JetBlue Airways Corp

NASDAQ:JBLU

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. My name is Brittany, and I would like to welcome everyone to the JetBlue Airways' Third Quarter 2024 Earnings Conference Call. As a reminder, today's call is being. [Operator Instructions]

I would now like to turn the call over to JetBlue's Director of Investor Relations, Koosh Patel. Please go ahead, sir.

[Koosh Patel, executive]

Thanks, Brittany. Good morning, everyone, and thanks for joining our third quarter 2024 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; Marty 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 2024 financial outlook and future results of operations and financial position, including long-term financial targets, industry and market trends, expectations with respect to tailwinds and headwinds, ability to achieve operational and financial targets, 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 and implied in these statements. Please refer to our most recent earnings release as well as our fiscal year 2023 10-K and other filings for a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements.

The statements made during this call are made only as of the date of the call, and other than as may be required by law, we undertake no obligation to update the information. Investors should not place undue reliance on these forward-looking statements. Also, during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation of these non-GAAP measures and a reconciliation of the corresponding GAAP measures, please refer to our earnings release, a copy of which is available on our website and on sec.gov.

And now I'd like to turn over the call to Joanna Geraghty, JetBlue's CEO.

[Joanna Geraghty, executive]

Thank you, Koosh. Good morning, everyone, and thank you for joining us today for our third quarter 2024 earnings call. The team continues to work hard to execute on our multiyear strategy, JetForward, with encouraging early results. This summer, efforts to deliver reliable and caring service, a core tenet of JetForward resulted in year-over-year improvements across key reliability and customer metrics.

While these investments are showing signs of traction, the results would not be possible without the dedication of our 23,000 crew members, who showed incredible resilience and professionalism throughout the busy summer travel period and in the face of Hurricanes Helene and Milton. We have thousands of crew members that live directly in the path of these storms. And even faced with uncertainty outside of work, you still showed up for your fellow crew members and customers. And for that, we all thank you.

The progress we've made this year is encouraging. And in the third quarter, our operating margin improved 5 points year-over-year and 5 points versus our initial expectations for the quarter. We remain committed to achieving our financial targets. And for the full year, we are improving our revenue guidance midpoint by 0.5 point and also maintaining the CASM ex-fuel target range we set at the beginning of the year. We are progressing toward our goals every day, but there is still significant work ahead on our path to full year operating profitability.

Now turning to Slide 4. Reliable and caring service drives choice, satisfaction and cost savings, and we believe that operational performance underpins the success of JetForward. In the third quarter, we built on operational achievements from the second quarter to deliver exceptional year-over-year improvements in A14 and completion factor.

Compared to last year, A14 was up over 12 points and completion factor was up nearly 2 points on the quarter. Additionally, the operation was particularly resilient during both Hurricanes Helene and Milton and returned to regular operations with minimal follow-on disruption.

This quarter's improved operational performance drove a double-digit increase in Net Promoter Score year-over-year. A reminder that operational reliability is a key driver of customer choice and satisfaction and is essential to delivering a premium customer experience and continuing to build long-standing relationships with our customers.

Revenue performance was strong in the third quarter and was bolstered by the continued success of our 2024 revenue initiatives. Progress from the changes to our Blue Basic carry-on baggage policy, which was announced in June and went live in September, is performing ahead of expectations. And across all initiatives, we've realized $275 million of the $300 million revenue target set at the beginning of the year.

Our premium offerings between preferred seating, Even More Space and Mint all continue to perform well, further evidence that our customers' desire for premium offerings is healthy and growing. On the cost side, better-than-anticipated operational performance, coupled with a shift of expenses to the fourth quarter, resulted in CASM ex-fuel beating the midpoint of our initial third quarter guidance by approximately 2 points.

Over the quarter, we also took substantial steps to secure our financial future, raising over $3 billion of debt to allow us to retire a portion of our existing debt, pre-fund 2024 and 2025 CapEx and provide us with the necessary runway to execute on JetForward.

Moving to the fourth quarter. We expect the relatively improved macro backdrop in our core geographies and especially in Latin, alongside healthy underlying demand and our own self-help capacity trimming to continue driving positive unit revenues through the second half of the year.

At the same time, we expect a large portion of our announced network initiatives to come online over the quarter. As we have previously communicated, these changes will take time to ramp, and though the RASM benefit will be modest system-wide in the fourth quarter, the redeploys are expected to mature throughout 2025.

We continue to expect positive year-over-year unit revenue in the quarter, though we expect transitory events to impact our sequential year-over-year RASM progression from the third quarter. We forecast that the disruption to travel and forward bookings from Hurricane Milton, combined with pressure from the election, will negatively impact our RASM performance by about 2 points. As we head into 2025, we remain confident in the underlying supply and demand backdrop, especially as our JetForward initiatives continue to deliver more value.

In the fourth quarter, our year-over-year unit costs also faced transitory headwinds and are expected to take a temporary step-up due primarily to timing of expenses over the year. This should not be viewed as the unit cost levels we are expecting for 2025.

Long-term capacity planning continues to be challenged by Pratt & Whitney aircraft on the ground, and we remain in discussions with them over future AOG expectations and compensation. As a reminder, we expect capacity to be roughly flat year-over-year in 2025.

Not having clear line of sight to our longer-term capacity is certainly frustrating, but we must remain focused on controlling what we can, and this is at the heart of JetForward.

