JetBlue Airways Corporation (JBLU) Earnings Call Transcript & Summary

Good morning, everyone. My name is Alexandra. I would like to welcome everyone to the JetBlue Airways Second Quarter 2026 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the call over to JetBlue's Director of Investor Relations, Koosh Patel. Please go ahead, sir.

Thanks, Alexandra. Good morning, everyone, and thank you for joining us for our second quarter 2026 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 will make forward-looking statements about our outlook, strategy and future performance. These statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our earnings release and SEC filings for information about risk factors that could cause those differences. These statements speak only as of today, and we undertake no obligation to update them. We may also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are included in our earnings materials and available on our Investor Relations website. 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 Second Quarter 2026 Earnings Call. Before we begin, I want to recognize our crew members for their outstanding work throughout a particularly challenging July. Despite extremely difficult, unpredictable conducted weather, coupled with ongoing ATC staffing constraints, our team has shown incredible dedication to our customers and each other. I'm especially appreciative of the many customers who have taken the time to recognize our crew members' professionalism, compassion and dedication during these very challenging operations. Their performance reflects the very best of JetBlue. It has been 2 years since we announced JetForward. And during the second quarter, we once again demonstrated our ability to execute and deliver results even as we continue to strengthen our foundation for the long term. Through JetForward, we are building a more reliable operation, a more compelling customer offering and a more focused network, while reinforcing our path to sustained profitability. Our ongoing work across each JetForward priority move enabled our crew members to execute during another quarter marked by a complex operating environment, including elevated fuel prices, significant thunderstorm activity and periods of airspace constraints. Delivering a reliable operation remains foundational to JetBlue. And despite these challenges, the investments that we've made in technology and process improvement are driving better performance. Fort Lauderdale is another clear example of our progress. We have grown rapidly and are seeing very strong customer demand for [indiscernible] flying. We are working closely with the Broward County Aviation Department, who shares our common goal of building a stronger and more diversified portfolio of destination for South Florida travelers. We are very thankful for our long-standing partnership with the airport as we work together to formalize additional gate leases this fall. We made changes to enhance our customer experience, which in turn improved our revenue performance. Second quarter RASM beat the midpoint of our revised and previously raised guidance. We were able to capitalize on strong demand across nearly all products and geographies, even as JetBlue and industry fares moved higher throughout the quarter. Fuel prices alone do not determine our earnings trajectory. What matters is how effectively we respond. Throughout the quarter, we made adjustments to both pricing and capacity in response to higher fuel costs. These actions, along with resilient customer demand enabled us to recover fuel costs more quickly than we originally anticipated. Based on the strength of demand and the traction from our commercial actions, we achieved nearly 50% fuel recapture in the second quarter, exceeding our expectation of 40% or more. Looking ahead, sustained demand strength gives us greater visibility into the second half, even as fuel prices remain very volatile. Assuming demand strength persists, we continue to expect to achieve 100% fuel recapture by early 2027. Following a very strong early start to the year, we withdrew our full year outlook last quarter after the external environment changed dramatically over a short period of time, even though our confidence in the underlying business remained strong. Since then, demand has remained resilient. Our commercial actions have proven effective and fuel prices moderated as expected from the elevated levels we saw in April. Recent volatility notwithstanding. Collectively, we believe these developments provide sufficient visibility to reestablish our full year outlook. We now expect full year operating margin of approximately negative 2% to negative 5% and an improvement from our very challenging first half of the year. The midpoint of our guidance implies a significant inflection in our profitability, with second half operating margin approximately 3.5 points better year-over-year. We widened our operating margin range given the recent fuel volatility, but still believe that pricing will continue to help offset higher fuel prices if they remain elevated. Despite this second half earnings improvement, we plan to continue to maintain a conservative capacity profile given that the geopolitical backdrop remains fluid and fuel remains volatile. JetForward is the key driver of our expected improvement. In the first half of 2026, we delivered $165 million of incremental EBIT from JetForward, bringing the cumulative benefit to $470 million. The most important takeaway is that JetForward is doing exactly what we said it would do. We established a clear plan, committed to measurable milestones and we're delivering against them. While there are undoubtedly been quarters influenced by factors outside of our control from weather to macro, the underlying trajectory of the business continued to improve, and our confidence in the years ahead continues to grow. We are on track to deliver at least $310 million of incremental JetForward EBIT in 2026 and several of our largest initiatives are still ahead of us or in early ramp, including Blue Sky, and Blue First, our new domestic first class product. As those initiatives continue to ramp, we expect 2027 to mark a return to sustained operating profitability, an important milestone toward annual positive free cash flow. Looking further ahead, we expect Blue First and other JetForward initiatives to continue ramping into 2028 and beyond, helping to drive JetForward annual incremental EBIT to approximately $1.2 billion and a return to positive pretax margin. Based on this planned trajectory, we expect to achieve 2028 EPS of at least $1 per share assuming continued demand strength and an average of $3 per gallon jet fuel price in 2028. As I look ahead, our priorities and commitments are clear: taking care of our people so they can deliver their best, executing JetForward, restoring sustained profitability, improving free cash flow and strengthening our balance sheet. Our Board and leadership team are confident that this disciplined focus is the right path, the best path to create long-term shareholder value while building a stronger, more resilient JetBlue. With that, over to you, Marty.

