Good morning. My name is Lara. I would like to welcome everyone to the JetBlue Airways Second Quarter 2023 Earnings Conference Call. As a reminder, today’s call is being recorded. And at this time all participant lines are in a listen-only mode. I would now like to turn the call over to JetBlue’s Director of Investor Relations [indiscernible]. Please go ahead, sir.

Thank you, Lara. Good morning everyone and thanks for joining us for our second quarter 2023 earnings call. This morning we issued our earnings release and a presentation that we’ll reference during this call. All of those documents are available on our website at investor.jetblue.com and on the SEC website at www.sec.gov. In New York to discuss our results are Robin Hayes, our Chief Executive Officer; Joanna Geraghty, our President and Chief Operating Officer; and Ursula Hurley, our Chief Financial Officer. Also joining us for Q&A are Dave Clark, our Head of Revenue and Planning; and Andres Barry, President of JetBlue Travel Products. This morning’s call includes forward-looking statements about future events. During today's call we will make forward-looking statements within the meeting of the safe harbor provisions of the private securities litigation reform act of 1995. All such forward looking statements are subject to risks and uncertainties and actual results may differ materially from those expressed or implied in these statements. Please refer to our most recent earnings release and our most recent 10-K and other filings for a more detailed discussion of the risks and uncertainties that could cause the actual results to differ materially from those contained in our forward looking statements including amongst others the COVID-19 pandemic, risks associated with execution of our strategic operating plans, our extremely competitive industry, fuel availability and pricing, our planned wind down of the Northeast Alliance, the outcome of the lawsuit filed related to our merger with Spirit Airlines and various other risks and uncertainties related to JetBlue's acquisition of Spirit. 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. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. For an explanation and reconciliation of these non-GAAP measures to the corresponding GAAP measures please refer to the tables at the end of our earnings release a copy of which is available on our website and on sec.gov. Please note that our definition of these measures may differ from similarly titled measures presented by other companies. And now I'd like to turn the call over to Robin Hayes, JetBlue's CEO.

Thanks [Krish] and good morning everyone. Thank you for joining us today. I'd like to start by offering a resounding and heartfelt thank you to our 25,000 crew members for their incredible dedication, patience and perseverance. I've been at JetBlue now nearly 15 years and this is the most exceptionally difficult summer that I can remember and our crew members have worked tirelessly to serve our customers as air traffic control challenges and weather issues have affected tens of thousands of flights industry-wide. Our crew members have gone above and beyond in helping our customers deal with this summer's problems and we very much appreciate their efforts every day but especially during this very challenging period. For the second quarter we delivered revenue and cost performance within our guided ranges. I am particularly pleased that we delivered all-time record quarterly revenues including record revenues in each month of the quarter as well as our sixth consecutive quarter of meeting or exceeding our cost expectations. As a result we reported adjusted pre-tax income of $236 million, adjusted pre-tax margin of 9.1% and adjusted earnings per share of $0.45 which was at the top of top end of our guidance range. These strong results demonstrate our momentum in this post-COVID era. Turning to Slide 5, on our first quarter earnings call in April we predicted the summer would be very challenging. To prepare we made significant investments to build resiliency into operation which helped us to manage costs related to unexpected scheduled disruptions and enabled us to deliver our second quarter results. We also received the very disappointing NEA decision during the quarter and have been working to adjust to the loss of that agreement. And finally as you've heard from others the transitory shifts in post-COVID customer demand are also affecting our results. Therefore as we look ahead we've recalibrated our expectations for the remainder of the year. While the current environment is extremely dynamic we are executing plans to offset these challenges as we'll discuss. Firstly and as previously disclosed we made the difficult decision not to appeal the unfavorable NEA court order. This allows us to turn our full focus to our combination with spirit which we believe is the best and most effective way to increase competition in the industry and bring the jet blue effect to more customers across the country. However our decision to terminate the NEA will result in a near term drag on margins as we lose key co-chair revenue. But certain NEA costs will linger due to the necessary gradual wind down of our NEA driven capacity growth. We expect a $0.20 to $0.25 EPS headwind to our full-year outlook and we expect to see the biggest impact in Q4. As we head into 2024 we will be able to mitigate the impact as we are increasingly able to redeploy capacity currently underperforming in NEA markets to high margin leisure opportunities throughout our network. We've already begun to reflect this initial capacity redeployment in our selling schedules and we are planning an orderly but gradual wind down of the NEA driven capacity growth through next summer to ensure that we continue to support our customers. As I mentioned, we are facing headwinds from weather and ATC in the northeast which have been much-much worse than we planned for when we reduced our New York departures by 10% for this summer and we are seeing ATC programs stay in place longer than we've ever seen before for similar weather events. Which is driving hundreds of delayed flights a day for JetBlue alone. To put it in perspective when we look at the FAA's data on the worst industry cancellation events for thunderstorms at JFK the worst four events since 2014 happened in late June and early July of this year. And while we don't know what the ATC impacts will be in August we have assumed that they will be similar to July. These real-time disruptions generate cost pressures beyond our initial planned investments and also impact revenue due to higher cancellations which drive refunds and reduce sellable capacity. Taken together we expect ATC constraints through Q3 to result in a $0.20 to $0.25 headwind to our full-year EPS outlook. Our Q2 results though do show the investments we made are making a difference as our June completion factor in New York outperformed the average of other airlines with a more significant footprint in the market. But it is coming at an incredible cost that is not sustainable over the long term and as we are pulling all the levers under our control to help drive improvement. As we look to next summer while the wind down of the NEA driven growth in New York will help reduce our northeast exposure we wouldn't also need to substantial improvements in ATC performance and additional industry slot relief to ensure we can deliver the operational experience our customers deserve. Finally, we've seen a greater than expected geographic shift in pent up COVID demand as the strength in demand for long international travel this summer has pressured demand for shorter haul travel. We estimate the shift away from domestic travel is negatively impacting our full-year EPS by $0.15 to $0.20. However we expect this trend to improve as we move out of the peak summer travel period and into Q4 particularly around the winter holidays when demand typically favors VFR travel which is not as susceptible to these shifting trends. As we head into 2024 we will be more aggressive in redeploying capacity to expected pockets of future demand areas where our VFR and leisure orientation give us an advantage in the marketplace. Given these revenue headwinds we are updating our full-year earnings outlook to $0.05 to $0.40 of EPS. Let me be clear we are not satisfied with this change and as I've described we are taking action on all of these issues. I also want to emphasis that our first that our full-year unit cost outlook remains intact as our team has been successful in offsetting the incremental costs associated with these challenges. We consider the coming quarters a reset as we adjust for the loss of the NEA and for the overall shift we and others are seeing in post-COVID demand. Over the longer term we continue to believe we have the right building blocks in place and we remain laser focused on rebuilding our earnings power and adding incremental value for our shareholders. Moving to Slide 6, I want to spend a few moments reviewing these building blocks for the positioning JetBlue for long-term success. First and foremost is the transformational nature of our planned acquisition of spirit. Combining with spirit will not only turbocharge our organic growth plan creating a truly national low fare challenger to bring more competition to the industry but it will also add geographic diversity to our network which will improve our network relevance and increase our operational resilience. We look forward to bringing more of JetBlue's low fares and award-winning service to more customers and more markets. Next a large footprint in the slot constrained New York market is a substantial long-term asset for JetBlue and even as we wind down the NEA New York will still remain our largest focus city with well over 200 departures per day. While New York was significantly impacted by COVID and therefore has taken longer to recover it has historically produced long above system average margins and is now improving faster than our network average. The closing of the gap will drive continued improvement of our red venue and margin performance. We're also driving long-term structural improvements in our profitability from our redesigned TrueBlue program which continues to see double digit membership growth and of course JetBlue travel products. Finally, we continue to deliver outstanding progress on cost execution. We have seen great success from our structural cost program which is on track to deliver $150 million to $200 million in savings by the year end 2024. We also continue to make strides in our ongoing fleet modernization program as we replace our E190 fleet with the margin accretive A220s. I'd like to close by again thanking our crew members for delivering our second quarter results. While we face near-term headwinds we remain focused on controlling what we can control and work towards improving margins and driving profitable growth. I remain optimistic about our future as our unique combination of low fares and great service continues to distinguish us in the market. With that over to you Joanna.

