Jetblue Airways Corp Q3 FY2025 Earnings Call

Ladies and gentlemen, good morning. My name is Abby, and I would like to welcome everyone to the JetBlue Airways Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. I would now like to turn the call over to JetBlue's Director of Investor Relations, Koosh Patel. Please go ahead, sir.

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

Thank you, Koosh. Good morning, and thank you for joining JetBlue's Third Quarter 2025 Earnings Call. As Hurricane Melissa makes landfall today, I'd like to begin by extending my thoughts to our JetBlue crew members, their families and the communities that we serve in Jamaica. As the largest airline in Jamaica, we are focused on caring for our crew members and resuming operations when we can safely do so. Our crew members are at the heart of providing the reliable and caring service that makes the JetBlue experience so special and I'd like to thank them for their dedication throughout the challenging summer travel season. Thanks to your hard work, we are continuing to make meaningful progress on our JetForward plan while taking care of our customers and each other. Throughout the year, our team has worked with urgency to adapt to the evolving demand environment, adjusting supply, implementing new revenue initiatives and pursuing self-help measures to continue reducing costs. Our results this quarter are an outcome of these efforts. We ended the period at the better end of our guidance ranges across all metrics, including unit revenues and costs, realizing meaningful margin improvement compared to initial expectations. The whole industry took a step back this year. But despite these challenges, we are gaining momentum from JetForward and making progress on our plan, operating a stronger airline every day and delivering on or beating our commitments. Building on the progress since we've announced JetForward five quarters ago, our operational metrics and customer satisfaction scores continued to improve in the quarter. We improved completion factor and on-time performance versus last year with A14 up two points, successfully navigating a challenging July in which air traffic control programs impacted operations nearly every day. As a result, customers are more satisfied with their JetBlue experience as demonstrated by improvements in our Net Promoter Scores, both in the quarter and throughout the year, and I'm proud of the team for achieving double-digit NPS gains year-to-date. Even though our operation has consistently been challenged by external factors, our results demonstrate that the investments we've made in reliability are working. This fall, airfield construction at both Boston Logan and JFK is negatively impacting on-time performance, but we expect that to improve in November when this phase of construction wraps up. Regarding the government shutdown, we have not yet seen any material impact to demand or our operation. From TSA and air traffic control to Customs and Border Protection, it's truly a team effort. We are grateful for their dedication in keeping us safely moving, and we also thank Secretary Duffy for being a strong partner as we navigate this situation. By delivering a reliable operation and improving customer satisfaction as part of JetForward, we are building greater customer loyalty and generating more repeat customers. Last quarter, for example, our TrueBlue attachment rate was up seven percentage points year-over-year and our loyalty members are increasingly choosing JetBlue for multiple trips per year. At the same time, we continue to modernize our fleet to drive efficiencies across our operation and enhance the customer experience on board. During the third quarter, we retired our remaining Embraer E190 aircraft, marking nearly two decades of service. We want to thank Embraer and GE for their partnership over the years. This completes our transition to a more customer-friendly onboard product and cost-efficient all-Airbus fleet, allowing us to take full advantage of additional network opportunities from our East Coast focused cities. Along those lines, in support of building the best East Coast leisure network, we are taking deliberate steps to deepen our presence in Fort Lauderdale. This expansion, which mostly launches in the fourth quarter, enables us to further strengthen our position in this highly valuable focus city, adding more leisure destinations for our South Florida customers and increasing connectivity to the Caribbean and Latin America. JetBlue has deep roots in Fort Lauderdale. It's where our first revenue flight landed from New York's JFK on February 11, 2000. And now, 25 years later, the opportunity is ripe to reaffirm our leadership position there. With our much better customer experience and competitive low fares and now more destinations, we are pleased to bring even more value and choice to customers in Fort Lauderdale and across South Florida. Looking ahead to the fourth quarter, we remain optimistic that the environment will continue to improve. And as Marty will discuss further, we are pleased by the overall health of bookings. Demand for peak period travel remains strong, led by the resilience of the premium leisure segment, which aligns well with our new Premier Card, our plans to open our first lounge this quarter as well as domestic first class launching next year. We've built a strong foundation with JetForward and we are on track to generate a cumulative $290 million of incremental EBIT this year. Our efforts to boost reliability, recalibrate our network, enhance our products and services, supercharge our loyalty program and execute on costs have fueled transformational change, delivering double-digit NPS gains and industry-leading operational improvements. Blue Sky implementation is on track with last week's loyalty launch, marking the first major milestone of our collaboration, and domestic first class is scheduled to launch next year, both expected to be meaningful drivers of incremental earnings in 2026 and beyond. We are encouraged by the progress so far and we are confident we are on the right path to restore profitability, building a stronger JetBlue for our customers, crew members and our owners. Over to you, Marty.

