Good morning. My name is Travis. I would like to welcome everyone to the JetBlue Airways fourth quarter 2023 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, Kush Patel. Please go ahead, sir. Thanks, Travis. Good morning,

everyone, and thanks for joining us for our fourth quarter 2023 earnings call. This morning, we issued our earnings release and a presentation that we will reference during this call. All of those documents are available on our website at investor.jefflee.com and on the SEC's website at www.sec.gov. In New York to discuss our results are Robin Hayes, our Chief Executive Officer, Joanna Garrity, our President and Chief Operating Officer, and Ursula Hurley, our Chief Financial Officer. Also joining us for Q&A are Dave Clark, our Head of Revenue and Planning, and Andre Sperry, President of JetBlue Travel Products. 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 2024 financial outlook and our future results of operations and financial position, industry and market trends, expectations with respect to headwinds, our ability to achieve our operational and financial targets, our business strategy and plans for future operations, and the associated impacts on our business. All such forward-looking statements are subject to risks and uncertainties and actual results may differ materially from those expressed or implied in these statements. Please refer to our most recent earnings release and our most recent 10K 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. Statements made during this call are made only as of the date of the call and other than as may be required by law, we undertake no obligation to update this information. Investors should not place undue reliance on these forward-looking statements. Also during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation of these non-GAAP measures and our reconciliation to the corresponding and gap measures, please refer to our earnings release, a copy of which is available on our website and on SEC.gov. Now, I'd like to turn the call over to Robin Hayes, JetBlue CEO.

Good morning, everyone, and thanks for joining us today. As always, I'd like to start with a huge thanks to our incredible crew members. Today, that message takes on even greater importance for me because, as you know, in two weeks, I'll be retiring as CEO, and this marks my last earnings call with JetBlue. So after 15 years of earnings calls, I want to extend one more public thank you to our crew members who are the reason our customers keep coming back to JetBlue. Their energy and dedication, their attention to delivering exceptional service to our customers, they truly are the source of our distinctive culture and brand. We would not be JetBlue without them. Let me also thank all of you, the analyst investors who have supported us and challenged us along the way. We very much appreciate the constructive engagement over the years. It's been a pleasure working with all of you, and I know you'll enjoy working more closely with Joanna. I'm also very excited for Joanna, who will be our next CEO effective February the 12th. No one on our team has worked alongside me, or as she would say, suffered longer than Joanna. She is an inspiring and energetic leader who has spearheaded many of our major strategic operational and commercial initiatives over the last six months she has been leading our efforts to develop and implement a turbocharged organic plan to help get us back to sustained profitability and restore our historical earnings power you'll be hearing more about that today and in the future i'm very confident about the next phase of our evolution which you'll hear more about and will deliver sustainable improved performance over time and create value for our shareholders, customers, and crew members. Before passing it over to Joanna, I want to briefly touch on the Spirit transaction. We strongly disagree with the court's ruling, and yesterday we filed a motion to expedite an appeal of the decision. Last week, we notified Spirit that certain conditions to close may not be satisfied prior to the outside date set out in the merger agreement. We are evaluating our options under the merger agreement, which remains in effect. Unless and until such time, as the merger agreement is terminated, JetBlue will continue to fully abide by all of its obligations. We're not in the position to discuss the spirit transaction any further at this point, and our focus today will be on our organic business. With that, for the last time, over to you, Joanna.

