal year for JetBlue, but also for the industry. With a new administration in Washington focused on efficiency, there is a real opportunity to structurally improve the FAA and fix the air traffic control challenges our industry has been plagued with. This could represent a clear benefit to the traveling public and another tangible tailwind if a focused effort is undertaken. We look forward to partnering with the new leaders at the DOT and FAA to help make this happen. I'm excited about the opportunity in front of us. And as we approached the 25th anniversary of JetBlue's first flight in February, I am confident we are executing on the right plan to usher in the next 25 years of flying. JetForward positions us to lean into our historic strengths, adapt to a changing industry and meet our commitments to our shareholders, customers and crew members. The first commitment of which is to run a sustainably profitable business, and we will continue to work with absolute urgency to get there. As we close the chapter on 2024, I would like to share a heartfelt thank you to our crew members who continue to deliver exceptional customer service, while managing immense change. I would also like to recognize the efforts of those that stepped up during the holidays. Without your commitment, meeting our goals would not be possible. We have incredible momentum coming out of 2024, and I'm excited to build on it in 2025. Over to Marty for a commercial update and outlook.

Thank you, Joanna. I echo your thanks to our crew members. Thank you all for delivering the JetBlue experience to our customers day in and day out, especially over the busy holiday season. Turning to Slide 9. Fourth quarter revenue performance was solid, with unit revenues growing 3.2% year-over-year on 5% less capacity. Close-in demand was strong in the November and December holiday peaks, and helped to drive about 1.5 points of unit revenue improvement versus our initial guidance. Unit revenue was strong across many geographies. On the Transatlantic front, we saw unit revenue ramp nicely as the region continues to mature, particularly as we enter our first winter with a more seasonal schedule. In our Latin leisure and VFR flying, we are pleased with the RASM improvements we saw in the first half -- excuse me, in the second half, which recovered sequentially as competitive capacity growth slowed from the first half. Our Transcon franchise continued to produce healthy year-over-year RASM, supported by strong Mint performance. Across Mint and EMS, unit revenues were up in the high-single-digits year-over-year in the fourth quarter. The success of Preferred Seating in 2024 is another testament to the strength of the premium leisure customer segment. It is healthy and growing, and we are enhancing our suite of products to better serve those customers. Loyalty also drove strength during the quarter, now accounting for 12% of our total revenue, which is a multipoint improvement from where we were in 2019. [Indiscernible] spend was up high-single digits year-over-year and active TrueBlue members were up low-single-digits, exemplifying that, while the core airline may not be growing, our customers are driving outsized loyalty growth through their positive responses to the JetForward strategy and the enhancements to our program. Fourth quarter benefited from our 2024 revenue initiatives, which generated $395 million of top line benefit for the year. The breakdown of these initiatives can be found on Slide 10 of the earnings presentation. Our revised the Blue Basic carry-on baggage policy and preferred seating were the key contributors to quicker revenue capture in 2024. The progress of these revenue initiatives is only the beginning, and it provides us with significant momentum headed into 2025. Turning to our first quarter and full-year outlooks. First quarter capacity is planned to be down 5% to down 2% year-over-year. And for the year, capacity growth will be roughly flat compared to 2024. In the first quarter, we expect year-over-year RASM in the range of down 0.5% to up 3.5%, with the shift of Easter back into the second quarter expected to be a roughly 1.5 point headwind. As a reminder, the first quarter is historically slower period of flying for leisure airlines, with many trough weeks. We've also redeployed about 20% of our network and much of it is in the early innings of its ramp. In the first quarter, we are seeing elevated competitive capacity in many of these markets, particularly in the Northeast of Florida. We expect competitive capacity will continue to ebb and flow, and we remain committed to competing in these geographies, core to our JetForward strategy. As you look to the rest of the year, the continued execution of our JetForward plan is expected to propel unit revenue growth higher than first quarter levels. For the full-year, we expect RASM to increase 3% to 6%. In May, we will launch new daily non-stop service to Madrid and Edinburgh from Boston as part of our efforts to expand and further seasonalize our transatlantic flying. Earlier this month, we made an additional network announcement and even more summer seasonal destinations in support of flying the best East Coast leisure network. And as we continue to take a hard look at route profitability across our network, we will plan to remain nimble and dynamic in our network optimization efforts. In 2025, our products and perks will also take a step forward, complementing changes to our network. In addition to the merchandising changes to even more announced last quarter, we updated the onboard experience to elevate the offering. Even more will now include dedicated overhead bin space and soft product enhancements among other perks. These updates go live today and position us well to compete with the premium economy options our domestic peers offer. We also recently added a new way for customers to pay for their flights using Venmo, demonstrating our commitment to enhancing customer experience on every step of the travel journey. Over the course of the year, several JetForward initiatives announced last year are also scheduled to go live, including our premium co-branded credit card, which begins accepting applications very soon and our launch of JFK's Terminal 5 set to open in the Q4. Unlocking incremental margin accretive revenue is crucial to the success of our plan and the progress for the shareholders. Between the momentum we have from the 2024 revenue initiatives, the improvements in customer satisfaction as a result of a better operation, the ramp of our network changes and our 2025 JetForward initiatives, I am confident we have all the right pieces in place to generate meaningful unit revenue growth and achieve positive operating margin. Now I hand it over to Ursula for any financial updates.