Thank you, Joanna, and thank you to our crew members for a strong summer. We continue to make meaningful strides on JetForward to refresh our commercial strategy and drive incremental revenue by refining our network, expanding our reach through partnerships, increasing the value and utility of our loyalty program, and enhancing our products and perks. Turning to Slide 6 in the presentation. As Joanna mentioned, we have reestablished our position as the largest carrier in Fort Lauderdale, a market where our differentiated product and robust network resonate well with customers. As previously announced, we plan to launch 17 new routes and increase frequency on 12 high-demand markets, with our schedule now representing a 35% year-over-year increase for the IATA winter season. Our schedule also features over 25 daily flights touching Fort Lauderdale with our award-winning Mint service, offering more transcontinental lie-flat seats from South Florida than any other carrier. To support continued growth in premium flying, we also announced our intent to establish a Mint base for in-flight crew members in Fort Lauderdale, alongside growing the size of our overall crew base, bringing more jobs to the region. These investments reaffirm our leadership in Fort Lauderdale and leverage our caring service, differentiated product, premium Mint experience and robust network. Turning to Slide 7. Implementation of Blue Sky, our collaboration with United Airlines, is progressing as planned and has already begun delivering value to our customers. Last week, we enabled point accrual and redemption across our loyalty ecosystems, enhancing the utility of each program. We are already seeing significant customer interest. And since announcing Blue Sky at the end of May, we've seen a sustained double-digit increase in average daily card acquisition growth across geographies, particularly in non-focus city markets. We expect to continue the momentum into the first quarter as we begin cross-selling each other's flights on all digital channels. This industry standard interline agreement is expected to expand distribution reach for both airlines and provide customers with more choices to travel across the globe on our complementary networks. Loyalty reciprocity and cross-selling are two of the largest drivers of value from Blue Sky, and we expect the successful implementation of both to generate significant earnings momentum for JetForward. Later, in 2026, we plan to launch reciprocal loyalty benefits and Paisly integration, driving high-margin growth and additional value for the partnership. As we improve our customers' network options, we are also enhancing the customer experience on board and at the airport. In September, we became the first airline to partner with Amazon's Project Kuiper to provide faster and more reliable connectivity to our onboard Wi-Fi, furthering our leadership in onboard connectivity. JetBlue launched Fly-Fi in 2013 to become the first and still only major U.S. airline to offer free high-speed Wi-Fi on every aircraft in its fleet. The rollout is expected to begin in 2027. We continue to build on our decade-long commitment to premium and are progressing our plans to further capitalize on the demonstrated industry shift to the segment. This month, we enhanced merchandising EvenMore, and now customers can book on a single transaction through the GDS and online travel agencies. Previously, purchasing the product required two separate transactions on our third-party channels, and the simplicity and increased visibility is expected to support buy-ups and higher yields. In addition to EvenMore, preferred seating continues to outperform expectations. Finally, we remain on track to launch domestic first class in 2026, with the first equipped aircraft expected to begin flying in the second half of the year. The domestic first fleet modification is planned to include our entire non-Mint fleet. By the end of '26, we anticipate having approximately 25% of the retrofit complete, with the vast majority of the fleet expected to be completed by the end of 2027, over which time we expect to see meaningful EBIT contribution. On the ground, we are on track to open our first airport lounge at JFK by the end of this year, while our Boston lounge is set to open in 2026. The lounges will offer complementary access to transatlantic Mint customers, premium credit card holders, where sign-ups have already exceeded 2025 targets, and TrueBlue Mosaic members. Passes will also be available for purchase on days where space allows. Alongside our construction of the JFK lounge, we are in the middle of a total refresh of Terminal 5, which is set to bring more than 40 new concessions and a redesigned center concourse. Moving to third quarter results. Over the summer, the demand environment continued to show signs of recovery characterized by strong close-in bookings, healthy demand for peak travel, and the sustained strength in premium. As a result, unit revenues ended the quarter down 2.7% year-over-year, just above the midpoint of our revised guidance range and more than a point better than our initial guidance midpoint. Premium continued to outperform core, and year-over-year, premium RASM growth was up six points relative to core. Our managed corporate yields also showed strength, with yields up high single digits. And while our domestic flying saw the most sequential RASM improvement quarter-over-quarter, its relative margin performance still lagged international. We continued our string of double-digit loyalty growth in the quarter with co-brand remuneration up 16% and TrueBlue revenue up 12%. The card and TrueBlue trends are evidence of our improved customer satisfaction scores, recalibrated network of product as well as the strong benefit we are already seeing from the Blue Sky collaboration announcement. For the fourth quarter, we expect unit revenues to be between flat and down 4% year-over-year on capacity of up to three-quarters of the midpoint. Third quarter demand trends are forecasted to largely continue into the fourth with continued robust demand for premium products. Peaks are expected to remain healthy, while troughs continue to see challenges, which we have and will continue to actively manage through capacity adjustments. We are seeing the booking curve normalize, and we expect the same trend to continue throughout the fourth quarter. We expect continued macro-related tailwinds going forward in addition to the ramp of our JetForward commercial initiatives. On the network side, our capacity investment in Fort Lauderdale will be in its early stages of ramp after launching in November, December. And coupled with the step-up in domestic competitor capacity are expected to be just over a point of headwind to RASM for the quarter. Lastly, it's too early to size the impact of Hurricane Melissa on our operations in Jamaica, so our guidance does not contemplate any impact. Jamaica represents about 2.6% of our capacity in the fourth quarter. As we look ahead, we know there's still more work to do, but JetForward is the right plan. The initiatives we outline today from our Fort Lauderdale growth to Blue Sky and enhancing our premium products will be key to getting us back to sustained profitability. I'll now turn it over to Ursula to provide more detail on our cost and financial performance.

