Q4 2023 JetBlue Airways Corp Earnings Call

Participants

Kush Patel; IR; JetBlue Airways Corp

Robin Hayes; CEO, Director; JetBlue Airways Corp

Joanna Geraghty; President, Chief Operating Officer; JetBlue Airways Corp

Ursula Hurley; CFO; JetBlue Airways Corp

Dave Clark; Head of Revenue and Planning; JetBlue Airways Corp

Mike Linenberg; Analyst; Deutsche Bank

Daniel McKenzie; Analyst; Seaport Global Securities LLC

Duane Pfennigwerth; Analyst; Evercore RiXML Test Company

Conor Cunningham; Analyst; Melius Research

Jamie Baker; Analyst; JPMorgan

Catherine O'Brien; Analyst; Goldman Sachs

Helane Becker; Analyst; TD Cowen

Savanthi Syth; Analyst; Raymond James

Andrew Didora; Analyst; BofA Global Research

Stephen Trent; Analyst; CITI

Scott Group; Analyst; Wolfe Research

Chris Stapipillus; Analyst; Susquehanna International Group

Presentation

Operator

Good morning.
My name is Travis. I would like to welcome everyone to the JetBlue Airways Fourth Quarter 2023 earnings conference call. As a reminder, today's call is being recorded at this time, all participants are in a listen only mode. I would now like to turn the call over to JetBlue's Director of Investor Relations, [Kush Patel] Please go ahead, sir.

Kush Patel

Thanks, Travis. Good morning, everyone, and thanks for joining us for our fourth quarter 2023 earnings call. This morning, we issued our earnings release and a presentation that we will reference during this call. All of those documents are available on our website at investor dot jetblue.com and on the SEC's website at www.SEC.gov.
In New York. To discuss our results are Robin Hayes, our Chief Executive Officer, and I guarantee our President and Chief Operating Officer, and Ursula Hurley, our Chief Finance. Also joining us for Q&A are Dave Clarke, our Head of Revenue and Planning, and Andres Barry, President of JetBlue Travel Products.
During today's call, we will make forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding our first quarter and full year 2024 financial outlook and our future results of operations and financial position, industry and market trends, expectations with respect to headwinds, our ability to achieve our operational and financial targets, our business strategy and plans for future operations and the associated impacts on our business. All such forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those expressed 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.
Statements made during today's call 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 this information. Investors should not place undue reliance on these forward-looking statements.
Also during the course of our call, we may discuss certain non-GAAP financial measures. For an explanation of these non-GAAP measures and a reconciliation to the corresponding GAAP measures. Please refer to our earnings release, a copy of which is available on our website at SEC.gov. Now I'd like to turn the call over to Robin Hayes, JetBlue's CEO, and

Robin Hayes

good morning, everyone, and thanks for joining us today. As always, I'd like to start with a huge thanks to our incredible crewmembers. Tell you today. That message takes on even greater importance for me because as you know, in two weeks, I'll be retiring as CEO, and this marks my last earnings call with JetBlue. So after 15 years of earnings calls, I want to extend one more public. Thank you to our crew members who are the reason our customers keep coming back to JetBlue the energy and dedication their attention to delivering exceptional service to our customers. They truly are the source of our distinctive culture and brand. We would not be JetBlue without them.
Let me also thank all of you the analysts, investors who have supported us and challenged us along the way. We very much appreciate the constructive engagement over the years. It's been a pleasure working with all of you, and I know you'll enjoy working more closely with Joanna I think I'm also very excited for Joanna, who will be our next CEO effective February. The 12th, no one on our team has worked alongside me or actually Woodside suffered longer than Joanna to the following an energetic leader, spearheaded many of our major strategic operational and commercial initiatives. Over the last six months, she has been leading our effort to develop and implement a turbocharge organic plan to help get us back to sustained profitability and restore our historical earnings power. You'll be hearing more about that today and in the future, I'm very confident about the next phase of our evolution, which you'll hear more about and will deliver sustainable, improved performance over time and create value for our shareholders, customers and crewmembers before passing it over to Joanna, I wanted to briefly touch on the Spirit transaction. We strongly disagree with the court's ruling, and yesterday we filed a motion to expedite an appeal of the decision whilst we notified notified that that certain conditions to close may not be satisfied prior to the outside date set out in the merger agreement, we are evaluating our options under the merger agreement, which remains in effect unless and until such time as the merger agreement is terminated, JetBlue will continue to fully abide by all of its obligations. We're not in a position to discuss this per transaction. Any further at this point and our focus today, we'll be on our organic business with that for the last time over to you, Jaana Thank you.