Thank you, Joanna, and thanks, again, to our crew members for their execution in the quarter. Our second quarter results reflect continued demand for the distinctive JetBlue product and traction from our JetForward imitatives. We delivered strong revenue performance in the second quarter with RASM increasing 10.9% year-over-year, driven by robust consumer demand across our network. Importantly, demand held up well even as days moved higher, and we did not see material signs elasticity. Demand strength was robust throughout the booking curve, including close-in demand, and that strength is carried into the third quarter. Premium products, including [indiscernible], continue to perform exceptionally well. Importantly, our [indiscernible] also saw meaningful improvement, benefiting from a healthy pricing environment and resilient leisure demand [indiscernible]. Given our existing focus there, Spirits exit represented one of the most significant strategic opportunities JetBlue has seen in many years. By this winter, we expect to operate more than 150 daily flights from Florida on larger schedule ever from the airport, including our largest net presence as well. Earlier this month, we launched a more structured bank schedule with 2 southbound and [indiscernible] designed to better connect customers to the Caribbean and Latin America. The capacity is ramping well, and customer response to our added flying has been very positive. For the second quarter, Fort Lauderdale RASM was up 11%, even with capacity growth of nearly 40%. Turning to loyalty. refreshed premium cat and strong demand for Blue House benefit supported nearly 40% growth in [indiscernible] acquisitions and 21% higher growth remuneration for the quarter. We expect similar momentum when our second BlueHouse lounge offers in Boston markets. In addition, South Florida was a standup contributor to our loyalty results, with TrueBlue enrollments growing 44% and corporate acquisitions more than doubling year-over-year. This momentum reinforces our confidence that investments remain in loyalty will create value well beyond the quarter, and keep us on track to deliver meaningful sequential growth in royalty revenue over the coming quarters. We want to thank Barclays for their continued partnership as the only major co-brand issuer without a competing proprietary travel cat. Barclays is uniquely aligned with JetBlue and focus on growing the long-term value of our portfolio. More broadly, the earnings progress we've made -- we were delivering reflect our ability to better monetize demand across the network through JetForward. We modernized our revenue management capabilities, which improves our ability to optimize premium products like [indiscernible] better manages both local and connecting demand across our network and unlaunched new merchandising capabilities. We've added new ways to pay and that go members can redeem true points for even more seats. And yesterday, we announced a simpler shopping experience that makes it easier for customers to compare our onboard experience and their options, experience customer choice and creates more opportunities for customers to experience our premium products. Our BlueSky partnership is another important contributor. It continues to rent and reach another milestone in May with the introduction of reciprocal loyalty benefits of members. This further benefits customers and enhances their access to the broader network made available for the [indiscernible]. Finally, safely continues to be an important part of our broader growth strategy, and engagement is growing as customers use [indiscernible] and TrueBlue travel to book more of their end-to-end trial. As part of BlueSky, it recently began distributing [indiscernible] products through the page powered miles travel site. And we look forward to powering a [indiscernible] this year. Beyond the BlueSky partnership, [indiscernible] continues to explore additional airline and non-anline partnerships as it continues to grow. BlueSky and BlueFirst are 2 of our most meaningful commercial initiatives, and we are still in a very early innings of realizing the associated margin benefits. BlueFirst is the largest individual debt partnership, it represents an important next step in evolving JetBlue's product offering, allowing us to best serve customers looking for a premium experience while strengthening unit revenue over time. We plan to share additional product details into launch sales in the fall. We remain on track to complete the majority of our retrofit work by the end of 2027 and expect BlueFirst full revenue and magic contribution to continue building in 2028 and beyond. At run rate, we believe BlueFirst will support meaningful unit revenue and margin expansion, including nearly 5 points of RASM growth. These initiatives reinforce our confidence to set forward and the earnings power of our ability across the business. Turning to our [indiscernible]. We're starting the third quarter from a strong position with substantially more of the booking curve exposes into today's favorable pricing environment. With that context, we expect the strong revenue trends we saw in the first half to continue into the third quarter. Regarding third quarter capacity growth of 3% to 6% year-over-year and RASM to 12.5% to 16.5% year-over-year. For the full year, we expect capacity to increase 1.5% to 3.5% year-over-year and RASM to increase 10% to 12.5% year-over-year to support by healthy demand, a strong yield environment and continued execution on JetForward. While July has been more operational challenging, our outlook assumes third quarter completion factor returned to historic levels for the balance of the quarter. We remain optimistic about our revenue trajectory for the balance of the year. Since 2019, prices across the broader economy had increased meaningfully, yet if started the year down in real terms by approximately 30%. This gives us confidence that the pricing environment that we are seeing now is sustainable. Even with a strong pricing environment, our capacity plan remains highly disciplined. In the second half, we're concentrating on incremental growth in Florida, where we have seen a compelling opportunity to strengthen our network and deepen our relevance for leisure customers. As a result, all of our net capacity growth is expected to come from Fort Lauderdale, while capacity across the rest of the network is expected to be down year-over-year. In the July as fuel prices increased, we decided to reduce our fourth quarter schedule by approximately 1 point, reinforcing our commitment to growing only where we can see the strongest returns. Our plan is to make discipline and we plan to revisit capacity again as needed. At LaGuardia, we've recently secured additional slots and are excited to the opportunity to build a robust schedule to Florida for our most loyal customers in both New York and Downhole. While we currently operate from Terminal B, we continue to seek a return to the lower cost and more convenient Marine air terminals. In conclusion, we have a strong commercial backdrop in place and our revenue and network initiatives further strengthened our conviction in our outlook for the second half of 2026 and beyond. With that, I will hand it over to Ursula to walk through fuel, costs and our financial results in more detail.