On Slide 5, you can see that we've maintained our bias toward action. And over the quarter, we have made substantial progress on our JetForward plan. Last month, we announced enhancements to our loyalty and airport experience to offer products and perks our customers value. These enhancements include the introduction of lounges at JFK's Terminal 5 opening at the end of 2025 and at Boston Logan opening soon thereafter as well as the introduction of a premium co-branded credit card.

Today, we are announcing additional steps to better match our onboard product to what our customers value, a further differentiated premium extra legroom offerings and a more intuitive purchasing experience for that product. You will hear more from Marty on this topic.

I am proud of the progress we've made on these key initiatives, all aligned with our JetForward strategy, which provides a clear road map to delivering value to all of our stakeholders. In many ways, we are returning to the core strengths that made JetBlue one of the industry's most beloved brands. At the same time, we are rapidly evolving to compete more effectively in a transformed competitive landscape.

By consistently delivering reliable service, focusing on our East Coast leisure franchises and offering compelling new product options to customers, we expect to be well positioned to deliver on our mission of bringing humanity back to air travel. With that in mind, I am excited about the future of our business, and I am confident that you'll share my enthusiasm for the next phases of JetForward, as we work toward delivering our goal of $800 million to $900 million in incremental EBIT and expanding margins, all while continuing to meet the needs of our shareholders, crew members and our customers.

Now I'll hand it over to Marty to discuss our commercial progress.

[Martin St. George, executive]

Thank you, Joanna, and thank you to our crew members for their service and dedication to JetBlue. Our crew members differentiate us, and I'm extremely proud of the way they continue to deliver caring service in the face of challenges to our industry like Hurricanes Helene and Milton.

They've also managed an immense amount of network change over the past 9 months, as we continue to execute JetForward and build the best East Coast leisure network. As part of this network recalibration, we have announced and implemented over 50 route exits and 15 Blue City closures.

Just last week, we officially left Burbank, Charlotte, Minneapolis, San Antonio and Tallahassee. I know these actions are tough for crew members, especially crew station in those cities and also for customers who love our brand. But these decisions are a necessary part of our plan to return to sustained profitability.

We must have profits in order to serve our mission, and we simply cannot tolerate perpetually loss-making flying. Every aircraft must continue to earn its way into the network. In total, the redeploys announced and executed this year represented over 20% of our network and have freed up aircraft to serve markets where we perform the best.

Our origin markets in the East flying to Florida to the Caribbean, transcon and Europe. These routes serve the large majority of our customers in our core geographies who know our brand and where we have and can build scale locally. To better serve these franchises and reinforce our deep and relevant East Coast leisure network, we have announced service to 7 new Blue Cities since the start of the year.

Blue City openings in Manchester, New Hampshire and Islip, New York leverage our brand awareness and regional relevance in geographies where we have a loyal customer base. As we continue to adjust our network, we plan to focus our efforts on serving needs in similar markets, markets such as Providence and Hartford, where in the fourth quarter, we are operating our largest schedules ever.

In Providence, we expect to be up nearly 200% in seats year-over-year and in Hartford, more than 30% year-over-year, further deepening our East Coast leisure network. We also remain committed to better matching our onboard product to the needs of our customers who have increasingly asked for a more premium experience.

Today, we are announcing another JetForward milestone in the priority move products and perks customers value. As we have mentioned, Even More Space has performed exceptionally well as interest in premium options continues to be strong. We believe that we can build on the success to attract more customers in the premium leisure segment and capture additional revenue by evolving how we merchandise and sell our Even More Space seats.

Starting in mid-November, we plan to give Even More Space greater visibility in the booking process by offering to customers directly on the flight search results page on jetblue.com in addition to later in the booking process for customers to find it today.

As we move in to 2025, we plan to rebrand the offerings even more and package new benefits and amenities with the extra legroom seats. By making it easier for customers to find and book an enhanced offering, we expect to strengthen JetBlue's competitive position in the premium leisure segment and deliver even more value to our customers.

We are also working to ensure our customers have a premium experience on the ground. I've recent announcements to bring lounges to JFK's Terminal 5 and to Boston Logan, and to offer a premium co-branded credit card will allow us to serve the premium leisure customer in a way we have not before, and enable our loyalty and airports experience to complement the reliable service customers expect to receive on board.

Throughout the travel experience, it is clear that we are quickly moving to address gaps and serve the full spectrum of leisure customers. But we are not yet finished, and we expect to make further exciting products and perk announcements over the coming months.

Now turning to Slide 7 to discuss third quarter revenue performance and our outlook for the fourth quarter. Reliability initiatives drove higher-than-expected completion factor and capacity for the period, with capacity finishing down 3.6% versus the midpoint of our initial guidance of down 4.5%.

Over the third quarter, we also took self-help capacity measures that included day-week cuts during the trough. And in September, we were down nearly 100 flights Monday, Wednesday and Saturday versus peak days, better matching our flying with customer demand. These thoughtful capacity pulls, combined with an improving competitive capacity environment, healthy demand close-in and during peaks, and the continued success of our 2024 revenue initiatives supported positive year-over-year RASM of 4.3% for the quarter.

Unit revenue improved across all geographies in the third quarter, but the Latin recovery was the most substantial with year-over-year overlapping competitive capacity in the region, 7 points improved versus the last quarter.

