All right, folks, as the day wears on, that's when we start featuring the airlines whose stocks are actually managing to rise today. So very pleased to have the JetBlue team here today. I think, you know, Ursula, Joanna, and Marty are household names at this point. So I'm very happy to turn the stage over. I was a little worried about you guys not being able to get anything to eat. So I didn't realize I have Junior Mints.
We'll leave it at that. It says registered trademark.
Yeah. Thank you for this. That was curious. You heard me rattling.
Thanks, Jamie. That was so kind of you. Fortunately, there's no Mini Mints that are branded. Okay, so welcome. Very pleased to be here this morning. I just wanted to briefly touch on the demand environment. I know many carriers went before us and just wanted to reiterate that we are seeing what others are seeing. The peaks remain healthy. The troughs obviously are under pressure. This was something that we actually were seeing back in our January earnings call. I think that came through in our RASM guide. Our guide today, we've got a capacity down largely associated with storms in February, as well as self-help measures that we took pulling capacity in March and April as we saw the trough periods. We are maintaining our RASM and our CASM guide for the first quarter.
With that, I did want to pivot to JetForward and talk a little bit about our longer-term strategy. We launched JetForward in July. The plan anchors around our strengths. If you think about JetBlue, tremendous strength in the Northeast, a brand that is loved northeast of Florida, the Caribbean. We've got a nice franchise transcontinental with our Mint product. Obviously, our transatlantic routes are performing nicely, given that we've made some capacity adjustments to better reflect the seasonality of those routes. The culture, obviously an important pillar for JetBlue, an important advantage that we have. The product, something that I think we can all agree is strong, although always opportunities to improve it. Just the overall leisure franchise.
JetForward is really based upon how do we enhance the inherent strengths of JetBlue and get more value out of those strengths. With that, we launched JetForward in July. It has four pillars. The first pillar is reliable and caring service. Historically, leisure customers were less focused on on-time performance. Since COVID, it is now a top three driver of choice for customers, even leisure customers. Building the best East Coast leisure network. Most certainly leaning into our strengths with the failed Spirit transaction. Our focus is now on building regional scale, regional relevance in the places where our brand is loved and known. Offering the products and perks that customers value is the third pillar. There is a host of initiatives that I will talk about in a minute around that particular pillar. Securing our financial future.
Having a low-cost structure is essential for JetBlue. We have to maintain a lower-cost structure than the legacy carriers to enable us to thrive in the markets where we compete against them. When we look at when we launched JetBlue, the margin read-through, the operating margin read-through would have been down four and a half points. We ended 2024 down one. So a three and a half point margin improvement from the launch of JetForward. Assuming a stable economic environment, the midpoint of our guide this year is 0.5. So an additional one and a half points of margin expansion over the year for a total of five points through the end of 2025, assuming again a stable macro environment since we launched JetForward back in July.
I think as we've evidenced in years past, but also this year, to the extent that there are changes in the macro environment, we will pull the necessary levers to adjust capacity. We pulled two and a half points out of March. We pulled a bit out of April to address some of the trough softness that we were seeing. We are committed to that. We are going to adjust the business and maintain a level of flexibility to reflect changing environments. This is a multi-year plan. It is not a linear plan. It is not consistent through the quarters. It's a three-plus year plan that gets JetBlue back on the right track with structural changes so that we can start driving long-term value for our shareholders.
This is a summary of the pillars and some of the initiatives that we executed in 2024, along with what we expect to focus on in 2025. 2024 was a year of immense change, and I'm really proud of the accomplishments the team has made, particularly around the first pillar, reliable and caring service. When you look at that particular pillar, we saw some meaningful improvements there. We moved up off of the bottom of the list for A14. We moved up three spots in the Wall Street Journal ranking, the most improved airline. We were back at the top of the list for Net Promoter Score with a 10-point improvement in Net Promoter Score for 2024.
We are absolutely focused on continuing these trends and continuing the investments that are needed so that we can return JetBlue back to a far more reliable airline, as well as one where you see a lot more smiles and providing caring service from our crew members. Some of the ways that we're going to go about doing this are schedule investments and enhanced scheduling tools, all buttressed by our data science team. We're rolling out new technology that will enable our mechanics to better predict out-of-service events, better troubleshoot events, which will reduce the amount of out-of-service time and hopefully reduce the number of maintenance cancellations. We have a real push this year around hospitality across our crew members. That is one area where we think JetBlue has a distinct advantage for our people.
