Conference Transcript - JBLU 2026-02-18

Brandon Oglenski, Analyst — Barclays

All right. Good morning, everyone. Welcome again to day two of Barclays 43rd Annual Industrial Select Conference. I'm Brandon Oglinski, Airline and Transport Analyst. And next up, we have JetBlue Airways joining us as Marty St. George, President of the Company, and Ursula Hurley, Chief Financial Officer. I know, Ursula, you have a couple things you want to maybe talk about first, but can we just cue up the audience response questions, and then we'll get right into it. And for those that have been through the firesides, you already know what this is. So do you currently own JetBlue? Yes, overweight, two market weight, three underweight, or four no? We appreciate everyone participating in this. Can we vote? You know, everyone asks, and every year we still don't get them up here. Question number two, please. What's your general bias towards JetBlue right now? Positive, negative, or neutral? And then question number three, technical difficulties. Well, Ursula, sorry about, okay, here we go. In your opinion, three-cycle EPS growth for JetBlue will be above peers, in line with peers, or below peers? We can vote.

Ursula Hurley, CFO

Looks like rapid fire, Brandon.

Brandon Oglenski, Analyst — Barclays

Anyways, we'll get to those results, Ursula.

Ursula Hurley, CFO

No problem.

Brandon Oglenski, Analyst — Barclays

But both of you, thank you for coming down and being in Miami. and I think you did want to open with a few.

Ursula Hurley, CFO

Sure, yeah. Well, thank you to Barclays and for you, Brandon, for having us. It's always nice to be in Florida and Miami in February. So we are really proud of the momentum that JetBlue has. We launched our JetForward plan about a year and a half ago, and last year we definitely focused on the things we can control, and we made good progress. So we've been steadfast focused on operational reliability, and last year we exceeded or met all of our on-time performance metrics that we had and that has resulted in a 17 point improvement in our nps over a two-year period and we all acknowledge that nps is one of the top customer choice drivers and so we've been proud of the improvements that we've seen there on the product side you know we've rolled out enhancements to even more preferred seatings performing really well we rolled out our first lounge at JFK called the Blue House and the network is evolving and definitely maturing given we changed 20 percent of it upwards of 18 months ago so and then on the we are also excited about our Blue Sky agreement we actually started selling flights on each other's websites about a week ago so the progress there has been nice. And so all in all, please, in our Jet Forward plan, we delivered $305 million of EBIT last year. As we look forward to 2026, we're going to deliver a break-even or better operating margin. Jet Forward is going to deliver upwards of $310 million of value this year. We've got a really strong RASM guide and a set of initiatives underlying that at three and a half percent and that's in conjunction with a unit cost guide of two percent and so we have a strong track record of delivering on the unit cost performance over time and so all in all like super pleased with the momentum demand in the first quarter is really strong which marty i'll talk about and so hitting that break even or better operating margin is our number one goal and that's really going to set us up in 2027 to deliver positive free cash flow. So all in all, like good momentum, excited to be here and happy to go deeper on any of those topics, Brandon.

Brandon Oglenski, Analyst — Barclays

That was a pretty bullish intro there, Ursula. Marty, do you want to comment maybe on the demand environment right now?

Martin J. St. George, Analyst — Other

Yeah, I think if you look at demand right now, we'll use a word we have not heard in the industry for a year, which is strong. Demand is strong. You know, we obviously saw that starting in fourth quarter. You know, we beat our fourth quarter RASM guide by a pretty good number, and that momentum is carried into the first quarter and beyond. And I think if you look at our overall number for 2026, as far as our RASM guide, I think it shows the underlying strength of the business, the strength of the macroeconomic environment that things seem to be picking up. I think, most importantly, the strength of JetForward and the initiatives that we're following to get us back to the pre-COVID margins.

Brandon Oglenski, Analyst — Barclays

And just remind me, did you guys quantify, too, the impact from the storms that we saw at Fern, I guess, that was up and down the East Coast?

Martin J. St. George, Analyst — Other

We have not quantified it, but frankly, we've done the math and it's been de minimis. And it's certainly not going to impact our annual guide in any way whatsoever. It was, you know, some of the weather we've had has actually come during trough period, which has been helpful for us as far as recapturing revenue. And we just saved some expense, but it will have no impact on our annual numbers.

Brandon Oglenski, Analyst — Barclays

Okay. Appreciate that.