Peak performance remained healthy. And as we previously announced, third quarter revenue was aided incrementally by 1 point from the industry-wide CrowdStrike event in July. Off-peak performance also improved relative to our expectations in September, supported by our trough capacity reductions.

Preferred seating and seasonal checked bag pricing as well as our Blue Basic baggage policy change also contributed to the revenue progress over the quarter. Our premium segments, Even More Space and Mint, continued to outperform with revenue up double digits year-over-year. Transatlantic Mint performance improved over the summer peak with PRASM in the third quarter up high single digits year-over-year and nearly 90% more ASMs.

We are encouraged by the ramp of these markets, but have also worked to further seasonalize the transatlantic schedule, allowing us to redeploy high ROI Mint aircraft to the sun and sand when weather in Northern Europe turns.

Our TrueBlue customer base continues to grow and increase their share of wallet on JetBlue flights. In the third quarter, nearly half of our customer flight revenue came from TrueBlue members. The deepened engagement and sustained strength in our co-brand portfolio contributed to an 11% growth in loyalty revenue versus last year.

The improvements we've made to our TrueBlue and Mosaic programs over the past year now make it one of the most attractive programs for introductory elite status members, which is reflected in the record number of both our customers and our competitors' customers who have chosen earned status with JetBlue this year.

The TrueBlue value proposition continues to improve and the addition of new partnerships, lounges and product offerings such as the premium cabin continue to further bolster that proposition. The work the team is doing to reward and attract customers, along with continued evolution of our network to further match flying to the preferences of our TrueBlue customer base, leaves us excited about the trajectory and growth potential for our program.

Shifting to the fourth quarter. We have made incremental trough capacity adjustments. And as a result, fourth quarter capacity is planned to be down 7% to down 4% year-over-year. We're also comping against near perfect completion factor in the fourth quarter of last year. And while we had hoped to perform similarly this quarter, the tropical weather environment has been more challenging than last year. For the full year, capacity is planned to be down 4.5% to down 2.5%.

In the fourth quarter, we expect revenue down 7% to down 3% year-over-year, which implies positive unit revenue at the midpoint of our revenue and capacity ranges. Positive fourth quarter RASM is supported by trends continuing from the third quarter, healthy peak demand, an increasingly constructive industry supply backdrop and the progress of our $300 million in revenue initiatives.

When adjusting for the CrowdStrike benefit in the third quarter and the negative impacts of Hurricane Milton and the election in the fourth quarter, year-over-year RASM is expected to be consistent from the third quarter into the fourth. Our fourth quarter revenue is also in line with our historic seasonality and prior expectations.

For the full year, we are raising the midpoint of our guide by 0.5 point and narrowing the revenue range to down 5% to down 4% for the full year. I echo Joanna's excitement for our plan and the progress made so far this year.

As you look towards the fourth quarter and into the New Year, I'm confident we are taking the right steps to give our customers the best experience with the best value, and a small part because of the dedication of the greatest crew in the industry. Thank you all for always putting our customers first and prioritizing a safe operation.

With that, over to Ursula, who will share more on the financial status and outlook of the business.

[Ursula Hurley, executive]

Thank you, Marty. We ended the quarter with an adjusted operating loss of just $11 million, about $130 million better than our July expectations, or the equivalent of about a 5-point margin improvement. Over 3 points of the improvement were driven by outcomes in our control.

As Marty described, we posted better revenue performance than expected, a trend we know must continue in order to effectively offset the significant cost increases we've seen since 2020. We also saw improved operational reliability and in turn, cost efficiencies and better customer satisfaction scores as our JetForward reliability priority move is beginning to produce benefits that directly impact the bottom line.

Fuel prices moderated down $0.23 from our initial midpoint, resulting in the remaining 2 points of improvement to margin over our July expectations. While fuel prices aren't in our control, we continue to manage our exposure to volatile prices through our opportunistic hedging program.

At the end of the day, we still weren't profitable. But the progress we made this quarter is evidence that we are taking the necessary steps to get the business back to operating profitability. It is also indicative of our commitment to hitting our financial targets.

From the $300 million in revenue initiatives for 2024, which we expect to exceed to the second iteration of our structural cost program, which we expect to achieve at the top end of our range, we have a consistent record of hitting our program targets.

The groundwork is set to realize the JetForward plan and hit the EBIT targets we set out for the next 3 years.

Turning to our third quarter results and fourth quarter outlook on Slide 9. In the third quarter, our CASM ex-fuel growth of 4.8% beat the better end of our initial guidance of up 6% to 8%, driven by better operational performance and a shift in the timing of expenses to the fourth quarter.

Our structural cost program has also progressed well over the year, achieving $24 million in savings in the third quarter and year-to-date savings of $169 million. And during the quarter, we continued our commitment to a more sustainable industry, signing an agreement alongside World Fuel Services and Valero, to bring to New York the first-ever ongoing supply of blended sustainable aviation fuel with initial delivery expected in 2024.

Turning to the cost outlook. I am pleased we are maintaining the midpoint of our prior full year guidance of 7.5%. In the fourth quarter, we do expect CASM ex-fuel to be temporarily pressured due to a number of transitory factors, including; one, 2.5 points of largely maintenance-related expenses that shifted into the fourth quarter; 2, the impact of contractual wage rate step-ups worth 2 points; 3, the lapping of one-time credits from the fourth quarter of last year, including our 2023 Pratt & Whitney compensation worth about 1.5 points; and 4, 1 point from comping against a near perfect completion factor in 4Q last year, and the impact on capacity from Hurricane Milton cancellations.