Thank you, Marty. In the early months of 2024, we refocused JetBlue on a path to profitability, which we have moved quickly to execute against. We exceeded our revenue initiative forecast of $300 million by $95 million, delivered on all of our commitments since launching JetForward, concluded our structural cost program, delivering $190 million of benefit at the top end of our forecasted range, beat our CASM ex-fuel guidance four quarters in a row and delivered full-year 2024 CASM ex fuel in line with our initial January guidance. Encouragingly, we ended the year delivering positive operating margin for the second half, a significant improvement from our July expectations. We also acted quickly to secure our financial future, deferring CapEx and raising over $3 billion of strategic financing, helping to provide JetForward the runway it needs to generate meaningful benefits. Our new leadership team delivered on our refocused commitments in 2024, and we aim to do the same in 2025. Now turning to Slide 14. For the full-year, 2024 CASM ex-fuel grew 6.6% year-over-year, firmly within our initial guidance of up mid-to-high single digits year-over-year. Through the combined benefits of controllable cost reductions as well as reliability driven cost efficiencies, we were able to offset about 1 point of headwind from the Pratt & Whitney compensation accounting change and 0.5 point of headwind from targeted capacity reductions in the second half. For the fourth quarter, unit cost increased 11%, which beat our revised guidance of 12.5% to 14.5%, driven again by operational efficiency, controllable cost reductions and year-end adjustments. With our performance over the year and in the fourth quarter, we have sustained momentum on controllable costs heading into 2025. Looking to this year, we expect aircraft on the ground from the GTF engine issue to rise to the mid-to-high teens, resulting in flat capacity and CASM ex-fuel up 5% to 7%. And with the help of strong unit revenue growth, we are forecasting positive operating margin in 2025, in line with the goal we first stated back in July. As Joanna mentioned, the AOG has represented a significant headwind to our operating margin performance in 2024, and we estimate that impact will increase to about 3 points of drag to operating margin in 2025. We've broken down this impact on Slide 15 of the earnings presentation. The direct impact includes the variable profit and staffing efficiencies we lose by not flying all of our available aircraft, and also the net cost from extending our A320 fleet. It does not include the indirect impacts to JetBlue, such as impacts to our market share and gate utilization. This situation is fluid, but ultimately transitory, and the margin headwind is expected to resolve as the grounded aircraft count begins to decrease, which is expected to occur in the next year or two. In the meantime, we plan to continue employing creative growth and cost optimization strategies to offset as much of the impact as possible. We expect CASM ex-fuel growth to remain slightly elevated in the first quarter of 2025, driven by the strategic capacity reductions during the trough, lapping against our 2024 pilot wage rates step up and the timing of maintenance. As a result, we anticipate CASM ex-fuel to be up 8% to 10% in the first quarter. Over the course of the year, CASM ex is expected to moderate down from first quarter levels. In 2025, we expect to begin realizing benefits from the $175 million 2027 JetForward cost transformation target, with capture weighted more to the back half of the year. Cost savings include technology-driven efficiencies in our operational and commercial functions, enhanced planning and sourcing strategies and savings from a cost functional fuel burn optimization effort. Turning to our balance sheet on Slide 16. In 2025, our financial priorities remain the same. First and foremost, achieving sustained operating profitability is critical, which will set us on a path to generate free cash flow and pay down debt in the coming years. One of the first steps towards securing our financial future was our $3.2 billion strategic capital raise last August. We ended 2024 with $3.9 billion of total liquidity, excluding our undrawn $600 million revolving credit facility. The incremental liquidity is expected to fund all aircraft deliveries in 2025 with cash, adding to our existing unencumbered asset base of about $5 billion. Our CapEx forecast for 2025 is approximately $1.4 billion and $270 million for the first quarter. We anticipate ending 2025 with a healthy liquidity buffer. Turning to our fleet plan on Page 17, which has a number of puts and takes this year. In 2025, we expect 24 deliveries, 20 A220s and four A321neos. We've also been working to extend the lives of our A320 fleet. And thus far, we've taken steps to extend 14 aircraft through a combination of lease extensions, lease buyouts and changes to the retirement dates of owned aircraft. The capacity benefits from these actions are expected to phase in over several years. Finally, in 2025, we plan to retire the remaining E190 aircraft after the summer peak, fully replacing them with a more fuel efficient and customer friendly A220s. In closing, the culmination of our efforts from 2024 into 2025 is expected to result in positive operating margin for the year, a big milestone for JetBlue and a commitment we made in July. By the end of 2025, we are forecasting nearly $300 million of total incremental EBIT generated from our JetForward program, growing to $800 million to $900 million by the end of 2027. One constant in our industry is that it never stands still, and we know we can't control every change or challenge. However, with JetForward, JetBlue is relentlessly focused on outpacing our challenges and hitting our commitments for our shareholders, crew members, and customers. Thank you, and we will now open it up to questions. Over to you, Christa.