Joanna Geraghty

And I want to start by expressing my deep gratitude to Robin for his leadership and friendship over the years. He deserves tremendous credit for building JetBlue into the company. We are today. He transformed us from a small domestic airline to one with a global footprint and created new ways to innovate and challenge the competition from free onboard WiFi to Mint, our award-winning premium offering, which has disrupted transcon and now transatlantic business on behalf of the entire JetBlue team, we wish him all of the best in his next chapter. I'm honored to be taking on the role of CEO. on behalf of this incredible company at a very pivotal moment for our business. Jetblue has a strong foundation underpinned by a truly exceptional brand and the industry's best crewmembers. We are building on this foundation as we take aggressive action to get back to profitability and intensify our focus on delivering value for our shareholders.
Before I begin my remarks, I'm thrilled that my first leadership appointment was announced yesterday, promoting Warren Christie to Chief Operating Officer effective February 12th. Warren has a robust aviation career spanning 30 plus years from his leadership and service in the military to his JetBlue career beginning 21 years ago and spanning various roles. Our dedication and passion for safety, operational performance and service excellence has been instrumental in our evolution, and he is well-positioned to help us execute a plan that will mark the start of JetBlue's next major factor as Robin mentioned, we've been hard at work evolving our standalone organic plans to restore profitability and reset JetBlue for future growth. And we've already begun to implement some of the initial components. Key strategic challenge we've always faced is how to thrive as a small player in an industry dominated by four large airline. We now face this challenge in a post-COVID environment where industry dynamics are coalescing around some clear trends. For example, customer travel preferences, including a premium onboard experience and improved customer service. These are increasingly shifting towards JetBlue's strength. We will deepen and strengthen our competitive position as a unique brand with a superior customer experience, finding new ways to be the best at what we do and further distinguish ourselves from the competition. This begins with refocusing on our most proven geographies. Our core network sits in some of the largest markets in the world, but there are clear barriers to entry and we intend to capitalize on our deep relevance in these markets by urgently optimizing our network to make sure that we're taking care of our core customer, making sure we go where they want to go when they want to go.
We are also recharging our innovation DNA to bring an even better quality experience to the full spectrum of JetBlue customers from leisure visiting friends and relatives to corporate and premium travelers. It means segmenting our onboard product offering more precisely so that each customer can get the best travel experience at the best price. We will use this new chapter to improve how we merchandise to our core suite of customers. And to the extent there are opportunities across certain customer segments, we will launch new revenue initiatives and close the gaps on our product offerings. All of this is underpinned by a more reliable operation, a complementary loyalty program and a strong culture with a competitive cost structure in many ways, this means refocusing on our core strengths. Let me be clear. It is not, however, business as usual. I commit to you that with our renewed focus, we are bringing more data-driven rigor, intensity and creativity than ever before to date, relentless focus on building value for our shareholders over the coming weeks and months, including at an Investor Day, we will host in May. We will be sharing more with you on our longer-term plan. But today, I want to share our 2024 priorities a preview, if you will, of how we intend to return to sustained profitability and how we are taking urgent action, including launching several initiatives in the first quarter.
Starting with our new initiatives. These are aimed at evolving our offering to better serve our core leisure customer while further diversifying our revenue stream in this process, we've identified over 15 different revenue initiatives. And in 2024, we expect these to add over $300 million to our top line, of which nearly two thirds is ancillary revenue. Included in these initiatives is our recent launch of preferred seating, which provides customers with the option to select more desirable seats closer to the front of the aircraft, but also gives us another way to reward our most loyal Mosaic customers who will get this additional benefit for free, and it enabled us to better match our product offerings to customer demands.
Another example I will highlight is our expanded distribution and OTT partnership. This expansion, further aligns our distribution capabilities with the legacy carriers, allowing us to reach more customers and giving those who rely on OTA greater access to our product. We are also making changes to how we manage our network rebalancing to deploy the right mix of risk and applying even greater discipline to our assessment of underperforming markets. As part of this refinement, we are aggressively reallocating capacity to proven leisure and VFR markets, including doubling down in those markets where we can leverage JetBlue Travel Products, superior offering to better serve customers and help us generate higher margins.
Our loyalty program also remains a priority as we look for additional ways to provide more value to our customers. And we expect our tuneable TrueBlue program to continue to drive margin accretive growth as we execute our multiyear plan to close the gap to peers and better monetize the program. We are expanding our suite of products with the continued goal of appealing to more of our core customers and plan to launch several new loyalty products in the coming years.
Next, continued cost and capital discipline are a top priority to that and we have reached an agreement to defer $2.5 billion of planned aircraft CapEx and smoothed our delivery stream. Ursula will provide more detail in her remarks.
Finally, we operate in one of the most complex and challenging air spaces. Operational reliability is foundational to all of our priorities, helping us deliver a better customer experience while also improving revenues with fewer refunds and disruption vouchers and better cost as we mitigate overtime and premium. This will be a continued area of focus in 2024 as we make more targeted investments in our operation, prioritizing areas such as predictive aircraft maintenance and scheduling enhancements, where we are already seeing meaningful returns for reliability. As I mentioned, we will share more at our Investor Day later this year.
Shifting now to our fourth quarter results. We delivered a strong end to the year as both revenues and costs exceeded our expectations. Fourth quarter revenues declined 3.7% year over year ahead of our December guidance update, driven by healthy close-in demand with both strong peak holiday period demand and better than expected performance during off-peak our premium offering and even more space, in particular, continued to perform extremely well with double-digit year-over-year revenue growth in the fourth quarter. We also benefited from continued strength in our redesigned TrueBlue loyalty program, both in the fourth quarter and for the full year 2019, we have had the fastest growing loyalty program, any major U.S. airline growing revenues by 75%. This reflects strong performance in our Barclays co-brand portfolio, which achieved a record high for JetBlue co-brand spend and generated over $1 billion in cash remuneration in 2023, more than double our 2019 performance. We continue to make enhancements that unlock value for our customers by expanding ways to earn and redeem points, which helped fuel record growth in redemptions in 2023, growing by over 25% year over year. We expect continued growth going forward as we recently launched our first seamless partner redemption relationship with Qatar and Hawaiian in the fourth quarter of 2023, and I am pleased to announce that we have additional new partners coming on.
Board capacity in the fourth quarter grew 3.3% year over year above the midpoint of our initial expectations. As our strong operational performance in November continued through the end of the year, we operated with high load factors during the peak, an extremely busy time of year. And despite weather issues, we were able to recover quickly and minimize cancellations when dealing with storms early in the quarter and during holiday peak. Our completion factor for the quarter was 99.8%, which is our best fourth quarter completion factor since 24 and was one of the best in the industry, and we continue to see momentum on this front headed into the first quarter. More broadly, we saw year-over-year improvements across nearly all of our operational metrics in 2023, reflecting the benefits of the structural investments we are making to improve reliability and boost resiliency. Strong operational performance, coupled with our continued cost discipline, resulted in Q4 CASMex fuel ahead of our expected range. As Ursula will discuss.
Looking ahead for the first quarter, we are seeing positive momentum in our revenue. Demand during peak periods remained strong and we have better matched our capacity to demand during off-peak. International demand remains very healthy and the domestic revenue environment is improving as industry capacity has been moderating. For the first quarter, we are forecasting revenues to be down 5% to 9% year over year at the midpoint and factoring in our capacity outlook of down 3% to 6% year over year. This represents a five point improvement, five point improvement in year-over-year unit revenue growth versus last quarter. Looking further ahead to the full year, we are well positioned to achieve roughly flat year-over-year total revenue growth, which we believe represents a positive outcome in a year when capacity is decreasing. While the first half of 2024 cycled against the high pent-up demand we saw in the first half of 2023, we expect year-over-year revenue growth to be much stronger in the back half of 24 as comparisons ease and the benefit from our enhanced revenue initiatives growth. I'd like to close by thanking our crewmembers for their commitment to delivering a safe and reliable experience to our customers. These investments we are making position us to deliver the JetBlue experience better than ever before. As we refocus our efforts on serving our core customers, we are increasing our efforts to drive reliability and consistency in our operation product and service. By digging deeper to do more of what we do best, we will be able to compete more effectively return to profitability and ultimately expand margins and returns for our shareholders. With that, over to you, Ursula.