Thank you, Marty. The revenue progress and network actions Marty shared reflects our strong execution and provide us a clear path through the balance of the year. Of course, we continue to manage the business conservatively given the potential for further volatility in fuel prices. Against that backdrop, we remain focused on disciplined execution across the levers within our control. Our capacity, pricing and cost actions helped to offset nearly 50% of the higher fuel cost in the second quarter while preserving our flexibility to remain nimble as conditions evolve. Turning to CASM ex fuel. We delivered second quarter performance ahead of our guidance range. CASM ex fuel increased 2.4% year-over-year, approximately 1.5 points better than the midpoint of our guidance, reflecting strong execution as well as a shift in timing of expenses. Looking ahead, we expect third quarter CASM ex fuel to increase 2.5% to 4.5% year-over-year. We continue to expect nonfuel unit cost growth to moderate meaningfully in the second half of the year as set forward cost savings initiatives take hold. For the full year, we now expect CASM ex-fuel to increase 2% to 4% year-over-year. Excluding the impact of first quarter weather-related operational disruptions, we remain on track with our initial full year CASM ex fuel outlook. This reflects disciplined execution across the business as we continue to offset headwinds while investing strategically in our operation, our crew members and the customer experience. Turning to fuel. We have used our normal process and timing for marking fuel and acknowledge pricing has been extremely volatile the past few weeks. Given strong customer demand and our ability to adjust capacity, we believe pricing will provide an offset if recent fuel price increases stick. Using the forward fuel curve at market close on July 10, we expect fuel price per gallon to be $3.49 for both the third quarter and the full year. We remain focused on fuel optimization with cross-functional teams increasingly leveraging real-time data and advanced technology to improve efficiency whether it's identifying more efficient routing opportunities in flight, providing pilots with personalized operational insights, we're using predictive planning and ground operation analytics to improve consistency, we're creating a more connected data-driven approach to fuel management across the airline. Together, with our fleet modernization efforts, these initiatives keep us on track to achieve our fuel efficiency improvement goal. Turning to capital expenditures. We expect third quarter CapEx of approximately $300 million and full year 2026 CapEx of approximately $850 million, driven primarily by 12 aircraft deliveries this year, the initial spend associated with retrofitting aircraft for BlueFirst and the incremental LaGuardia slots we've recently secured. We continue to expect annual CapEx to remain below $1 million through the end of the decade. This level of investment supports prudent long-term capacity growth while preserving flexibility and maintaining our focus on generating free cash flow. Turning to the balance sheet. We executed a $500 million aircraft-backed financing transaction in the second quarter, further strengthening our liquidity position. We ended the quarter with $2.2 billion of cash and investment securities, representing approximately 23% of trailing 12-month revenue, excluding our $600 million undrawn credit facility. We remain committed to maintaining liquidity within our target range of 17% to 20% of trailing 12-month revenue, while optimizing our cost of capital. Should additional financing be required, the amount and timing will depend on how fuel and the macro environment evolves. We would expect to first [indiscernible] aircraft back transactions accordion while also evaluating other low-cost opportunities. We expect to continue to take a disciplined and proactive approach to managing the balance sheet with a focus on preserving liquidity, reducing interest expense where possible, supporting JetForward and positioning the business for sustained profitability. I want to be clear that I am very confident in our plan and optimistic about the direction we are heading. We believe we are reaching a major inflection point in the business. RASM is now expected to be 10-plus points higher than CASM ex fuel in the second half, and we expect operating margin to improve by approximately 3.5 points year-over-year, demonstrating the meaningful operating leverage we are beginning to realize. That progress extends beyond 2026 as JetForward initiatives already underway, continue to mature and BlueFirst begins to ramp, we expect to return to sustained operating profitability in 2027 and make meaningful progress towards positive free cash flow. Looking to 2028. Our confidence in the earnings power we are building is percepted in our EPS target of at least $1 per share. After navigating a highly volatile first half of the year and month of July, we look forward with greater visibility and a stronger financial outlook. The financial road map we've outlined today makes clear why we are confident in our plan and why this is the plan we are pursuing. While there is still work ahead, we believe the progress we've made has positioned JetBlue for meaningful earnings acceleration in the second half of the year and a stronger financial trajectory in the years ahead. We remain firmly focused on restoring sustained profitability, generating free cash flow, strengthening the balance sheet and creating meaningful long-term value for our shareholders. With that, we are happy to take your questions. Back over to you, Alexandra.

