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JetBlue Airways Corp (JBLU -0.61%)
Q3Â 2018 Earnings Conference Call
Oct. 23, 2018, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. My name is James. I would like to welcome everyone to the JetBlue Airways Third Quarter 2018 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 like to turn the call over to JetBlue's Director of Investors Relation, David Fintzen. Please go ahead.
David Fintzen -- Director of Investors Relation
Thanks, James. Good morning, everyone, and thanks for joining us for our third quarter 2018 earnings call. This morning we issued our earnings release, our investor update and a presentation that we'll reference during this call. All of those documents are available on our website at investor.jetblue.com and have been filed with the SEC.
Joining me here in New York to discuss our results are Robin Hayes, our Chief Executive Officer; Marty St. George, EVP, Commercial and Planning; and Steve Priest, our EVP and CFO; and Joanna Geraghty, our President and Chief Operating Officer.
This morning's call includes forward-looking statements about future events. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore investors should not place undue reliance on these statements.
For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to our press release, 10-Q and other reports filed with the SEC. Also during the course of our call, we may discuss several non-GAAP financial measures. For reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website.
And now, I'd like to turn the call over to Robin Hayes, JetBlue's CEO.
Robin Hayes -- Chief Executive Officer
Good morning, everyone. Good morning, Dave, and thanks for joining us today. This morning we reported our results for the third quarter of 2018. Before we start and as usual I'd like to thank our 22,000 crew members across our network for their hard work, delivering the JetBlue experience every day to our customers.
Starting on Slide 4 of our presentation. Our third quarter adjusted operating income was $195 million, our adjusted pre-tax was 9% and our adjusted earnings per share was $0.43. This quarter our financial performance was impacted by higher fuel prices, which increased approximately 37% year-over-year. At our Investor Day in early October, we showed our plan to help us improve our margins and achieve our 2020 EPS target of between $2.50 and $3.00. A higher oil environment pressures margins at least temporarily, but we've built the plan to include our earnings by focusing on the areas we can control. Executing that plan we believe we will expand margins in 2019 and again in 2020. We have been taking actions to recapture higher fuel cost through price, both with fare increases over recent months and through ancillary revenue initiatives.
During 2019, we expect to see further earnings benefit from our network reallocations as well as from ancillary revenue initiatives. We're already seeing the benefits of building relevance in our primary focused cities as RASM continues to show strength during the second half of the year. At Investor Day, we talked about our expectation to add 1 to 1.5 points of RASM benefit in calendar year 2019 from both our network and product building blocks. As we look to 2019, we plan to balance near full (ph) term pressure with the RASM benefit that comes from greater relevance in our focused cities. We continue to expect capacity growth of between 5% and 7%.
Turning to our fleet and cost building blocks. We are making investments in margin accretive aircrafts and finding ways to reduce our controllable cost to support earnings growth. I'm particularly pleased with the progress we are making on the structural cost program in securing over $173 million in 2020 cost savings. We are on track to hit our 2018 CASM ex-fuel guidance, despite pulling capacity in the second half of the year to respond to higher fuel prices. We are taking measurable actions as it relates to our long-term strategy through the environmental social and governance or ESG initiatives. We are learning (ph) our efforts to mitigate the impact of changes in the fuel market by fly more efficient aircraft and optimizing our fuel consumption.
We have signed a renewable jet fuel purchase agreement for a total of 330 million gallons or about 4% of our network consumption. We recently took delivery of an A321 aircraft that was powered with renewable jet fuel blend. This has given us hands on exposure and experience with infrastructure for renewable jet fuel in the eastern US, where we are the leading low cost carrier. We've also announced the plans -- our plans to retrofit our entire Airbus fleet with Vortex Generators to reduce noise in the communities where our customers and crew members live and work. We estimate that this will help us address pending local regulation.
Before I pass the call over to Marty, I'm pleased with the progress we are making on our building blocks we laid out at Investor Day. Since 2014, we have a track record of executing our plans and through revenue initiatives and improving cost control, we have a thought to increase our margins. Although it is hard to predict the exact price of oil, I'm optimistic we will see an improvement in our absolute margins in 2019. I feel strongly that achieving this margin expansion in 2019 is essential on our path to achieve the EPS goals we laid out in 2020. We have the culture, the brand and the geography, we need to be successful. We believe that realizing the opportunities through our revenue performance and cost initiatives, we will sustain high earnings growth and improve our returns for years to come.
Marty, over to you.
Marty St. George -- Executive Vice President, Commercial and Planning
Thank you, Robin. Let me start with that capacity outlook on Slide 6. We continue to grow our capacity on the lower end of our mid-to-high single-digit range. During the third quarter, our flown ASM grew by 8.7%, slightly above the midpoint of our guidance range of 7.5% to 9.5%. Our schedule capacity growth for fourth quarter is approximately 6%. We expect flown capacity growth of 7.5% to 9.5% in the fourth quarter 2018, as we lap the 2.9 point storm impact in fourth quarter 2017. Our capacity in the fourth quarter includes a previously announced 2 point ASM growth reduction to mitigate the impact of higher oil and follows a 0.5 point reduction we made for the third quarter.
Turning to our network. We continue to upguage both our New York and Boston markets with a margin accretive A321 All-Core aircraft. In Fort Lauderdale RASM outperformed a system average for the sixth consecutive quarter as a growing relevance to translating into revenue strengths. Our Transcon franchise including both Mint and non-Mint markets remain strong with RASM performance beating our expectations in the quarter.