Thank you Robin. I would also like to thank our crew members for their continued commitment to our customers as we navigate this difficult operating environment, although the summer has proven challenging your hard work is making a difference. Through early June we saw nice operational improvements year-over-year. Our completion factor and on-time performance were middle of the industry and we were beginning to see improved productivity. However as we stepped into June despite meaningful structural investments including substantially more pilot and in-flight reserves, more spare aircraft and more improved SSC tools in addition to our 10% schedule reduction in the New York area airports it was still not enough to overcome the combined weather and more restrictive ATC programs. Of course we know how to manage extreme weather conditions and are performing as well as others in the northeast during these events but the sheer number of these events and their duration is among the most challenging that we've ever seen. Our teams are doing an excellent job navigating this environment and our investments are enabling us to recover more quickly. This in turn allows us to better protect completion factor coming out of these events. However the factor remains our network exposure to this challenged geography is the highest in the industry. Turning to Slide 7. Sorry Slide 8. For the second quarter of 2023 capacity grew 5.8% year-over-year around the midpoint of our guidance. This capped a strong first task in which we delivered a three-point year-over-year improvement in our completion factor and a six-point improvement in our on-time performance. Our strong operational performance in the first half of the year helped offset the more than half a point of adverse impact from the severe ATC led restrictions beginning in mid-June. While our proactive operational investments and anticipation of a challenging environment this summer enabled us to mitigate 30 days in a row of irregular operations during the months of June into July they have not been enough to overcome even greater challenges in July which reduced our July completion factor by four points. We are assuming a similar level of operational disruption will continue in August and now expect third quarter capacity to be up 5.5% to 8.5% year-over-year. We'd like to thank our colleagues with the FAA for the close partnership and transparency as we work to plan for the operation on challenging ATC days and better understand what is behind decisions to implement severe ATC restrictions on certain days. While we are not alone and expect these delays to ease in the coming years as the FAA works rebuild staffing and experience to more appropriate levels our northeast centric footprint makes us disproportionately exposed to these challenges. Turning to revenue, in the second quarter we grew revenue by 6.7% year-over-year above the midpoint of our guidance range and driven by strength in Latin leisure, VFR and transatlantic demand. The demand environment remains healthy overall characterized by double digit growth in RASM compared to 2019. Our transatlantic service in particular has performed extremely well and driven the strongest year-over-year revenue of all geographies in our network. We look forward to continuing to diversify geographically by expanding our transatlantic network and later this month we will launch service to our third transatlantic blue city Amsterdam. We expect to continue on this path in the coming years as we take additional deliveries of our A321LR aircraft. We also continue to see healthy demand across much of our domestic networks however the demand recovery in our largest market of New York City while showing sequential improvement continues to lag that of other geographies in line with the area's slower economic recovery compared to the rest of the country. This slower recovery coupled with our NEA driven capacity growth and reduced schedule flexibility due to slots has pressured our New York margins. While the gap is improving our New York margins are still lagging 2019 levels by high single digits. This is a sharp contrast from the rest of our network which exceeded 2019 margins during the second quarter. To be clear we do have many attractive opportunities and will redeploy capacity into these higher performing geographies as we unwind our NEA growth in New York. As we head into the third quarter we continue to see many of the same trends including strong demand during peak periods however during off peak periods we are now seeing demand trends normalize. This contrasts with the same period last year when we saw extremely strong pent up COVID demand across our entire network during both peak and off peak periods. As a result while low factors remain very strong we have seen fairs normalizing back towards 2019 levels. In the third quarter we expect revenues to be down 4% to 8% year-over-year. In addition to the revenue pressures from the NEA unwind process, ATC challenges and demand shifts to long haul international travel we are also cycling against a very difficult revenue comparison. As last year in Q3 we delivered revenue 23% above 2019 levels more than double the industry average. For the full year we are now forecasting revenue to be up 6% to 9% year over year. Finally our loyalty program is an area of continued strength as loyalty revenue hit a record level of 21% year-over-year in the second quarter and continues to become a bigger piece of our revenue story. In the second quarter, we relaunched our redesigned TrueBlue program which offers even more ways for our customers to engage with us and earn points. And we saw double digit year-over-year increases in active members, enrollments and CoBrand acquisitions. CoBrand spend had its best quarter ever and we expect to reach record contributions from our Barclays CoBrand portfolio this year as member engagement continues to grow and as we continue to expand our loyalty ecosystem. We're excited by the growth these enhancements are delivering as part of our multi-year journey in evolving our TrueBlue program and closing the gap to our peers. I'd like to close by once again thanking our crew members for everything we have done to serve our customers in very stressful situations. While we are facing near-term headwinds amid a challenging operational backdrop we are focused on taking action and pulling all levers at our disposal to minimize the impact to our customers and to our crew members. Together we will build a better and stronger JetBlue for all stakeholders. With that over to you Ursula.