Thank you. [Operator Instructions]. Your first question comes from the line of Jamie Baker with JPMorgan. Please go ahead.

Hey, good morning, everybody. Probably a couple for Marty. So if we look at the implied revenue guide in the first quarter and compare it to the full-year guide, it's clear that you're modeling for several points of acceleration. Basically, Slide 12 is what I'm referencing. But how should we think about each of those buckets of improvement? So for example, let's just pick a round number, you're modeling for 5 points of revenue acceleration. How much of that is rising tide? How much is idiosyncratic to JetForward? Maybe there's some corporate in there. You did call out the Easter shift. Yes, that's my first question.

Sure. Thanks, Jamie. Thanks for the question. Well, obviously, the first easy chunk is Easter because it's 1.5 points move from first quarter to second quarter. And frankly, the rest of the improvement is basically the continued implementation of JetForward and the continued phasing of the benefits from all the things that we promised already and started delivering. There was no assumption in here about a dramatic change in competitive capacity. It is basically us managing what we can manage ourselves and delivering on all those commitments. So there's no sort of exogenous factor that's driving the numbers we're seeing. It's basically our forecast of the baseline JetBlue and putting on top of that, all the things that we're doing. Obviously, we look at the normal factors, GDP, CPI, competitive capacity, things like that. But we're not expecting any direction change from sort of consensus numbers out there right now.

Okay. And then as a follow-up to that, Marty, just looking at forward schedules, you've got some double-digit growth going on in Boston. You called out two international markets. But relative to that full-year revenue aspiration, is it fair to characterize Boston as a likely RASM drag? And if so, could you quantify that?

I mean, obviously, with the growth that it's getting, I'd say RASM growth in Boston is less than we're seeing elsewhere. I think I said the mathematical question more than anything else. I would say we're still not back to the peak we were in Boston pre-NEA. And frankly, I think what we realize in the entire Northeast, and I think that was one of the things we talked about during the communication of the JetForward plan is that we had basically given up a lot of leisure lift when we moved airplanes from Northeast leisure into basically LaGuardia to cover business back [indiscernible] the NEA. So we finally finished unwinding LaGuardia growth in 2024, and that traffic -- those ASMs are being now redeployed back into where they originally were, which was Northeast Asia.

Okay. Very helpful. Thanks for taking my Marty. Take care.

Thank you.

Your next question comes from the line of David -- sorry, Daniel McKenzie with Seaport Global. Please go ahead.

So setting aside today's stock price, it looks like you are giving us the first -- kind of given us your -- how you're thinking about normalized earnings longer term. So given us the first piece, sorry. So if we could just, if all goes according to plan, should investors simply add $650 million to their 2025 EBIT outlook to get to some semblance of normalized earnings if they want to discount back to today?