In total, these factors represent about 7 points of transitory headwinds to our controllable costs, resulting in CASM ex-fuel expected to be up 13% to 15% year-over-year for the quarter. Independent of these headwinds, CASM ex-fuel would be firmly in the mid to high single-digits for the quarter.

I want to be clear, we remain firmly within the full year CASM ex-fuel range we shared last quarter and have now narrowed our range to up 7% to 8%.

As we look to next year, I would like to reiterate our previous commentary on 2025 costs. On flat capacity, which we currently expect in 2025, our model has historically resulted in annual CASM ex-fuel growth in the mid-single-digit range. While we will not guide 2025 metrics until the January call, these fourth quarter unit cost levels are not indicative of where we expect CASM ex-fuel growth to be in 2025.

Now, shifting to our fleet. In the third quarter, we took delivery of 6 A220 aircrafts, supporting the continuation of our fleet modernization program. So far, the program, which we have increased from $75 million to $100 million earlier in the year, has avoided roughly $95 million of cost to date through the continued optimization and avoidance of engine maintenance on our E190s. The program and its benefits will continue through 2025 when our E190 fleet is set to be fully retired.

In the fourth quarter, we expect to take 7 deliveries for a total of 27 aircraft deliveries this year. These deliveries make up the majority of our CapEx forecast of about $450 million for the fourth quarter and $1.6 billion for the full year.

Turning to our balance sheet on Slide 10. At the end of the quarter, our total liquidity, excluding our undrawn $600 million revolver, was $4.1 billion. This includes the proceeds from our $3.2 billion debt raise in August, which consisted of senior secured notes and a term loan, both backed by our TrueBlue loyalty program as well as $460 million worth of new convertible notes. The proceeds from the new convertible notes were used to retire a portion of our existing 2026 convertible notes.

The remaining capital is expected to prefund CapEx for the remainder of 2024 and through 2025, and provide ample runway for JetForward. The deal structure also gives us balance sheet flexibility with prepayment options and exposure to more floating rate debt. We expect aircraft deliveries to be funded with cash, further adding to our existing unencumbered asset base of about $5 billion.

Being well capitalized allows our team to fully focus on getting the business back to profitability, improving our balance sheet and working to eventually produce free cash flow.

We firmly believe JetForward is the right plan to get the business back to operating profitability, and we are confident in the $800 million to $900 million EBIT uplift in 2027. JetForward consists of initiatives that are in our control, providing reliable service even in the face of ATC challenges, building out our leisure network in the Northeast, where our brand is already well positioned to win and offering our customers the products and perks that they desire, all the while ensuring our cost base allows us to offer more value versus our peers.

JetForward is clear. It is actionable. And as we move through the fourth quarter and into 2025, I believe we have a solid foundation to realize its benefits and drive value for our shareholders, crew members and customers.

Thank you. We will now open it up to your questions.

[Operator]

[Operator Instructions] And we'll take our first question from Savi Syth with Raymond James.

[Savanthi Syth, analyst]

I know Joanna mentioned like network deployments kind of maturing in 2025, and you do have the JetForward initiatives. I'm not sure, if this is a question for Marty or David, but when should we start seeing kind of the year-over-year revenue RASM trends as they move sequentially kind of performing better than seasonality?

[Martin St. George, executive]

Savi, thanks for the question. Yes. It's funny. I think, if you look at all of the contributors to JetForward, there are a lot of puts and takes in here. I'll go back actually to the first $300 million we promised in 2024.

The beauty of having a lot of different initiatives is that, some can be above, some can be below. I think we've said already that, the network changes are not among the biggest changes that we are making. Certainly, things like the preferred seating program, preferred seating fees have changed even more. Some other stuff, we'll be announcing soon.

On a relative basis, will be bigger. But we're really focused on the more macro elements of both the $300 million 2024 promise and the $800 million to $900 million promise of JetForward. And we'll be updating you going forward about that one. But I'd say from a network perspective, we're very happy with what we're seeing so far. But I will say that, if you think about the path for that to phase in, the redeployment of the capacity is going to start ramping.

Now, the good news is, if you look at our fourth quarter capacity, the last big tranche of capacity changes are coming out in the stations we just closed, the Blue Cities just closed, and then being redeployed. And I'll give you an example of Minneapolis.

We flew to Minneapolis for 57 months, and we had phased pretty aggressively as far as revenue going up there. That plane is now flying, I think, in Islip. And we're in month 1 of Islip, and yet we're still maintaining the RASM growth that we've already seen in the third quarter.

So actually, I'm really, really happy with the redeployment opportunities. We're putting the airplanes in places where we already have a very, very strong frequent flyer base. In fact, Islip is already in probably the top quartile of frequent flyer attach rates for our network. So we're very, very positive about what we're seeing there, and I'm actually very much looking forward to the redeployment. I think it's really a big part of building the depth that we need in the North -- as the East Coast region market.

[Savanthi Syth, analyst]

That's helpful perspective. And if I might just ask on the competitive capacity side. So you're doing what you can do to control that -- what you can control. But it seems like industry capacity is also moderating. I wonder, if you could give a little bit more color, especially on what you're seeing from Frontier and Spirit because there were some aggressive cuts this quarter.

