JetBlue Airways Corporation (JBLU) Earnings

Management highlights

- JetForward Transformation Progress * Two years into the JetForward transformation plan, the company is on track to deliver at least $310 million of incremental EBIT from JetForward initiatives in 2026. * Cumulative incremental EBIT from JetForward reached $470 million in the first half of 2026, with the plan on track to deliver $850-$950 million of incremental EBIT by end of 2027, and $1.2 billion of annual incremental EBIT by 2028. * Key ongoing JetForward initiatives include modernizing revenue management capabilities, implementing data-driven operational tools, and launching new premium products. - Strategic Network Adjustments * Following Spirit Airlines' exit, the company is rapidly expanding at Fort Lauderdale, expecting to reach over 150 daily flights by winter 2026, with a new connected bank schedule that improves access to Caribbean/Latin America destinations for both local and connecting customers. * The company maintains a disciplined overall low-to-mid single-digit total capacity growth target, with all 2026 net capacity growth concentrated in Fort Lauderdale, and capacity flat to down across the rest of the network. * The company recently secured additional slots at LaGuardia Airport, with plans to expand Florida-focused service, and is actively pursuing a move back to the lower-cost Marine Air Terminal. - Product & Customer Experience Updates * Blue First, JetBlue's new domestic first-class product, is on track to launch sales in fall 2026, with the majority of aircraft retrofits completed by end of 2027; full revenue contribution will build through 2028. * A simpler, more transparent fare shopping experience was launched in July 2026 to improve customer choice and increase exposure to premium products. * The Paisley travel platform, part of the Blue Sky partnership, has begun distributing United's car rental products, with hotel distribution planned for late 2026, and is exploring additional third-party partnerships. - Operational & Cost Execution * Investments in technology and process improvement have improved operational reliability despite challenging weather and air traffic control staffing constraints. * JetBlue achieved nearly 50% fuel recapture in Q2 2026, exceeding its guidance of 40% or more, via pricing and capacity adjustments. * Non-fuel unit cost growth is expected to moderate meaningfully in the second half of 2026 as JetForward cost savings initiatives ramp. - Balance Sheet & Liquidity * JetBlue ended Q2 2026 with $2.2 billion of cash and investment securities (23% of trailing 12-month revenue), above its 17-20% target range, after completing a $500 million aircraft-backed financing transaction in the quarter. * Full-year 2026 CapEx is expected to be ~$850 million, driven by 12 aircraft deliveries, Blue First retrofit spending, and newly secured LaGuardia slots; annual CapEx is projected to remain below $1 billion through the end of the decade.

Guidance

- Full-year 2026 guidance has been reestablished after being withdrawn last quarter: operating margin is expected to be between negative 2% and negative 5%, an improvement from the first half of the year, with second half 2026 operating margin expected to be ~3.5 percentage points better year-over-year. * Full-year 2026 capacity is expected to increase 1.5% to 3.5% year-over-year, with RASM expected to increase 10% to 12.5% year-over-year. * Full-year 2026 CASM ex-fuel is expected to increase 2% to 4% year-over-year, in line with the initial full-year outlook excluding first quarter weather-related disruptions. * Based on the July 10 forward fuel curve, full-year 2026 average jet fuel price is expected to be $3.49 per gallon. - Third quarter 2026 guidance: capacity growth of 3% to 6% year-over-year, RASM growth of 12.5% to 16.5% year-over-year, and CASM ex-fuel growth of 2.5% to 4.5% year-over-year. * Management expects to reach 100% fuel recapture by early 2027, assuming current demand strength persists. - 2027 guidance: JetBlue expects to return to sustained operating profitability and achieve $850-$950 million of incremental EBIT from JetForward, with a target of positive free cash flow for the full year. Low single-digit CASM ex-fuel growth and mid-single-digit RASM growth are projected. - 2028 guidance: JetBlue targets at least $1 EPS, with $1.2 billion of annual incremental EBIT from JetForward, assuming an average $3 per gallon jet fuel price and continued demand strength. Blue First will reach full run rate contribution by 2028, driving mid-single-digit RASM growth and low single-digit CASM ex-fuel growth, leading to positive pre-tax margins.