Ursula Hurley

Thank you, Joanna. I'd like to add my thanks to our outstanding crew member for all their hard work and closing out the year on a strong note, I am particularly pleased with our cost performance in 2023 amid a very challenging backdrop. For the full year 2023 chasm ex-fuel increased 4.5% year over year within the range we provided last January, despite facing an incremental 1.5 points of chasm pressure from weather and ATC challenges in the Northeast.
Fourth quarter cost performance was stronger than expected, driven by a higher completion factor and better overall cost execution. Specifically, our operational investments have been enabling us to better manage day of disruption planning and to recover more quickly and complete a higher number of flights without having to incur additional costs related to overtime, premium pay or disruption vouchers. We continue to be impacted by the GTF engine issues. We currently have seven aircraft parked due to these issues and expect the number of artist service aircraft to increase steadily as the year progresses. Our current assumption is 11 average aircraft will be out of service throughout the year, peaking at 13 to 15 aircraft out of service. At the end of the year. We are actively engaged in discussions around compensation with Pratt & Whitney. However, in the meantime, we have launched a number of measures to mitigate the impact, including leasing and purchasing extra spare engine. While these efforts have yielded additional FARES, they are not enough to offset the headwinds associated with the elevated number of engine changes. As a result, we expect capacity and departures to be down in 2024 in a year in which we are growing. Cost discipline is even more important. And we are taking a hard look at our spending to make sure every dollar we invest is making an impact and making a change when it does not. As part of this, we are making deeper cuts across our cost base, including rationalizing our real estate footprint, offering voluntary opt-out packages to crew members as well as better leveraging data to plan our operation and reduce unexpected disruption costs. We also continue to execute on our structural cost program, which delivered $70 million in cost reduction in 2023. We are now on track to track to deliver run rate savings in the range of $175 million to $200 million by the end of 2024, which is $15 million better at the midpoint than previously expected savings accelerated through the back half of 2023 as we launched technology-based solutions aimed at enhancing crew member productivity and optimized maintenance planning for our midlife aircraft. Additionally, through our fleet modernization program, we remain on track to avoid $75 million in maintenance costs through 2024 as we replace our even 90 fleet with the margin accretive eight to 20, we have already achieved $55 million in cumulative cost savings to date, and we continue to plan for all of the even 90s to be retired in 2025. In the interim, we will still be operating three fleet types, which will result in near term headwinds from associated costs and complexity. However, once we are through this transition period and back down to two fleet types we expect a bigger benefit and a more meaningful tailwind to our cost. This will be further amplified by the fact that the A. two 20s deliver a 20% improvement in ex-fuel unit cost economics compared to the even 90. For the first quarter, we expect chasm ex fuel to increase between 9% and 11% year over year, which includes impact from the GTF issues and approximately two points related to wage step-up in our pilot contracts. As we move past the first quarter, we expect absolute CASMex to moderate downward and supported by our robust set of cost initiatives stay relatively flat on an absolute basis through the end of the year. We expect this to result in chasm ex growth up mid- to high-single digits for the full year, together with the $300 million of revenue initiatives Joanna mentioned earlier, we expect this cost performance well result in an adjusted operating margin that is approaching breakeven for the full year and to our fleet. As Joanna mentioned, we reached an agreement with Airbus and other business partners to defer approximately $2.5 billion of aircraft CapEx previously expected in 2024 through 2027. This agreement supports our path back to positive free cash flow provides a more consistent level of aircraft deliveries and CapEx through the end of the decade and prioritizes the margin accretive A. to 20 and fleet modernization program. As the E were 90 exit the fleet, we now expect to take delivery of 27 aircraft in 2024, we expect our full year 2024 CapEx to be approximately $1.6 billion. While we work through the near-term growth challenges stemming from the GTF. issues. We recognize this level of growth is not in line with our historical performance, and we are evaluating all of our lever to partially offset the growth headwinds. Most notably, we have a significant amount of flexibility to extend the life of over 38 through 20 aircraft to provide growth tailwinds, and we will continue to explore other cost effective and capital-light ways to grow our fleet.
Onto the balance sheet, we ended the year with $2.3 billion in liquidity, including our undrawn $600 million revolving credit facility. We continue to take a very conservative approach to managing our liquidity. And in 2023, we raised $1.4 billion in aircraft financing to support our liquidity needs. In 2024, we plan to raise additional financing to support our CapEx and our planning assumption for full year interest expense is between $320 million and $330 million. We also continue to maintain a healthy unencumbered asset base. We hold a total financeable asset pool of over $10 billion, which included the TrueBlue loyalty program, the JetBlue brand, our slot portfolio aircraft and engines.
Finally, we continue to opportunistically look at hedging as a means to manage risk. As of today, we have hedged approximately 30% of our expected fuel consumption for the first quarter and approximately 13% for the full year.
To Slide 10 for a recap of our financial outlook for the first quarter and full year 2024. As you can see, we are refocusing our guidance around six key metrics, which we believe are mission critical to understanding our story and measuring our progress as we refocus our efforts around returning the business to profitability, we are shifting to adjusted operating margin, which we believe will provide greater insight into our core business performance. Additionally, for the full year, we have moved towards directional qualitative guidance rather than specific ranges, given the number of moving variables, we plan to provide more specific guidance for the full year at our upcoming Investor Day.
Yes.
To conclude, I'd like to thank our amazing crewmembers once again for all of your incredible work in 2023. We are at a pivotal moment in our company's history, and I know that we are focused on the right areas to position the business for long-term success and restore our historical earnings power. The fourth quarter showed us that we are making progress. So while 2024 is a transition year, we have a strong plan in place and we are taking the necessary steps to return the business to profitability. We are refocusing on our core customers and proven geographies with network product and operational changes to better meet their needs while still delivering the low fares and great service. Jetblue is now known for. We are diversifying our revenues with margin accretive initiatives to grow our TrueBlue loyalty program and JetBlue Travel product portfolio. And we are executing with continued cost and capital discipline, making more aggressive cuts to our controllable costs and deferring CapEx to help the balance sheet. Taken together, I am very confident in our ability to create long-term value for our owners and all our stakeholders.
With that, we will now take your question.