Ursula Hurley, CFO

And I guess if we were to unpack last year, because the target was again to break even then and obviously we're not the only airline to miss guidance as well so um can you just unpack what you feel went wrong maybe in 2025 outside of obviously the market pulling back about this time yeah so we exceeded our jet forward ebic goal last year and so that just really speaks to our jet forward program has over 200 initiatives that are built up from the bottoms up and the team is pretty relentless in tracking those and so execution of the team continues to be really really strong which is what gives us confidence to be able to deliver the break even or better operating margin in 2026 you know we taking a step back we've we've said if it weren't for the macro step back last year we actually would have hit our break even target last year which i think is a pretty powerful statement right because that speaks to we're executing on the things we can control and we're progressing these initiatives at the highest level. You know, 80% of these initiatives are top line revenue focused and 20% of them are costs. And as we look forward to 2026, the progression throughout the year in terms of the RASM step change really speaks to the ramp up of the initiatives that we're rolling out. Capacity is actually growing as we navigate throughout 2026. And so that is driving unit cost efficiencies throughout the year as well. And so that's really the combination of what is going to deliver, you know, the break-even or better op margin next year. I don't know if you have anything else to add, Marty.

Martin J. St. George, Analyst — Other

Yeah, the only thing I'll say is our overall performance in 2025 actually came with a pretty significant reduction in our ASM growth year-over-year. And there were a good chunk of things in Jet Forward that were passenger count related. Bag fee increases, premium seating, things like that. And even with all that, we exceeded Jet Forward. So I'm really happy with the resilience of the team as far as adjusting. We have 200-plus initiatives in Jet Forward. We track them every other week. And the team is relentlessly focused on making sure that we achieve all these things that really were part of catching up from the lost two years between the Spirit transaction and between the NEA with American. And we had a lot of catching up to do, and I think we're nailing it.

Brandon Oglenski, Analyst — Barclays

Marty, as well, it looks like industry capacity growth is more subdued, tame this year, especially one of your direct low-cost competitors out of Fort Lauderdale. How is that helping the environment for you or creating opportunities?

Martin J. St. George, Analyst — Other

It's certainly having an impact on the macro environment. I think it's actually having relative less impact for us because as you look at that competitor, the one place that they're hanging on to most feverishly has been Fort Lauderdale that being the case they have still done some pulling and frankly the facilities that they've freed up at Lauderdale mostly for international arrivals has been funding a lot of our growth because the whole for us has been the lack of ability to fly more international in and out of Fort Lauderdale so that's been very helpful for us and frankly if you look at the competitive environment and look at what Spirit has announced, I think they'll end up being flat second quarter, excuse me, third quarter and beyond. So I think if you look at where the Spirit polls have been, it's benefited our competitors a lot more than it's benefited us. But frankly, I cannot stress enough how much Fort Lauderdale has overperformed versus our expectations. I think right at the time of their second bankruptcy filing, we put a significant amount of capacity in for November and beyond for Fort Lauderdale. Knowing our traditional results as far as ramping and the fact that we're announcing stuff on 90 days anticipation versus, you know, 120, 150, we had expected a pretty significant headwind. We called out our fourth quarter rather than performance would have a one point headwind just based on Fort Lauderdale growth, and it was less than half of that. So the response from customers has been fantastic, and we're, we've continued to grow a lot of it'll pass that and we're still on a trajectory as as international gates become available we will absolutely continue to grow for a lot of them and is there any differentiation across the network right now with the better performance that you're seeing is it domestic it's funny it's i will say i'm going to break one of my rules and generally we don't give a lot of color on that but in this specific case i will give color that there's no color i mean we're really seeing it universally everywhere. We've spent a lot of time trying to dissect what the source is of the current overperformance. The competitive capacity environment is better than it was in 25, but not dramatically better. But I think if you look at the overall results, certainly Lauderdale has been a very good thing for us. I do think there's just a macroeconomic good guy right now as far as people flying more. And frankly, I would love to blame it on very cold weather in the northeast and we've got you know month month year old you know month old snow banks up there that haven't really moved and it's still very cold but frankly it's not just the florida and caribbean outperformance we're seeing outperformance um uh in transcontinental as well and that's you know 90 something percent of our capacity between those three regions so it's really been spread broad across the system okay uh ursula i think you mentioned uh even more space the blue sky agreement i don't know what is most important on jet forward for 2026 yeah i would say i'm most proud of the improvement in the operational performance i mean it goes