Segment performance

JetBlue does not break out formal separate product segment financials in this call, but highlights performance by key business verticals: 1) Overall network: Second quarter total revenue increased 10.9% year-over-year, with RASM beating the midpoint of prior guidance. 2) Premium products (Mint, Even More, Blue First): Premium products continued exceptional performance; the upcoming Blue First domestic first-class product is expected to add nearly 5 points of RASM growth at full run rate. 3) Fort Lauderdale focus city: Fort Lauderdale RASM was up 11% year-over-year even with capacity growth of nearly 40%, outperforming system average RASM during the ramp-up after Spirit Airlines exited the market. 4) Loyalty (TrueBlue): Refreshed premium co-brand cards and strong demand for lounge benefits drove 40% year-over-year growth in new co-brand card acquisitions and 21% growth in remuneration for the quarter; in South Florida, TrueBlue enrollments grew 44% and co-brand acquisitions more than doubled year-over-year. 5) Blue Sky Partnership: The partnership continues to ramp, with reciprocal loyalty benefits introduced in May 2026, and is on track to contribute meaningfully to incremental EBIT by 2027-2028.

Risks & headwinds

- Volatility in jet fuel prices remains a key near-term and medium-term risk, with recent sharp increases in fuel prices creating uncertainty for full-year profitability. * Geopolitical conditions remain fluid, contributing to macroeconomic and fuel price uncertainty. * July 2026 has seen significant operational disruptions from severe convective weather and ongoing air traffic control staffing constraints, which could impact near-term operational and financial results if disruptions persist. * Fort Lauderdale Airport has limited capacity, particularly for international arrivals, which could constrain faster growth at the focus city even with strong demand. * Achieving the 2028 EPS and profitability targets depends on continued successful execution of JetForward initiatives and sustained demand strength, which are not guaranteed.

Analyst Q&A

• Q: How large can JetBlue's Fort Lauderdale expansion get, and how is the connectivity mix evolving? /

  A: JetBlue plans to reach over 150 daily flights at Fort Lauderdale by winter 2026, and there is room for additional modest long-term growth. Fort Lauderdale has strong inherent local demand, so connecting share will remain well under 50%. The new connected bank schedule improves access to Caribbean/Latin American destinations for customers from smaller northern markets, creating a meaningful network benefit that expands JetBlue's overall reach. (150 characters) /n/n

• Q: When will Blue First begin monetization, and how quickly will the ramp progress? /

  A: The first retrofitted Blue First aircraft will operate in fall 2026, and will not be monetized initially. Monetization will begin as soon as the second retrofitted aircraft enters service, with sales starting immediately on all operating Blue First aircraft as they are completed. The majority of the fleet retrofits will be finished by the end of 2027, with full 5-point RASM run rate benefits achieved in 2028. (182 characters) /n/n

• Q: What is the timing and financial impact of the Pratt & Whitney settlement? /

  A: The initial settlement closes out 2024 and 2025 claims, for a total benefit of $105 million. 80% of the benefit will reduce operating expense through 2027, with 20% reducing capital expenditures. 25% of the total operating expense benefit will hit 2026 (already included in guidance), with the remainder impacting 2027. (148 characters) /n/n

• Q: Why is 2028's at least $1 EPS guidance being provided now, and how do JetForward initiatives phase to hit this target? /

  A: Management provided guidance now because current investor consensus does not accurately reflect how JetForward initiatives compound over time, particularly Blue First's growing contribution. By end of 2027, JetForward will deliver $850-$950 million of incremental EBIT; Blue First and other maturing initiatives will add another ~$300 million in 2028 to reach the $1.2 billion incremental EBIT target that supports the $1 EPS goal. The guidance assumes a $3 per gallon 2028 jet fuel price and low-to-mid single-digit capacity growth, which management believes are reasonable base assumptions. (276 characters)