Question and Answer Session

Kush Patel

Yes, thanks. I think we are now ready for the question and answer section. As Robin mentioned, we are not in a position to discuss the Spirit transaction any further, and we will not be answering any questions related to the transaction on today's call.
Travis, please go ahead with the instruction.

Operator

Thank you, sir. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, it is star one to ask a question. We will pause for a moment to allow questions to queue.
Our first question comes from Mike Linenberg, Deutsche Bank.

Mike Linenberg

Yes, hey, good morning and congratulations, Robin, on the retirement of graduations. Joanna, on out of Ascension to the CEO position of World Bank, some Jenny, you read out of a lot of the elements of what believe we'll make JetBlue a successful stand-alone company comm, notwithstanding the M&A process, which still has to play out here with Spirit. As you think about JetBlue over the next several years now we still have call it a market share relevance or a scope issue is that still feature prominently or is that still a priority for JetBlue?
You've been running it as a stand-alone debt still longer term, it's important for that company to become bigger.
What is your thinking on that? How has that evolved as you move into the senior role?

Joanna Geraghty

Yes, I think, Gregg, great question. So a little bit was about accelerating our organic growth more JetBlue to more places more people. And we still intend to do that. We're going to do it organically. It will be a bit slower for sure. And but you know, as we think about this year this year is really about a reset year to get the fundamentals of the business right to ensure that as we as we grow and as we bring more JetBlue to more places that we're doing it in a profitable way on a sustained basis.
I mean, if you think about some of the unique advantages that JetBlue has neither these are tremendous strength and we need to redouble our efforts around amplifying the strength of our network. Obviously, we've got the corner, LA, JFK and Boston. These are markets that are constrained their markets where JetBlue is very relevant and customers know our brand and our experience. We need to maintain our leadership position there, but we need to be more selective where we fly to bolster profitability in those core geographies and so that we can start rebuilding top line revenue. We've already got an extremely strong leisure franchise with a strong premium onboard offering, more than 25% of our seats are actually premium seats in the industry. And so when we think about how we can capitalize on the leisure customer with our diverse portfolio of products. We are quite bullish there, but we need to improve how we segment, how we merchandise. We need to close gaps in that product offering. And we need to kind of do all. But at the same time, hence, the focus on delivering over $300 million of revenue initiatives this year will can co-brand is well positioned to be an accelerator. Jetblue Travel Products likewise has had one of its best years yet. Ursula touched on capital and cost discipline. We need to be on flagging in our efforts to reduce and better control our costs and then reliability underpins all of this. Obviously, our network footprint makes that more challenging, but we are making really nice progress there. Notwithstanding some of the headlines and then reinvigorating our culture. So scale matters, but we also believe relevance matters, and we have scale and we have relevance in some really big markets, and we need to focus on doing what we do best in those markets.
We also have a path to capital light growth sources. I touched on the deferral, but I think it's worth noting we're still taking over 50 aircraft over the next two years. And we have the ability to defer some of our ET-3 20 deliveries, which isn't the same as acquiring another airline but it will give us a path to sustainable profitable growth over the next few years. So we have a short-term priority. But yes, we believe we've got a nice long-term plan as well.