Yes. Thanks, Dan. Appreciate the question. I think maybe just pulling up a notch. Really proud of the team and the momentum that they're delivering under JetForward. We announced it back in July, and have consistently met all of our guidance metrics were outperformed in many cases. As you think about this year, we should end this year with 200 to 300 EBITs, and you should think of '26 and '27 at similar amounts. So as we look at exiting JetForward of the commitment to $800 million and $900 million of EBIT that obviously sits on top of a constructive macro backdrop, and we're cycling against some of the Pratt headwinds. So yes, you're thinking about it absolutely in the right way. I think, frustratingly, we would love to have, I think even faster ramp, but this is a multiyear strategy, and it's not linear, and we're focused on the long-term here in getting JetBlue back to sustained profitability. So it's going to take a little time. But really, really pleased with the progress so far. The implied guide when we launched JetForward for full-year '24 was 4.5% -- negative 4.5% op margin. We ended the year with negative 1. So a 3.5 point improvement. This year, we're meeting our commitment to go out with a breakeven or better op margin, and that will be a 5-point improvement since we launched JetForward. So I think really good progress there and just continuing to focus on executing for the long-term.

Understood. Terrific. And then, Ursula, second question on unit cost, CASM ex, the CASM ex cadence in particular. I'm wondering how that trends throughout the year? And can we -- does it imply as we exit 2025, some CASM ex directionally as we head into 2026? Or is there some perspective you can share on Pratt & Whitney groundings that could potentially impact that?

Yes. Good morning. Dan, thanks for the question. So I'm really proud of the team delivering on 2024 controllable cost guide that we laid out last January, despite Pratt & Whitney headwinds and also some capacity that we pulled down in the trough. Here in 2025, we're delivering exactly what we've been telling you guys, with roughly flat capacity expecting a mid-single-digit unit cost growth. Q1 is very elevated, and it's the most elevated throughout the whole year. That's really driven by timing of maintenance as well as the pilot wage rates step up that we executed last August. So CASM ex will come down in the quarters to come, and I have a lot of confidence the team will deliver on the 5% to 7% full-year guide. As we look beyond 2025, the Pratt & Whitney scenario does continue to be really fluid. I do think that we will hit the peak AOG within the next one to two years, I mentioned that in my prepared remarks. If we sit here in 2026 with a roughly flat capacity number, for example, I would yet again expect that mid-single-digit range in terms of controllable costs. We do continue to see inflationary pressures. But with the launch of our new cost transformation program as part of JetForward, that is to offset the inflationary pressures.

Thanks much for the time guys.

Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go ahead.

Hey, thank you. So just a follow-up on Dan's question. One of the questions we're getting earlier this year is that bridge from the March quarter cost outlook to the rest of the year and 2Q specifically. So I wondered if you had any early thoughts on the shape of 2Q CASM relative to the first quarter?

Yes, thanks for the question, Duane. As I said, Q1 is the most elevated. I do expect there to be a step down as we head into the second quarter. We're not guiding here today, but I would expect a different capacity layout as well, which you can probably tell from the forward schedules that are already posted. So I do envision us being in a slightly positive capacity environment, which should also help support the step down in Q2. As a reminder, the pilot wage rate step up we granted last August, so that doesn't lap until we hit August. So Q2, we'll see a headwind associated with that as well.

Got it. And then just, Marty, can you expand a little bit on what you're seeing in Caribbean and Latin, and maybe taking the Easter shift off the table. What sort of improvement are you seeing there and -- relative to the rest of the system and maybe just talking sequentially 4Q to 1Q or 4Q to 1Q adjusted for Easter shift? Thanks for taking the questions.

Sure, Duane. Thanks. I'd say, consistent with what we've heard about fourth quarter results and first quarter outlook, International is a strong point for us. Latin has actually fully recovered from what we had seen at the beginning of 2024 and Latin has actually been strong for us. A little bit of pressure in San Juan, it's mostly capacity driven, but we're maintaining our customer base very well. And also Transatlantic has done very well. So again, I think, consistent with what we've heard, International is a strong point. I'd say, on a relative basis, international -- Transatlantic is really not big for us at all enough to move the needle, and San Juan is a relatively big part of Latin. So overall, I think the fundamental demand profile for Latin is very strong right now. We're happy.

Thank you.

Your next question comes from the line of Tom Fitzgerald with TD Cowen. Please go ahead.

Thanks so much. Would you mind just touching on the competitive capacity in Fort Lauderdale and what you're seeing there?

Yes. I mean it's funny. When we had gone through the process of Spirit's bankruptcy, there are a lot of conversations at the time about opportunities that may represent in Fort Lauderdale. I think if you look at the reorganization plan, they put a stake in the ground that a lot of that is important to them. And frankly, it's exactly what we had expected because a lot of those were important to us, too. Overall, competitive capacity is still down in Fort Lauderdale. So we're actually in a very a very good environment, but I don't think we're expecting any significant pull down from Spirit down there. And frankly, we're very happy with how Fort Lauderdale is performing right now.