Now looking at our network, in the Caribbean and Latin region, we made tactical adjustments to address RASM trends and we are seeing improvement in the fourth quarter revenue trends. Few weeks ago, we announced a series of important changes that relate to our network reallocation building block as discussed at our Investor Day. We are reallocating underperforming routes to our three primary focused cities and expect revenue benefits of $100 million to $120 million by 2020. We have a list of opportunities to support RASM and margin growth in our primary focused cities.
As we recently announced, we will be closing three BlueCities; Washington Dulles, Saint Croix and Daytona Beach. We plan to convert a fourth BlueCity, Portland Maine to seasonal service and we're reducing frequencies to Mexico City from both for Ford Lauderdale and Orlando. These network changes follow our recent redeployments from Long Beach to Transcon markets, which we announced in April, and take effect throughout the fourth quarter. We do not take these changes lightly as we know these reallocations impact a number of our crew members.
Turning to Slide 7 in the revenue outlook. Third quarter RASM grew 1.7%, which is above the midpoint of our updated guidance of 1% to 3%, on excluding the 0.4 point impact from severe weather during September. We are pleased with our quarterly RASM, which was in line with the 2.2% achieved during the first half of the year, despite a full point of ancillary headwinds that we called out during our last earnings call.
During the quarter we saw close-in demand trends improve across the network. Demand in July and August was strong. We were encouraged to see stronger off-peak demand than we saw in the first half of the year. September started and ended extremely well, although, bookings to weather impacted destinations did slow temporarily as storms passed through. By market, RASN is driven by strengths in New York and Fort Lauderdale as well as in Transcon. We continue to see RASM pressure in Boston leisure markets and some pressure in Orlando.
We're encouraged that Boston leisure trends continue to improve sequentially. Orlando is a highly price elastic markets with strong leisure demand and it has a history of absorbing additional capacity very well. Our margin in Orlando remained near system average even with high competitive capacity growth. For the fourth quarter, we expect RASM growth between 1% and 4% year-over-year, which would represent sequential acceleration of RASM growth in the fourth quarter, even with a 1 point tougher comparison. September trends have carried into October and bookings so far for Thanksgiving are strong, but we only have about one-third of December booked. Trends so far are very encouraging.
In the fourth quarter, we also expect to see initial revenue benefits from our network and ancillary revenue changes launched in the third quarter. Our West Coast network reallocation is performing according to expectations. The ancillary changes are ramping and are expected to contribute approximately $8 million in revenue during the fourth quarter.
Before I turn it over to Steve, I would like to add my thanks to our crew members for their hard work. We are confident in our plan and in the investments we are making in the network to make JetBlue more relevant to our customers and more profitable for our owners.
Steve, over to you.
Steve Priest -- Chief Financial Officer
Thank you, Marty. Good morning, everyone, and thank you for joining us. I'll start on Slide 9 with some highlights from the third quarter. Revenue was $2 billion, up 10.5% year-over-year. Adjusted pre-tax margin was 9%, down 7.3 percentage points from the third quarter of last year mainly due to higher fuel prices. Adjusted EPS was $0.43 per diluted share.
Our adjusted effective tax rate this quarter was 26% and we expect our effective tax rate to be approximately 26% to the fourth quarter 2018. We reported a $0.16 GAAP EPS, including one-time costs related to the E190 fleet transition and the pilot contract. We are successfully managing near-term margin pressure from higher fuel pricing, capacity and network adjustments, the ramp up through the fourth quarter. At our Investor Day earlier this month, we laid out five building blocks to underpin our long-term plan to improve our margins and returns with a target of $2.50 to $3 in EPS for 2020.
Moving to Slide 10. During the third quarter, CASM ex-fuel increased 3.2% year-over-year on the low-end of our updated guidance of 3% to 5%.The third quarter unit costs included a 2-point headwind from the recently signed pilot contract.
Looking into the fourth quarter, we expect CASM ex-fuel growth to range between minus 3.5% to minus 1.5%, including 3 points of pressure related to the pilot deal. We've seen a positive impact on cost from our investors -- investments in the operation. Our on-time performance initiatives and efforts to mitigate ATC challenges in the Northeast have improved the A14 DOT (ph) versus our peers, and are helping us to achieve our CASM target. In our two largest focused cities, New York and Boston, A14 DOT versus our peers has improved approximately 5 points compared to 2017.
Back in January, we laid out our 2018 cost guidance, including a second half inflection point and an underlying CASM ex-fuel growth trend. I'm delighted to say that we are on track to hit our plan, despite the added pressure from reducing our capacity in the second half. I want to thank the teams within JetBlue that have put so much effort into finding added cost savings needed, plus that lower capacity. We will continue to find opportunities to mitigate these pressures in addition to the savings from the Structural Cost Program that build each quarter.
We continue to see sequential improvement in the underlying non-fuel costs and have made great progress through the second half of this year, as we execute on our Structural Cost Program. We are confident we can deliver on our 2019 commitments made at Investor Day and are on track to achieve our 0 to 1 CASM CAGR through 2020.
Turning to Slide 11, we are thrilled, last week we closed our 250 aircraft delivery. We anticipated ending 2018 with 253 aircraft. Investments we have included our anticipated order book in the appendix section. We believe our fleet is critical to improving returns. Starting with the A320s, we expect to have 11 restyled aircrafts by the year end and anticipate to see the benefit of at least 60 additional restyled aircraft in 2019. Next year, we expect to take our first A320 NEO to help us upgauge our primary focused cities. These aircraft have the latest technology in fuel efficiency and a new core product.
The majority of our CapEx is used to grow our fleet and enable our mid-to-high single-digit growth to build relevance to our focused cities. CapEx also helps us invest in our engines, transition us our E190 fleet and execute on our A320 restyling. Our CapEx guidance for 2018 ranges between $1 billion and $1.2 billion, comprised of up to $895 million to $1.1 billion in aircraft and the remainder from non-aircraft spends.