[Operator Instructions] Your first question comes from the line of Mike Linenberg with Deutsche Bank.

Marty, I just want to sort of dig into Fort Lauderdale. I think actually Joanna mentioned about working with the county and being able to secure more leases, I think you mentioned that as well. How big could you actually get in Fort Lauderdale, -- you talked about 150 or 150 more. And as that has -- as you built out that hub, can you just give us some data on just connectivity today versus where it was local versus connect? And where you actually see it going? And then I have a follow-up.

Mike, thanks for the question. So we said we're going to be over [ $150 million ] at the end of 2026 or '27. We do think there's another tranche of growth to get come in. I think it's important to note that as a company, we're growing basically low to mid-single digits. So we don't have an aggressive growth rate beyond this. We're extremely excited where our numbers are right now. And I say we've spent a lot of time working with economy to make sure that we have the facilities we need. It is going to be tough because, especially for international liables that the constrained the airport. But as a complete conference we'll get to where we need to be with the [indiscernible]. We are building a Terminal 5 there, but that's maybe a 2030 arrival, if we're lucky. So again, our results are fantastic. I'd love to grow faster, but I think what we're doing right now is quite prudent. As far as bank and connectivity. I don't really want to give a number. It will be well under 50% because [indiscernible] does have very good local demand. But what we're really excited about more than anything is how the banking brings a lot more destinations into the mix in the north. If you look at Boston and New York, we have great access at any lease destination in the Americas. I look at places like Albany, we went to lot of the Orlando. Now with connectivity in Lauderdale, if you're a customer in Albany, for example, you get access to all of the Caribbean and [indiscernible] Central and South America. So I think it's really gained [indiscernible] it's for the -- just a local market.