Ursula Hurley, CFO

without saying you run a good operation your customers are happy your crew members are happy and costs naturally come out of the business so we've invested significantly in tools to better help the operation, whether it be in our system operations center or frontline labor, or even to ensure that customers are able to self-serve when things go wrong. I'm most proud of the operational reliability improvements we've seen. What I'm most excited about as we look at 2026 is rolling out domestic first class. This is going to be a product that is going to allow us to better compete. so i'm very much looking forward to that that initiative rolls out most likely in the third quarter i am also looking forward to the continued ramp up of our partnership with blue sky you know like i said we started selling each other's flights on each other's websites about a week ago and we're pleased with what we're seeing thus far and then later this year we're going to continue to roll out the ability for united customers to actually use our paisley product to buy ancillary type products. So those are probably the two initiatives that I'm looking forward to continue and ramp up and roll out later this year.

Brandon Oglenski, Analyst — Barclays

I want to come back to the Blue Sky Partnership, but on operations and costs specifically, I think you're facing fewer aircraft on ground this year owing to the GTF. Is that right?

Ursula Hurley, CFO

We are. So last year we averaged about nine aircraft on the ground due to the gtf engine issues um year over year that is improving so we'll have mid single digit number of aircraft on the ground this year um so we have um hit the peak and um we are seeing improvement and this is allowing us to grow again so jet blue hasn't been in a position to be able to grow over the last few years given the engine challenges and so just being able to grow and drive some efficiency, quite frankly, in the cost structure is really, really helpful.

Brandon Oglenski, Analyst — Barclays

And just to be clear, you were staffed for a higher level of operations. Is that right?

Ursula Hurley, CFO

We have been over the last few years. I mean, we've done things to help right-size that. We did a pilot early retirement. We've done a lot of voluntary programs across a multitude of work groups. So yes, we were carrying some excess costs and we're basically working our way to right-sizing that given the growth profile this year.

Martin J. St. George, Analyst — Other

It's worth saying we're hiring our first in-flight crew members in years. So in-flight has certainly been rationalized to the point we need to grow again. We're still not there on the pilot side, but having some of these airplanes come back will certainly help.

Brandon Oglenski, Analyst — Barclays

I guess, Marty, from a network perspective, what's the priority for expansion this year?

Martin J. St. George, Analyst — Other

Priority is absolutely Fort Lauderdale. And we started adding capacity in the middle of 25 with the first bankruptcy filing. We're adding more near the end of 25 with the second bankruptcy filing. And we'll continue to add as facilities become available. At the same time, we're still in the mid-single-digit growth profile right now. Clearly, our number one goal is to get back to fully allocated profitability and start paying down the balance sheet so as tempting as it may be to grow a little bit faster you know we we don't have the balance sheet to do that right now where we'd like to be we're going to get there and I feel very great I mean again we'll be a positive free cash flow in 27 which is extremely important for us and you know we will we will fund some of this growth from elsewhere in the system as we need but obviously the gtf airplanes coming back has been really really helpful so I feel like from a timing perspective I'm very happy with the progress we're making with Pratt. We'd like more progress, but that being the case, I feel very good about the trajectory that we're following as far as where the network growth has been and where it's going.

Brandon Oglenski, Analyst — Barclays

And I don't think you've finalized an agreement with Pratt for this year.

Ursula Hurley, CFO

We are still working through the compensation negotiations with Pratt and Whitney. We're going to settle when we think we've achieved, quite frankly, what we deserve given the magnitude of the impact on the business. Our full-year guide for 2026 does assume a small benefit associated with compensation, just given we're such a big PRAT customer, so compensation can come in various ways. And then when you layer in the accounting treatment, the impact on a 2026 annual basis ends up being minimal.

Brandon Oglenski, Analyst — Barclays

John, does he have a question?

John, Analyst — Audience Member

Revenues were 13 points above main cabin or the core. How's that developing with the current macro you're seeing? And then also it's out that the core of Ormerdale is developing maybe a little quicker than a normal maturation curve. Can you just kind of talk to that and maybe how that plays out through the year?