Turning to Slide 12, the strength of our balance sheet allows us to invest in the business and return excess capital to our owners. We've executed $375 million worth of share repurchases from the $750 million authorization. This quarter, we repaid $54 million in debt and raised nearly $261 million in secured aircraft debt. We closed the quarter with an adjusted debt to cap ratio of 32.7%. And our cash in investments of 12.6% of trailing 12 months revenue.
Lastly, we plan to continue our policy of opportunistic hedging to help protect our margins given the current oil price environment. This quarter, we executed hedges for 7.7% of our expected fuel consumption for the rest of 2018 and 7.5% for the first half of 2019 in line with prior hedging positions. We are excited about the opportunities in front of us to improve both margins and returns. As we build relevance in our focused cities, it is critical that we execute on our plan to improve cost control, so we better convert growth and RASM spend into margins and EPS.
I would like to thank all of our crew members in helping us carry our momentum into the next couple of years with our five building blocks and for working every day to create value for all of our stakeholders.
We will now take your questions.
David Fintzen -- Director of Investors Relation
Thanks, everyone. James, we're ready for the question-and-answer session with the analysts. Please go ahead with the instructions.
Questions and Answers:
Operator
(Operator Instructions). Your first question comes from the line of Hunter Keay of Wolfe Research. Your line is open.
Hunter Keay -- Wolfe Research -- Analyst
Hi, everybody. Good morning. Thank you. Hey Robin, I'm not sure if you're prepared to discuss this, but I'd be curious to know kind of what the early discussions have been like with the with the Board with the new additions of Ben and Sarah. The questions really are they still sort of an information gathering mode, or are they kind of coming in already sort of challenging some of the existing status quo?
Robin Hayes -- Chief Executive Officer
No. Good morning, Hunter, and I appreciate the question. No, I would say they were both very engaged in their first board meetings. Lots of questions --I mean -- I think you know Ben as well as I do. He's not a shrinking violet. And it's great to have them on the board. I mean, I think we have a strong board. We have a board that is very focused on delivering this plan. And I think having Ben and Sarah join our Board makes that even stronger.
Hunter Keay -- Wolfe Research -- Analyst
Okay. Thanks, Robin. And then Steve, a little bit more of a follow up from the Analyst Day. When you talked about renegotiating some of these maintenance agreements, you mentioned OEMs, but do these renegotiations also involves some of your aftermarket providers -- I am kind of curious to know, who exactly you're negotiating with and what are you looking to get other than just cost savings? Thanks.
Steve Priest -- Chief Financial Officer
Thanks, Hunter. Great question. Yes. Just to give full transparency, as I've mentioned, when we look across our fleet, we have some newer aircraft and newer engines coming into the fleet. And then obviously, we've got existing E190s and existing fleet (fleet) of Airbus fleet of around 190 aircraft. When it comes to looking at both the airframe and the maintenance as we go forward, we have been engaging both -- in the market, we've been engaging both the OEMs and the MROs. In terms of what we are looking at, it's a balanced approach, it's not just about cost, but it's about absolute quality, because the asset that we go forward with have a life of around 25 years, we have to make sure that the engineering and the maintenance on the airframes and the engines are top notch. Make sure that we've got the right turnaround time with those partners, because obviously the more the aircraft is flying the more they're driving returns and margins for JetBlue. And so, at the heart of a lot of what we're doing and some of the materials we shared with you at the Investor Day, we have seen significant CASM inflation appetite some maintenance costs since 2010 and so that is a critical and core part of the discussions and negotiations that we're having.
Hunter Keay -- Wolfe Research -- Analyst
Thank you so much.
Operator
Your next question comes from the line of Michael Linenberg of Deutsche Bank. Your line is open.
Michael Linenberg -- Deutsche Bank -- Analyst
Hey, two questions here. Just -- I guess to Marty with respect to the network realignment, I guess, another phase is kicking in in January of '19 or the March quarter of '19. Is that what's already been announced what you -- the big press release that had a lot of the changes, or is there another phase subsequent to that that we should anticipate?
Marty St. George -- Executive Vice President, Commercial and Planning
Hi, Mike. Thanks for the question. No, what's kicking in the first half of 2019 are the things we've already announced. So it's -- obviously depending on seasonality, certain things make sense to do at certain times, but when we laid out that run rate of $100 million to $120 million, that was inclusive of everything that we laid out at Investor Day.
Michael Linenberg -- Deutsche Bank -- Analyst
Great. And just my second question to Rob. Robin, I think you basically said that you are optimistic with respect to margin expansion in '19 and I thought I heard you qualify it by saying ex-fuel margin expansion. How are you thinking about just overall margin expansion? Are you cautious? Do you think it's a reach or am I reading too much into that?
Robin Hayes -- Chief Executive Officer
No. Just to clarify, I wasn't saying ex-fuel, I was just sort of -- I made a comment that probably being in this industry for 30 years you never know where fuel's going to go, and there may be from extreme state. But I'm very pleased, I mean, we've seen an uptick in fuel in the second half of the year. I think JetBlue has been very proactive on capacity reduction. I think we've been very proactive on pay increases. I think we've been very proactive on ancillary revenue changes to -- we kind of mitigate the cost of higher fuel. We don't want to use that as an excuse. And margin expansion 2019 even in a higher fuel environment, I'm very, very optimistic about, because we have a pathway to get there to have a 2020 EPS goals of five building blocks that we laid out and many of those start to kick in the early part of 2019. We have the network building blocks that you just asked Marty about. We have the Structural Cost Program that continues to have added bite as we go through just like we said it working so. Yes, we are very confident -- we're very confident that we will see absolute margin expansion in 2019, even if fuel was to rise from here.