Okay. That's really helpful. And then I'd love to get your perspective on non-aircraft CapEx and in-flight entertainment, Wi-Fi, your mobile apps, just given kind of the arms race across the industry and making investments there. Just kind of curious how you're thinking like the size of investments you're thinking and any focus areas, love your thoughts. Thanks again for the time.

Yes, Tom, thanks. It's Joanna. I can let Urs touch on the CapEx question in general. But from a Wi-Fi perspective, we've got a fully outfitted fleet of Wi-Fi, Viasat is the partner, and it's free, and we've had that for 10 years. And we're the only carrier that can make that claim. And we continue to be very pleased with how that Wi-Fi, relative to the competition is performing. We're obviously keeping a close eye on customer preference and the other opportunities that are out there, and we'll continue to make sure that we stay very competitive in this space. Maybe, Urs, on just the CapEx?

So maybe just some color on the CapEx. So we had $1.6 billion in CapEx in 2024. So we're actually stepping down in 2025. So the guide is $1.4 billion. About 85% of that $1.4 billion is associated with aircraft. So not only do we have the '24 deliveries, but we also are investing in extending the A320s. And we're also investing in the ramp-up of domestic first class. So that's all embedded in the guide. The remaining 15% of the CapEx is associated with non-aircraft. So Tom, to your point, I think technology, I think airports ground equipment, those are where those dollars are going.

Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Hey, thanks. Good morning. I just want to make sure I heard right. Is it that with the GTF issue that aircraft on the ground goes up in '26 and then potentially up again in '27? Is that right? And then any idea like when this is fully behind us as an issue?

Yes. So thanks for the question, Scott. We tried to give you guys some color just on how burdensome this is to JetBlue financially, which we've highlighted all the math on Slide 15. As a reminder, we had 11 aircraft on the ground in 2024. In the guide that we're providing for 2025 today, we have mid- to high teens. And as I mentioned in my prepared remarks, we believe we are likely approaching the peak in the next year or two. So we continue to work constructively with Pratt & Whitney to gain further color, quite frankly, on '26 and beyond. Obviously, there are a lot of inputs that can materially impact the number of aircraft that we have on the ground, everything from Pratt & Whitney supply chain to their shop capacity. So it does continue to remain pretty fluid. But the next year or two, we believe that we'll be approaching the peak.

Okay. And then I'm guessing you can't say too much because you haven't announced anything yet, but any thoughts on timing for an NEA replacement? And just is that part of JetForward? Or would that be incremental to JetForward? Just how do you think about NEA?

Thanks for the question. So we're having conversations with a number of carriers right now to discuss the potential for future partnership. The judge in Massachusetts obviously laid out a framework that would be acceptable under at least the prior administration. So that's what we're looking at, but there's nothing to announce now. In terms of what's in JetForward, there's a very small amount of money associated with potential partnerships, but nothing in a very meaningful way.

Thank you guys. Appreciate it.

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

Good morning. Just, Marty, you withdrew from 15 cities, you redeployed 20% of your capacity. How have you seen the mix change, corporate versus discretionary as a result of those changes? And has there been a meaningful change to the booking curve, given the fact that maybe a large percentage or a greater percentage of your customers are now booking further out? Can you just talk about some of the dynamics around your mix and maybe how you sell the product?

Mike, thanks for the question. The first thing I'll say is, on a macro level, it is getting tougher and tougher to do business leisure mix post-COVID because we have the great mix of leisure in the middle who customers who say they're on business, they take it like they run leisure more so. So it's less clear than it once was. What I will say is we've seen no significant change to the business mix that we have. And frankly, I think that's part of the reason why the city that we closed actually weren't working for us because we're carrying a lot of great leisure customers in places like Minneapolis, San Antonio, and we really weren't penetrated in the business market. So we've seen no significant change to the booking curve or the business leisure mix to that.

I think I'd just add as well, if you were at Q1 RASM, as a leisure carrier, we obviously experienced a different sort of period given the trough that it is even when you adjust for that Easter shift. In the depth, we also have the slide that lays out the timing of the network announcements, and there was a number of really meaningful Northeast changes made in the late October, November time frame from a capacity standpoint. These are all in early ramp. And as I mentioned, this isn't a linear plan and it's going to take some time for these markets to mature.

Great. And then just my second, as we think about timing around first-class, Ursula, I think I heard you that some of the CapEx this year is going to be tied to the installment of first class. Will JetBlue be in a position to start selling late 2025 first class? Or is that first quarter 2026 when you can start selling the first-class product? Thanks for taking my questions.