[Martin St. George, executive]

So I don't want to go into too much detail airline by airline, but I would say on a macro level, competitive capacity, our competitive capacity is actually up fourth quarter over third quarter and competitive capacity in our markets, it's really not being contributed to by the ULCCs, but we're seeing it from other carriers. And I'd say even with -- I've got a pretty big increase. And frankly, even among that, we're still maintaining our third quarter unit revenue. I think that just speaks to the underlying strength of the revenue performance we have right now.

[Operator]

We'll take our next question from Jamie Baker with JPMorgan.

[Jamie Baker, analyst]

So when I think back to the merger, Joanna, I always viewed your predecessor as sort of leading the charge on that and it's water under the bridge at this point. But when I think of the international strategy, I was always of the impression that there was pretty widespread agreement that it made sense and the domestic network could support it and so on. So I guess, that's my question, with the downsizing that's taking place and what you internally are contemplating from here, is there still widespread logic for the transatlantic operation? And are we anywhere near the point where the domestic franchise might not be able to adequately support it?

[Joanna Geraghty, executive]

Jamie, I appreciate the question. I think maybe just a headline, you've seen us communicate the different pillars of JetForward on a very good trajectory, and I'm pleased with the direction that we are moving. Obviously, one of the pillars is focused on building the best East Coast leisure network. But transatlantic is an important part of that, as I spoke. It drives nice relevance in our loyalty program. But if you actually look at the underlying performance from this summer, we were really pleased with how it did.

As we think about the future, I think the team has done a nice job seasonalizing it appropriately and looking for opportunities to redeploy the fleet during those kind of long, cold winter months, and focusing on the revenue that we can drive during the summer from some great leisure destinations across the Atlantic. So it's evolved since my predecessor, but I think evolved in the way it needed to as we move forward with our JetForward plan.

[Jamie Baker, analyst]

Okay. Helpful. And then second, I do have to ask, can you envision any scenario where you might reengage with Spirit? Or maybe scratch that. A better way to ask the question, do any of the tenants of the original deal still stand or still appeal to you given how your balance sheet and your margins have evolved since then?

[Joanna Geraghty, executive]

So maybe to be clear, we're not interested in revisiting the Spirit's potential acquisition. We want to really focus on improving our margins within JetBlue, delivering on JetForward, controlling what we can and keeping the team laser-focused on that.

I will say that, if there are opportunities that come up with assets that are reasonable and may allow us to grow in a capitally prudent manner, obviously we would consider and evaluate those. But of course, there's a complexity there, lease price, aircraft age, reconfiguration and the list goes on.

So headline, we're not interested in revisiting the Spirit acquisition, focusing on JetForward, laser-focused on delivering sort of the organic plan for JetBlue and then the opportunity to potentially consider things that may shake free to the extent it makes sense for JetBlue.

[Operator]

We'll take our next question from Daniel McKenzie with Seaport Global.

[Daniel McKenzie, analyst]

Great job on the third quarter, and thanks for the commentary on 2025. It would be great to go back to that confidence in the 2025 supply-demand backdrop that you guys mentioned in the script. And I know, you're not going to guide to the '25 metrics, but it would be great just to revisit the goals. And so if we could just set aside any further hiccups from Pratt & Whitney, based on what you're seeing today, is the goal of a breakeven margin still a reasonable base outlook for next year? And I guess, what are the moving pieces that you're watching most closely that could potentially change that?

[Ursula Hurley, executive]

Dan, thanks for the question. I appreciate it. So in regards to 2025, we're just going to reiterate what we've been saying. So we're still expecting mid to high teens number of aircraft on the ground due to the GTF issue. And that is going to result in flat capacity year-over-year. We're in the middle of the planning process at the moment.

In terms of CASM ex-fuel, historically, with a flat capacity, you should expect a mid-single-digit CASM ex-fuel number. It's still a little too early to provide guidance beyond that. So we're reiterating what we've previously said, which is building a plan with a goal to have op margin, which is breakeven or better.

So we're pleased with the momentum that we're seeing in JetForward. And we also continue to assume that the macro backdrop continues to be constructive. So more to come in January, but we're just reiterating what we've previously said around our 2025 outlook.

[Daniel McKenzie, analyst]

Yes, helpful. And I guess, second question here on JetForward. I don't believe the benefits that you guys are current targeting included another large partnership, but I believe that's something that you're looking at. And so I guess, my question is, how quickly -- if a new partnership is announced, how quickly could that be turned on? And how quickly could any incremental revenue potentially fall to the bottom line?

[Martin St. George, executive]

Dan, thanks for the question. So I will say, we did -- there is a plug in JetForward for the concept of some level of partnership going forward. And it's certainly something that we're looking at. It certainly could be with American. It could be with another carrier. I do want to remind you, we do have 52 partners right now that we work with, that mostly at JFK and Boston.

So we understand partners well. I think we learned a lot through the NEA as far as what worked for us, what might not work for us. So I'm cautiously optimistic that we might have an opportunity at some point in the future. It's not a gigantic number that's going to make this plan pivot, but I think it's certainly one of the tools that could be in the toolbox to try to achieve JetForward.

Now, second thing is with respect to speed, I think it'd be too early to say. I think it depends on what the structure of the partnership is, but we have a lot of experience at this, and I'm -- it will be the appropriate speed for whatever size partnership we choose.

[Operator]

We'll take our next question from Duane Pfennigwerth with Evercore ISI.