Thank you, Robin. I want to start by expressing my deep gratitude to Robin for his leadership and friendship over the years. He deserves tremendous credit for building JetBlue into the company we are today. He transformed us from a small domestic airline to one with a global footprint. He created new ways to innovate and challenge the competition, from free onboard Wi-Fi to Mint, our award-winning premium offering, which has disrupted TransCon and now TransAtlantic business class. On behalf of the entire JetBlue team, we wish him all of the best in his next chapter. I'm honored to be taking on the role of CEO on behalf of this incredible company at a very pivotal moment for our business. JetBlue has a strong foundation underpinned by a truly exceptional brand and the industry's best crew members. We're building on this foundation as we take aggressive action to get back to profitability and intensify our focus on delivering value for our shareholders. Before I begin my remarks, I'm thrilled that my first leadership appointment was announced yesterday, promoting Warren Christie to Chief Operating Officer, effective February 12th. Warren has a robust aviation career spanning 30-plus years, from his leadership and service in the military to his JetBlue career beginning 21 years ago and spanning various roles. Warren's dedication and passion for safety, operational performance, and service excellence has been instrumental in our evolution, and he is well-positioned to help us execute a plan that will mark the start of JetBlue's next major chapter. As Robin mentioned, we've been hard at work evolving our standalone organic plan to restore profitability and reset JetBlue for future growth, and we've already begun to implement some of the initial components. The key strategic challenge we have always faced is how to thrive as a small player in an industry dominated by four large airlines. We now face this challenge in a post-COVID environment where industry dynamics are coalescing around some clear trends. For example, customer travel preferences, including a premium odd board experience and improved customer service. These are increasingly shifting towards JetBlue's strengths. We will deepen and strengthen our competitive position as a unique brand with a superior customer experience, finding new ways to be the best at what we do and further distinguish ourselves from the competition. This begins with refocusing on our most proven geographies. Our core network sits in some of the largest markets in the world, where there are clear barriers to entry, and we intend to capitalize on our deep relevance in these markets by urgently re-optimizing our networks to make sure that we are taking care of our core customers, making sure we go where they want to go, when they want to go. We are also recharging our innovation DNA to bring an even better quality experience to the full spectrum of JetBlue customers, from leisure to visiting friends and relatives to corporate and premium travelers. This means segmenting our onboard product offering more precisely so that each customer can get the best travel experience at the best price. We will use this new chapter to improve how we merchandise to our core suite of customers. And to the extent there are opportunities across certain customer segments, we will launch new revenue initiatives and close the gaps on our product offerings. All of this is underpinned by a more reliable operation, a complementary loyalty program and a strong culture with a competitive cost structure. In many ways, this means refocusing on our core strengths. Let me be clear. It is not, however, business as usual. I commit to you that with our renewed focus, we are bringing more data-driven rigor, intensity, and creativity than ever before with a relentless focus on building value for our shareholders. Over the coming weeks and months, including at an investor date we will host in May, we will be sharing more with you on our longer-term plan. But today, I want to share our 2024 priorities, a preview, if you will, of how we intend to return to sustained profitability and how we are taking urgent action, including launching several initiatives in the first quarter. Starting with our new initiatives, these are aimed at evolving our offering to better serve our core leisure customer while further diversifying our revenue stream. In this process, we've identified over 15 different revenue initiatives, and in 2024, we expect these to add over $300 million to our top line, of which nearly two-thirds is ancillary revenue. Included in these initiatives is our recent launch of Preferred Seating, which provides customers with the option to select more desirable seats closer to the front of the aircraft. This also gives us another way to reward our most loyal Mosaic customers, who will get this additional benefit for free. and it enables us to better match our product offerings to customer demand. Another example I will highlight is our expanded distribution and OTA partnership. This expansion further aligns our distribution capabilities with the legacy carriers, allowing us to reach more customers and giving those who rely on OTAs greater access to our product. We are also making changes to how we manage our network, rebalancing to deploy the right mix of routes and applying even greater discipline to our assessment of underperforming markets. As part of this refinement, we are aggressively reallocating capacity to proven leisure and VFR markets, including doubling down on those markets where we can leverage JetBlue Travel Products' superior offering to better serve customers and help us generate higher margins. Our loyalty program also remains a priority, as we look for additional ways to provide more value to our customers, And we expect our True Blue program to continue to drive margin and creative growth as we execute our multi-year plan to close the gap to peers and better monetize the program. We are expanding our suite of products with the continued goal of appealing to more of our core customers and plan to launch several new loyalty products in the coming years. Next, continued cost and capital discipline are a top priority. To that end, we have reached an agreement to defer $2.5 billion of planned aircraft CAPEX and smooth our delivery stream. Ursula will provide more detail in her remarks. Finally, as we operate in one of the most complex and challenging airspaces, operational reliability is foundational to all of our priorities, helping us deliver a better customer experience while also improving revenues with fewer refunds and disruption vouchers, and better costs as we mitigate overtime and premium pay. This will be a continued area focus in 2024 as we make more targeted investments in our operation, prioritizing areas such as predictive aircraft maintenance and scheduling enhancements, where we are already seeing meaningful returns for reliability. As I mentioned, we will share more at our Investor Day later this year. Shifting now to our fourth quarter results, we delivered a strong end to the year as both revenues and costs exceeded our expectations. Fourth quarter revenues declined 3.7% year-over-year, ahead of our December guidance update, driven by healthy close-in demand with both strong peak holiday period demand and better-than-expected performance during off-peak. Our premium offerings, and even more space in particular, continue to perform extremely well, with double-digit year-over-year revenue growth in the fourth quarter. We also benefited from continued strength in our redesigned True Blue loyalty program, both in the fourth quarter and for the full year. In 2019, we have had the fastest-growing loyalty program at a major U.S. airline, growing revenues by 75%. This reflects strong performance in our Barclays co-brand portfolio, which achieved a record high for JetBlue co-brand spend and generated over $1 billion in cash remuneration in 2023, more than double our 2019 performance. We continue to make enhancements that unlock value for our customers by expanding ways to earn and redeem points, which helped fuel record growth in redemptions in 2023, growing by over 25% year-over-year. We expect continued growth going forward, as we recently launched our first seamless partner redemption relationship with Qatar and Hawaiian in the fourth quarter of 2023. And I am pleased to announce that we have additional new partners coming on board this year. Capacity in the fourth quarter grew 3.3% year-over-year, above the midpoint of our initial expectations, as our strong operational performance in November continued through the end of the year. We operated with high load factors during the peaks, an extremely busy time of year, and despite weather issues, we were able to recover quickly and minimize cancellations when dealing with storms early in the quarter and during holiday peaks. Our completion factor for the quarter was 99.8%, which is our best fourth quarter completion factor since 2004 and was one of the best in the industry, and we continue to see momentum on this front headed into the first quarter. More broadly, we saw year-over-year improvements across nearly all of our operational metrics in 2023, reflecting the benefits of the structural investments we are making to improve reliability and boost resiliency. Strong operational performance, coupled with our continued cost discipline, resulted in fourth quarter ChasmX fuel ahead of our expected range, as Ursula will discuss. Looking ahead, for the first quarter we are seeing positive momentum in our revenue. Demand during peak periods remains strong and we have better matched our capacity to demand during off-peak. International demand remains very healthy and the domestic revenue environment is improving as industry capacity has been moderating. For the first quarter we are forecasting revenues to be down five to nine percent year over year. At the midpoint and factoring in our capacity outlook of down 3% to 6% year-over-year, this represents a five-point improvement in year-over-year unit revenue growth versus last quarter. Looking further ahead to the full year, we are well-positioned to achieve roughly flat year-over-year total revenue growth, which we believe represents a positive outcome in a year when capacity is decreasing. While the first half of 2024 cycles against the high pent-up demand we saw in the first half of 2023, we expect year-over-year revenue growth to be much stronger in the back half of 2024, as comparisons ease and the benefits from our enhanced revenue initiatives grow. I'd like to close by thanking our crew members for their commitment to delivering a safe and reliable experience to our customers. These investments we are making position us to deliver the JetBlue experience better than ever before as we refocus our efforts on serving our core customer. We are increasing our efforts to drive reliability and consistency in our operation, product, and service. By digging deeper to do more of what we do best, we will be able to compete more effectively, return to profitability, and ultimately expand margins and returns for our shareholders. With that, over to you, Ursula.