Thank you Joanna. I'd like to add my thanks to our crew members for all their hard work and dedication. Our second quarter results are a testament to the impact their efforts are having on the operation and on the cost side. Turning to Slide 10. As Robin mentioned I am pleased that this quarter marked the sixth consecutive quarter where we met or exceeded our quarterly cost guidance. In outcome, I am particularly proud of given the increased cost pressures we faced as we navigated an exceptionally challenging operational environment in June. Specifically the second quarter faced one point of CASM-EX fuel pressure from the significant investments we made across our operation to boost resiliency as well as an incremental one point of CASM-EX pressure as the ATC challenges we faced in June were more severe than expected which resulted in lengthier delays, increased cancellations, and a lower completion factor. Despite these headwinds our team's laser focus and execution enabled us to deliver second quarter CASM-EX in line with our expectations as our investments to enhance operational planning and build resiliency into our schedule successfully enabled us to exert greater control over variable costs such as label premiums and disruption related costs. We also continue to successfully implement our structural cost program supporting efforts to mitigate cost pressures related to maintenance and rents and landing fees. We remain on track to drive approximately $70 million in cost reduction this year and $150 million to $200 million in cumulative cost savings through 2024. We expect structural cost program savings in the second half of 2023 and throughout 2024 to be driven by three main areas enterprise planning initiatives technology-based solutions aimed at enhancing frontline productivity and maintenance optimization of our midlife aircraft. Additionally, we continue to expect our fleet modernization program to generate $75 million of cost savings through 2024 as we replace our E190 fleet with margin accretive A220s. We have already achieved over half of the expected savings from this program with 12 E190s retired to date including seven currently parked and five that we have sold. Looking to the third quarter we are forecasting Chasm Ex-fuel to increase 2.5% to 5.5% year-over-year. As Robin noted unwinding the NEA will result in a law in a near term drag on margins as the cost benefits will lag the immediate loss of co-chair revenues. As we gradually redeploy our NEA related capacity and optimize our schedules for this new normal we expect to see a corresponding improvement in cost. For the full year, we remain on track to execute on our chasm x-fuel target of up 1.5% to 4.5% despite an additional 1.5 points of Chasm-Ex headwinds for the full year from the ATC challenges versus our original expectations. We are seeing exceptional cost headwinds but we are working hard to find offsets and to ensure we are delivering on the cost guidance we've set out at the start of the year. As a reminder our full year cost outlook implies a step up in year-over-year Chasm-Ex in the second half of the year primarily driven by two factors an additional step up tied to our pilot agreement which is about three points total year-over-year in the third quarter and four points in the fourth quarter and the timing of maintenance which is about two points of year-over-year in the fourth quarter. As Robin mentioned, we now expect to generate earnings per share between $0.05 and $0.40. This is not an outcome we are satisfied with and I want to reiterate that we are taking action to offset these temporary headwinds as we work towards restoring our long-term earnings power and delivering profitable growth for our shareholders. Turning to slide 11 we closed the second quarter with $2.4 billion in liquidity including our $600 million revolving credit facility which remains undrawn. We continue to take a conservative approach to managing liquidity as we step up our fleet modernization efforts. We have been financing recent aircraft deliveries and have committed financing in place for approximately $550 million year-to-date of which approximately $300 million was raised in the first half of the year. We took delivery of four new aircrafts in the second quarter and one in July bringing our year to date total to seven new aircrafts. We expect to take delivery of 12 additional aircrafts through the end of the year for a total of 19 new deliveries this year. Finally, we continue to look at hedging opportunities to manage risk. In the second quarter, we took advantage of renewed price weakness to layer on some additional protection for the fourth quarter of 2023 and as of today we have hedged approximately 30% of our expected fuel consumption for the second half of the year. Turning to Slide 12, our updated earnings outlook reflects the near-term headwinds we are facing. The NEA termination, ATC constraints and a temporary shift to long haul international travel this summer. However, we are not standing still. We are focused on controlling what we can control and executing our plans to address these challenges. On the revenue side, we are leveraging the strength of our network to shift capacity from New York in the near term where we can. On the cost side, we remain acutely focused on pulling every lever at our disposal, efficient utilization and planning, technology upgrades, fleet modernization, and our structural cost program. And we are also working closely with the FAA to identify solutions to help ease disruptions next summer. Despite the headwinds I'm optimistic about the trajectory of the business. Our team’s ability to continue to execute under these very challenging circumstances coupled with the spirit combination puts us solidly on a path towards creating significant long-term value for our owners and all our stakeholders. With that we will now take your question.