Mike, I'll take that one. So there's some CapEx coming this year, which is basically the beginning of the process through seat design, certification, et cetera. The first install is actually going to be in 2026. So there will be no revenue benefit to speak up in 2025. And by the way, that is exactly how it's laid out in the phasing of JetForward.

Great, thank you.

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

Hey, good morning everyone. Just wanted to follow-up on some of the corporate commentary. We've been hearing that corporate trends are seeing a bit of a pickup again this Fall. One of your competitors know that Tuesdays, Wednesdays are looking better. I know you're focusing your network on your leisure DNA, but are you seeing any pickup out in New York, Transcon or the traditionally more corporate leading sites like your New York to Boston flights? Just any color there?

So what I'd say is if you look at our corporate demand right now, the last two or three quarters, we've been setting records as far as the amount of money we're getting from our corporate accounts. That being the case, corporate is still a really small part of JetBlue's revenue base. So we're talking a nine-digit number, a low nine-digit number. So it's not a gigantic number. We are seeing great numbers. But I think in looking at our network and looking at where we're flying and I think looking at our frequencies with the network as it exists, we don't see ourselves as being a big corporate carrier. And I don't think it's been big enough for us to do a significant difference on Tuesdays and Wednesdays.

Got it. And then maybe just, Ursula, if you don't mind, and one more on the GTF. I just want to confirm, I don't think you're baking in any kind of compensation from Pratt into your outlook. But when do you think you'll reach a settlement on those 2024 damages or however you want to put it? And what form does that take? Is it going to be something we're going to be able to notice on the cash flow statement? And then I know you've already filled in a couple of questions on this, but -- and I don't want to get too myopic, but when you're saying one to two years from now on the peak, does that imply the peak is sometime January 28, 2026 or later? Just any color on the GTF questions there would be really helpful. Thanks.

Good morning, Catie. So the situation with Pratt & Whitney continues to be pretty fluid. Obviously, as we've highlighted today, it's a very material impact to our business. So the settlement negotiations are taking a while, quite frankly, because of the materiality to the business, we want to ensure that we settle with something that is fair and acceptable. So I don't have any timing on that. It's a work in progress. In regards to your last question, just about the peak, I mean, when I say within the next year or two, I mean -- that means that we hit peak, quite frankly, between now and 2027. And so again, we work consistently and fluidly with Pratt. And so there are things that could accelerate this. And so we're watching it very closely.

Thanks. I appreciate the moving target.

Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Great. Thanks. Good morning, everyone. Some of your mainline peers obviously highlighted strength transatlantic demand in the first quarter, which, as you pointed out, is kind of seasonally weak period. Can you just talk about kind of what you guys are seeing there and potential for upside through the summer as well?

Sure. Thanks, Ravi. I'd say, first of all, the Atlantic is still in ramp for us. I mean we added new cities in '24. We've announced these cities for '25, new routes for '25. So I think I look at our growth in the Atlantic is partially being strength and partially being ramped. So I don't want to get too aggressive as far as how we describe it. Most important thing for us is continued growth of yields and mid-cabin. If you look at the configuration of the airplanes, we are very heavily net focused. It is absolutely a fantastic product. I really think it's the best part across the Atlantic. And from that perspective, that's where we would like to see the growth, and we're really seeing great growth as far as net yield. So we're very optimistic about the results as the network exists right now. I will also say that we deferred almost all of our [indiscernible] deliveries into 2030. So I'd say you're more or less roughly what you see is what you get right now. We'll continue to treat that network and continue to move plans between the Atlantic and domestic, summer to winter, but we're really happy with the choice to fly there. We're happy with our results, and we think it's going to be a nice profit source for us.

Got it. Great. Thanks for the color. And maybe as a follow-up, I just want to confirm, the $95 million outperformance in revenue capture initiatives for 2024, is that all just go forward from future periods, which obviously is also very impressive. Or are you seeing pockets of potential strength or upside, which may end up even kind of upsizing the target over time?

So as far as how we look at it right now, it does look all to be moved forward. We'll obviously keep watching that going forward. But we've got pretty good visibility as far as things like preferred seating and the Blue Basic, and it does look like move forward. I'm not saying at some point that won't grow. And hopefully, as we grow, we'll see that grow in general. But fundamentally, we're very excited that this has come forward as it has. And frankly, I'm optimistic about all the initiations of JetForward, not just the ones that we've already launched in '24. So we're actually very excited. Again, with EvenMore just launching today. So we're actually very excited about that.