Great. And then just my second question to Ursula on the, I guess, the initial phase of a Pratt agreement here. It looks like it's through 2025. So presumably, I guess, that covers 2 years of disruption. And as I recall, you had highlighted that it was maybe 3 points of margin on a direct basis versus there is also an indirect element. This has got to be one of the biggest Pratt deals out there. And it seems like it's one of the last ones to actually get done, although I guess you're going to get compensated for 2026 and beyond. How are we going to see this in the numbers? How should we look at this? Is this going to be going forward some reduction in D&A, some reduction in maintenance expense, like this is a big deal, and it should find its way into the P&L. How should we think about the potential benefits from this?

Thanks for the question. So we are pleased to have an initial settlement complete with Pratt. You're correct. This closes out 2024 and 2025, and 80% of the settlement will be a reduction in operating expense between now and the end of 2027. And 20% of it will be a reduction to CapEx. At a high level, about 25% of the settlement will impact 2026 and obviously is included in our guide. And then the remainder will hit 2027.

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

So Marty, looking for a little bit more color on BlueFirst. It obviously took the industry quite some time to monetize the front of domestic cabins, but consumers have adapted. So I'm assuming the ramp for JetBlue is going to be much steeper, much quicker than Delta's decade-long journey in this regard. But further to that, can you begin monetizing with the very first aircraft? Or do you effectively have to wait until most of the retrofits are done? I know 2028 is the real ramp to run rate. I'm just trying to think of how to layer on any yield benefits in 2027?

Great. Jamie, thank you. Well, I will start actually with our experiences met. We were a little bit different when we started versus the industry. For many, many years, there was no way to get into the mid-cabin without paying for us. Our job was to basically come up with everyday low prices that would give the most value of the customers. And although we do have limited ways to get into the points right now, we fundamentally believe we can provide a great product at a very reasonable price. I think we have 15 years of experience in the industry, monetizing the first-class cabin. And I think we expect to take full advantage of all the ways to get into that cabin that our competitors have already demonstrated to be successful. And actually, we're very excited about it. I think we'll give you more detail on the ramp as we get closer in. But we are very excited to get customer benefits very quickly. I'll give you the one step tip is we have 1 airplane out there this fall. We're probably the first one will not be monetized, but the minute we get to 2, we're going to start selling this product on the fleet as it flush.

Okay. Helpful. And then Ursula, just following up on your prepared remarks regarding liquidity, given the delay in the move to positive cash flow, how should Mark and I think about the cadence of liquidity against current cash burn, your targets, your options. We know there's this meeting coming up next week to meet with lenders and creditors. Maybe you could give us some color on that. Do you intend to raise more liquidity and with loyalty trading over 13% right now, what's sort of your assumed cost of other liquidity options that you referenced, if you decide to go down that path? Thank you in advance.

Appreciate the question, Jamie. So first and foremost, our liquidity target is 17% to 20% of trailing 12-month revenue. I'm extremely pleased with where we ended the quarter. We're at 23%. Obviously, our liquidity needs in the back half of the year are heavily going to depend on the fuel environment. I was pleased within the second quarter, we executed a $500 million aircraft backed financing deal. The average rate on that deal was 6.5%. And as part of that deal, the deal has an accordion feature that is $250 million at a 6.5%. If we need liquidity in the second half of this year, our #1 priority will be pulling on the accordion. If we need liquidity above and beyond that, given oil we will look to do additional aircraft financing. I want to also remind everyone across the entirety of our capital structure, our weighted average cost of debt is 6.8%. So we're very focused on cost of capital and the interest expense level that we have on the books, and we're going to be extremely thoughtful with any additional liquidity needs. We do have a normal course business meeting next week with investors. This is a consistent approach that we've taken over the last several years. We engage within the quarter with equity and fixed income investors across conferences, non-deal road shows, is one-on-one. We also historically have done in person and virtual meetings with senior leadership to better understand the investor perspective and quite frankly, to communicate the progress that we're making on JetForward. So next week's meeting with fixed income investors, and it is ongoing outreach, and we're only going to be discussing what's publicly available in terms of information on the company and JetForward. So we're very much looking forward to the discussion.