Mike Linenberg

Great. Thanks for that answer.
And then just a quick follow-up just from Ursula on the debt on balance sheet, it looked like it was, I think, about$400 million to $700 million maybe that was up about and $700 million net, mostly aircraft debt, like what was the swing there quarter over quarter? Thanks and thanks for taking my question.

Ursula Hurley

Good morning, Mike, and just by baseline and go back to what Andrew and I comment in regard to the one lever that we have is extending or buying out a three 20 aircraft to that that they're deploying Aleris and then extending the retirements?
Yes, but that back to your question, Mike, the increase in debt was driven by the financing of aircraft throughout 2023 we raised $1.4 billion against various aircraft them as we navigated it through last year. So that's really what's driving the uptick in the debt metrics and over year Thank you.

Operator

Our next question comes from Dan McKenzie, Seaport Global.

Daniel McKenzie

Are Hey, thanks. Morning, guys. On the 38 320s providing a growth tailwind, are they enough to make up the shortfall from the deferred deliveries and the GTF issues looking ahead, say to 2025 and 2026?

Ursula Hurley

Yes.
Hi, Dan. It's a good question. It's definitely an opportunity to backfill some of the law driven by the GTF. We are still working through in GTF exposure that we have in 2025 and beyond. So we look forward to sharing more about our multi-year growth rate projections at Investor Day in May.

Daniel McKenzie

If I understood on and then the capital and cost discipline that's coming through loud and clear this morning, does the CapEx now slope sufficiently downwards in 2025 and beyond to get you to free cash flow and at least you know, how can we help how can we think about that journey?

Ursula Hurley

Yes.
So the deferral today, the And basically, it has us taking on average 24 aircraft over each year over the next five years. And we prioritize BA to 20 aircraft as we want to continue with the 90 exit. We believe that this sets us up to be more successful in getting this business back to profitability and hence in return driving free cash flow. So that was the essence of why we did the deferral. And I think there are are there capital light effective ways that we can continue to grow. And that's a nod to the 30 aircraft that and we could potentially extend our buyout on lease. So the way we're going to go about driving a level of growth over the next few years and is capital friendly.

Daniel McKenzie

Okay.
Thanks for the time, guys.

Operator

Our next our next question comes from Duane Pfennigwerth, Evercore ISI.

Duane Pfennigwerth

Appreciate the time and best of luck to Robin, just a couple of questions from me. As you as you dig into the detail of your network, I peel back the onion, can you just speak to the variability of your margins on a route level. Are there parts of your flying are that are generating sufficiently high enough unit revenue to generate positive decent margins or are the margins fairly uniform across your network?

Joanna Geraghty

Yes. Maybe I'll take it and then I'll throw it over to Dave. So Caribbean leisure franchise continues to do very nicely. Obviously, there's some near-term revenue pressure with the capacity that's flowed into those markets, but that continues to be a stronghold for JetBlue. And as you think about the future, obviously, the focus on leisure JetBlue Travel Products and the markets that it is in that remains a very, very strong part of the network.
The good news front domestic is trending well on capacity has moderated across domestic. So and so that's seeing nice improvements. And then New York and New York continues to improve our mix. Most certainly been a bit slower than we hoped for, but it continues on a nice trajectory. And as we think about the future at New York overall continues to be a really, really important part of part of our network and transatlantic small part, but also doing extremely well. So we've got a number of kind of core geographies and that continue to produce very nice margins for JetBlue. But in a world where we're not growing. We need to be more selective where we fly.
Dave, I don't have anything to add.

Dave Clark

Yes, I'll just add on that. Over the past couple of years, demand has been pretty fluid in different geographies. And as we've come through the post COVID environment, I think it's now pretty clear as to what the new customer travel habits and preferences are and we've been working to really actively align our network to those new demand areas. We did a fairly big network of redeployed back in October. We had another one in January. I think you'll see another one or two as we go through this year and just realign to really reinforce the core markets that are working well and to be more selective and redeploy some of the markets that we've seen demand shift away from over the last couple of years.
Okay. Thanks for that. And then just for my second question, can you talk a little bit about the deferrals in this backdrop, not not asking for like contract specifics, but you know, normally there would be penalties and escalators for deferring aircraft, but given how tight things are, could we actually envision incentives or maybe some reverse brokering for doing that right now, just given how tight things are?

Ursula Hurley

Brian, I'm not going to comment unlike commercial negotiations with Airbus, we appreciate the partnership. I do believe that this was a win-win for both us and ourselves over the next few years.

Duane Pfennigwerth

Okay.
Appreciate the thoughts.

Operator

Our next question comes from Conor Cunningham, Melius Research, everyone.

Conor Cunningham

Thank you. Congrats, Robin and enjoying that. Can you maybe help a little bit couple of comments on headcount? And just you mentioned early outs. And I was just trying to understand a little bit more in terms of actual magnitude and maybe cutting out the overall reduction. And if you could just maybe speak to cadence.
Thanks after that.