Very good. Thank you.

Your next question comes from the line of Savi Syth with Raymond James. Please go ahead.

Hey, good morning. Marty, can I ask -- you mentioned pressure in the Northeast and Florida. But I think to Tom's question, you also kind of noted Florida capacity is down year-over-year as competitive capacity. And it seems like that's the case in Orlando, too. I was wondering if you could provide a little bit more color, which cities or routes you're seeing kind of competitive pressures that you called out in like the Northeast and Florida?

I'm not going to give a lot of color on that. And then clearly, from a competitive capacity perspective, the most competitive capacity pressure has been in Boston. But in general, I'm not -- yes, in Lauderdale, in Orlando, the trends are actually good. I think some of the other cities, [indiscernible] not as good. But I don't look at any of them as really sticking out like significantly other than Boston.

Got it. That's helpful. Thank you. And just on the kind of fleet plan, Ursula, it looks like some of the A220s that you had thought might come in 2026 are shifted out. I was curious, what kind of drove that? And just on that investment question, is the investment in premium products on the CapEx meaningful? Or is that just part of the kind of the aircraft and not really meaningful?

Yes. Good morning, Savi. The aircraft order books have been really fluid with delays and such. So we just adjusted our delivery schedule to reflect the most recent timing information from Airbus. So to your point, there were a few puts and takes between '25 and '26. I will mention, as you look at the overarching JetBlue aircraft order book, we've talked a lot about Pratt & Whitney today. And within the next one to two years, hitting the peak AOG. And I do just want to remind everyone, at some point, this situation will become a tailwind. And we will get airplanes back. And as you look at our order book in '27 and beyond, it actually lines up pretty well in terms of when we think we're going to get aircraft back due to the AOG issue. In regards to your last question around CapEx. The investment into domestic first class. That investment is going to be approximately $400 million over the next few years. And a small portion of that is included in the 2025 guide, as Marty mentioned, just for the start-up of the ramp of the program. But I do want to remind everyone, I mean between the domestic first class as well as the A320 extensions, I mean, these are very accretive ROI positive and in a timely manner. So I feel good about the investments that we're making.

Thanks. Appreciate the color. Thank you.

Your next question comes from the line of Tom Wadewitz with UBS Financial. Please go ahead.

Yes. I wanted to circle back a little bit to, I think, where Jamie kicked off the Q&A, just asking about RASM. It seems to me that one of the big concerns is just your 1Q RASM outlook looks a fair bit weaker than the industry. Marty, what's the framework? Would you expect like 2Q or second half for the RASM performance for JetBlue to kind of get back in line with what we see for the broader industry? Or how do you think about the framework for that to be the case?

Well, Tom, thanks for the question. So first, let's talk about the sequential numbers that we're fleshing right now. Again, we're very happy with the fourth quarter overperformance, and we talked about that being very focused on really good results in the peak. As you sequence in the first quarter, if you look at the historical trend of fourth quarter to first quarter RASM, and you -- we've got 12 years' worth of data. We're actually above that normal trending. So what we're producing in first quarter of '25 is actually higher than you would normally see for that time period, and I attribute one of that to JetForward. I will say, versus the rest of the industry, we do face a competitive capacity headwind. I think if you look at the big four, they're all facing competitive capacity numbers that are under 1%, some of them like 0.3%, 0.4%. United is actually negative. Our competitive capacity number is 3%. So I think looking at the headwinds that we're seeing in the first quarter, I feel great about where we stand as far as RASM, given all the things working against us. And I give a lot of credit on that to JetForward, the initiatives we've laid out already. With respect to the improvements across the rest of the year, obviously, the headwind we get in the first quarter from Easter comes right back as a tailwind at second quarter. So that 1.5 points bad guy in the first will come back at the 1.5 points good guy in a second. And I think I want to be clear, as we go through the year, we're not making any big assumption about competitive capacity coming down. There's no -- back to the point I said to Jamie at the very beginning, there's no sort of a secret assumption that competitive capacity goes back down to 1% or 0.5%. I think it is 0.4% right now. We're basically looking at the industry as it stands right now. A lot of this is just execution of the plan as we've laid it out. And I think what we've seen so far as far as the ramping of JetForward, how we've seen the network changes take. And I think we were especially happy with what happened in the fourth quarter with places like where -- with the demand we're able to drive during the peak in the market, [indiscernible] the market that was 25 years served by one of our big competitors to Florida, and we had success there very, very quickly, especially in the peak. So I feel very bullish about JetForward as it goes forward. I just want to stress, there are no numbers games as far as we need some sort of a big industry change to get to three to six. That is core of stuff we can control.