Thank you, Marty. We ended the quarter with an operating margin three points better than what was implied by our July guidance ranges, supported by a more reliable operation, greater close-in demand for our products and our team effectively controlling costs. Despite a tough air traffic control and weather environment in July, completed capacity growth of 0.9% was above the midpoint of our revised guidance. This, coupled with strong execution, helped to deliver excellent cost performance for the quarter. We ended the quarter with CASM ex-fuel up 3.7% year-over-year, beating the midpoint of our initial guidance by over one point, marking yet another quarter of cost execution. It is clear the investments we are making in our operation are increasing efficiencies across the business. Over the year, the team has demonstrated solid cost execution, and we are improving our full year CASM ex-fuel guidance from up 5% to 7% to up 5% to 6% year-over-year, lowering the midpoint by half a point despite less capacity than initially planned. For the fourth quarter, we expect CASM ex-fuel growth of up 3% to 5%. For the third quarter, fuel price came in at $2.49 in the lower half of our revised guidance range. We expect fourth quarter fuel to be between $2.33 and $2.48. Our fuel guidance is based on the forward curve as of October 10. As we work through our budgeting process for 2026, we expect our unit cost next year to be low single digits, underpinned by low to mid-single-digit capacity growth. We plan to grow capacity through new aircraft deliveries as well as the return of a sizable number of parked aircraft to service. As we get back to growing once again, we're doing so with our balance sheet in mind by adding capacity despite reducing CapEx. We expect our capital expenditures to be at or below $1 billion next year and each year through the end of the decade, supporting our balance sheet and our return to positive free cash flow over time. We ended the quarter with a healthy liquidity level of $2.9 billion in cash and marketable investments, excluding our $600 million revolver, representing 32% of trailing 12 months revenue. At the end of 2025, we expect to carry liquidity in excess of our 20% liquidity target. Looking forward to 2026, we expect to raise a modest amount of capital to maintain our liquidity target, driven by the maturity of $325 million of our 2021 convertible notes and new aircraft deliveries. I believe our healthy unencumbered asset base of over $5 billion will provide us flexibility to meet our funding needs. Finally, JetForward remains on track to hit its target of $290 million of incremental EBIT by year-end, and I am confident we are also on the path to meet our $850 million to $950 million 2027 commitment. The exciting commercial initiatives Marty detailed, including Blue Sky, domestic first, and lounges are expected to drive significant earnings momentum for JetForward in 2026 and into 2027. And alongside these efforts, we plan to remain focused on cost discipline and managing our fleet to preserve liquidity and drive capital-light growth. Taken together, we are confident we have the right initiatives in place to drive meaningful profitability improvement in 2026. And while we are still in the early innings of our budget process, it is our intention to build a plan that gets us to breakeven or better operating margin for 2026. We look forward to sharing more details during our January call. We will now open it up to your questions. Back over to you, Abby.