Michael Linenberg -- Deutsche Bank -- Analyst
Okay, that makes more sense. Thank you.
Operator
Your next question comes from the line of Brandon Oglenski of Barclays. Your line is open.
Matt Wisniewski -- Barclays -- Analyst
Hi, good morning. This is actually Matt Wisniewski on for Brandon. Thanks for taking my question. I was hoping you could talk about the competitiveness at high level in the largest three focused cities JFK and Boston and Fort Lauderdale. It seems like there's a decent amount of growth from some competitors in those markets. And then you know as a side, could that potentially impact some of the commercial initiatives that are recently announced?
Marty St. George -- Executive Vice President, Commercial and Planning
Hi, Matt. It's Marty. I'll take that one. So let's talk about the three focused cities independently. New York, obviously being a smart controlled market, the real action we see in New York is guage-related and we've been particularly in that pretty aggressively with the introduction of the All-Core A321, highly margin accretive and it's been very helpful for us to continue to capture the normal day-to-day growth of a matter of 18 million people without being able to grow the departures because of slot constraints.
I'll talk about Lauderdale and Boston separately. First of all Lauderdale, obviously, it's been a very competitive market for many, many years. We have been competing against the ULCC for quite a while, pretty aggressively. I say more recently we've seen growth coming from another ULCC. I think if you look at the data that we put out in both for 2016 and the 2018 Investor Day that's -- you can see that from a RASM performance and you come back into margin performance of that, we compete extremely well against those carriers. And certainly I see not just on RASM, but also on margin if you use the data back into margin. So we feel very confident about our short-term and long-term prospects in Fort Lauderdale. I think if you look at the change that we announced, we have added a couple of more destinations for Ford Lauderdale through the network reallocation. And the biggest constraint we have in Fort Lauderdale right now is gate availability, but we're very, very interested in more growth in Fort Lauderdale.
I think Boston, next, Boston we've been working for many, many years at Massport to make sure that we can secure the gates we need to get to the 200 Fort Laurendale level in Boston that we think the market requires. And courtesy of Massport, we actually now secured gate space we can get there. We are very, very confident in our position in Boston right now. I did call out that we have had some RASM challenges in Boston, mostly in Boston leisure, tied to growth from a legacy airline. And frankly if you look at our RASM results, we've seen some nice RASM acceleration in those markets over the last probably two quarters. And then I think if you get into first quarter 2019, the competitive capacity trend, actually turns pretty nicely for us. So we were optimistic that we have the formula to be successful in Boston. Given the geographic location, that market is absolutely positively made for an airline that specialized in point-to-point, as the business models that specializes in point-to-point. You combine that with the product advantage we have whether it's free Wi-Fi, live TV on (inaudible) aircraft, Mint you name it. We're very happy to be -- we're very happy being in Boston.
Matt Wisniewski -- Barclays -- Analyst
Okay, great. And as a quick follow up, we talk a lot about tech ops being the largest portion of the structural cost initiatives, but it is the second largest component that kind of the corporate portion also has a lot of work, maybe the most work remaining. Could you give a quick update on that and then maybe potential timing?
Steve Priest -- Chief Financial Officer
Yes, Matt, Steve here. Thank you very much for the question. We continue to make progress on all four of the pillars of the Structural Cost Program. Following the update that we gave back at our on Investor Day and 2Q earnings, we have continued to make some progress. So the corporate pillar itself is obviously the support center that support our frontline crew members who supply customers and as you all be aware, we went through a recent reorganization and as a (inaudible) census that impacted around 10% of our crew members. These initiatives are never easy and it's a challenge as we go through those, because it impacts some of our leaders and crew members, but we've gone through that.
In addition, a big part of the proper initiative is associated with sourcing, so we have gone through a soup to nuts approach with regards to RFPs. I'm looking at all of $1.5 billion of third-party business partners spend and that we have across JetBlue and we're going sector by sector, contract by contract and to make sure that we go through that and drive cost savings with JetBlue. The final item really pertains to some of our IT infrastructure, the way we have our data, the way we support the overall business and initiatives that we take in that. So they are the primary B blocks within the corporate pillar. And again, I'm pleased with the progress we're making, not only in the corporate issues, but also the wider problem as a whole. And as we talked about today, we are up $273 million, of the $250 million to $300 million by 2020. So we're well on track and happy with the progress we've made.
Matt Wisniewski -- Barclays -- Analyst
Great. Thank you.
Operator
Your next question comes from the line of Jamie Baker of JPMorgan. Your line is open.
Jamie Baker -- JPMorgan -- Analyst
Hey, good morning, everybody. First, for Steve on the pilots. Now the (inaudible) and you've got what I guess about three or four months of operation, I guess, three months of operation under your belt. Are there any inherent efficiencies that you're realizing more that you would expect to realize going forward relative to the sort of pre-contract -- construct? Also any commentary on pilot hiring challenges.? Thanks in advance.
Joanna Geraghty -- President and Chief Operating Officer
Hey, Jamie. I'll take that one. This is Joanna. So in terms of efficiencies, you know, the contract was just signed this past summer, so we're in the process of implementing a number of the IT changes to support the work rule changes that we have ahead of us. So we're very early in terms of that part of the process. In terms of the pilot hiring, no -- I mean, we're confident with our pilot hiring plan. We are not seeing any challenges around the pipeline for pilots. We actually just announced a class this week that we're hiring, so if anybody's interested on the phone -- I'm only kidding, but I know we're not seeing any challenges on the pilot pipeline either.