I think if you fly us, you see that our people bring a lot of personality to our airline and really do care about serving customers in the best way possible. We are seeing that through improved Net Promoter Score rankings. The second pillar, best East Coast leisure network. We redeployed 20% of the network this year. A very meaningful set of network changes. We redeployed 50 routes. We closed 15 cities, the majority of which was implemented in quarter four. 2025 is about seeing those changes really scale and mature throughout the year. The third pillar, products and perks. This year we saw $90 million of early EBIT capture associated with our preferred seating rollout this year, along with changes to Blue Basic.
We put the carry-on bag back in the Blue Basic fare, which enables us to have more competitive positioning on places like Google Flights. We are seeing a strong improvement there. In 2025, we expect to continue to see those initiatives ramp, as well as the launch of Even More Space as a cabin in the first quarter. We launched the Premier Card in January as well. We will be launching the JFK Lounge later this year. I will talk about Mini Mints/Junior Mint in a minute, Jamie. The fourth pillar, really proud of what the team is doing around costs. We met all quarters, our cost goals for all four quarters last year and for the full year. This year we are going to be launching a larger cost transformation program through 2025.
In all, we expect to capture an incremental $200 million of EBIT, assuming again a macro backdrop that is stable from JetForward. We are extremely proud of the progress that we're seeing so far. Turning to our onboard product. At the end of the day, we want to be able to serve a whole category of customers. The product evolution is just that. We implemented Blue Basic changes. We've implemented Even More Space as a cabin. We have announced our domestic first product. It will not be called Mini Mint or Junior Mint, unfortunately. We are taking suggestions. You can send them to Marty if you have an idea about what it should be called. The domestic first product will be rolled out in 2026, beginning in 2026 on all non-Mint aircraft. It will complement the recent changes that we've made to the cabin.
At the end of the day, it's really about better utilizing the square footage on our aircraft while keeping our costs low. It also complements the premium card and the introduction of lounges. We have 10 years of serving the premium customer through our Mint product. We know there's a demand for this. The number of seats will stay the same or grow on the aircraft. The seat pitch will be equivalent, at or better than the legacy carriers for the rollout of our Mint product. We're very excited to see this happen. It does take some time with approvals and getting the seats ordered. Finally, our cost transformation program. Maintaining a cost structure is absolutely essential to our business model, especially during a period of time where we have low growth associated with the GTF groundings from Pratt & Whitney.
We've demonstrated a very strong commitment to this. As I've mentioned, we hit all four quarter cost guides and the annual cost guide last year, even in the face of some capacity challenges due to the aircraft and an accounting change associated with Pratt & Whitney compensation. In 2025, we begin the new cost transformation program, which will drive an incremental $175 million of savings through 2027 as part of JetForward. There are three areas I'm going to touch on with regard to the cost program to give you a sense of the types of initiatives that underpin this particular pillar. The first is increased productivity. I think a lot of people talk about increased productivity, but we have very specific IT investments associated with driving this.
For customer support, it's continuing to roll out AI so that we can drive more self-service for our crew members and our call center, but also customer self-service on our app. We're targeting another 8-10 points of self-service shift this year. In maintenance, we're going to be providing pilots with tools that will enable them to better troubleshoot on board the aircraft through their iPads so that we can reduce the amount of time it takes to troubleshoot and resolve maintenance problems, which in turn should reduce out-of-service events. We will then turn to predictive maintenance and then workload and parts optimization. In our system operations center, we're focused on leveraging AI to do things like manage gate demand.
At JFK, if you have an aircraft arriving early and there's not a gate, that would be a miss on on-time performance or potentially the ability to recapture minutes in the day. We have a tool that's enabling us to better manage gate demand at places like JFK. A tool that's also enabling us to make better delay, swap, and cancel recommendations. A lot of variables behind whether you choose to cancel or swap or delay a flight. Some of those variables can go two and three days out into the future, consisting of perhaps a broken crew pairing or an aircraft not getting back to a maintenance base in time. This tool enables our people in system operations to make better decisions because it considers more variables associated with those particular decisions. Fuel optimization.