And our first question comes from the line of Dan McKenzie with Seaport Global.

Thanks for the preliminary outlook for 2026. But backing up, JetForward didn't factor in the Chapter 11 filing of one of your toughest competitors. And so I'm wondering if you can talk about what that means to the Fort Lauderdale operation and what that means to revenue upside to the JetForward plan?

Dan, it's Marty. Well, I'm not going to go into detail about our competitor's action, but most important thing is our reaction. And frankly, we have been hamstrung in Fort Lauderdale because of our lack of access to international gates in the middle of the day. And it's a relatively constrained customs facility at the airport and we have multiple carriers attempting to fly at the same time. What's worked out very well for us is that as our competitor has made some pretty significant pull-downs in Fort Lauderdale, we have seen a lot of opportunity to move flights into that customs facility at a time when it's actually good for our local customers and also very good for generating connections to markets to the north. So if you look at the growth that we have put into Fort Lauderdale, it is notwithstanding our reputation as being a Northeast airline, the growth is very much focused on markets in the Southeast and south of Fort Lauderdale. I'm actually very optimistic about the opportunity this creates. I mean I use the word generational about this. I mean our ability to get such significant growth for international services in such an important market for us is something we're absolutely going to take advantage of at the time. As I mentioned in the script, in the very short term, it's going to create a bit of a headwind in the fourth quarter, but we perform very well in Fort Lauderdale today as is shown by the fact that we have such a big Mint operation there. We compete very well against our competitor, which is probably one of the reasons why they are going through the restructuring they're experiencing. And we are very bullish on Fort Lauderdale. So thanks for the question. I think it's actually one of the good parts of the story. With respect to the impact of JetForward, there are an awful lot of puts and takes in there. There was a big chunk of network rebuild in there. We have made the commitment to investors that we'll update every six months on JetForward. And I don't want to give an update now, but that's something we'll probably talk about at the end of the year.

Yes, very good. If I could go back to the end of the year and how we are closing it out, it seems that the government shutdown likely cost JetBlue around $500 million in lost revenue. Please correct me if I'm wrong. Is it accurate to think that this is revenue that will return in 2026? Additionally, how do all the JetForward initiatives you’ve mentioned fit into this? I'm referring back to the quote from Joanna regarding the momentum heading into 2026. Could you provide more detail on that?

I want to highlight that we have met every guidance metric since April and have improved our third-quarter margins compared to our internal expectations, despite facing industry-wide challenges due to customer confidence issues in the airline sector. I'm proud of our team's efforts to recover from the setbacks. JetForward is a long-term initiative, and we are on course to achieve $290 million in EBIT this year, having launched it five quarters ago. Our progress has been excellent. The numbers reflect a four-point impact on our full-year operating margin compared to our initial guidance, which our analysis attributes to our premium mix being stronger than that of other carriers. Those with higher premium exposure have been less affected. JetForward focuses on enhancing our premium offerings, and we are making strides with initiatives like the Premier Card, new lounges, and preferred seating. Looking ahead to next year, we will continue expanding lounges and will introduce domestic first class. We are in the midst of executing our plans and I am very optimistic about our direction as we approach 2026. Our Net Promoter Score indicates that we are leading the industry, which is crucial for attracting premium customers. As we move towards 2026, while we need to see improvements in the macro environment, the combination of JetForward and our current momentum gives me confidence that we will develop a plan to break even or better and recover the ground we lost this year.

And our next question comes from the line of Savi Syth with Raymond James.

Could you provide insight into the incremental contribution from JetForward in 2026 and 2027? Additionally, I'd like to know about the headwinds you mentioned, alongside the macro tailwinds. I'm trying to understand how to view an EBIT bridge as we look toward 2027 and aim for solid profitability.

Yes. We've mentioned that the JetForward breakout is expected to be in the range of $850 million to $950 million, with contributions coming in equally over three years. While there are more than 200 initiatives, they are rolling out at a rate of one-third each year. As noted earlier, our goal for next year is to develop a plan for 2026 that achieves at least operating margin breakeven. We aim to recover some of the ground lost this year due to the macroeconomic challenges. Overall, I'm satisfied with the progress across all JetForward initiatives, including strong performance from our premium initiatives so far this year. We also have more developments on the way, including lounges, a premium credit card, and domestic first services next year. I'm particularly excited about domestic first as it should enhance our competitiveness. On a broader scale, we need continued macroeconomic improvement, which is factored into our 2026 projections. Overall, we're optimistic about our momentum, and JetForward is performing as expected. We look forward to sharing more details on our 2026 plan next year.