Jamie Baker -- JPMorgan -- Analyst
Okay. Great. Follow up for -- probably for Rob, the topic of lifting the LaGuardia perimeter rule hasn't come up in a while. I know at one point JetBlue was somewhat against the idea, but your fleet plan has changed somewhat since then. Any change in your personal view? I would think that particularly given the strength of making the Transcon that -- LaGuardia transcon could be potentially lucrative?
Robin Hayes -- Chief Executive Officer
Thanks, Jamie. I know, my view hasn't changed. I mean, just for those who don't know the perimeter rule that Jamie is referring to, it's a (inaudible) rule, so it's different from the way the permissable works in DCA, Port Authority of New York and New Jersey. And I think we've been very vocal that that the airports in New York work in a competitive balance. And that if you were to lift the perimeter rule at LaGuardia, there would be a significantly more interest in LaGuardia to serve other markets. And so the airlines like JetBlue who have a very small slot portfolio, we would be concerned that that would put us at a disadvantage. So we're open to compensation or not, but we do think that any lifting the perimeter rule have to come with some kind of divestiture of slots to make sure LaGuardia stays more and more competitive. I would also say that with all the construction going on at both LaGuardia and JFK, LaGuardia at the moment and JFK planned, now it's really not the time to be making that change.
Jamie Baker -- JPMorgan -- Analyst
Got it. Thank you both. Appreciate it. Take care.
Operator
Your next question comes from the line of Savi Syth of Raymond James. Your line is open.
Savanthi Syth -- Raymond James -- Analyst
Hey, good morning. Steve, I wonder if you could help us think about the cost progression in 2019. I know in the first half there is more pilot cost pressure and I think it get gets better as you get into the second half, but any thoughts there, and how we should think about that?
Steve Priest -- Chief Financial Officer
Thanks so much for the question. Good morning. Nice to speak to you. I'm very pleased with the progress that we've made during '18 and how we're finishing the year as we go into '19. I'm particularly pleased with inflection point that we saw at the back end of '18 as we go through quarter four, because if you think about the capacity pulls that that we took right in Q3 and Q4 and you look at the original plan that we laid out back in January, we are absolutely executing to that. And the reason I say that is that we're coming out of '18 in a strong position as we enter into '19 with a structural cost program that continues to ramp as we go forward. If you think about the headwind that we have from the ALPA contract, the ALPA contract just has a 3-point headwind in the first half of next year. But you can sort of see the guides that we gave at Investor Day in terms of the 0 to 2 so as to 2019 CASM, which absorbs that. And as we cycle through 2019, the Structural Cost Program continues to ramp. We'll continue to have more P&L benefits associated with the Structural Cost Program. They will continue to offset the cost headwind that we have with the ALPA contract. In addition, as I mentioned in my prepared comments, we will close 2018 with 11 restyled aircraft and we'll be restyling up to 60 -- around 60 next year. So again not from a tailwind perspective that will continue to help us with our CASM progression. So as Robin talked about in terms of the building blocks that are going to drive margins up in 2019, the CASM contribution, the CASM-Ex contribution to that will remain critical and we are very pleased with the execution that we've seen so far with the Structural Cost Program.
Savanthi Syth -- Raymond James -- Analyst
Thanks, Steve. And if I may ask on the fuel side, how should we think about fuel efficiency? It seems like fuel efficiency has been pretty flat here in '18 and '19. I know there's been some maybe -- last minute capacity arrangements that make that a little tougher as well and storms. How should we think about fuel efficiency? (Multiple speakers)?
Steve Priest -- Chief Financial Officer
Again, another great question. I think your comments right. It's been sort of pretty flat in terms of how are things going forward. The good news though is, you do see further fuel efficiency as we bring more A321s into the fleet. You're going to see some more NEO aircraft coming during 2019 as we start deliveries of those. And also with the restyled A320 fleet that starts to ramp. On the ASM basis, you're going to see more fuel efficiency going forward. So, I think the story has been sort of pretty flat, but we're confident that we'll continue to see more efficiency as we migrate and go forward through to 2019.
Savanthi Syth -- Raymond James -- Analyst
Follow-up on that is, should we assume that 2020 should see a bigger improvement than 2020 -- I'm sorry 2019 or is 2019 a big year?
Steve Priest -- Chief Financial Officer
I think you'll continue to see the ramp, because as we mentioned, we will have the full impact of the restyling completed. As we go into 2020, you'll have the full year impact of the additional shelves that we're restyling in 2019. We will have a greater proportion of NEOs in the fleet at that point and the deliveries we're taking next year, a greater proportion of A321s overall. So you'll see sequential improvement in terms of the benefits, in terms of fuel consumption per ASM on an average basis, as you migrate through the back of '18 to '19 onto '20.
Savanthi Syth -- Raymond James -- Analyst
Thanks a lot.
Steve Priest -- Chief Financial Officer
Thanks, Savi. Great to speak to you.
Operator
Your next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your line is open.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Hey, thanks. Most of my questions have been asked, but I wanted to go back to one of the charts you showed at Investor Day showing the margin outperformance of the high density A321s. Margin improvement of Mint as well as high density, what did you intend to communicate with that slide? And are you in any way sort of deemphasizing premium, deemphasizing Mint going forward? Thanks for taking the question.