Thank you, Joanna. I'd like to add my thanks to our outstanding crew members for all their hard work in closing out the year on a strong note. I am particularly pleased with our cost performance in 2023 amid a very challenging backdrop. For the full year 2023, Chasm X fuel increased 4.5% year-over-year within the range we provided last January, despite facing an incremental 1.5 points of Chasm X pressure from weather and ATC challenges in the Northeast. Fourth quarter cost performance was stronger than expected, driven by a higher completion factor and better overall cost execution. Specifically, our operational investments have been enabling us to better manage day-of disruption planning and to recover more quickly and complete a higher number of flights without having to incur additional costs related to overtime, premium pay, or disruption vouchers. We continue to be impacted by the GTF engine issues. We currently have seven aircraft parked due to these issues and expect the number of out-of-service aircraft to increase steadily as the year progresses. Our current assumption is 11 average aircraft will be out-of-service throughout the year, peaking at 13 to 15 aircraft out-of-service at the end of the year. We are actively engaged in discussions around compensation with Pratt & Whitney. However, in the meantime, we have launched a number of measures to mitigate the impact, including leasing and purchasing extra spare engines. While these efforts have yielded additional spares, they are not enough to offset the headwinds associated with the elevated number of engine changes. As a result, we expect capacity and departures to be down in 2024. In a year in which we aren't growing, cost discipline is even more important, and we are taking a hard look at our spending to make sure every dollar we invest is making an impact and making a change when it does not. As part of this, we are making deeper cuts across our cost base, including rationalizing our real estate footprint, offering voluntary opt-out packages to crew members, as well as better leveraging data to plan our operation and reduce unexpected disruption costs. We also continue to execute on our structural cost program, which delivered $70 million in cost reduction in 2023. We are now on track to deliver run rate savings in the range of $175 to $200 million by the end of 2024, which is $15 million better at the midpoint than previously expected. savings accelerated through the back half of 2023 as we launched technology-based solutions aimed at enhancing crew member productivity and optimized maintenance planning for our midlife aircraft additionally through our fleet modernization program we remain on track to avoid 75 million dollars in maintenance costs through 2024 as we replace our e-190 fleet with the margin accretive A220. We have already achieved $55 million in cumulative cost savings to date, and we continue to plan for all of the E-190s to be retired in 2025. In the interim, we will still be operating three fleet types, which will result in near-term headwinds from associated costs and complexity. However, once we are through this transition period and back down to two fleet types, we expect a bigger benefit and a more meaningful tailwind to our costs. This will be further amplified by the fact that the A220s deliver a 20% improvement in ex-fuel unit cost economics compared to the E190. For the first quarter, we expect CASM ex-fuel to increase between 9% and 11% year-over-year, which includes impacts from the GTF issues and approximately two points related to wage step-ups in our pilot contract. As we move past the first quarter, we expect absolute CASMX to moderate downward and, supported by our robust set of cost initiatives, stay relatively flat on an absolute basis through the end of the year. we expect this to result in chasm X growth up mid to high single digits for the full year together with the 300 million of revenue initiative Joanna mentioned earlier we expect this cost performance will result in an adjusted operating margin that is approaching break-even for the full year printing to our fleet as Joanna mentioned we reached an agreement with Airbus and other business partners to defer approximately $2.5 billion of aircraft capex previously expected in 2024 through 2027. This agreement supports our path back to positive free cash flow, provides a more consistent level of aircraft deliveries and capex through the end of the decade and prioritizes the margin accretive A220 and fleet monetization program as the E-190 exits the fleet. We now expect to take delivery of 27 aircraft in 2024 and expect our full year 2024 CapEx to be approximately $1.6 billion. While we work through the near-term growth challenges stemming from the GTF issues, we recognize this level of growth is not in line with our historical performance, and we are evaluating all of our levers to partially offset the growth headwinds. Most notably, we have a significant amount of flexibility to extend the life of over 30 A320 aircraft to provide growth tailwinds, and we will continue to explore other cost-effective and capital light ways to grow our fleet. Turning to the balance sheet, we ended the year with $2.3 billion in liquidity, including our undrawn $600 million revolving credit facility. We continue to take a very conservative approach to managing our liquidity. And in 2023, we raised $1.4 billion in aircraft financing to support our liquidity needs. In 2024, we plan to raise additional financing to support our CapEx, and our planning assumption for full-year interest expense is between $320 and $330 million. We also continue to maintain a healthy, unencumbered asset base. We hold a total financeable asset pool of over $10 billion, which includes the True Blue Loyalty Program, the JetBlue brand, our slot portfolio, aircraft, and engines. Finally, we continue to opportunistically look at hedging as a means to manage risk. As of today, we have hedged approximately 30% of our expected fuel consumption for the first quarter and approximately 13% for the full year. Turning to slide 10 for a recap of our financial outlook for the first quarter and full year 2024. As you can see, we are refocusing our guidance around six key metrics, which we believe are mission critical to understanding our story and measuring our progress. As we refocus our efforts around returning the business to profitability, we are shifting to adjusted operating margin, which we believe will provide greater insight into our core business performance. Additionally, for the full year, we have moved towards directional qualitative guidance rather than specific ranges, given the number of moving variables. We plan to provide more specific guidance for the full year at our upcoming Investor Day in May. To conclude, I'd like to thank our amazing crew members once again for all of your incredible work in 2020 series. We are at a pivotal moment in our company's history, and I know that we are focused on the right areas to position the business for long-term success and restore our historical earnings power. The fourth quarter showed us that we are making progress. So while 2024 is a transition year, we have a strong plan in place, and we are taking the necessary steps to return the business to profitability. We are refocusing on our core customers and proven geographies with network, product, and operational changes to better meet their needs while still delivering the low fares and great service JetBlue is known for. We are diversifying our revenues with margin-accretive initiatives to grow our TrueBlue loyalty program and JetBlue travel product portfolio. And we are executing with continued cost and capital discipline, making more aggressive cuts to our controllable costs and deferring CapEx to help the balance sheet. Taken together, I am very confident in our ability to create long-term value for our owners and all our stakeholders. With that, we will now take your question.