Your next question comes from the line of John Godyn with Citigroup.

You mentioned that we're at a major inflection point for initiatives, and you've given a lot of great detail for the balance of '26. I was hoping we could just spend a minute talking more about how things layer on in 2027 and then '28 to ultimately hit the dollar number. I'm not sure if things are getting phased on uniformly, front-end loaded, back-end loaded when we think about '27. I know Jamie asked about the BlueFirst retrofit time line, but I just wanted to kind of square up the numbers more broadly, the cost initiatives, Blue Sky, how things are maturing, whatever you're willing to reveal?

Perfect, John. Thanks. I'll take that. I think headline, our strategy, it remains unchanged. This is all about JetForward working. There's really nothing new in the way of initiatives. What you're seeing is initiatives continuing to mature and build on one another. So ended 2027, we expect to deliver $850 million to $950 million of incremental EBIT. After that, Blue Sky, some of our cost initiatives, BlueFirst continue to mature and become much more meaningful contributors in 2028, particularly BlueFirst. Obviously, that's the one -- the bulk of the fleet will be done through '27. We'll complete it first -- first half or so of '28. So that's really the momentum in terms of those '28 earnings. So these initiatives compound in '28 and drive the $1.2 million incremental EBIT. So you should think of that basically supporting the roughly $1 of EPS for 2028. One of the reasons why we put that dollar out there is because current consensus doesn't accurately reflect how these initiatives do build over time. And as I said, BlueFirst in particular, that's the one where we see pretty strong momentum into 2028. And we're hoping that this better aligns the investor framework with the earnings trajectory that we're seeing with these JetForward initiatives. Maybe another add, I'll just say all of this does contemplate $3 jet fuel price in 2028. And then I think we mentioned low to mid-single capacity growth, mid-single-digit RASM growth and low single-digit CASM ex fuel in '27 and '28.

Okay. Great. That was helpful color. And just to follow up on one for 2026, you talked about the meaningful moderation in CASM ex in the second half as initiatives take hold. I was just hoping you could add a bit of color and elaborate there?

Yes. Thanks for the question, John. We've been extremely pleased with the team's execution on controllable costs. And despite -- if you exclude the Q1 disruptions that we experienced, we've maintained our full year controllable cost guide. The initiatives within JetForward continue to ramp in the back half of the year. I think I would point to 3 areas of focus. We've created and introduced like new digital tools across a few different teams, customer support, airports, maintenance, and that's enabling task automation, faster access to information and just the team is more empowered to make decisions more quickly. The second area is we're continuing to modernize our technology infrastructure, which is driving greater optimization of cloud usage and infrastructure costs. So we're moving to a more scalable, lower-cost model within the technology framework. And then the third is, we're really leading into data science across a multitude of operational teams across various areas, right? Crew disruption management, improving crew utilization, improving the liability. And so that's kind of the third area where we're leaning into. So the team is doing a great job in execution, and you're seeing that benefit in the back half of the -- of the year as well as a slight step-up in capacity as well. So those are the really drivers of execution. The other thing -- the last thing I would add is over the next 2 years, and the ultimate goal is to deliver a lot of single-digit capacity growth. And as a result, we're going to have a low single-digit CASM ex fuel, and we believe that, that's really foundational to help us achieve the [ $850 to $950 ] in JetForward and then ultimately deliver the at least $1 EPS in 2028.

Your next question comes from the line of Brandon Oglenski with Barclays.

Marty, I wonder if you could talk more generally about the pricing environment, especially post Spirit. I know you talked a lot about Fort Lauderdale, but maybe more generally across your network. And then the outlook for mid-single-digit annual RASM growth in '27 and '28, I mean, that would be pretty significant. I guess a lot of investors are just worried that like what is different this time, if fuel prices do come down, doesn't the industry ultimately give it back?