We launched technology last year on our pilot iPads that allows them to choose the most efficient flight plan for routing. This new technology is accessed through the iPad. It was rolled out last year. We are seeing tremendous adoption among our pilots this year and look to start seeing the benefits of greater fuel efficiency in 2025. Finally, contract management. We are creating a center of excellence that can drive more value from our contracts.
Thinking about how do we include all the decision-making terms of contracts into a data science tool so that we can enhance our negotiating power when we're at the table negotiating large contracts, improve contract compliance to ensure that we are getting what we deserve under service level agreements when there are service failures, and then early detection of supply chain challenges to help better mitigate some of those issues down the road. In all, I'm extremely pleased with the progress the team has made. We launched this less than a year ago. We are very much focused on driving shareholder value and getting JetBlue back on track and driving long-term earnings for our crew members, our customers, and our shareholders. We'll remain nimble and adjust to the changing macro environment. As I mentioned, it's a long-term plan and progress will not be linear.
I think we've demonstrated and will continue to demonstrate that we will act quickly to pivot our plan to adjust to the changing environment while evaluating all levers that are necessary to ensure that we keep JetForward on track, including better managing our fixed costs. For example, we offer early retirement packages for our pilots, voluntary programs for many of our crew members to take time off during trough periods. We're going to continue to lean into those types of opportunities to better manage our fixed costs through the trough period. I'll just add, I think fuel could potentially be a tailwind to the plan to the extent that we see some macroeconomic pressures. I just wanted to thank you for the time today. We're really pleased with the progress.
This is a team that is focused on execution, driving a sense of urgency to ultimately get JetBlue back to a path of profitability. Jamie, over to you.
I'll kick off, but don't believe we'll get to the audience Q&A as well.
I do have a question on domestic first class. It took Delta over a decade to monetize the front cabin. I can't remember the exact date, but when they first started, I think payload factor upfront was, I don't know, 13%. Now it's in the 70s. It took a long time. I would assume from JetBlue's perspective, since consumers have already learned that they may have to pay up for this product, that it's not going to take you a decade. Is there any scenario where you have to give it away at first just to build familiarity with the product? Does that factor into any of your internal projections?
Hey, Jamie, thanks for the question. I'll.
You just turn it on and everyone buys it. Yeah.
I'll say a few things. First of all, we're not here to announce any of the details of how Junior Mini Mint is going to be, as you call it. I would talk about the history of first-class monetization. We obviously watched this very closely. At the time that Delta did that, we were already started with the Even More Space product, now Even More. Four years into it, we went with Mint. We have a lot of experience in the whole upgrade world. Frankly, my personal opinion, looking at what happened over the 10-year period, is that they had to deconstruct a model where customers expected to get it for free. We never did that.
In fact, from the very beginning of Mint, one of the things that I had made as a tenet of that product is that we will price it to maximize the RASM of payload factor. That's why you regularly see three-digit fares in Mint, where it's four-digit fares begin with a two in competitive airlines. Because I view the world as we did not want the bubble of four people paying $2,000 and 12 people on upgrades. We never set that precedent. I will say that we are excited about the product we're going to be offering. I think given the experience that we've had with Even More and with Mint, we have complete confidence that our customer base will love it. Our surveys are showing our customers want it.
One thing that's also worth noting is that, and we said it a couple of times, I want to stress it again, the total number of premium seats in the airplane is not going up. The quality of the seats is going up because there'll be two or three rows of the domestic first-class product in the front of the airplane. We are not dramatically increasing our exposure to premium products. What we are increasing is the quality of the revenue we get.
Thank you.
A couple of things. Marty and Joanna, to start, Washington, D.C., New York airspace, do you sense that over the next four years there will be material progress made given the turnover in transportation, the hope for FAA modernization, air traffic control, etc.? Obviously, you're acutely impacted by this.