Thanks, everyone. We are now ready for the question and answer section. As Robin mentioned, we are not in a position to discuss the Spirit transaction any further, and we will not be answering any questions related to the transaction on today's call. Travis, please go ahead with the instructions.

At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We will pause for a moment to allow questions to queue. My first question comes from Mike Lindenberg, Deutsche Bank.

Yeah, hey, good morning, and congratulations, Robin, on your retirement. Congratulations, Joanna, on ascension to the CEO position. Thanks, you know, Jannie, you laid out a lot of the elements of what you believe will make JetBlue a successful standalone company, notwithstanding, you know, the M&A process, which still has to play out here with Spirit. As you think about, you know, JetBlue over the next several years, though, you know, we still have, call it a market share relevance or a scope issue. Does that still feature prominently or is that still a priority for JetBlue, even running it as a standalone that, you know, still longer term, it's important for that company to become bigger? Or what is your thinking on that? How has that evolved as you move into the senior role?

Yeah, thanks, Dan. Great question. So maybe Spirit was about accelerating our organic growth, more JetBlue, to more places, more people. And, you know, we still intend to do that. We're going to do it organically. It will be a bit slower for sure. But, you know, as we think about this year, this year is really about a reset year to get the fundamentals of the business right to ensure that as we grow and as we bring more JetBlue to more places that we're doing it in a profitable way on a sustained basis. If you think about some of the unique advantages that JetBlue has, these are tremendous strengths, and we need to redouble our efforts around amplifying those strengths to our network, obviously. We've got the corner lot at JFK in Boston. These are markets that are constrained. They're markets where JetBlue is very relevant and customers know our brand and our experience. We need to maintain our leadership position there, but we need to be more selective where we fly to bolster profitability in those core geographies so that we can start rebuilding top-line revenue. We've already got an extremely strong leisure franchise with a strong premium onboard offering. More than 25% of our seats are actually premium seats in the industry. And so when we think about how we can capitalize on the leisure customer with our diverse portfolio of products. We are quite bullish there, but we need to improve how we segment, how we merchandise. We need to close gaps in that product offering, and we need to do all of this at the same time. Hence, Dave's focus on delivering over $300 million of revenue initiatives this year. Loyalty & CoBrand is well-positioned to be an accelerator. JetBlue Travel Products, likewise, it's had one of its best years yet. Ursula touched on capital and cost discipline. We need to be unflagging in our efforts to reduce and better control our costs. And then reliability underpins all of this. Obviously, our network footprint makes that more challenging, but we are making really nice progress there, notwithstanding some of the headlines, and then reinvigorating our culture. So scale, it matters, but we also believe relevance matters. And we have scale and we have relevance in some really big markets, and we need to focus on doing what we do best in those markets. We also have a path to capital-like growth. So Ursula touched on the deferrals, but I think it's worth noting we're still taking over 50 aircraft over the next two years, and we have the ability to defer some of our A320 deliveries, which isn't the same as acquiring another airline, but it will give us a path to sustainable, profitable growth over the next few years. So we have a short-term priority, but yes, we believe we've got a nice

long-term plan as well. Great. Thanks for that answer. And then just a quick follow-up, just Ursula on the debt balance sheet. It looked like it was up, I think, four, seven, maybe that was up about 700 million. Is that mostly aircraft debt? Like what was the swing there quarter over

quarter? Thanks. And thanks for taking my question. Good morning, Mike. I just want to go back to one of Joanna's comments in regards to one lever that we have is extending or buying out A320 aircraft. So that is one lever. Yeah, the deferring deliveries. I meant extending the retirements. Yeah. But back to your question, Mike, the increase in debt was driven by the financing of aircraft throughout 2023. So we raised $1.4 billion against various aircraft as we navigated through last year. So that's really what's driving the uptick in the debt

metrics year over year. Great. Thank you. Our next question comes from Dan McKenzie,