[Duane Pfennigwerth, analyst]

Just on the election impact, Marty, maybe for you. Can you speak to the shape of bookings on the other side of the election? Is this -- are we seeing this pick up on the other side? Or is it an expectation that booking activity will pick up when we get to the other side of it?

[Martin St. George, executive]

So when we modeled 2024, we were making an assumption for election impact, which has come true because we've seen this in previous presidential elections. And there's really 2 pieces of the change. The first one is depressed travel during the actual week of elections, and that's something we've seen historically, and I think we're forecasting it this year.

Luckily, we had already made trough adjustments because as we have talked about in the fourth quarter, we are much more aggressive at pulling down the troughs. So I think we have that piece recovered. The longer -- I think, actually slightly larger impact than the longer-term impact is, it's just a period of 7 to 10 days where there's just not as much booking activity as they have been historically. And it's actually not that different from what we saw during Milton, which was, yes, during the hurricane, there was no flying in and out of Tampa and Sarasota and that West Coast of Florida.

But at the same time, there was also people who just weren't booking because they were focused on dealing with the hurricane. And I think during the election, sort of the same thing, which is there's some bookings just sort of melted away because people are focused on other things.

But again, this is nothing different than what we've seen historically, but we really felt the need to call it out mostly to make sure that we can give you a clean comparison between the third and fourth quarters.

[Duane Pfennigwerth, analyst]

And then maybe just to stay with you, I wonder, if you could comment on how you're seeing Caribbean RASM playing out winter. We had at least one carrier give some forward look on early 1Q January, February yield commentary. I just wonder, what sort of RASM improvement you're thinking about? Would that be a leading entity for you? Or would it be sort of more similar to system average?

[Martin St. George, executive]

So Caribbean has always been above system average for us. So it's a very strong market, and it's a market where we have a strong franchise and a very strong customer following. I think it's really too soon to really talk about first quarter RASM. I will say, in general, we've been pretty aggressive as far as adding capacity into San Juan, and we're very happy with what we've seen so far, including putting many capacity in there. But this market is going to be important to us, and we have a lot of confidence about how Caribbean will shake out.

[Operator]

We'll take our next question from Scott Group with Wolfe Research.

[Scott Group, analyst]

So on the capacity front for flat next year, any initial thoughts on how to think about the first half of next year? And then I think you said, we're going to have mid to high teens aircraft on ground related to GTF. Would you expect to end the year any higher or lower than that mid to high-teens? I just want to understand the trajectory of the GTF.

[Ursula Hurley, executive]

So maybe I'll start with the fleet, and then I can hand it over to Marty. So no, our expectation continues to be, on average, we will have mid to high teens number of aircraft on the ground next year. That's our planning assumption that we're using heading into the 2025 plan.

I also want to remind everyone, we're also in a process of extending 30 leases that were set to retire. And we're keeping those in the fleet in order to backfill some of the lost capacity due to the GTF. So we are in the process of working through those negotiations. And so that is helping the capacity outlook for next year. Maybe over to Marty just on any more detail that you would add.

[Martin St. George, executive]

Yes. The only detail -- I mean, we're not going to -- I mean, obviously, in the fourth quarter call, we'll give better guidance as far as what to expect in the first half of '25. But based on what we know with the fleet plan right now, you see that ASMs are negative in fourth quarter. We will still be negative in first quarter as well. And it's -- unfortunately, this fleet situation is very, very dynamic, and we continue to be very frustrated as far as the status right now as far as being able to actually get a good handle on what's happening with Pratt. But we'll give more detail about that in the fourth quarter -- on the fourth quarter call.

[Scott Group, analyst]

And just secondly, when we talk about the mid-single-digit type CASM for next year, I just want to make sure, are we including the sort of the 2-point hit from the wage step-up? I guess, you'll still have that for a couple of quarters next year. And are we assuming anything around pilots because I think the extension starts to expire, I guess, early next year?

[Ursula Hurley, executive]

So with flat capacity, as a reminder, our historical unit cost performance would insinuate that we would be at mid-single-digit CASM ex-fuel next year. And that is inclusive of all labor assumptions, maintenance assumptions. I mean that's all in.

Next year, at the highest level, we'll continue to see inflationary pressures across the labor work groups. We also will have a step-up in maintenance expenses as well just due to the nature of the V2500 fleet. But these are reasons why we also put in place the cost pillar as part of JetForward. So we have ways in which we're going to offset these pressures that we're seeing across labor and maintenance and which will result in a mid-single-digit number for 2025.

[Operator]

We'll take our next question from Brandon Oglenski with Barclays.

[Brandon Oglenski, analyst]

So Marty, if I'm hearing you right, I think the majority of the improvement you're seeing on the commercial side is really being driven by changes to product and pricing. Is that correct? And the network changes are going to maybe potentially be more impactful in 2025? Is that correct?

[Martin St. George, executive]

That's absolutely correct.

[Brandon Oglenski, analyst]

I mean, can you elaborate a little bit on what changes have been made this year, though, that where you're seeing that run rate of $300 million or more?

[Martin St. George, executive]

Sure. So there's a bunch of changes we've made already. I think the most impactful one so far has been the preferred seating program where for the non-even more seating that's in the front of the airplane, we are charging a fee to get into those seats.

Now to be clear, we have not taken away free seat assignments. We still offer free seat assignments for even our Blue Basic customers. But you will be -- if you want to sit in the front of the airplane, there will be a fee for that. That has been above our expectations. We just recently, in September, announced a change to Blue Basic, where we are now offering a free carry-on bag for Blue Basic customers. Also it's performed well above expectations. We're quite happy with that and how that's gone.