Yep. Thanks for the question. I think more than acutely, we're the most impacted by it because of the footprint that we have in the Northeast, let alone New York, where as a percent of our network, we have more exposure to New York than anybody else. Unfortunately, I think the tragic accident at DCA has drawn a lot of attention to the issue, rightfully or wrongfully, in that accident because the decision on what happened is not out yet, but drawn a lot of attention to the issue of staffing. I mean, we've been screaming from the top of the mountain for the last five years. There is a problem with staffing. There's a problem with staffing. I'm pleased to see the amount of attention it's getting in the public because it's something that's hard to understand.
Frankly, the traveling public understands it better now, but also with the Department of Transportation. The three areas that need to be addressed are staffing. I could say staffing, staffing, staffing, but it is staffing, it is technology, and then continuous funding to support technology improvements and a robust staffing pipeline. I do think it is getting traction. At the end of the day, the staffing issue, just pumping more people through the Oklahoma Center is not going to fix things. They need to get the career college programs off the ground running. We have lots of students out there who want to be air traffic controllers, who were born to be air traffic controllers. We need to make sure all those pipelines are very robust and generating air traffic controllers to ultimately fix the situation because there is not enough capacity in Oklahoma.
The failure rate is quite high there. I'm optimistic, but we haven't seen anything yet.
Sticking with the Washington theme here, obviously, American is appealing the NEA decision. You and the team have been vocal about exploring partnerships. Just maybe give some insights into are there parallel teams? Is there one team that's still thinking about what could happen with American if they're successful while you have other efforts underway with other airlines to explore potentially what could be done? What is the sense of timing and urgency for all this?
Yeah. We have been quite vocal that we are exploring partnerships in general with a number of carriers. The construct would not look like the Northeast Alliance. It would look more like a traditional partnership. Is there a sense of urgency? Yes, there is, but we need to make sure we have the right construct for JetBlue. With regard to the decision, the petition for certiorari on the American case, my understanding is American is concerned about the precedent that the case is setting that could extend to even other partnerships. That particular case, if decided, will not have a direct impact on JetBlue because we terminated the Northeast Alliance several years back. It could serve as better precedent in the future for other types of partnerships down the road.
Ursula, a question for you. Most people in the room hopefully know at this point that we think your loyalty debt, $2 billion of it, is very attractive given where it's yielding right now. I think there's been a lot of noise regarding your balance sheet strategy. I want to clarify a couple of things, right? There was a shelf that was filed. Do you have any need to tap any further capacity in the loyalty financing to raise incremental liquidity? Can you talk about how the events of the first quarter since you've put in place that financing and your liquidity walk and cash flow walk, has it been materially altered by any of these results? How are you thinking about liquidity right now?
Yeah. Thanks for the question. As a reminder, we raised over $3 billion last August. We utilized the loyalty program, and we also did a convert offering. That was really to give us runway to execute on the JetForward strategy. The intent of that financing was to fund the 24 deliveries that we're taking here in 2025. The shelf registration was just an administrative filing. Our previous shelf was expiring, so we just re-upped the shelf. There is no need at the moment for additional liquidity. Obviously, we're watching the environment, which continues to be pretty fluid. We'll continue to assess and scenario play if we need liquidity if we do end up in a recession. I think what gives me a lot of comfort is we've got over $5 billion of unencumbered assets. About a third of that is good, healthy aircraft and engine collateral.
We could tap incremental loyalty, but we also have our slots, gates, and routes and our brand. The unencumbered asset base gives me a lot of comfort if we do head into a recessionary period. We do have many different levers to pull if we do need liquidity.
Just to follow up on loyalty, I think it was Mike Leskinen sort of referred to United, and maybe someone else made a comment about there's a few loyalty programs out there, implication, United, Delta, American, that have tremendous value that's sort of locked up in the enterprise. Would you put your loyalty program and your loyalty economics in that same category of margin and importance and so forth? Because I think there's this view that loyalty just isn't as important to JetBlue. I think the numbers sort of indicate otherwise, but maybe you can clarify that.
Yeah. I'm happy to start, and then Marty can add on. It's a significant asset to JetBlue. I think that there's a good amount of runway to continue to grow the program. I mean, it's 12% of our revenue, which actually is a stat that is higher than a few of our legacy friends. We do view it as valuable. Marty and the team have a significant roadmap that is contributing to JetForward over the next three years in how we continue to grow the program. Maybe over to you, Marty, to give a little color.