Joanna Geraghty

Sorry, I couldn't hear. I think it's CASMex. I'll throw the second question, Ursula, just on headcount. We just launched our voluntary and our voluntary sort of opt out program that covers our support centers. So salaried with the goal of trying to reduce fixed costs in a world where we're not growing, and then it extends to a few of our operational operation groups in the frontline, but it's literally three days old. So we're not really in a position to provide and provide more details, but we're trying to do it in a thoughtful way and provide in terms of opportunities outside of JetBlue to the extent that they want to pursue that First, maybe on the CapEx question, just around I guess

Ursula Hurley

just on CASMex, you know, I do want to take a victory lap on 2023, and we actually the full year controllable cost guide that we set last January, despite 1.5 points of headwinds driven by ATC. and weather throughout the year. And so pleased that we delivered and executed on what we said we would going to we were going to do in 2023 in terms of 2024. And I, you know, I want to note we're up mid to high single digits with growth down low single digits. I do believe that this is a good and confident guide and we have been ruthless in terms of addressing the fixed cost and base given we're not growing and we are on track to exceed the higher end of our structural cost guide. And then we're continuing to capture value given we're progressing with the even 90 exit from a fleet modernization program. So when you combine the laser focus, the core across all three initiatives and I'm especially pleased and we intend to execute the mid to high single digits on a full year basis in terms of how that plays through throughout the year. And Q1 is slightly elevated in terms of the year over year and the 9% to 11% guide includes two points have pilot pay. And given that contract is lapping here in the January and February timeframe as we navigate through the rest of the year, from a pure has an expense perspective, were essentially flat every quarter throughout the year. And so the progression improved and from a CASMex year-over-year perspective, as we navigate through the rest of the year, and I feel confident that we'll hit the mid to high single digits.

Conor Cunningham

Okay. That's helpful. And then on the deferral versus lease extension comment, I mean, I'm a little, I would have thought that the change in deferrals meant you are pivoting the slower growth until margins improve to now some level. Can you you just have to play out the scenarios between maybe low single digit growth to like your historical range of mid to high and 2025 and beyond? Thank you.

Ursula Hurley

And the deferral we believed was imperative because the number one priority is getting this business back to sustained profitability. And we had 35 aircraft that were supposed to deliver in 25 and 45 in 2026. And we just didn't feel like that was capital and investment that we should be making when we're just getting the business to profitability. So we slowed the growth on average, we'll take 24 aircraft per year over the next five years. And we honed in on PA to 20, we protected that delivery schedule so that we can continue to exit the year were 90 and the end, as I mentioned, we do have a lever to pull in terms of extending or buying out these leases. And the goal is to get this business to grow and to overcome the GTF challenges that we're seeing. So we do look forward to sharing you the multi-year growth plan at the Investor Day in May Okay.

Conor Cunningham

Thank you.

Dave Clark

Our next question comes from Jamie Baker, J.P. Morgan.

Jamie Baker

Okay. Good morning, everybody. I'm first for Ursula. Just trying to reconcile the unencumbered asset disclosure. So for the bridge loan. Can you remind us what was pledged there in confirm that was $9 billion, is that correct?
So in theory, if that bridge goes away, just hypothetically, those assets come back to you, then there's another billion plus and that gets us to the figure on Page 9. Is that the correct way to think of it?

Ursula Hurley

That is the exact way to think about it, Jamie.

Jamie Baker

Okay. Thank you for that. And then second for Joanna, that's the how do I ask this? If Plan A was the premerger trajectory and Plan B was or is the merger? Have you allocated any internal resources to coming up with a potential Plan C? Or is that how we should in terms of at today's deck, I guess I guess put differently, are the adjustments you're announcing today? Can this in with the merger plan, you know, meaning in a scenario where if the merger doesn't go through, we should be prepared or further revisions. Does that make sense?

Joanna Geraghty

Yes, it does.
Yes.
So the plan we are talking about today is our organic plan without a spirit acquisition. And given the and the appeal that's pending. And given the outcome of the judge's decision, we'll see that process played through. Our hope is that the First Circuit realizes the decision is erroneously decided and we continue down the path with the spirit acquisition. But if that does not happen, we need to be prepared with our organic plan. And so that's what you heard about today. We will explain that greater at an Investor Day in May. You know, we're in the process. We've been in the process for the last several months of building that I call it, the Plan B actually building this plan B, which is the kind of supersized organic plan and in case Spirit, does not happen. So that's what you heard about today.

Ursula Hurley

From a resources perspective.

Joanna Geraghty

And there is a team that has been working through the integration management office on the Spirit plan, and that team will continue to do what they need to do and this organic plan will be worked by the broader JetBlue organization.

Jamie Baker

Okay.
That's perfect. Thank you very much.

Operator

Thank you. Our next question comes from Catherine O'Brien, Goldman Sachs Good morning and congrats to Robynne.

Catherine O'Brien

And I just wanted to dig in a bit on your comments on reshaping the cost structure to address cost convergence of that presentation, not what what types of initiatives are you looking at to achieve this? I know you've been talking about being relentless on our fixed costs in gave a few example voluntary out those that are in early innings and a few other things. But could you just can you just give us a little bit more color on and what exactly you are looking at in it. And I guess, you know, on the cost convergence front and where do you see yourself kind of sitting in VERSUS on the bigger more premium guys and maybe the lower cost. How do you view your performance in the last couple of years in that context?

Ursula Hurley

Katy, thanks for the question. So a couple of thoughts and definitely on the labor front, costs have obviously converge as we've navigated through COVID. And I am very hopeful that the peak is behind us. And hopefully from a pilot labor perspective, attrition has been lower and that environment has been tightening. And so I feel confident that and the peak of labor rate across some of these larger frontline work groups is behind us. And so we've got to be laser focused on ensuring that we drive productivity that we set up the network first success in terms of how we recover the network, but also ensure that our frontline crew members have the tools that they need to do their job easier and essentially that will result and in productivity efficiencies going forward. So like I said, I'm very pleased with our controllable cost execution in 2023. And I do believe that this is a competitive side compared to the peer set in light of us not growing this year and I while we expect to deliver on our full year guide again.
Great. And maybe just one for Dave.