Thanks everyone. Lara we're now ready for the question and answer session. Please go ahead with the instructions.

Thank you sir. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Mike Linenberg from Deutsche Bank. Please go ahead.

Yes, hey good morning everyone. Two here. Can you just -- how many of your A321 NEOs with the GTFs are potentially subject to the issues that that fleet is now facing? And is there any risk that this is an A220 issue as well? Just your thoughts. Really it's very early so you may not have much information on it but whatever you can [speak] then I have a follow-up. Thank you.

Good morning Mike thanks for the question. So we have had two A321 NEO aircrafts on the ground for the last few months due to various engine issues. We have been notified by Pratt & Whitney over the last few weeks that we have a handful of engines that will be impacted and have to come off wing by mid September. So we expect the number of aircraft that we have on the ground through the end of the year to approximately double from what we have today. And as a note, we did not include any of that impact in our guidance today, given that we're still assessing the longer-term impact with Pratt & Whitney. In regards to the A220, we're still working through a potential, if any, impact on that GTF engine with Pratt & Whitney.

Yes, if I could just add, this is Joanna. So we are trying to take whatever self-help measures are available to attain additional engines on the leasing market, but as you know, that supplies is pretty constrained at this point.

Great. And then just my follow-up is, as you wind down the NEA, obviously the schedules will change, but when I do look in the forward schedule going all the way out next year, it does seem like you are planning to operate, or at least in the schedule, that a good amount of additional LaGuardia flights. Is that the plan, or are we going just see everything wind down and you'll be back to, I don't know, it was about a dozen departures a day from LaGuardia? Just any insight you can give on that, if possible. Thanks for taking my question.

Sure, thanks Mike for the question. This is Dave. With regards to the NEA wind down, we've already made some initial adjustments in Boston, where we don't have to work through slot issues and constraints there, so we've been able to move a bit more quickly. On New York, we have a plan coming together, but have not yet changed it in our selling schedule. Just as a reminder, LaGuardia, we flew before the NEA 16 round trips a day for LaGuardia. That went up to 52 during the NEA, so an incremental 36. As we go into this winter season, you'll see us step down by about a handful of flights in LaGuardia, and then next summer, so beginning in the mid spring for the summer season, you'll see us flying less than half of those 36 growth round trips with LaGuardia. So it'll be an orderly wind down that takes the first step down late October this year and second step down in late March of 2024.

Okay. Great. Thank you.

Thank you. Your next question comes from the line of Dan McKenzie from Seaport Global. Please go ahead.

Hey, good morning. Going back to the script and the commentary about having the right building blocks in place for better earnings power, you referenced some of the moats that JetBlue has, but one, are they enough to get the airline back to 2019 margins, I guess, first? And then secondly, how quickly can you turn things around? Is it reasonable to assume we can get close in 2024, for example, all sequel?

Yes, I'll take that. Thanks, Dan. It's Robin and good morning to you. I think when I think about our progress against 2019, on the revenue side, I think that quarter two was very important, because we were, other than New York. We were above system margins, 2019 system margins, and all of our other focus cities. And so, the ramp up in New York is extremely important to our recovery to 2019 margins. And whilst this summer has been a significant setback for reasons that we've described, we were continuing to see recovery in New York. And I believe as we go into next year, we're going to continue to see that recovery. So, I think overall, the New York recovery has to deliver as Dave and Joanna mentioned, or one of the -- Joanna mentioned earlier, I'm sorry, the fact that we have such a strong presence in New York, even post NEA in a slot in the environment, we believe becomes a tailwind at some point. Then on the other revenue side, I think continuing rolling out of the revenue initiatives, very pleased with TrueBlue, very pleased with JetBlue travel products. One of the areas that's been constrained with our fleet delays is Mint. I'm pleased to say that the airplanes that we're now taking from Airbus the 321s are main configured airplanes that we can catch up. That continues to be part of our business that's not performing. I think continuing to develop more geographic diversity, I think is important. So, you're going to continue to see ramp up to European markets next year very, I mean, other airlines have talked about how strong Europe is. We're seeing that too. We just don't have very much of it. And then on the cost side, I'm really pleased with the progress on the structural cost program. This is a different JetBlue two years ago. And the fact that we can take the punches that we're taking both in Q2 and Q3 around very, very significant operational costs and headwinds. I mean, when you are flying one day schedule with hundreds of flights that are running significantly late due to ATC programs, and you have -- a lot of that flying has to be recruit, we're absorbing all of that. And so, I'm very confident that continuing execution on the structural cost program is underway. And of course, the last thing I mentioned, Dan, is the fleet transition. This has been a much longer fleet transition than we would like. But, 2024 is game time. We take the most to 20s next year. We retire most 190s next year. And by the time we get to end to 2024, we really be left, I think with maybe a dozen 190s that would then sort of start to retire by summer 2025. So we're really now getting into that part of the fleet transition that other airlines have demonstrated is a significant tower wind to unit cost improvement. So overall, I think we've got the right building blocks in place. We do have some challenges to work in the near term. We do have actions to take to mitigate some of the challenges in the near term. And that's what we're doing.