Joanna Geraghty -- President and Chief Operating Officer
Yes. Hi. This is Joanna. I'll take that one. So at Investor Day, we wanted to just illustrate how critical the A321 aircraft has been to our fleet. It's a fantastic aircraft, both in the mid-configuration and also in the high density configuration. We have announced and deployed the first and second phase of our Mint cities and they've done remarkably well from a margin perspective. And now as we look to the best and highest use of that asset, we're looking at the higher density version. And actually the margin on that in terms of where we are deploying it largely be a (inaudible) markets and single day flight leisure market and the margin is actually exceeding that on our Mint routes. So it's really just a great news story all around both in the mid configuration, but also in the all-density configuration.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Okay, so we shouldn't have interpreted that you're going to be pulling down an aircraft, replacing with high-density, is it that a different objective?
Joanna Geraghty -- President and Chief Operating Officer
No -- Yes, just a different objective and we are just trying to ensure that we put on these planes and use them in the best and highest possible way out there.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Thank you.
Operator
Your next question comes from the line of Kevin Crissey of Citi. Your line is open.
Kevin Crissey -- Citibank -- Analyst
Hey, good morning everybody. On the 320 restyling, given the limited number of aircraft currently restyled are you able to sell them as 162 seats yet or not?
Marty St. George -- Executive Vice President, Commercial and Planning
Hi, Kevin. It's Marty. Yes, we do -- we have them on close rotations and we take them -- we basically schedule them in as (inaudible) factory and we are selling them with 162 seats.
Kevin Crissey -- Citibank -- Analyst
Terrific. Thanks. And maybe a question for Joanna. Now that you've been in your expanded role for a bit, can you talk about the changes you've been leading and how far along they are or maybe how you see things changing, big picture discussion of what you see maybe different in the future than -- than maybe the way things operated in the past.
Joanna Geraghty -- President and Chief Operating Officer
Sure, yes. So I mean, from my perspective, there's been a few key areas that we are really drilling down on. First is cost, obviously, we are absolutely aware of -- our investors use on cost, but also as we compare ourselves to other carriers, we need to start resetting our cost base for the future. We've done I think a really good job on revenue historically and really growing RASM and also growing capacity. And at the end of the day we need to continue to do that. So as you see sort of both top-line and bottom-line growth, we want to expand those margins. And part of the network changes has been sort of under my leadership along with rolling out and announcing the evolution of our fare options. So primary focus is cost, also looking at how do -- we are continue to drive new revenue initiatives and then the third point is operational performance. We are very mindful of the airspace that we operate into and ensuring that we continue to make investments to tactically improve our operational performance in our key focused cities.
Kevin Crissey -- Citibank -- Analyst
Terrific. Thank you. And if I could sneak one last one to real simple. JetBlue vacations for Q4, is there anything of note in terms of pluses and minuses for RASM in Q4 as it relates to vacations?
Marty St. George -- Executive Vice President, Commercial and Planning
Hi, Kevin. So we're still working on closing out some of the operational issues, some of the technical issues with our platform. We're a little bit behind in fourth quarter, but we have other parts of the revenue mix that are over performing and that's what's created the guide that we laid out. The most important thing us to make sure that we're ready for the first week of January because that is by far the biggest booking week of the year and everything we're seeing right now makes us very confident that we're in a good spot.
Kevin Crissey -- Citibank -- Analyst
Thank you so much.
Steve Priest -- Chief Financial Officer
I think anything I'll add to that, Kevin if I may because I think Marty made a great point about the challenges we've had with cutover, but I feel very confident about having everything in place for a strong 2019 as Marty said. We got a leadership team in place now and we're working through some of those cutover issues and so I expect 2019 to be a very strong year for vacation.
Kevin Crissey -- Citibank -- Analyst
Thank you.
Operator
Your next question comes from the line of Dan McKenzie of Buckingham Research. Your line is open.
Daniel McKenzie -- Buckingham Research -- Analyst
Hey, good morning. Thanks guys. I guess just kind of circling back to some of the earlier questions. I wonder if you can just give us some insight into what the revenue contribution is from even more in Mint overall results today. So $7.7 billion in total revenue for this year, 1% of that comes from the premium cabin. And then I appreciate the shift of the denser aircraft, but it doesn't -- it's not like the premium cabin growth is helping here. So I'm just wondering if you can just help us understand how you're thinking about the growth in the premium cabin space next year? So contribution today and growth next year is really what I'm trying to get at here.
Robin Hayes -- Chief Executive Officer
Hi, Dan. Thanks for the question. We don't actually break out the Mint specifically. We definitely break out Even More. And Even More has been a fantastic contributor for us. It's well over $300 million right now. I think if you look at what's happened in the most recent quarter, our Mint revenues -- and again we had a lot of growth this year in Mint, so I think it's important to make it clear, I'm looking at same store sales because we can't take credit for all the new Mint routes, but for the routes that have been opened, at least a year, Mint revenue was up 14%. And actually during that same period even more revenue was up 16%. So they have actually been very nicely accretive to our results. And I think back to that point that Joanna made earlier, what we laid out in the Investor Day about the challenge of picking between high density 321s and the Mint A321s is the definition of a high-class problem. And we have two really good uses of the airplane and our job as best in highest use, that the most important thing for us. I'll also mention that specifically with Mint, we're very happy with the acceptance on the new route we've added in, certainly that the secondary cities from Boston and New York. And I think that really ties to the corporate accounts strength that we've been able to get from having such a high quality product. Certainly, we -- a very, very good corporate conference in Boston and a significantly improved corporate conference in New York from corporate customers whose travelers, sort of really desperately angling to get on the net product.
Daniel McKenzie -- Buckingham Research -- Analyst
And then Marty, the growth in premium cabin, if we were just this motion (inaudible) even more together, growth rate next year versus this year?