Yeah. It's funny. I'm amused every time I hear this question because if you look at the percentage of total revenue, we are outperforming some airlines you may have mentioned in that question. I feel great where we are. Moreover, I feel great knowing that we have a currency that does not have the same utility as some of our competitors. It's very difficult to redeem to a lot of parts of the world with TrueBlue points versus some of the big legacy airlines. Frankly, to me, that's one of the big opportunities about our partnership program. We never really got to the full implementation of the NEA because the judge struck it down before we were able to offer that to our customers. Just from what we saw in the beginning of the NEA, we recognized the value of a loyalty partnership.
Obviously, people get excited about Codeshare and Interline and all the things that are normal partnership things. I think for me, equally important in whatever partnership we do will be being able to give a lot more opportunity to our most loyal customers.
One of your competitors earlier today, the context was actually Southwest because they're starting to charge for bags. It was Scott Kirby. The point he made is that to fix Southwest, you need to charge for bags and stop flying routes that lose money. The context wasn't JetBlue, but it got me thinking about JetBlue. My perception is that there used to be a higher tolerance for loss production internally at the company. I don't know if you agree with that, but would you have any data that you could share? The first day that you took over, Joanna, what percentage of capacity was money losing? What's that number today? I know it's a little unfair because part of the capacity has been redeployed, so new markets need to. It's not necessarily apples to apples.
All of the JetForward data was very helpful. Can you give us a sense for how loss production throughout the network has changed with you at the helm?
Yeah. I think we're probably not going to share that data. Maybe let me speak more broadly to how we're thinking about the network. Marty, feel free to chime in. Part of the challenge we had when we were trying to acquire Spirit was that we couldn't make a lot of network changes without potentially undermining the legal arguments that we had. We sort of froze the network. The other piece is had that transaction been successful, there would have been cities that may have been underperforming for JetBlue but would have done better with the combined entity. I'd say Los Angeles Short Haul is the best example. I think we actually gave that example last year because we had just announced we were closing it. Los Angeles Short Haul had underperformed for a very long time for JetBlue.
We had been sort of making changes around the edges. We announced that we were going to acquire Spirit. They had a nice footprint in Los Angeles. The combined JetBlue Spirit footprint would have probably produced better results given the breadth there. When that transaction failed, we took action immediately. I do think I personally, Marty, the team, we have less tolerance for underperforming routes when you're not growing. Every one of those planes needs to be productive. You've got to have a high threshold for where you fly. You are seeing that. Also, the trough peak dynamic post-COVID, the troughs are definitely longer and a bit deeper. As we think about mitigating losses in the troughs, that's been a real priority for us.
It is not just about where we fly, but also day of week flexibility, pulling capacity day of week when we need to. You have a team that is very focused on being more dynamic now to get JetBlue back to profitability. We cannot rest on our laurels anymore. I do think we would wait longer. Some of that was also Spirit related.
Yeah. I actually don't even agree with the premise of the question in the first place. I mean, if you go back and look at our margins in the teens, we had margins in the teens. I left in 2019. COVID came in 2020. Between COVID and the Spirit transaction, we were sort of frozen back to Joanna's point. I don't think anything's changed in tolerance. I mean, I think we were frozen during that period. We unfroze, and change came very, very quickly. My view of the world is we have laid out in JetForward a plan that if you add these numbers together, gets us back to double-digit margins. That is the path we're on. We are completely focused on JetForward, and we've got a plan that's going to get us where we need to be.
Marty, we've talked in the past about bag fees and Southwest's reluctance to charge for them. They're up next. Big reveal this morning. We've all seen it. I know you have an exact number. You're not going to share it with us, right? When we think about what bag fees at Southwest do for JetBlue, just what can you tell us?
We could throw the question in the back of the room.
Yeah. We have people more qualified to answer that question in the room, I believe. No, listen, my job's to manage JetBlue. It's not to manage Southwest. I'll hold my view of what they're doing. I mean, every airline is focused on the same thing, which is getting returns above, across the capital, and making sure that we have happy investors. We're doing it. Southwest is doing it. Everybody's doing it. We all have our own paths depending on our starting point. Our path is JetForward. Southwest has a path that they talked about this morning. I have no stones to throw at anyone's path. We're all focused on making sure we have happy investors.