With respect to the change to even more, we are actually very excited about that with respect to how we'll hopefully be able to better merchandise that product and make it a little bit more attractive product, and we'll be announcing some product changes as we go forward. We've also put in variable pricing for check baggage during peak periods.

Again, in the fourth quarter call, as we close out 2024, we're going to give a full accounting of the $300 million we promised and a little more detail as far as where the benefits have come. But again, this is the point of having a multifaceted approach. Some things can be above forecast, some things can be at, some things can be low, can be below. But the goal we have as a leadership team is to make sure that we make a commitment to our investors, and we deliver on that commitment, if not more. So that's why we actually really enjoy having a basket.

And then the last thing I want to mention, and Joanna mentioned it in the script, but I can't stress it enough. Our crewmembers have really stepped up as far as delivering a fantastic product, whether it's airports folks and flight and inflight crews as far as improving on-time performance, whether it's maintenance, getting airplanes in tiptop shape. Having our on-time performance go up by 12 points and the improvement in NPS, I can't stress enough how important that is.

So again, I should give a thanks to all of our crewmembers for their hard work, because we're really seeing in some of our numbers. I think we're definitely seeing the benefit of an improved customer experience.

[Brandon Oglenski, analyst]

I appreciate all that, Martin. And maybe if I can just one last in for Joanna. I mean, if things aren't turning towards profitability next year, and I know you guys don't want to provide guidance right now, but what are incremental levers you can pull to get the business in the black solidly?

[Joanna Geraghty, executive]

Yes. So I think, it's JetForward. And if you look at what we laid out, the goal is to get us back on the trajectory towards profitability. So as we think about next year, we're building a plan with the goal to get to op margin breakeven or better. And that's the first step. And then we'll continue after that. But all of these pillars contribute to that, some of which, as you know, we've announced, but there's more to come down the pipeline.

Even More Space is obviously the announcement today, but we've actually got a number of additional announcements coming. Obviously, this is all against a macro backdrop of cooperative fuel, other airline capacity and then obviously managing through our own AOG issues. If those improve in any meaningful way, that will be tailwinds on the plan.

[Operator]

We'll take our next question from Andrew Didora with Bank of America.

[Andrew Didora, analyst]

So Ursula, just kind of going back to GTF. I know, it's very fluid, but any thoughts on what 2026 could look like maybe relative to 2025 in terms of AOGs? And then I guess, for next year, any kind of framework on how we should think about potential -- what any potential compensation from Pratt could look like?

[Ursula Hurley, executive]

Andrew, thanks for the question. We don't have clear line of sight beyond 2025. We're continuing to work constructively with Pratt & Whitney, both on our aircraft on the ground forecast as well as compensation. So both are a work in progress.

[Andrew Didora, analyst]

Okay. Got it. And then maybe just a follow-up for Marty, just on the election impact. Just curious, are there any particular markets where you see an outsized impact? Or is it pretty broad-based? Just curious your thoughts there.

[Martin St. George, executive]

It's definitely broad-based. There's no specific markets we see here.

[Operator]

We'll take our next question from Stephen Trent with Citi.

[Stephen Trent, analyst]

I'm sort of curious when you think about your focus on premium leisure customers. Do you anticipate any movement or adjustments in how you think about your frequent flyer program?

[Martin St. George, executive]

Actually, I think if you look at how we've structured TrueBlue right now, it is already more friendly for leisure customers than we see in competitive programs. And frankly, we've had a great year in TrueBlue. Even in the world when we're flat or down in capacity, our credit card spend is up in the low teens, we're actually -- I think -- I don't think we released a number. We've had a major growth in Mosaic customers. We've got a program out there for elite customers from other airlines to come over to JetBlue and earn elite status here.

I think it's actually worked extremely well with respect to what we've done in TrueBlue. And I think the beauty of this is, and it's funny. If you think about the sort of the customer target for us, and one of the phrase I like to use is, every single person who flies is a leisure customer. There is a subset of them who are both leisure and business customers.

So being focused on leisure customers actually, I think, is an opportunity for us. And frankly, if you look at -- I think we were one of the very first programs in the country to have dollar-based earning and dollar-based burning, which we did at least 10, 12 years ago. Our value proposition is fantastic. So we're very happy with how TrueBlue is structured, and I'm very optimistic about the ability of that team to continue to shift more share.

[Joanna Geraghty, executive]

Yes. If I could just add on top of that, I think this all ladders back not to sound like a broken record, but ladders back to our JetForward plan and delivering the things that customers' value. And if you look at our loyalty program, whether it's the lounges or some of the improvements to Mosaic that we're rolling out, including the premium card, that all plays to the premium customer.

We've launched a business card down in Puerto Rico. We've got a great status match with Avis for Mosaics. And so the list goes on and on. So as we think about loyalty in particular and how we designed the program, as Marty pointed out, it's very much designed with the leisure customer in mind.

But we also are being very thoughtful and deliberate about how we drive more stickiness with our Mosaics and really make them feel important to JetBlue. There's this vast amount of people who fly, a good amount every year who are lost by some of the bigger programs, and we see a real opportunity with them.

[Stephen Trent, analyst]

And if I may just follow-up real quickly on that. When you think about the growth of TrueBlue, for example, any sort of high-level idea on what portion of that growth is attrition from other carriers?