Marty St. George -- Executive Vice President, Commercial and Planning
We actually don't -- I don't want to guide that because we haven't even given the overall guidance. But I will say we're very optimistic about what we're seeing right now in both of those. I think it's tied to one of the themes we've heard in earnings in general, which is overall strength in the corporate market and certainly Mint and even more, other areas where we're heavily exposed in a good way to that growth.
Daniel McKenzie -- Buckingham Research -- Analyst
Okay. Second question here, this is really an IT question. So I don't know if Eash is there or not, but just -- the question really is just about challenges on implementing the IT infrastructure necessary to rollout fair families 2.0. So I guess -- I know it's probably a year off before you can execute on that, but I just wondering what some of the factors might be that could accelerate or potentially delay that rollout?
Joanna Geraghty -- President and Chief Operating Officer
Sure, so we have been scoping. This is Joanna. We've been scoping the implementation requirements for evolving for options 2.0. We have to have several IP platforms involve Datalex to provides the shopping platform; Sabre provides the reservation and booking platform behind it. Those two systems need to speak in order for this to work. So we've been working with both business partners in earnest for the last several months trying to make sure that all the requirements are fully outlined consistent with how we want to roll and how we want to roll this out. So yes, IT is a big lift here. It's the long haul in the tens, but we are confident that -- we're well on the path to ensuring that we can implement these changes in 2019.
Daniel McKenzie -- Buckingham Research -- Analyst
And how many IT systems are involved Joanna?
Joanna Geraghty -- President and Chief Operating Officer
I'm not an IT expert, so I'd say there's two at least Datalex and Sabre. I'm sure there's a few other systems that support those systems behind the scenes. But those are the primary -- I think IBM as well those are the primary systems that are involved in making that change.
Daniel McKenzie -- Buckingham Research -- Analyst
Okay. Thanks for timing guys.
Robin Hayes -- Chief Executive Officer
Dan, I think the only other thing I would add to that, although it's not directly linked to the fair options 2.0. We are also going through a -- our people are new (inaudible) as we call it because we never use the word passenger in JetBlue, we say the customer that it's the same system. Each in his team has done a great job over the last several years, moving our dependency of that core system away from the original house, so we have Datalex now for retailing, we have the IBM, who do a lot of our self-service and kiosks. We built our web services live on top of that. So all of those things mean that if we do make a decision to change CSS provider, it is nothing as -- I don't want to underplay it. It will be significant, but it will not be a significant as what we have to go to back in 2010 cutover. So we're also navigating map at the same time as this to make sure that the timeline meet the fair options rollout is not jeopardized by any potential change in the CSS.
Daniel McKenzie -- Buckingham Research -- Analyst
Got it. Thanks, Robin. What's the time frame for that decision possibly in rollout? If you do make a change.
Robin Hayes -- Chief Executive Officer
Yes. I'd say we have -- you know these things kind of, you want to move, you want to get the decision as quickly as you can, but these are complex negotiations. There's lots of -- as we saw with our E20 (ph) decision, there was a lot of value in letting it take as long as it took and to a certain extent I feel the same with all these. So the teams are working through it. I'd say we're definitely near the end of the process and the start, but I don't want to put exact timeline on it because there's still lots of conversations ahead of us with the various parties that we are talking to.
Daniel McKenzie -- Buckingham Research -- Analyst
Okay. Thanks again.
Operator
Your next question comes from the line of Helane Becker of Cowen. Your line is open.
Helane Becker -- Cowen and Company -- Analyst
Thanks very much operator. Hi Team. Thanks for taking the time here to answer my questions. I think, Robin last year or maybe Joanna, you had just talked about operational issues and the improvement that you've seen. And I know, last year you had cited ATC issues in New York as one of the third quarter issues. So I was wondering if you could -- I don't know, maybe quantify the improvement on year-on-year basis that you saw from either revenue terms or cost terms?
Joanna Geraghty -- President and Chief Operating Officer
Sure. So we made a number of strategic investments going through this summer to try to alleviate some of the operational concerns we had in the summer of 2017. Those included very tactical cost conscious investments. So don't think about it as kind of spreading the creamy peanut butter over everything. It was adding some time on West Coast red eyes. We added some additional time for our technicians to have access to the aircraft to perform overnight maintenance. We identified certain flights that had challenges with broken crew pairings. Those are just some examples of what we did going to this summer.
And if you look at this summer, we've also been working proactively with the FAA to try to get ahead of any ATC challenges that are actually present. I will point out that, August actually was a worst air traffic control month than what we saw in August of 2017. And I think, given some of the investments that we made, we did see some progress in terms of on how JetBlue performed overall. We've seen an improvement of about 5 points, compared to where we were last year on A14 and we've also held our completion factors. So I think, all things trending in the right direction. But the reality is that, JetBlue flies into the most congested airspace in the United States and we need to be very mindful of the types of investments that we do make, because just adding block does not solve ATC challenges. Robin and I were actually with the administrator last week. And I think, we continue to focus on infrastructure investments, next-gen investments, focusing on the Northeast corridor and how we can make improvements there, because obviously, JetBlue benefits significantly from that. So a multi-pronged approach, but we are seeing improvements and have seen improvements this summer.
Helane Becker -- Cowen and Company -- Analyst
That's very helpful. Thanks Joanna. And then, just on the fuel comment that was made earlier. I think, 4% of fuel was -- I guess alternative, is that the right word to use. And I'm just kind of wondering, is that a scalable number? Can you get to something that is meaningful in terms of cost prediction using an alternative fuel or fuel blend?