One thing that I noticed when you had the comparison of your cabin configuration up, and you were very clear to reinforce the fact that your number of premium seats isn't going to change when you roll out domestic first class and so forth. When you think about the back of the plane in adding a more premium product, is there any further decontenting that you need to do at the back, given that you're increasing the content upfront, if you will? Do you feel that your Blue Basic product is where it needs to be relative to the competitive environment?
We just made a gigantic change to Blue Basic in adding the carry-on bag back. To me, that was a seminal move as far as making Blue Basic more competitive. As Joanna said, we are very happy with the results as far as share we have captured in Blue Basic. We have not seen degradation from the Blue fare. That was really the only thing we were concerned about, was buy down. It is absolutely RASM- accretive. I will say in general, what we are seeing as a company, and I think we are seeing as an industry, is that certainly for those of us who have premium products, again, Southwest is a different place. For those of us who have premium products, it is a barbell. You have got a lot of demand at the very bottom.
You've got a lot of demand at the top and not as much in the middle. That differentiation between the premium products and the non-premium products, I think, is more distinct than it has been over the last 10 or 15 years. This is the response that what customers want. Frankly, we continue to tweak our product like Mint. We continue to be very happy with it. I look forward to doing the same thing with domestic first Junior Mini Mint.
Last one for me in that regard. I'm now back and forth between Boston and New York, but I'm up in Boston now. I'm flying you even more, more so than ever. Listen, if you have Mint service, I'm buying it. Full fare. I'm flying it, right? It's a great product. I'm a quintessential corporate traveler, right? I know you're embracing your leisure routes and so forth, right? Is there still a corporate opportunity for JetBlue? What is the corporate sales force at this point and so forth? As you embrace leisure, I mean, today, the market weakness, the quarterly weakness is driven by leisure, right? Not as much by corporate to some degree, I guess. We can argue that, right? Just sort of thinking about, have you abandoned all corporate efforts at this point?
Is the corporate sales force out there trying to generate what some might argue is a stickier part of the demand curve?
Yeah. I mean, we definitely still have our corporate workforce out there. It's the same size it was pre-COVID, post-COVID. They remain focused on those opportunities. We have a product that works for everybody. We are focused on capturing every customer where the schedule works well for them. At the end of the day, the routes that we fly tend to be predominantly leisure, and hence the strategy around Best East Coast Leisure Network. That's not to say we're not capturing our fair share of business customers on those routes where maybe they need to go to a leisure location or TransCon, as you mentioned. There are some markets out of Boston that just underperformed. The amount of even business customers on them was very thin. We decided those assets would be better deployed to leisure markets.
We serve everybody, and we have a product that I think speaks to everybody. In the spirit of being focused on the network, you see a largely leisure footprint.
Anybody else from the audience before I ask a final question?
Ursula, you mentioned the R-word recession, I believe, twice in one of the answers you were given. What do you think the next recession looks like for the airline industry? The reason I ask is that prior recessions have all followed a fairly similar script. Some were more severe. The duration has changed. Usually, corporate demand would dry up. The Big Three would suffer. Discounters would fare okay. The Big Three would have to issue equity because they were starting from a lower liquidity and margin bet. You fast forward to today, and clearly, you're not doing as well as you'd like to, but you also don't have - 22% operating margins. How does the competitive dynamic play out in the next U.S. downturn?
Yeah. No, it's a really good question. I probably mentioned it twice in my response because I'm just looking through the lens of risk, right? I think where the sector is today is very different than prior recessions, right? We're in this environment where capacity is at a high level constrained already, right? Like given the OEM challenges. I do think as you look here at the domestic U.S. landscape, capacity is already depressed. Obviously, the biggest lever is to start pulling more capacity. I do think, generally speaking, we all have decently strong balance sheets. I think we could weather this a lot better than previous recessions. I think the convergence of the business models also is playing into the environment as well. I think, unfortunately, it will be much tougher for others.
I feel good about the JetBlue model and the plan that we have and the multi-year strategy. Even in a depressed environment, I still think that we can make good progress on the path that we're on.
Okay. All right. That runs down the clock. JetBlue, thank you very much.