Seaport Global. Well, hey, thanks. Good morning, guys. On the 30A320s providing a growth tailwind, are they enough to make up the shortfall from the deferred deliveries and the GTF issues looking

ahead, say, to 2025 and 2026? Yeah. Hi, Dan. It's a good question. It's definitely an opportunity to backfill some of the loss driven by the GTF. We are still working through the GTF exposure that we have in 2025 and beyond. So we look forward to sharing more about our multi-year growth rate projections at Investor Day in May. Yep, understood. And then the capital and cost

discipline, you know, that's coming through loud and clear this morning. Does the CapEx now slope sufficiently downwards in 2025 and beyond to get you to free cash flow? And at least, you know, How can we help – how can we think about that journey?

Yeah, so the deferral today, Dan, basically it has us taking, on average, 24 aircraft over each year, over the next five years. We've prioritized the A-220 aircraft as we want to continue with the E-190 exit. it. We believe that this sets us up to be more successful in getting this business back to profitability and hence in return driving free cash flow. So that was the essence of why we did the deferral. I think there are other capital light effective ways that we can continue to grow and that's a nod to the 30 aircraft that we could potentially extend or buy out on lease. So So the way we're going to go about driving a level of growth over the next few years is capital friendly.

Okay. Thanks for the time, you guys.

Our next question comes from Dwayne Fennigworth, Evercore ISI.

Hey, appreciate the time. Best of luck to Robin. Just a couple questions for me. As you dig into the detail of your network, peel back the onion, Can you just speak to the variability of your margins on a route level? Are there parts of your flying that are generating sufficiently high enough unit revenue to generate positive, decent margins? Or are the margins fairly uniform across your network?

Yeah, maybe I'll take it and then I'll throw it over to Dave. So Caribbean leisure franchise continues to do very nicely. Obviously, there's some near-term rising pressure with the capacity that's loaded to those markets. But that continues to be a strong hold for JetBlue. And as you think about the future, obviously, the focus on leisure, JetBlue travel products and the markets that it is in, that remains a very, very strong part of the network. On the good news front, domestic is trending well. Capacity has moderated across domestic. So that's seeing some nice improvements. And then New York and New York continues to improve. It's most certainly been a bit slower than we'd hoped for, but it continues on a nice trajectory. And as we think about the future, New York overall continues to be a really, really important part of our network. You know, transatlantic, small part, but also doing extremely well. So we've got a number of kind of core geographies that continue to produce very nice margins for JetBlue. But in a world where we're not growing, we need to be more selective where we fly. Dave, I don't know if you have anything to add.

Yeah, I'll just add on that over the past couple of years, demand has been pretty fluid in different geographies. And as we come through the post-COVID environment, I think it's now pretty clear as to what the new customer travel habits and preferences are. And we've been working to really actively align our network to those new demand areas. We did a fairly big network redeploy back in October. We had another one in January. I think you'll see another one or two as we go through this year and just realign to really reinforce the core markets that are working well and to be more selective and redeploy some of the markets that we've seen demand shift away from over the last couple of years.

Okay. Thanks for that. And then just for my second question, can you talk a little bit about the deferrals in this backdrop? Not asking for like contract specifics, but normally there would be penalties and escalators for deferring aircraft. But given how tight things are, could we actually envision incentives or maybe some reverse brokering for doing that right now, just given how tight things are.

Wayne, I'm not going to comment on commercial negotiations with Airbus. We appreciate their partnership. I do believe that this was a win-win for both them and ourselves over the next few years.

Okay. Appreciate the thoughts.

Our next question comes from Connor Cunningham, Milius Research.

Hi, everyone. Congrats, Robin and Joanna. And can you maybe help a little bit in terms of the comments on headcount? I'm just, you know, you mentioned early outs, but I was just trying to understand a little bit more in terms of actual magnitude and maybe the overall reductions in headcount there. And if you could just maybe speak to the cadence in CASAMX as that kind of plays out through the year.