Brandon, thanks for the question. I need to start by saying in travel is still an incredibly good value, back to the point we made in the Spirit. On a real basis, [indiscernible] down 30% from where they were in 2019. You will not find any other major commodity in this economy that has that much decline in their real pricing. And even with the changes that happened in 2026, we are still well below 2019 levels. That's point number one. Point number 2 is, even in a world where we've got an industry where the majority of airlines are not profitable. Even the profitable airlines are well below their returns that they had in the teens. And I think if you look at the environment we're seeing right now, the lack elasticity proves that customers actually recognize that it's still a really, really good value. And as far as the RASM growth in '27, '28, -- it's one of the reasons why in the script, I specifically called out the BlueFirst benefit. I think if you think of a run rate BlueFirst RASM of 5 points and then back that out of the mid-single-digit number, I think you'll recognize that the RASM growth -- the underlying RASM growth BlueFirst is actually a lot lower than the number we've called out. So [indiscernible] of the reasons why I commented on specifically because I knew someone was going to ask this question, and we want to make sure we gave you as much guidance as we could because it is really a unique initiative that we have, very similar to what we saw with Mint. When we looked at Mint originally 10 years ago, we saw an airline where coach cabin to coach cabin performed extremely well. Our competitors had 20 points runs on top of that, that came from the premium cabin that we didn't have and that's actually the benefit we're going to get with BlueFirst, which is getting new revenue in the airplane that we didn't have before.

I appreciate that, Marty. And Ursula, just really quick. So it sounds like in the near term, you think your liquidity is fine. And I think you said end of 2027 reaching positive free cash flow. Can you unpack that a little bit?

Yes. Listen, like clearly, we are on a path to deliver a positive operating margin in 2027. The goal will be to deliver positive free cash flow next year. We've taken the steps to lay out the order book to give us a runway to actually deliver that. I continue to be pleased with set-forward execution. And so that's definitely the goal in 2027.

Your next question comes from the line of Duane Pfennigwerth with Evercore.

Maybe just to start with where you left off on that last question on the run rate of 5 points for BlueFirst. When do you think you'll hit that run rate? And can you quantify maybe in like a fourth quarter, how much tailwind there would be from this BlueFirst?

First of I would say fourth quarter '26, it will be de minimis because it will be a small airplanes have come relatively late. So I don't have -- I think it's not a number you should be modeling. We've got a pretty aggressive schedule in 2027 of installations. The majority of the planes will be done by the end of '27, but it's really going to be in the '28 before you see the entire fleet done. So any hitting of run rate is going to be late '28 or '29. So we're not looking at this as something that's going to accelerate fast as far as run rate. We see this as a prudent addition in the revenue sort of portfolio for JetBlue.

Okay. Marty, that's helpful. And then from arm's length, if we just look at maybe some of the changes and some of the opportunities that opened up, it feels like you're maybe deemphasizing higher-cost airports and redeploying into a lower-cost airports. Maybe just react to that concept. How far along are you in that transition? And is there any way to quantify the cost tailwind or the margin tailwind once this transition is complete?

Duane, I'll take that. We can take off-line what the cost tailwind is and calculate that. I think from a high-level perspective, we're very mindful of the cost to operate at higher -- higher-cost airports and we haven't been quiet about that. It's one of the reasons why we'd love to move back to the rear terminal at LaGuardia assuming there will be a lower operating cost there with the slots that we have secured. With that said, Fort Lauderdale is a great deal, particularly when you compare it to Miami. And Spirit's liquidation has presented us with a great opportunity to redeploy some of the flying that we see some of these higher-cost airports into Fort Lauderdale, and provide a better experience for customers at a lower price given the differential in cost that [indiscernible] been able to achieve with operating down there. So it's very front and center. JetBlue was founded on affordable air travel, and we want to make sure we continue to deliver that mission. And it does require us to look very carefully at the places we're flying. And when we speak with airport authorities, this is item #1. while people love the fountains and the art work, at the end of the day, we need to make sure that these airports are really providing what matters the most to people so that we can to pass on low airfares to customers flying us.

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

Marty, if I might on Fort Lauderdale, just another question. Unit revenue up 11% despite kind of 40% growth is impressive. I'm guessing that's a combination of a drag from like the market ramp, but then offset by maybe kind of Spirit exiting. I was just kind of curious if that's the right way to think about it and how we should think about then the kind of the sequential improvement as those kind of growth matures over the next 6 to 12 months?