That's helpful. And may I just –- another question for you is just kind of how are you thinking about liquidity and leverage and kind of what type of financing needs you kind of anticipate over the next 12 to 18 months?

Yes. Listen, we did the strategic capital raise back in August of 2024. So that's really provided a strong liquidity runway for us through the end of 2025. We're projected to end the year above our 20% liquidity target. We are going to need a modest amount of capital next year just to support the new aircraft deliveries that we have coming as well as we do have a convertible debt maturity of $325 million in the April timeframe. By no means will the capital raise be anywhere near the size that we did in August of 2024. In terms of what assets we will use, I mean, we're in a pretty powerful position in terms of having over $5 billion of unencumbered assets, about 40% of that $5 billion is aircraft and engines, and then the remainder includes our slots, gates and routes as well as our brand. I would say we will look at all markets. I mean we're clearly focused on the level of interest expense and obviously the debt level that we have currently on the balance sheet. So we're going to try to be super thoughtful and strategic just given market availability with all the different types of unencumbered assets that we have.

And our next question comes from the line of Michael Linenberg with Deutsche Bank.

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

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

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

We don't typically provide detailed insights about demand by region. Generally, we observe that international performance is outpacing domestic, and premium offerings are performing better than economy seating. This trend remains consistent. If we assess our overall RASM performance, it’s important to recognize that this is a matter of weighted averages. With international being stronger and domestic lagging, there's still room for improvement in the domestic sector. What excites me most about enhancing our domestic RASM is the ongoing introduction of premium products. When we analyze our RASM on a competitive basis, we find that we perform well across the board. However, we are missing out on the revenue potential from the front of the aircraft, which is a significant advantage for our competitors. We perform very well against ultra-low-cost carriers that offer subpar premium products, but we see considerable potential in the premium offerings we’re introducing to help us close the gap with legacy airlines. While I won’t make predictions for the fourth quarter, I anticipate that we can discuss this in greater detail as we approach 2026.

And our next question comes from the line of Jamie Baker with JPMorgan.

So Ursula, following up on Savi's earlier question about modest cash raises next year, can you share your thoughts on the current incremental cost of debt? If we consider that aircraft debt is usually the lowest, are you leaning more towards sale leasebacks or borrowing against aircraft?

Yes. Listen, I think the benefit of the assets that we have unencumbered is that we can look at all markets and hone in on what is, quite frankly, most cost effective. I think the other priority we look at is building in prepayment flexibility. I mean our #1 priority is getting the business back to consistent operating margin positive. Then it's delivering free cash flow so that we can start to delever. Clearly, the most cost-effective money you can raise right now is with aircraft. So given we are focused on the level of interest expense, that could be a likely path. So how we do the aircraft, it will be what's the most attractive market. Is it bilateral bank loans? Is it capital markets? Is it sale leaseback? We'll look at everything.

Okay. Fair enough. Following up on that, if I remember correctly, it was during this call last year when I first heard you mention approaching breakeven in terms of forward year operating margin. I know 2025 has taken a different direction, and I'm not going to hold that against you. Here we are a year later, and you're bringing that narrative back. So my question is, do you or Marty think that industry fundamentals are more or less favorable for getting JetBlue back on track compared to this time last year? Given what you've shared about capacity and costs for next year, achieving breakeven or better seems like a significant challenge.

Jamie, let me address that. We believe that the fundamentals of the industry are now more in line with our direction. I understand that it feels repetitive, similar to where we were at this time last year with the same determination. I appreciate you acknowledging that the industry faced a setback, and we are all working to recover from it. Focusing on the premium customer is undoubtedly the correct approach. We have been implementing this strategy with Mint for ten years, and we are seeing positive results in our Mint performance. Now, a year later, we have already launched several initiatives that support this strategy. The progress we've made since last year includes the execution of JetForward, and we remain committed to delivering the initiatives we've planned so that as the economy improves, we can fully leverage them during the ramp-up phase. This includes preferred seating, additional space offerings, and the launch of the JFK lounge this December, along with Boston next year. We are also close to introducing our domestic first class service. Our analysis this year revealed that airlines with greater exposure to premium markets experienced a smaller margin impact from the recent downturn, reinforcing that JetForward is the right approach. We are enthusiastic about moving closer to profitability and maintaining this momentum. From my viewpoint, the fundamentals of the industry support our trajectory, and I am eager to see this come to fruition this year.