Yes, very good. And then I guess for the second question here, the full year revenue guide implies a pretty strong reversal of revenue trends in the fourth quarter versus the third quarter. And you guys did touch on that in the script a little bit, but I want to be just elaborate a little bit more. What is it that snaps back in sort of a seasonally weaker quarter?

Hi, Dan. Thanks for the question. This is Dave. It really ties to the timing of these three big headwinds we've called out. Two of them improve markedly as we head out of the third quarter into the fourth. So first with ATC, we expect that entire impact to be limited to the third quarter. And we're expecting no ATC impact in the fourth quarter. So that's a full three plus points of revenue in the third quarter that dissipates before the fourth. And then secondly, the geographic shift is much more pronounced in the summer, especially as Europe's in their peak season. As we head into the winter travel, we expect a point or more of improvement as we go from the third quarter to the fourth quarter of that geographic demand shift. The one piece that does get worse, is the NEA headwind will grow from about one point, a bit more than one point, but roughly one point in the third quarter to two points in the fourth quarter. And that's just getting the full impact of sort of the ramp up. Since codes share sales turned off in late July, we did get a partial quarter in Q3. And then that will begin to improve with the capacity to redeploy as we go through the winter and into 2024.

Thanks for the timing, guys.

Thanks, Dan.

Thank you. Your next question comes from the line of Savi Syth from Raymond James. Please go ahead.

Hey, good morning. Just on -- it looks like you're only expecting about 30 of the kind of 60 contractual kind of aircraft next year and GTF issues seem to be continuing. I was just kind of curious what your early thoughts on 2024 capacity are? And if you'd still lean a little bit more international or how you're thinking about it?

Thanks, Savi, for the question. It's still really early given the fluidity of Airbus and the Pratt & Whitney conversations and evolutions. So contractually, we technically had over 40 deliveries expected in 2024. Our current planning assumptions are using 30 deliveries and that does not include any impact to the recent GTF issue. So, we are still working with Airbus and Pratt & Whitney identifying 2024 impact. And as Robin highlighted in one of his answers, a good portion of those deliveries are 220s, but also Mint configured aircraft to help support our European aspirations. So, more to come on 2024 capacity. There's just a lot of puts and takes right now. Obviously, we strive to the mid to high single digit and we'll continue to work with our partners to refine what we think that growth rate will be.

That's helpful. Thanks, Ursula. And just if I might, on the New York region commentary, is that more of a kind of -- is that more short haul business markets that are lagging? Or I was just kind of curious if there was any kind of smoking gun or whatever that's driving the slower recovery in New York margins versus the rest of the system? I was curious how much your business demand has recovered and if that's driving it.

Yes Hi, Savi. This is Dave. Great question and you're spot on. We're seeing the largest impact in terms of revenue recovery in two areas. One is the business markets which are recovering much more slowly than leisure. And second is short-haul. So a short-haul business market sort of the most impacted type of market. And obviously we fly some of those, and then the industry flies some of those and has been redeploying some capacity out of those and into other leisure markets that have competitive capacity to us. So that's sort of the general type of market that's most at risk. And whether it's something we fly or a competitor is redeploying capacity out of it into our markets. We feel the impact both ways.

That's helpful. Thank you.

Thank you. Your next question comes from the line of Jamie Baker from JP Morgan. Please go ahead.

Hey, good morning everybody. So when you think about more aggressively redeploying capacity to expected pockets of future demand, your words. I mean, that's pretty much what Southwest is also planning to try. And I suspect we may hear something similar from Frontier and Spirit. I realize your networks aren't carbon copies of one another. But if everyone is trying to optimize their network and shifting capacity to peak days, I mean, does that factor into your expected returns? I'm not saying you shouldn't try to optimize. I'm just thinking if everybody tried the same thing, well, then that really doesn't drive much optimization

No, it's a great question, Jamie. This is Dave. A couple of things. One, we think about not only what's underperforming and what is performing better today, but then we think a lot about what our natural sort of model advantages are, our business model advantages are versus these other carriers. So for example, we know JetBlue as well, especially on longer haul flying because the onboard product is excellent and certainly far superior to the ULCC. So, as we redeploy, we not only think about current capacity, but competitive capacity and how structurally advanced we are over the long-term.

Okay.

And I think, Jamie, to give you an example, we touched on Mint a little bit. Mint continues to perform very well, and it's both the front of the airplane and the back of the airplane. And what we haven't been able to really do in the last year or two is add any Mint capacity, because those airplanes have really not been coming at us in any volume and the ones we've had have been flying to Europe. And so, I think we expect next summer to be a very strong seasonal, another strong European summer. We think Transcom will continue to perform sort of with both the Mint franchise and the products at the back of the airplane. And again, I think that New York, New York flying is going to have to look different. But New York is coming back and will continue to come back. And those are markets, of course, because they're slot constrained are going to be tough to get into. But also we don't know what the FAA is going to have to do next year on New York slots either. I mean, as there was that 10% slot waiver this year, if you want Robin's personal opinion, that was not enough from what we've seen. And so, how should we think about New York capacity going forward in terms of total industry capacity as well? So I feel really good that given the number of airplanes that we have, we have a lot of good options. But I take your point, everyone's going to be looking for that pot of gold, but we're going to focus on our plan and improving our network returns.