Sorry, I couldn't hear. I think it's CASAMX, so I'll throw the second part of the question to Ursula. Well, just on headcount, we just launched our voluntary sort of opt-out program. It covers our support centers, so salaried, with the goal of trying to reduce fixed costs in a world where we're not growing. And then it extends to a few of our operational groups in the front line, but it's literally three days old, so we're not really in a position to provide more details. But we're trying to do it in a thoughtful way and provide our co-members with opportunities outside of JetBlue to the extent that they want to pursue that.

or it's maybe on the CapEx question. Thanks, Joanna. Yeah, just on ChasmX, you know, I do want to take a victory lap on 2023. We actually hit the full year controllable cost guide that we set last January, despite 1.5 points of headwinds driven by ATC and weather throughout the year. So, pleased that we delivered and executed on what we said we were going to do in 2023. In terms of 2024, I want to note we're up mid to high single digits with growth down low single digits. I do believe that this is a good and competent guide. We have been ruthless in terms of addressing the fixed cost base given we're not growing. We are on track to exceed the higher end of our structural cost guide. And then we're continuing to capture value given we're progressing with the E-190 exit from a fleet modernization program. So when you combine this laser focus across all three initiatives, I'm exceptionally pleased and we intend to execute the mid to high single digits on a full year basis. In terms of how that plays through throughout the year. Q1 is slightly elevated in terms of the year-over-year. The 9 to 11 percent guide includes two points of pilot pay, given that contract is lapping here in the January and February timeframe. As we navigate through the rest of the year, from a pure CHASM X sense perspective, we're essentially flat every quarter throughout the year. So the progression improves from a CASMX year-over-year perspective as we navigate through the rest of the year, and I feel confident that we'll hit the mid-to-high single digits.

Okay, that's helpful.

And then on the deferral versus lease extension comment, I'm a little confused there. I would have thought that the change in deferrals meant you were pivoting to slower growth until margins improved to some level. Can you just help to play out the scenarios between maybe low single-digit growth to like your historical range of mid to high in 2025 and beyond?

Yeah, the deferral we believed was imperative because the number one priority is getting this business back to sustain profitability. And we had 35 aircrafts that were supposed to deliver in 2025 and 45 in 2026. And we just didn't feel like that was the capital investment that we should be making when we're just getting the business to profitability. So we slowed the growth. On average, we'll take 24 aircraft per year over the next five years. We honed in on the A220. We protected that delivery schedule so that we can continue to exit the E190. And as I mentioned, we do have a lever to pull in terms of extending or buying out these leases. The goal is to get this business to grow again and to overcome the GTF challenges that we're seeing. So we do look forward to sharing you the multi-year growth plan at the Investor Day in May.

Okay, thank you.

Our next question comes from Jamie Baker, J.P. Morgan.

Oh, hey. Good morning, everybody. First, for Ursula, just trying to reconcile the unencumbered asset disclosure. So, for the bridge loan, can you remind us what was pledged there and confirm that was $9 billion? Is that correct? So, in theory, if that bridge goes away, just hypothetically, those assets come back to you, then there's another billion plus and that gets us to the figure on page nine is that the correct way to

think of it that is the exact way to think about it Jamie okay okay thank you

for that and then second for Joanna let's see how do I ask this uh if plan a was the pre-merger trajectory and plan B was or is the merger have you allocated any internal resources to coming up with a potential plan C or is that how we should interpret today's deck? I guess put differently, are the adjustments you're announcing today consistent with the merger plan? You know, meaning in a scenario where if the merger doesn't go through, we should be prepared

for further revisions. Does that make sense? Yes, it does. Yeah. So, the plan that we're talking about today is our organic plan without a spirit acquisition. Given the appeal that's pending, given the outcome of the judge's decision, we'll see that process play through. Our hope is that the First Circuit realizes the decision is erroneously decided, and we continue down the path with the spirit acquisition. But if that does not happen, we need to be prepared with our organic plan. And so that's what you heard about today. We will explain that greater at an investor day in May. You know, we're in the process, we've been in the process for the last several months of building this, I call it the plan B actually, building this plan B, which is the kind of supersized organic plan, you know, in case Spirit does not happen. So that's what you heard about today. From a resources perspective, there is a team that has been working through the Integration Management Office on the SPIRIT plan. That team will continue to do what they need to do, and this organic plan will be worked by the broader JetBlue organization. Okay, that's perfect.

Thank you very much. Take care. Our next question comes from Catherine O'Brien, Goldman Sachs.

Good morning, and congrats to Robin and Joanna again. I just wanted to dig in a bit on your comments on reshaping the cost structure to address the cost convergence. That was in the presentation. What types of initiatives are you looking at to achieve this? I know you've been talking about being relentless on fixed costs, and you gave a few examples of voluntary opt-outs that are in early innings and a few other things, but could you just give us a little bit more color on what exactly you're looking at. And I guess, you know, on the cost convergence front, you know, where do you see yourself kind of fitting in versus the bigger, more premium guys and maybe the lower cost? How do you view your performance over the last couple of years in that context?

Thanks for the question. So a couple thoughts. Definitely on the labor front, costs have obviously converged as we've navigated through COVID. I'm very hopeful that the peak is behind us. Hopefully, from a pilot labor perspective, attrition has been lower and that environment has been tightening up. And so I feel confident that the peak of labor rates across some of these larger frontline work groups is behind us. And so we've got to be laser focused on ensuring that we drive productivity, that we set up the network for success in terms of how we recover the network, but also ensure that our frontline crew members have the tools that they need to do their jobs easier. And essentially, that will result in productivity efficiencies going forward. So, you know, like I said, I am very pleased with our controllable cost execution in 2023. And I do believe that this is a competitive guide compared to the peer set in light of us not growing this year. And, you know, I fully expect to deliver on our full year guide again.