[Joanna Geraghty, executive]

So we don't have that number. We can circle back with you on it. Some of it is clearly that. But at the end of the day, that's not how we're thinking about TrueBlue. It's not about necessarily trying to see others tread out. It's trying to demonstrate we've got a program that people want to be a part of because it drives value for JetBlue, value for the customers on JetBlue, and frankly, a unique approach to loyalty. So, perks that you care about and perks that you want. Marty?

[Martin St. George, executive]

Yes. The one thing I would add is, I think that for us, TrueBlue represents on a relative basis, a somewhat better opportunity than you'll see from some other carriers. The example I'll give is if you're a frequent flyer in an OA hub, whether you're in Minneapolis or Dallas or whatever, there's not a lot of share to shift.

We tend to be in very competitive markets. South Florida, there's 2 other airlines hubbing in South Florida. We've got multiple airlines hubbing in Metro New York, 2 airlines hubbing in Boston, hubbing I use the phrase loosely. But we're in a very competitive market. So as a relatively low share of wallet airline, I think we actually have a lot of upside that you would not have if you were a Delta customer in Minneapolis, where they probably have all that share of wallet already.

[Operator]

We'll take our next question from Thomas Fitzgerald with TD Cowen.

[Thomas Fitzgerald, analyst]

Just curious how adding the carry-on bag to Blue Basic has performed versus your expectations as well as some of the seasonal Mint flying you're rotating out of transatlantic this winter?

[Martin St. George, executive]

First of all, with respect to the carry-on bag, it is above what we had expected. And I think as we've seen, I think during the peak, we were able to be competitive without having that product against our biggest competitor. But clearly, in the trough season, we really suffer from it. And frankly, we've seen more upside than we had originally forecasted. So that's been a great program for us.

With respect to the rotation of the seasonal Mint services, I almost jumped in when Joanna finished her comment to Jamie about the transatlantic. But I think we have really found a fantastic formula with being able to shift airplanes between the Atlantic in the summer and in some of the seasonal mid markets in the wintertime.

So historically, I think this summer, we had 13 or 14 daily round trips across the Atlantic. This winter, we're down to 6. Those airplanes are being redeployed into domestic markets that are actually very strong in the winter. I'll give one example. We've got, I think, 3 or 4 airplanes in Phoenix, both from Fort Lauderdale, Boston and New York. The Mint bookings have actually been fantastic on that. I think we just started that service this week, in fact, but that looks to be a rising success as far as the ability to shift airplanes back and forth.

Now back to aligners in the script, every airplane has to earn its way into the network. When you talk about the international strategy, when Jamie used that phrase, 2019, when we started talking about the Atlantic, I said it is a spoke. And the Atlantic still is a spoke. And this summer, it's been a profitable spoke.

So I think actually, we have a really good combination. And it's a testimony to how good the Mint product is because -- I mean we just had this week, a customer who did a Mint review that was published. We've had a couple of e-mails from customers who had come over to JetBlue. It is a fantastic product, and it's been a great, great profit generator for us.

[Thomas Fitzgerald, analyst]

Thanks so much for that color, Marty. Just curious as a follow-up, there's been reports in the press about cutting out hot food on transatlantic in basic economy. I'm just kind of curious on the broader strategy of how you just driving a revenue premium while also being really judicious on costs? So I'd love to hear more on the thinking there.

[Joanna Geraghty, executive]

We have a fantastic core product across the transatlantic, whether it's cold or it's hot. I personally sat through an entire food tasting process with DIG, and it is second to none. So I would put it up against any other hot product currently flying the transatlantic. So I think there's not much to see there, frankly. It's a fantastic product.

We moved it to cold because we think that there's an opportunity there to save some costs, but it's still a far superior product to what you've got flying transatlantic and coach currently. So really proud of what we're delivering there.

[Operator]

And we will take our final question from Conor Cunningham with Melius.

[Conor Cunningham, analyst]

Just back to the network for a second. I realize a lot of the changes that you've made. I've been additive to RASM and returns and all that stuff, and that's great. But when you think about relevancy as you've made those changes, are you finding that you're growing the pie of people that are coming towards JetBlue? Like point being is like do the network adjustments really drive more dependence for people that are using your product overall?

[Martin St. George, executive]

The answer is absolutely yes. I'd say based on the numbers we're seeing in places like Providence, Bradley, Manchester, Islip, we are absolutely pulling customers towards JetBlue.

I will note that all 4 of those markets had competitors, both ULCC competitors and full-service competitors, our legacy competitors, I guess. I'm not sure we can call Southwest full service, but we had a lot of Southwest stuff there as well. And we are actually doing a very good job of pulling these customers over.

And frankly, in these markets, in New York State, in New England, we are sort of the default carrier for leisure. And I don't want to be in a situation where we have customers who would like to fly JetBlue, who do not have opportunity in a market that we forecast we can do profitably. So this is not the end of the growth we're going to see in those markets, and it's because customers respond to it extremely well.

[Conor Cunningham, analyst]

Maybe I'll just keep it at one.

[Operator]

And we have no further questions in the queue at this time. I'll turn the program back over to Mr. Koosh Patel for any additional or closing remarks.

[Koosh Patel, executive]

Thanks, everyone. That concludes our third quarter 2024 earnings conference call. Have a great day.

[Operator]

And again, that will conclude today's conference. Thank you for your participation.