That's helpful, thank you. And obviously, part of JetBlue's challenge is market concentration, the exposure in New York. You talked about this in your prepared remarks, Robin. And the merger will obviously help with that. But just for argument's sake, if the merger doesn't close for some reason, have you started to develop a plan B, which I assume would include trying to find an additional hub or focus city, somewhere else, presumably not in the Northeast?

Yes, Jamie, look, how I'd answer that is we're very focused on getting the spirit deal done. It is our number one priority. It's going to a turbo charge organic growth. Having said that, and the next team, network team is always looking at opportunities that might be out there. And they've done that in the past. They'll continue to do that.

Okay, thank you very much, gentlemen.

Thank you. Your next question comes from the line of Andrew Didora from Bank of America. Please go ahead.

Hi, good morning, everyone. So just that, I guess, historically, you've targeted sort of that mid to high single digit type of capacity growth. When we think about the continued unwind of the NEA, I think you said it goes through sort of next summer. Does that, does it change your growth expectations for 2024 at all? And just as a follow up to that question, based on your answer to that question, I guess, what are the puts and takes on CASM-EX next year, particularly as the additional pilot flow through any color there would be helpful? Thanks.

Sure, thanks, Andrew. This is Dave. I'll start it off and then kick it over to Ursula. In terms of the NEA wind down, given the strength we're seeing in our non-New York geography, as mentioned in Q2, our non-New York flying significantly outperformed 2019 in terms of profit margin, we feel good about our redeploy options and sort of the larger ability to properly deploy the fleet. So from that perspective, no impact on 2024 capacity. Obviously, as Ursula mentioned, delivery schedule engines, ATC, those things may have an impact, but from a pure customer demand perspective, we feel good. Over to Ursula.

On the CASM-EX side, so as we ramp down the NEA, you will start to see some CASM relief in 2024, depending on how quickly and at what rate we ramp down. We're going to, as Dave mentioned, redeploy that capacity and obviously the average rent and landing fee across the country is typically lower outside of New York. So you will see some benefit there. In regards to the pilots, so we actually have a step up in pilot rates here in the third quarter and the fourth quarter of 2023. So in the third quarter, it's a three point impact to CASM-EX and a four-point in the fourth quarter. Those obviously will impact one age of 2024 and then we'll lap it in the back half of next year.

Great. Thank you. Thank you.

Your next question comes from the line of Catherine O’Brien from Golden Sachs. Please go ahead. Catherine O’Brien: Hey, good morning everyone, thanks for the time. Maybe just a bit of a follow up to Jamie's question. So on the leisure routes you're reallocating to, are these routes JetBlue has historically served and had to pull down to feed the NEA? If historical JetBlue, how has the competitive landscape changed since you last served them or maybe it hasn't? And then, or are there some new markets? I'm just trying to get a sense of how we can expect these routes to ramp versus system performance? Thanks.

Yes, thanks. This is Joanna. So it's a combination of routes we previously served but also new routes exploring some of the seasonal markets, really refining our day of week flying as well to target specific demand pockets that may be there for vacation and high peak periods. So it's a combination of both. Catherine O’Brien: Okay. Got it. And then -

Yes, I think, what I'd say is just what I'd be, is that historically, leisure markets have ramped up more quickly and we know that there is a, many months a year, there is a demand that can't be satisfied. So I think the question is going to be in terms of some of the off-peak capacity. And in a world where corporate travel is 20% down, how do airlines sort of meet that off-peak need? And I think it's far broader than network. I think it's resourcing strategy. I think it's maintenance planning. I think there's a whole number of things that in a world where business travel may not be coming back, we're going to have to work through and think through and just rest assured that we have a lot of actions on focus on that area. So it's far broader than just network in terms of how we manage these off-peak periods. Catherine O’Brien: Got it. Super interesting. And maybe just, the last FAA outlook on air traffic controller headcount, I saw, it didn't show a big improvement anytime soon. Just given your geography in a more constrained operational environment and the investments you've had to make to deal with that, should we expect the headwind you're pointing to in the slides, I think the entirety of your 2.5% to 5.5% year-over-year growth for the full year driven by that. Is that just part of the base now? And like into next year and going forward? Or, we got to wait until there's more air traffic controllers or do you see a pass to any release into next year? Thanks.

Yes, let me, I just want to make sure I'm answering the right question. I don't know if you're talking about capacity on CASM in terms of what's baked into the. - Catherine O’Brien: CASM-EX.

CASM-EX, yes. You should expect that we will continue to carry an elevated number of resources as we go into the summer. You should think of air traffic control sort of through the lens of high volume and convective weather. So summertime is when we see the most challenging time. That abates in the fall and it abates in the winter. So, in terms of the longer term trajectory, it will improve. It just won't improve in the next couple of years. There are a few things that were focused on what the FAA. They've been a very collaborative and transparent partner this summer in terms of collaborating with us and letting us know when there are staffing challenges going into events. But what that has translated to is longer events and more restrictive events. And that has impacted obviously, as we mentioned in the prepared remarks, July completion factor by four points. As you think about the other things that we can do to help mitigate some of the near term challenges given our exposure, additional slot relief next summer is going to be something that we're working on with the FAA. Obviously, the sooner the better on that slot relief, because it will enable us to pull costs out. The way the slot relief came in this year was too close in and we'd already hired pilots and in-flight and we just kind of reabsorb those in as additional operational protections. But if we can address the slot relief earlier, that will enable us to pull capacity more efficiently. And then we're going to have a smaller footprint in LaGuardia next summer as we think about stepping down the NEA. And so, that should provide some relief as well. And then hopefully with Spirit, that will help us diversify the network longer-term out of the Northeast in New York more quickly. Catherine O’Brien: All that color is super helpful.