And our next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Just on the GTF impacts, do you have any update on the grounded aircraft and the forecast for next year embedded in your preliminary '26 comments? And can you remind us, is there any compensation that's actually baked into the results this year?

Sure. So the GTF challenges have improved. So if you recall, back in January, we thought we would have mid to high teens number of aircraft on the ground. The average for 2025 is going to be nine. We currently have six on the ground today. 2025 is the peak in terms of AOG. So that number will come down next year. So the projected AOG that we'll have on the ground in 2026 is low- to mid-single digits. So this is going to position us to actually be able to grow again, which we mentioned in our prepared remarks. In regards to our 2025 full-year controllable cost guidance, it does not assume any Pratt & Whitney compensation. We continue to be in constructive conversations with Pratt. And just given the magnitude of impact it's had on our business, we will settle when we get to the right place. I would say the other last comment from me is this is putting us in a position where we're growing in a capital-light way. So obviously, we've previously paid for these aircraft with the GTF engines, and having them return to service is great. This is definitely a tailwind for us and we're happy with where we're at in terms of getting these aircraft back up in the air.

Could you provide an update on your domestic business class or first class? What is the implementation timeline for that, and where do you expect to be by the end of 2026?

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

And our next question comes from the line of Atul Maheswari with UBS.

We are getting pushback that profit decline ex JetForward is accelerating just based on the fourth quarter guidance. So why do you think that is the case? And what needs to happen for the portion of profits not touched by JetForward to start improving again such that JetForward can truly be all incremental?

Yes. Listen, as we look at the fourth quarter, we do see an improvement in fuel year-over-year. But you have to remember, we're still operating from a much lower base in terms of the overarching demand environment. While it's improving, and we've seen that along with the rest of the industry, we're still operating way below where we had anticipated this year. We are showing RASM progression from Q3 to Q4. Our JetForward initiatives continue to ramp up. And you've heard us in our prepared remarks as well as in the Q&A highlight all of these premium initiatives that are coming to market. So we are seeing progress. I will remind you yet again, like if it were not for the macro setback earlier this year, which was a four-point impact to JetBlue, we would have hit our full year breakeven or better operating margin. So we believe we're on track and we've got solid momentum as we head into 2026.

Atul, if I can also mention, we've announced very close-in capacity and launch for Fort Lauderdale in Q4. So that's pressuring RASM a bit. Hence, the one point step forward in RASM. But that's a really great opportunity for JetBlue and absolutely the right long-term decision for this company because of the opportunity to really reclaim Fort Lauderdale as the third leg of our stool.

And our next question comes from the line of Conor Cunningham with Melius Research.

Just two questions, if I may. First, regarding the RASM outlook for the fourth quarter, can you detail what you're observing on the U.S. domestic front compared to Latin America and transatlantic markets? And my second question is about maintenance costs for next year. It seems like your maintenance is increasing by over 30 percent this year. With the E190s no longer in service, I think there is significant potential moving into 2026. I'm trying to understand how these aspects will play out.

All right. Conor, I'll address the first part regarding RASM. Overall, the regional perspective shows that RASM is relatively consistent, with international numbers performing better than domestic. There isn't any significant news regarding changes in trends. I believe that the capacity changes from ULCCs will ultimately have a positive impact. It's evident that as capacity has decreased, this should alleviate some pressure on the back of the airplane. However, it might be too soon to definitively identify that trend. I'll pass on the maintenance comment to...

Yes. Just on maintenance, Conor, I would say when you look across all the P&L cost line items, maintenance is still going to be a headwind next year. I mean, about half of our fleet is the A320. And that fleet is aging. It's not on a flight hour agreement. It's on a time and material agreement. So it is still going to be a headwind. Obviously, that's going to be offset by all of the JetForward cost initiatives, I think technology, I think productivity. So maintenance will be the one headwind. But as I mentioned in my prepared remarks, we are targeting a low single-digit CASM ex-fuel next year. So I'm pleased with the overarching like trajectory and the team's ability as we navigated through this year to execute to the cost performance. We improved the midpoint of our full year guide, and that's really attributable to the teams. And that's despite a one-point pull in capacity. So super pleased with the execution, and that's going to continue as we navigate through 2026.

And ladies and gentlemen, that will conclude today's conference, and we thank you for your participation. You may now disconnect.