Martin J. St. George, Analyst — Other

Great question. So with respect to the relationship between the coach cabin and the premium cabins, that relationship has stayed more or less steady. But I think the good news is we're seeing actually relatively good results in the back of the airplane, which we have not seen for a couple of years. So I think overall that's a testimony of the fact that we do have a much better operation than we've had historically. I mean, we had a tough year in 22 and 23 as far as operational metrics, and we certainly saw it in NPS. We do subscribe to the Bain, I can't remember, Paulist, I think they call it. They have an industry-wide NPS, and we are at the top of the industry in NPS, and we have not been at the top of the industry for a few years. So I think that does translate into strength in the back of the airplane. With respect to Fort Lauderdale, you know, it's funny. We recognize that this is an incredible opportunity for us to diversify this network out of the Northeast. And frankly, you know, we've had focus. We still have focus cities in Orlando and in Fort Lauderdale. We did a good crunch of growth in San Juan in 2024. but again it's not that big a market um we'll continue to grow in san juan but it doesn't have you know it doesn't have the capability to be 100 flights anytime soon um as you look at orlando versus fort lauderdale with respect to our focus on premium customers south florida is the premium market in florida no question um and frankly i am very excited about the results we're seeing so far and as long as a lot of that continues to perform we'll continue to add growth in there. You know, we had mentioned a little bit earlier, you know, our ASM growth there is in the double digits, and RASM is basically flat. I mean, we don't see that performance elsewhere. And frankly, I don't know what's happening with our competitor as far as what their bookings look like. They're not in some of the databases that we use to measure things like that. But I know our numbers, and we're really happy with what we're seeing right now. And I think the long-term impact of diversifying the company more broadly away from New York and Boston will have great upside in the long term.

Brandon Oglenski, Analyst — Barclays

Marty, maybe along those lines and talking about blue sky, can you just give an update on where that sits today? Because I think you guys went live with selling each other's flights. Is that correct?

Martin J. St. George, Analyst — Other

We did. Eight days ago, we started selling each other's flights. As you may remember, we did upguide our jet forward numbers based on our expectations from our United relationship. And I think that this is a relationship that is very important to JetBlue in the long term, mostly because the challenge we've had over the last several years has been scale. And I think if you look at between the originally planned Spirit transaction and the relationship we have with American, they were both really focused on trying to get more scale for JetBlue. As I think we all know, reading the results of our competitors and some of their statements, the industry has recognized that the credit card programs are a really important part of a sort of a well-rounded revenue portfolio. Now, frankly, we're in the middle of the pack right now as far as percentage of our revenues that come from our friends at Barclays, who's a great partner for us. And not just saying that because we're on your stage thank you um but uh you know we are ahead of a couple of our big competitors uh as far as percentage of total revenue but we recognize that the true blue currency is a little bit uh impaired you know if you want before the united transaction a relationship um you know there are a lot of parts of the world where you could not earn or burn true blue points and with this trend uh with this uh blue sky program that has finally changed and we are extremely excited about that i will also say uh and i know mike was here a little bit earlier um we still remain competitors with united and you know this is a industry standard interline agreement that we do with many many airlines uh this is not any sort of relationship like we have with american because the judge made it clear to us what relationship would work for jet blue and work for our competitors but we are really excited about what this is going to do for true blue and for on top of that the benefits of paisley which are going to start picking up in 2026 as we start taking over the sales of some of the united ancillaries i think this is a really important part of jet forward and something i think is very good for the long term of jet blue we remain competitors they will be flying in jfk at some point in 2027 but the overall benefits for uh for blue sky are still very creative for us and we're really excited about it but more than anything we're excited but for customers um you know the the uh the the metaphor i use all the time is if you were uh trying to decide what program to align with and you were in a place like buffalo where we fly to florida we fly to new york we fly to boston but if you want to fly west can't fly jet blue like now you can actually earn and burn true blue points anywhere in the world from buffalo and i think in some of those secondary markets the benefits we will get for selling more credit cards, is really, really important to us.

Brandon Oglenski, Analyst — Barclays

Well, Marty, you guys were in a unique position with Spirit and the Biden administration, you know, effectively rejecting that deal. And it's pretty amazing to see how that's played out now since. But I guess looking forward, the scale issue doesn't go away. So does M&A play a larger part for the industry going forward?

Martin J. St. George, Analyst — Other

I'll say I, you You know, predicting what happens in Washington is way by my pay grade. We are focused on jet forward and making sure we accomplish the goals in jet forward. I think that if you look at our network and what we're building as far as up and down the east coast, being the preeminent leisure airline, we are well on path to do that. I do think there's a parallel between us and Alaska. I mean, no one's talking to Alaska about, like, what's your Midwestern hub going to be? People still ask us that question, what's your Midwestern hub? I'm like, I don't need a Midwestern hub because, frankly, they're all taken. I do think there's a very strong path for us going forward with the United relationship to sort of fill that hole for us. And there's no focus whatsoever as far as M&A here. I don't know if you want anything.