Thank you. Your next question comes from the line of Helane Becker from TD Cowen. Please go ahead.

Thanks very much, operator. It's Helane. Just a question on the weather-related issues. They've been getting worse every summer for the past decade. And I heard your answer to Catherine's question about ATC and I appreciate that. But as you think about whether in three of your biggest markets, Boston, New York and Fort Lauderdale, how should we -- how should you think about adjusting capacity for summer months to not get into a situation where you're continually having 30 days in a row of irregular operations? And then the other question I have unrelated a little bit is I'm just kind of trying to figure out when you figured out that Europe was going to be the strong place this summer, because as part of the Northeast Alliance, you should have seen where your passengers, the passengers you were putting on American flights were going. So kind of trying to rationalize this to Europe being so strong, yes, but shouldn't you have seen it?

Hey, Helane, I'll grab those and then Robin might have some additional commentary on the weather as he's been spending quite a bit of time studying it on the weekends. So, in terms of capacity reductions in the Northeast to address potentially more challenging weather environments, as a reminder, New York is slotted and so reducing capacity without FAA relief is going to be a challenge for us. And as we've mentioned New York was an incredible margin producer for JetBlue pre-COVID. And so, New York continues to be a very strategically important part of our network. And even in the face of weather, we need to operate within that environment. We know weather, it has been worse this summer, but in terms of the magnitude of the challenges, this really requires the FAA to continue to pursue its plan to hire more controllers and also address the inexperience issue during COVID, as we know they lost a number of experienced controllers. And so that plays into events on the weekends when weather typically hits. And the FAA has done a number of things over the last few weeks to try to address that experience gap issue. So that we hopefully can avoid some of these more restrictive programs when you have weather that, maybe slightly worse than year's prior, but not the magnitude that we're seeing this summer in terms of the restrictive ATC programs. And then with regard to Europe. As you think about last summer and our revenue performance last summer, demand was incredibly strong in our domestic and our Caribbean franchise, our belief was that some of that would come out and we addressed that in how we planned the year, but that some of it would actually spill over into this summer. If you remember, April, we had a very strong Easter break, we had a very strong spring break, and we believe this summer we would see some of the extra COVID pent-up demand play out for those customers who were limited in being able to fly last year because fares were higher and capacity was more limited. Obviously that hasn't played out quite as we expected, but hindsight's 2020. And while they're all in Europe and Asia this summer, we expect that to cycle through as well just as that extra COVID pent-up demand we saw last summer cycles to a different geography this summer. Robin, I don't know if you want to answer this.

Yes, Helane, the other point I would just add on the demand, what we've seen is. I'm going to give you some examples. I mean, markets like New York, Nantucket, Masters Vineyard and markets like that have always been extremely strong performers for us in the summer. People look at the ATC environment, they look at the weather and they drive and get on the ferry. And so, I think these things are also to a certain degree, commingle. So, people may take less trips or they want to do one trip and it's a longer trip. I think Joanna's point, I mean, the demand, I mean, there's a lot of people traveling. Our load factor today is well into the 90s. So it's not a -- it's not that people aren't traveling. It's just on the domestic system, as you know, the fairs this summer have come in lower than I think everyone in the industry had expected. I mean, on the weather that you asked, I mean, we have a team of meteorologists. I think we are really good at this, given how important it is to JetBlue being so focused in the Northeast. We spend time, and actually we work with a company called Tomorrow.io, which was one of the original JetBlue Ventures investments that we made as well. And it's been amazing to see how their business has evolved over 10 years. But, we look at various measures in terms of the synoptic analysis, the participation, the surface analysis of pressure. And there is no doubt that the conditions this year have set us up, at least for July, for a more challenging environment. Having said that, it still compares in terms of severe weather, 2016 was worse. So it's been worse in recent years. However, as Joanna said, it's not just the weather. We are seeing -- when weather comes in, we're seeing programs earlier, we're seeing them lasting for longer. You look at LaGuardia last Friday night for anyone who was flying, I think we had 50 -- there were 50 industry airplanes out there, and it gets very challenging to recover from those events, and then it bleeds into the next day. So, I think we made a good call on the amount of disruption that we would see this summer. What we underestimated is the ATC impact to these weather delays. And again, Joanna stressed important point, the FAA, they accept the challenge they've got. They've been extremely collaborative. There no one is interested in finger pointing. People just want a system that works. That's what we want to. And I'm confident that as we get to 2024, whatever, however we do it, whether it's more controllers, whether it's different work resources, whether it's slot waivers again, that we have to get as an industry, an FAA, to a better operating solution for the flying public. And at JetBlue, we will be vocal in making sure that that happens.

That's really helpful. Thank you. Well, hopefully we get a budget. And I think it was actually 61 planes at the peak last Friday night at LaGuardia. But thank you. Thanks for that.

Thank you. Your next question comes from the line of Duane Pfennigwerth from Evercore ISI. Please go ahead.

Hey, thanks. Good morning. Just taking a step back, can you remind us how much of your revenue and your capacity touched the NEA at peak? And is there any potential fleet implication here? In other words, could some of this capacity get parked or will it all be transitioned to markets away from New York and Boston?