Catherine O'Brien

Can you just drill in a little by region for goals fourth quarter unit revenue performance and how those trends are evolving into the first quarter? You mentioned as well as your peers. Sounds like there's been a bit of an inflection in domestic power I'll let I'll close it or Lucca. Your Home is perhaps a bit more challenged just given some of the industry capacity, what are you seeing? What do you see in Q4 what underlies that 1Q guide?

Dave Clark

Yes, hi, Katy.
Thanks for the question. We're seeing some really positive trends of demand, certainly remaining healthy and also the unit revenue is being driven by both that healthy demand as well as capacity movements. And so for example, in Q1, we expect our domestic unit revenues to be positive year over year. I know for the system we're still a slightly negative. But domestically, we expect it to be positive as that demand our women's very healthily and we optimize our own capacity to align with demand. And we see the industry come down a bit as well and working internationally, Latin remains very strong. We've been adding to it to really increase our focus and service of those markets that always pressures in revenue a bit. No, it will take a little while to absorb, but those are our bread and butter market for us, and we remain extremely committed to them I'd also note internationally, Transatlantic continues to perform really well. As Johnny mentioned earlier, Q4, Amazon was up double digits on about 70% more capacity. We expect that level of strength to not only go through the first quarter, but to probably accelerate further. So feeling very good about where demand is and about how we are more closely aligning our capacity with that demand.

Catherine O'Brien

Yes.

Operator

Our next question comes from Helane Becker, TD. code.

Helane Becker

And thanks very much, operator. Hi, everybody, and thank you for the time. And yes, I will add my congrats to Robin and Joanna too. And on slide 10 or slide you talk about CapEx and it looks like it accelerates through the year. So too, is that an increase just the way the cadence of the way it's working? Or is it an increase in in PDP.s? Or how should we think about the way the with that growth?

Ursula Hurley

Yes. Thanks for the question, Helane. The majority of that $1.6 billion in CapEx to aircraft, I think over 90% of it is dependent on aircraft. So it's really just the timing of those deliveries and throughout the year that's driving the Q1 versus the full year.

Helane Becker

Got it. That's very helpful. And then just from and how are you thinking about likely grazing capital going forward, what would you mean just wanted to kind of think you may do equity, but would you consider doing more in the aircraft or on for doing and are testing the ABS market again or doing something, you know, to maybe grow debt but get yourself in a position where you can January positive well

Ursula Hurley

in 2023 and we financed $1.4 billion of aircraft CapEx. We were exceptionally successful in the finance lease market. And I think what we value when we look at financing in general is obviously the cost of the capital, but also the flexibility and the ability to hopefully pay down and debt over time. And so we are, as I mentioned, in the market at the moment and assessing opportunities to raise capital in 2024. And so we'll be focusing on obviously, cost of funding as well as flexibility. And there's a decent amount of money in the finance lease market at the moment. But obviously, we I mentioned earlier, we have a very large financeable asset pool. So we'll continue to optimize across markets and across asset classes as we progress forward.
And.

Helane Becker

Okay, that's really helpful. Thank you.

Operator

Our next question comes from Savi side, Raymond James.

Savanthi Syth

And good morning, everyone and Robinson. A pleasure and wish you the best on the next chapter here, and congrats to Joanne and Warren and Joanna, you mentioned premium gap, and I was wondering if you can elaborate on that. I'm guessing one of them was probably the does it still exceeding that you're introducing in 1Q, but wondering if you can elaborate a little bit more on what you mentioned.

Joanna Geraghty

Yes.
We'll talk a bit more about it at Investor Day. But if you think about how we segment the cabin currently, we have obviously Mint for a subset of our market, even more space. We have basic economy and we have sort of our core core main core blue product. And so as we think about preferred seating, that's one piece of it, but we think there potentially are additional additional product offerings. We could introduce that tap into a broader spectrum of customers, and we are focused on, particularly with the focus on like the leisure customer how we close any gaps in those offerings. So it's both in terms of how we sell, but also the actual hard product itself.

Savanthi Syth

Understood. And if I might, on the this kind of refocusing on the high-value leisure premium leisure passenger and your kind of fleet mix there. What's the role that the eight to 20 plays in this? And do you kind of expect, I think right now you have around 20% of your revenue that comes from business. Do you expect that mix to change over time?

Joanna Geraghty

So our focus continues to be on offering a strong product portfolio for all of our customers, whether you're a more price-sensitive customer or a customer who wants a more premium experience. And I mentioned over 25% of our seats fall into either even more space or the mint category. If you look at the 80 20, it's got 90% more even more space seats than the one 90. And so just think about how we are modernizing the fleet, naturally that introduces more even more space seats, but we want to be the airline that can serve all of our leisure customers as well as business customers because the product offering does speak. So those customers and to the extent we have a schedule that works for them and so we'll continue to look to invest in sort of the broad array. But this quarter, in particular, we had an extremely strong premium and offering and both need more space and did exceptionally well from a revenue perspective. And so we'll continue to lean into the areas that are doing well. But we want to make sure we have a product offering that caters to a whole wide spectrum of customer.
Sure.

Savanthi Syth

Thank you.

Operator

Our next question comes from Andrew Didora, Bank of America.

Andrew Didora

Hey, good morning, everyone. Most of my questions have been answered one as it relates to the GTFR. side. I know you're still going exposure's for 2025 and the impact there, but I'm just trying to think through what would be the 2025 capacity tailwind from just getting the 2024 GTF impacted planes coming back on?