Okay. Yes, great. Thanks. And for the follow-up question, just wanted to ask about how we think about the kind of key levers and potential timing to get to free cash breakeven? It would seem like this year, potentially next year, you'd still be looking at a fairly significant use of cash. So I wanted to see if you could kind of multi your offer, any thoughts about is that more so driven by a CapEx reduction that might come in '26 '27 or is it just a matter of kind of keep going on JetForward and get the operating margin up?

Thanks for the question, Tom. So we executed in aircraft deferral last year, and it paves the way for us to execute on JetForward and get the business healthy again and get us to consistent profitability, which is the #1 priority. Number two is in getting the free cash flow positive. And I do feel like with the deferral in the way the order book lays out and just with the expected progression of JetForward, there is a means to get to positive free cash flow within the timing of the JetForward program. Priority #3 will then be to start delevering the balance sheet. So make no mistake. We don't like where our metrics lie today and we want to get back down to more competitive reasonable balance sheet metrics. So -- but we got to continue executing on JetForward, get to consistent profitability before we can talk about taking steps to delever the balance sheet.

Great. Thank you.

Your next question comes from the line of Steve Trent with Citi. Please go ahead.

Good morning, everybody. And thanks very much for taking my questions. If I could follow-up on the alliance question, I think, as Scott Group maybe asked earlier. Great color on what you said for how you're thinking about the U.S., but what about potential alliances oversees sort of existing ones that are in place? And maybe any new opportunities given some of the Latin American airlines today are going through some gyrations?

Hi, Steve, thanks for the question. Well, first, I guess, worth mentioning, we have 52 or 53 alliance partners across the world, including a lot of international carriers. I think we're especially lucky that New York is a very, very important gateway for international carriers, and we fly a lot of connecting lift there. So if you're not aligned with one of the other airlines there, we're a great partner as far as getting access to the interior U.S., where the fares -- excuse me tend to be higher. And we continue to grow that portfolio even as we negotiate with domestic carriers. We just added British Airways in, I think the third quarter of this year, a limited partnership that actually continues to grow. I think there's opportunities there. We're certainly not taking your eye off the ball on that type of partnership, while we work on what might make sense for us on a domestic partnership.

Okay. Appreciate it, Marty. And for my follow-up, I recall you guys are offering some early exits for some of your older pilots. I'm guessing this is kind of a fairly small piece of the pie in terms of your labor cost and there would not be a significant cash event on the back of these packages that you'd offer? Thank you.

No, thanks. Obviously, looking forward to offering some early retirements from our pilots, I think it's a win-win for JetBlue and for some of our pilots who are ready to pursue something after they retire. So it continues to be a focus on how do we manage some of our elevated labor costs in a world where we have as many aircraft on the ground that we have right now with the Pratt & Whitney issue.

And there will be no major cash outflow.

Correct.

Not material.

And ladies and gentlemen, that does conclude our question-and-answer session. And I will now turn the call over to Joanna for closing comments.

Thanks for joining us today. Very happy to answer your questions. When we launched JetForward in July, we came out with a commitment to a 2025 year where we were breakeven or better from an operating margin perspective, and I'm so pleased that the team is maintaining those commitments that we set out to do. We've got great momentum, really great progress on reliability, beat costs every quarter in 2024 last year. And since launching JetForward, we've outperformed on our revenue guidance as well. This is a multi-year strategy. It is not linear. And many of these programs start ramping in 2025, whether that's EvenMore, which launched today, the premier card, which is launching at the end of the month or even our domestic first class which launches next year. So we have a lot happening. And there'll be a number of puts and takes through the quarter. So our focus is on the long-term. Our focus is on hitting that annual expectation of breakeven or better, and we are off to a promising start. If you look at the midpoint of our '25 guide of 0.5 point, you can expect another 5 to 6 points of margin from JetForward in '26 and '27. And then we've got the Pratt & Whitney headwind of 3 points, which will become a tailwind as we cycle through that particular situation. So all in all, when you look at JetForward, a couple with Pratt & Whitney, you should expect 9 points of operating margin improvement from 2025 on. So I'm pleased with the program and how we're executing to it and keeping our eye on the ball, which is the annual guide of breakeven or better for operating margin. Thanks for your time today, and we look forward to talking with you on the next call.