Great. And maybe just one for Dave. Can you just drill in a little by region for both fourth quarter unit revenue performance and how those trends are evolving to the first quarter? You know, you mentioned as well as your peers that it sounds like there's been a bit of an inflection in domestic, you know, LATAM, you know, close or LATAM near is perhaps a bit more challenged given some of the industry capacity. You know, what are you seeing? What do you see in fourth quarter? What underlies that 1Q guide? Yeah.

Hi, Katie. Thanks for the question. We're seeing some really positive trends. Demand is certainly remaining healthy. And I would say the unit revenue is being driven by both that healthy demand as well as capacity movement. So, for example, in Q1, we expect our domestic unit revenue to be positive year over year. I know for the system we're still slightly negative, but domestically we expect it to be positive. That demand remains very healthy, and we optimize our own capacity to align it with demand, and we see the industry come down a bit as well. Looking internationally, Latin remains very strong. We've been adding to it to really increase our focus and service of those markets. That always pressures unit revenue a bit, and it will take a little while to absorb, but those are our bread and butter markets for us, and we remain extremely committed to them. I'd also note internationally, Transatlantic continues to perform really well. As Joanna mentioned earlier, fourth quarter RASM was up double digits on about 70% more capacity. We expect that level of strength to not only go through the first quarter, but to probably accelerate further. So, feeling very good about where demand is and about how we are more closely

aligning our capacity with that demand. Thanks so much. Our next question comes from Helene Becker,

TD Cohen. Thanks very much, Operator. Hi, everybody, and thank you for the time. And yes, I will add my congrats to Robin and Joanna, too. On slide 10, Ursula, you talk about CapEx, And it looks like it accelerates through the year. So is that an increase in just the way, the cadence of the way it's working, or is it an increase in PDPs, or how should we think about the way that grows?

Yeah, thanks for the question, Helene. I mean, the majority of that $1.6 billion in CapEx is aircraft. I think over 90% of it is dependent on aircraft. So it's really just the timing of those deliveries throughout the year that's driving the Q1 versus the full year.

Got it. That's very helpful. And then just for my follow-up question, how are you thinking about, like, raising capital going forward? I mean, at these levels, I don't think you would do equity, but would you consider doing more leasing of aircraft or doing, I don't know, testing the ABS market again or doing something, you know, to maybe grow debt but get yourselves in a position where you can generate positive cash flow at some point?

So in 2023, we financed $1.4 billion of aircraft CapEx. We were exceptionally successful in the finance lease market. I think what we value when we look at financing in general is obviously the cost of the capital, but also the flexibility and the ability to hopefully pay down debt over time. And so we are, as I mentioned, in the market at the moment, assessing opportunities to raise capital in 2024. And so we'll be focusing on, obviously, cost of funding as well as flexibility. There's a decent amount of money in the finance lease market at the moment. But obviously, I mentioned earlier, we have a very large financeable asset pool. So, we'll continue to optimize across markets and across asset classes as we progress forward.

Okay, that's really helpful.

Our next question comes from Savi Scythe, Raymond James.

Hey, good morning, everyone, and Robin, it's been a pleasure and wish you the best on the next chapter here, and congrats to Joanna and Warren. Joanna, you mentioned premium gaps. So I was wondering if you can elaborate on that. I'm guessing one of them was probably the select seeding that you were introducing in 1Q. But I wonder if you can elaborate a little bit more on what you mentioned there.

Yeah, we'll talk a bit more about it at Investor Day. But if you think about how we segment the cabin, currently we have obviously mint for a subset of our market, even more space. We have basic economy, and we have sort of our core, core main, core blue product. And so, as we think about preferred seating, that's one piece of it. But we think there potentially are additional product offerings we could introduce that tap into a broader spectrum of customers. And we are focused, particularly with a focus on, like, the leisure customer, how we close any gaps in those offerings. So, it's both in terms of how we sell, but also the actual hard product itself.

Understood. And if I might, on this kind of refocusing on the high-value leisure, premium leisure, passenger, and your kind of fleet mix, and, you know, what's the role that the A220 plays in this? And do you kind of expect, you know, I think right now you have around 20% of your revenue that comes from business. Do you expect that mix to change over time?

So, you know, our focus continues to be on offering a strong product portfolio for all of our customers, whether you're a more price-sensitive customer or a customer who wants a more premium experience. And I mentioned over 25% of our seats fall into either the Even More Space or the Mint category. If you look at the A220, it's got 90% more, even more space seats than the 190. So just think about how we are modernizing the fleet. Naturally, that introduces more, even more space seats. But we want to be the airline that can serve all of our leisure customers as well as business customers because the product offering does speak to those customers to the extent we have a schedule that works for them. So we'll continue to invest in sort of the broad array. But, you know, this quarter in particular, we had an extremely strong premium offering, both even more space and Mint did exceptionally well from a revenue perspective. And so, you know, we'll continue to lean into the areas that are doing well, but we want to make sure we have a product offering that caters to a whole wide spectrum of customers.

Appreciate it. Thank you.

Our next question comes from Andrew DeDora, Bank of America.

Hey, good morning, everyone. Most of my questions have been answered already, but just one as it relates to the GTS. Ursula, I know you're still going through the exposures for 2025 and the impact there, but I've just been trying to think through what would be the 2025 capacity tailwind from just getting the 2024 GTS impacted planes coming back on?