Hi, good morning, Dwayne. This is Dave. I'll take that. As noted, we are very exposed to the Northeast and concentrated there. Our New York and Boston is 75% to 80% of our capacity just to sort of put it in terms of order of magnitude. So it's the vast majority of what we do. As mentioned though, we see certainly opportunity for redeploy. We've already started to execute that and we'll be continuing to execute that over the coming period. But with the non-New York part of our network driving above 2019 margins in the second quarter, we feel confident that we've got a number of good options to redeploy this capacity into. So don't expect it to impact the overall level of capacity but certainly the geographic deployment of airport.

I guess not the 75 to 80 that needs to be redeployed but what percentage touched the NEA specifically if you have there. And just for my follow-up, can you remind us what JetBlue committed to with respect for labor to be able to implement the NEA. Was there a rate bump specifically tied to that?

Yes. So, there was, I would say that was before the last extension that we did. So, to a certain extent not sort of in the past line because that kind of just kind of where we started from and thus where we got to. And that was for the pilot group. Another thing I just wanted to add to what Dave said is that a lot of the La Guardia flying that we talked about getting redeployed is those is short stage flying. So, what you're going to probably see is that get deployed to longer stage market, 190s are disappearing, A220s are arriving. So, you're going to see a stage engage bump on that. So, it might be like a larger number of flights being redeployed to a fewer number flights in stage, and the flights is going to go up. So, it’s not and from an ASM perspective it won't be that material, it will be from a sort of New York flight count and exposure to flight per flight cost in New York and the ATC issues that are obviously per flying New York.

I appreciate the thoughts.

Thank you. Your next question comes from the line of Stephen Trent from Citi. Please go ahead.

Good morning, everybody. And thanks for taking my question. Most of them have been answered. But I was curious if you wouldn’t mind providing any color on what sort of competitive dynamics you're seeing south bound into the Caribbean and Latin for example we hear for instance a carrier called Arajet that recently started and I'm wondering to what extent you guys are bumping short shortages with them, thank you.

Yes thanks, I'll take that. I think in terms of industry capacity, there's most certainly industry increased industry capacity into Latin and Caribbean. But it's also a market that tends to be quite resilient. I mean, as you think about last summer and just a sheer volume to pent up demand and to go to some of these VFR market, will most certainly seen that translated into summer. That's what our capacity has largely been more up that capacity for domestic but up in the Latin leisure market. In terms of competitive new entrants and what not, I think JetBlue as a strong franchise down there, we do Latin and VFR traffic very well, we do leisure very well. It's sort of our bread and butter and one that we will continue to grow and redouble our effort with that segment.

Super, I appreciate that. And actually there's one quick follow-up to the Duane Pfennigwerth's question one. You're thinking about the shift from E190 stage A220s I believe are definitely going with a bit of a bigger plan. But should we also assume that you'll also be maybe getting rid of some of those smaller destinations or have those routes that were adequate for E190s 20 years ago having now kind of split up to accommodate larger gigs flying. Thank you.

Yes, thanks Stephen, it's a great question. All the cities we serve today with the E190 can be served with the 220 from sort of operational perspective. And from a demand perspective, we believe the same. So, I would not expect a new market exit as we go through the transition.

And I'd just add. I think and once have here the reduction in some of that TrueBlue business line which being and one recognizes and send a we'll do from the trips that we used to do and don’t do now, but the ones most on the pressure. To a certain extent that coincided with the replacement of the 190s with the 220s, and the 220s the course, and can but do it a lot more mission in terms of length than the 220 -- the 190. So, I think to a certain extent that as we whether this was the NEA or not, we may be looking to redeploy from business market into other market -- the 220, as you give this much more flexibility to do that.

Okay, very helpful. I appreciate the color.

Thank you. Your next question comes from the line of Scott Group from Wolfe Research. Please go ahead.

Hey, thanks. Good morning. So, the maintenance step up in Q4, I'm just wondering does that continue into '24, I'm just no you said for first half of pilots and we get some benefit from NEA coming down. But just overall, like do you see a pass to CASMx being down next year?

Thanks for the question, Scott. In regards to CASM ex-fuel for 2024, a meaningful input to that is the actual capacity growth expectations which I kind of highlighted earlier, it's pretty fluid given the airbus delivery delay as this well is Pratt & Whitney. So, if we were targeting mid-to-high single-digit, capacity the goal would be to deliver flattish CASM ex-fuel over the next few years. Specific to your question on Q4, this is just the timing of maintenance spend and specific to the year-over-year comp. we have highlighted that maintenance will continue to be a headwind over the next few years just given the V2500 fleet but that's also why we have this structural cost program in place which I'm very pleased on the progress that we're making on that program in order to continue to mitigate maintenance pressures over the next few years.

Okay. And then, Robin, the NEA ruling and then your decision to withdraw, how does that you remind bolster or not your confidence around getting this Spirit deal done?

Well, the first with the folks on the Spirit deal but also if you read the complaint, there's they talk about the DOJ talks about the NEA. And certainly it came a lot, it came up a lot during the call so the last year. And so, we've completely taken off the table. When we went into the sort of the beginning, we felt the NEA was pro-competitive. We still do, we lost the case and as such we're moving on. And so, this is now and I think if you look at the strength of the legacy airlines at the moment and just the benefit of this go and the geographic diversity, I think this plays extremely well into our argument about pricing, a pro-consumer national low-fare high-quality airline as the best catalyst the competition that we have. And so, we're going to focus on now making that case.

Thank you.

Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Nikhil Mittal for any closing remarks.

Thanks, Lara. And that concludes our second quarter 2023 conference call. Thank you, for joining us.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask to please disconnect your lines. Have a lovely day.