Robin Hayes -- Chief Executive Officer
Yes. Helane, thank you for the question. I think, with sustainable fuel, there is two sort of issues that you have to work through. First of all, to make sure the fuel is truly sustainable and something that can get over time. And secondly, that the cost of getting that biofuel blend is equivalent or better to what you would get to sort of those normal jet purchase. And we kind of took our time getting into this. Sophia Mendelsohn, who is our Director of Sustainability; she really understands this space very well. We've ended up with a business partner and a plan that we think over time can scale. But we want to do it in a series of thoughtful steps to make sure we don't either a) jeopardize supply or b) create a cost to the airplane that's greater than what we'd otherwise expect.
Helane Becker -- Cowen and Company -- Analyst
Got it. So just to follow-up briefly. Is that like a 10-year thing or five-year thing, how should we -- I mean, it's so small, right now, but obviously it has the potential to really be meaningful to your cost?
Robin Hayes -- Chief Executive Officer
Yes. No, I mean, it will -- we haven't sort of shared sort of our own internal forecast of how we think that will ramp up. But it's definitely a priority for us to increase that over time. We're also working with various fuel firms (ph) and infrastructure in different airports to make sure that we can supply into there as well.
Helane Becker -- Cowen and Company -- Analyst
Fair enough. Thanks very much. Have a nice day.
Robin Hayes -- Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Joseph DeNardi of Stifel. Your line is open.
Joseph DeNardi -- Stifel Financial Corp -- Analyst
Hey good morning everybody, Marty just wondering if you could talk about demand for a second. It would seem like the incremental revenue you're expecting from the ancillary changes would suggest that consumer behavior has a chain, it's a whole lot and one of you could just kind of talk to what that says about demand and should we look at that as effectively a fare increase, which would kind of mitigate further pressure on fares or do you think that that's incremental to what you guys can do? Thank you.
Marty St. George -- Executive Vice President, Commercial and Planning
Hi Joe, thanks for the question. I mean, honestly I think if you look at the revenue environment we see right now, I think the entire industry is trying to react to what we're seeing as far as the run up in fuel prices. I don't really look at the bag fee as being a sign of lack of pricing strength, I think with what we're seeing in demand right now, especially in peak periods, we are definitely seeing pricing strength.
In the third quarter we led several fare increases that was successful in addition to change in the ancillary world. I don't -- my view is, in the environment that the industry is in right now, we do need to recapture the impact of the fuel run up and I think if you look at the progression that we're showing right now between third quarter, you can back into the fourth quarter, which based on the guidance we gave in fuel price and RASM, it's sort of like 40% recapture. I think we're optimistic of a good trajectory right now. So, no, I don't look at it as a substitute at all.
Joseph DeNardi -- Stifel Financial Corp -- Analyst
Yes, I guess what I was asking was, it would seem like the incremental revenue you're expecting from that would suggest that demand can absorb that additional fares, is that what you're or that additional increase fare if you want to look at it that way, is that what you're saying?
Marty St. George -- Executive Vice President, Commercial and Planning
No,no I definitely agree with that. I think you're absolutely right. And I think it's what we're seeing in the demand environment overall. And I think if you look at what we -- how we described the more demand versus what we said earlier is that -- during the peak -- the two peak period we were seeing acceleration and I think what we were more interested in is that even in the trunk period we started to see demand strengthen up a little bit. So I think you're absolutely right on that.
Joseph DeNardi -- Stifel Financial Corp -- Analyst
Okay, and then Steve just on the CapEx profile, I think there's some concern about what that looks like maybe beyond 2020, as the A220s start to ramp up. So can you just talk about maybe your flexibility whether it be from a deferral standpoint or just aircraft, non-aircraft, about your ability to kind of manage that down if the economic environment changes? Thank you.
Steve Priest -- Chief Financial Officer
Yes, thank you very much for the questions. We always look to build flexibility into the future order book. And you'll recall we have moved the order book around a little bit over the last sort of 15 months to 18 months. We differed 13 aircrafts in the early parts of last year. We then migrated to the E190 decision and we looked at the replacement aircraft as we went forward. So it's critical for me that we maintain flexibility for every eventuality and we work very closely with the OEMs running for these contracts together.
We have obviously outlined our CapEx guide. We've been very transparent with the order book. You can see that in the appendix of the materials we shared this morning. We will continue to maintain flexibility in terms of the delivery schedules and have a very close and symbiotic relationship with the OEMs that we deal with.
Joseph DeNardi -- Stifel Financial Corp -- Analyst
Great. Thank you.
Operator
Thank you Your next question comes from the line of Susan Donofrio of Macquarie Capital, your line is open.
Susan Donofrio -- Macquarie Capital -- Analyst
Yes, all my questions were answered. Thank you.
David Fintzen -- Director of Investors Relation
Great. Thanks Susan. And that concludes our third quarter 2018 conference call. Thanks for joining us have a great day.
Operator
And again that will conclude today's conference. Thank you for your participation.
Duration: 56 minutes
Call participants:
David Fintzen -- Director of Investors Relation
Robin Hayes -- Chief Executive Officer
Marty St. George -- Executive Vice President, Commercial and Planning
Steve Priest -- Chief Financial Officer
Hunter Keay -- Wolfe Research -- Analyst
Michael Linenberg -- Deutsche Bank -- Analyst
Matt Wisniewski -- Barclays -- Analyst
Jamie Baker -- JPMorgan -- Analyst
Joanna Geraghty -- President and Chief Operating Officer
Savanthi Syth -- Raymond James -- Analyst
Duane Pfennigwerth -- Evercore ISI -- Analyst
Kevin Crissey -- Citibank -- Analyst
Daniel McKenzie -- Buckingham Research -- Analyst
Helane Becker -- Cowen and Company -- Analyst
Joseph DeNardi -- Stifel Financial Corp -- Analyst
Susan Donofrio -- Macquarie Capital -- Analyst
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