Ursula Hurley

Yes. It's a good question. Yes, we don't yet have detailed color from Pratt & Whitney on our 2025 exposure. And I don't believe that it will drastically improve in regard to the average number of aircraft on the ground throughout the year and but more to come on that as we continue to work with Pratt and to give you more color in May.

Andrew Didora

Okay.
That's all I had. Thank you.

Operator

Our next question comes from Stephen Trent, Citi.

Stephen Trent

Good morning, everybody, and congrats as well to Robin and Joanne. I'll once again, most of my questions have also been answered, but I was curious about your labor force comments and appreciate what you've said. How are you guys feeling about your supplier mechanics? And I'm just trying to think through maybe who might be departing and where you might still have a big need, I think, sorry.

Joanna Geraghty

Yes, that you said you might have mechanics during holiday yet. So we have a healthy pipeline of mechanics. And we've spent a lot of time building out gateway program so that we can actually provide opportunities for crew members and other departments to obtain a license and licenses a general mechanics. We also have programs with local school division, high school and others to name a few. And so we feel we feel great about sort of our pipeline for mechanics we've also seen a slowing of attrition across all work groups, which has been nice, I think, was through that COVID and COVID cycle where and where it was just a much more challenging period where we were doing a lot of hiring. And so that's all balanced out. So we're in a good place there.

Stephen Trent

Okay.
Great.
I appreciate that. And just one very quick follow-up. I believe you mentioned a shift towards adjusted EBIT margin as we as we move forward. And I was just wondering understand and high-level sort of what your view is Thank you.

Ursula Hurley

As we provided estimated full year 2024 guidance on an adjusted operating margin perspective, we said that we would be approaching breakeven. We think this is a valid metric or a helpful metric in regards to where we are in driving the core business and to profitability. So that was the essence of honing in on operating margin. Obviously, we will progress, but we provide guidance to as we navigate and get this business back to sustained profitability.

Stephen Trent

Okay. Appreciate that. And thanks for taking my questions.

Operator

Our next question comes from Scott Group, Wolfe Research.

Scott Group

Hey, thanks. Good morning. So I wanted to just clarify one thing on the cost guidance. So I thought you were saying that absolute cash stays sort of flat throughout the year, which I think would imply some higher than the five to nine. But maybe I'm just taking some of that comment a little too literally.

Ursula Hurley

So just any color would be helpful as to what we highlighted in the deck, as we said, roughly flat absolute chasm ex fuel throughout 2024. So from a pure CASMex cents. perspective, that's would that mean?
So the flat throughout the year, the year-over-year comp and we'll improve beyond that QUARTER.
Okay. And that that will result in the up to mid to high single digits on a full year basis. So Q1 is an outlier outlier in terms of the year over year.

Scott Group

Okay. And then I'm wondering maybe it's just too early, but do you guys have any visibility to second quarter unit revenue? Yes, right. So I mean, you guys a lot of other airlines talking about domestic inflecting positive in Q1. I'm just trying to understand, is this a real inflection? How much of this is maybe an easier comp for March and earlier Easter, do you have visibility that this positive? Verizon continues into Q2 or maybe just too early?

Dave Clark

And Scott, this is Dave. I'll take that one. We do feel very good about our unit revenue momentum that we've built, that it will continue going into Q2 and throughout the year.
A couple of ways to think about this. One is just as we look ahead to the spring and summer, it's still early. We don't have a lot of bookings, but the ones we have our had a higher load factor built in a higher fare year over year. So what we do have on the books is certainly positive for Q2 and Q3. Secondly, and just at a higher level as we ramp through the year between our revenue initiatives ramping up throughout the year and in the comp, which is much more difficult in the first half of the year in the second half of the year, we expect both of those to drive significant meaningful revenue improvement and year over year unit revenue as we go through the year.

Scott Group

Helpful. Thank you, guys.

Operator

And our final question comes from [Chris Stapipillus] Susquehanna International Group.

Chris Stapipillus

Good morning, everyone. Thanks for taking my question. I'll keep it to Robin. Congrats and best of luck.
And John, congrats on the promotion of Just my first question, if you could give I think you might have said this on the last call, but any color on these high-growth markets as it relates to geography, I think you said high-growth accretive and leisure and VFR market at markets where those are.
And then two on your transatlantic products, if you could comment on what you're seeing with respect to competitive capacity FARES and just summarize your I guess your value proposition here or kind of how you see this evolving, particularly as network carriers here continue to emphasize from that market? Thank you.

Joanna Geraghty

So I'll take the U.S. and Caribbean VFR. Of piece. So this is one of our core markets. It's foundational to who JetBlue is. It's a important part of JetBlue Travel Products and our growth and in those markets and so while there is increasing capacity in those markets, it remains foundational and fundamental to JetBlue. And we do drive some nice margins on from those locations.
In terms of transatlantic 4% of our seats. So a relatively small footprint. We've got a great value proposition over there with Mint and our core products.
And maybe I'll let Dave kind of pick up from there?

Dave Clark

Sure. I'll just add, we're getting continue to get really strong feedback both from customers on the product as well as our operational reliability. And it's not only about the individual markets, too. But these are quite a bit of relevance to our New York and Boston focus cities adding in these major European destinations as part of our larger network portfolio so we're very pleased with the ramp that we've had and see multiple benefits strategic was this market.

Joanna Geraghty

Okay.

Operator

Thank you.
That concludes today's questions. I would now like to turn the call back over to Krish Patel for any closing remark.

Kush Patel

Thanks, Travis. That concludes our Q4 2023 earnings. Thank you for joining us and have a great day. And again, that will conclude today's conference. Thank you for your participation. You may disconnect at any time.