Ursula Hurley, CFO

No, I totally agree. We're focused on owning our own destiny and executing jet forward. I mean, our number one priority is getting this business to consistent profitability again. And then, clearly, we need to improve the balance sheet. And so we feel confident we're on the right trajectory right now. And we're super pleased with the momentum that we had coming out of 2025. And the demand environment is obviously like really, really strong.

Martin J. St. George, Analyst — Other

And I just think it's worth mentioning. These are not numbers that have been unseen before. If you look at the 2015, 2016 period, you know, we did produce these margins. And our goal is to get back to where we were then. Yes, sadly, it's a decade of challenges between then. But, you know, a lot of the eminent in the industry had happened before then. So it's not like M&A has created this incredible threat for us from the big three and a half carriers who've gone through M&A. We can get there, and I think that's what JetForward's really focused on.

Brandon Oglenski, Analyst — Barclays

Can we queue up question number four, actually, for the audience, please? In your opinion, what should JetBlue do with excess cash? First to our M&A, then share repurchases, dividends, debt pay down, or internal investment? Go ahead and vote, please. Can we thank everyone for this?

Martin J. St. George, Analyst — Other

I can, we can, we can take bets on what this, I know the answer to this one.

Ursula Hurley, CFO

I mean, if this isn't, if this isn't number, wow. There we go.

Brandon Oglenski, Analyst — Barclays

Question number five, in your opinion, what multiple of 2026 earnings should JetBlue trade? Go ahead and vote, please. And, or so, I want to ask about CapEx and plans this year, too. And then question number six, what do you see as the most significant share price I had when facing JetBlue? Core growth, margin performance, capital deployment, or execution and strategy? Okay. Ursula, I think you guys guided to about, is it $900 million of net CapEx this year? And I think you've said that maybe you need about a half a billion more of capital. Is that right?

Ursula Hurley, CFO

Correct. Yeah. So your numbers are spot on. So through the end of the decade, our CapEx profile is going to be sub a billion dollars. So we've laid out the order book appropriately. um you know the quantity of deliveries once we get to 2027 steps down to a handful per year i mean we did that to ensure that we have the runway to deliver positive free cash flow in 2027 um i will note you know the the capex profile being at sub a billion each year we can still deliver you know low to mid single digit growth through the end of the decade and we believe that that's the optimal growth rate for us as we get this business back to consistent profitability. So that's a combination of the new deliveries, but also the GTF engine issue continuing to improve. On the balance sheet front, we believe that we've hit peak debt levels. So this year, we'll pay down about $800 million in debt, and we're raising $500. So we believe we've got a solid runway. I mean, priority number one is break even or better op margin. Priority number two is positive free cash flow in 2027. And then number three is starting to pay down the debt profile. We need to get in a better position in terms of our leverage metrics. And that's going to be the number one priority once we hit that free cash flow target. And I guess, what would you call your unencumbered assets today yes yeah we have this provides us a lot of flexibility we have over six and a half billion of unencumbered assets um about two billion of that is aircraft and engines um we have more we can do in terms of levering our loyalty program and then we have slots gates and routes and our brand so it provides a nice cushion for us um you know So I feel good about the flexibility that we would have if we needed to raise more liquidity. Obviously, with the positive demand environment that we're seeing and the CapEx profile being sub-a-billion, I feel good about the position we're in in terms of liquidity balance and just the setup that we have to deliver free cash flow next year.

Martin J. St. George, Analyst — Other

Also, one thing I'd add is we have hit our point of peak leverage. I mean, if you look at paying off the convert, things like that, you know, we're only going one direction. It's the right way as far as leverage right now. So I cannot stress enough how much that's a singular focus of this team is making sure we execute on results to make sure we can get the balance sheet back in good shape.

Brandon Oglenski, Analyst — Barclays

Sounds like Jet Forward is on track this year.

Ursula Hurley, CFO

Yes, we feel good. We feel really good.

Brandon Oglenski, Analyst — Barclays

Marty and Ursula, thank you so much for coming down. Thank you. Thank you all for coming.

Ursula Hurley, CFO

Thank you for having us, Brandon, and thank you for everyone being here.