Yeah, it's a good question. And we don't yet have detailed color from Pratt & Whitney on our 2025 exposure. I don't believe that it will drastically improve in regards to the average number of aircraft on the ground throughout the year. But more to come on that as we continue to work with Pratt to give you more color in May.

Okay, that's all I had.

Our next question comes from Stephen Trent, Citi.

Good morning, everybody, and congrats as well to Robin and Joanna once again. Most of my questions have also been answered, but I was curious about your labor force comments and appreciate what you've said. You know, how are you guys feeling about your supply of mechanics? You know, and I'm just trying to think through, you know, maybe who might be departing and where you might still have a big need. Thank you.

Sorry. You said who might... Mechanics. So, we have a healthy pipeline of mechanics. We've spent a lot of time building out gateway programs so that we can actually provide opportunities for crew members and other departments to obtain an A&P license and become a Jeppelin mechanic. We also have programs with local schools, Aviation High School, and others, to name a few. So we feel great about sort of our pipeline for mechanics. We've also seen a slowing of attrition across all work groups, which has been nice. I think we're through that COVID cycle where it was just, you know, a much more challenging period where we were doing a lot of hiring. So that's all balanced out. So we're in a good place there.

Okay, great. Appreciate that. And just one very quick follow-up. I believe you mentioned the shift towards adjusted EBIT margin as we move forward, and we just wanted to understand high-level sort of, you know, what your view is on that.

Yes. So, we provided estimated full-year 2024 guidance on an adjusted operating margin perspective. We said that we would be approaching break-even. We think this is a valid metric or helpful metric in regards to where we are and driving the core business to profitability. So that was the essence of honing in on operating margin. Obviously, we will progress what we provide guidance to as we navigate and get this business back to sustained profitability.

Okay, appreciate that. And thanks for taking my questions.

Our next question comes from Scott Group.

Wolf Research. Hey, thanks. Good morning. So, I want to just clarify one thing on the cost guidance. So, I thought you were saying that absolute chasm stays sort of flat throughout the year, which I think would imply something higher than the five to nine, but maybe I'm just taking some of that comment a little too literally. So, just any color would be helpful.

Yeah. So, what we highlighted in the deck is we said roughly flat absolute chasm ex-fuel throughout 2024. So from a pure Chasm X sense perspective, that's what that means. So flat throughout the year. The year over year comp will improve beyond the first quarter. And that will result in the up to mid high single digits on a full year basis. So Q1 is an outlier in terms of

the year-over-year comp. Okay. And then I'm wondering, maybe it's just too early, but do you guys have any visibility to second quarter unit revenue yet, right? So, I mean, you guys, a lot of other airlines talking about domestic inflecting positive in Q1. I'm just trying to understand, is this a real inflection? How much of this is maybe an easier comp for March and earlier Easter? Do we have visibility that this positive RASM continues into Q2 or maybe it's

too early? Hi, Scott. This is Dave. I'll take that one. We do feel very good about our unit revenue momentum that we've built, that it will continue going into Q2 and throughout the year. A couple of ways to think about this. One is just as we look ahead to the spring and summer, it's still early. We don't have a lot of bookings, but the ones we have are at a higher load factor build in a higher fare year over year. So what we do have on the books is certainly positive the C2 and C3. Secondly, and just at a higher level, as we ramp through the year, between our revenue initiatives ramping up throughout the year and then the comp, which is much more difficult in the first half of the year than the second half of the year, we expect both of those to drive significantly meaningful revenue improvement in year-over-year unit revenue as we go through the year. Helpful.

Thank you, guys. Our final question comes from Chris from Susquehanna International Group.

Good morning, everyone. Thanks for taking my question. I'll keep it to two. Robin, congrats. Best of luck. And Joanna, congrats on the promotion. Just a first question. If you could give, I think you might have said this on the last call, but any color on these high growth markets as it relates to geography. I think you said high growth, creative and leisure and VFR markets where those are. And then, two, on your transatlantic product, if you could comment on what you're seeing with respect to competitive capacity and fares and just summarize your, I guess, your value proposition here or kind of how you see this evolving, particularly as network carriers here continue to emphasize that market. Thank you.

I'll take the Caribbean VFR piece. So, you know, this is one of our core markets. It's foundational to who JetBlue is. It's an important part of JetBlue travel products and our growth in those markets. And so while there is increasing capacity in those markets, it remains foundational and fundamental to JetBlue, and we do drive some nice margins from those locations. In terms of transatlantic, 4% of our seats, so it's a relatively small footprint. We've got a great value proposition over there with Mint and our core product. And maybe I'll let Dave kind of pick up from there.

I'll just add, we're getting, you know, continuing to get really strong feedback, both from customers on the product as well as our operational reliability. And it's not only about the individual markets, too, but these add quite a bit of relevance to our New York and Boston focus cities, adding in these major European destinations as part of our larger network portfolio. So we're very pleased with the ramp up that we've had and see multiple benefits strategically with these markets.

Okay, thank you.

That concludes today's questions.

I'll now like to turn the call back over to Kus Patel for any closing remarks.

Thanks, Travis. That concludes our fourth quarter 2023 earnings call. Thank you for joining us and have a great day.

And again, that will conclude today's conference. Thank you for your participation. You may disconnect at any time.