JetBlue Airways (JBLU) Q4 2023 Earnings Call Transcript

JetBlue Airways (JBLU 1.05%)
Q4 2023 Earnings Call
Jan 30, 2024, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

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, Koosh Patel. Please go ahead, sir.

Koosh Patel -- Director, Investor Relations

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.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; Joanna Geraghty, our president and chief operating officer; and Ursula Hurley, our chief financial officer. Also, joining us for Q&A are Dave Clark, our head of revenue and planning; and Andres Barry, president of JetBlue Travel Products. 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. The statements made during today's -- 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, copy of which is available on our website and on sec.gov. Now, I'd like to turn the call over to Robin Hayes, JetBlue's CEO.

Robin Hayes -- Chief Executive Officer

Good morning, everyone, and thanks for joining us today. As always, I'd like to start with a huge thanks to our incredible crewmembers. 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 crewmembers who are the reason our customers keep coming back to JetBlue.

Their 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 analyst 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'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, as she would say, suffered longer than Joanna. She is an inspiring and energetic leader who has spearheaded many of our major strategic, operational, and commercial initiatives. Over the last six months, she has been leading our efforts to develop and implement a turbocharged 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 we'll deliver a sustainable improved performance over time and create value for our shareholders, customers, and crewmembers. Before passing it over to Joanna, I want 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. Last week, we notified the Spirit 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 the Spirit transaction any further at this point, and our focus today will be on our organic business. With that, for the last time, over to you, Joanna.

Joanna Geraghty -- President and Chief Operating Officer

Thank you, Robin. 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.

He created new ways to innovate and challenge the competition, from free onboard Wi-Fi to Mint, our award-winning premium offering, which has disrupted transcon and now trans-Atlantic business class. 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. Warren's dedication and passion for safety, operational performance, and service excellence has been instrumental in our evolution, and he's well positioned to help us execute a plan that will mark the start of JetBlue's next major chapter. As Robin mentioned, we've been hard at work evolving our stand-alone organic plan to restore profitability and reset JetBlue for future growth, and we've already begun to implement some of the initial components. The key strategic challenge we've always faced is how to thrive as a small player in an industry dominated by four large airlines. 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 toward JetBlue's strengths. 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, where 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 are taking care of our core customer, making sure we go where they want to go when they want to go. We're also recharging our innovation DNA to bring an even better-quality experience to the full spectrum of JetBlue customers, from leisure, to visiting friends and relatives, to corporate and premium travelers. This 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 complimentary 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 with a 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 sustain 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 streams.

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. This also gives us another way to reward our most loyal Mosaic customers, who will get this additional benefit for free, and it enables us to better match our product offerings to customer demand. Another example I will highlight is our expanded distribution and OTA partnership. This expansion further aligns our distribution capabilities with the legacy carriers, allowing us to reach more customers and giving those who rely on OTAs greater access to our product.

We are also making changes to how we manage our network, rebalancing to deploy the right mix of routes 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 on 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 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 costs and capital discipline are a top priority.

To that end, we have reached an agreement to defer $2.5 billion of planned aircraft capex and smooth our delivery stream. Ursula will provide more detail in her remarks. Finally, as 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 costs as we mitigate overtime and premium pay. 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-peaks. Our premium offerings and Even More Space, in particular, continue to perform extremely well with double-digit year-over-year revenue growth in the fourth quarter. We also benefited from continued strength and our redesigned TrueBlue loyalty program, both in the fourth quarter and for the full year. In 2019, we had the fastest-growing loyalty program at a 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 and 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 relationships 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 this year. 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 peaks, 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 2004 and was one of the best in the industry. And we continue to see momentum on this front heading 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 fourth-quarter CASM ex-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 remains strong, and we have better matched our capacity to demand during off-peaks. 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 cycles 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 benefits from our enhanced revenue initiatives grow. 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 customer. We are increasing our efforts to drive reliability and consistency in our operation, products, 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 -- Chief Financial Officer

Thank you, Joanna. I'd like to add my thanks to our outstanding crewmembers for all their hard work in 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, CASM ex-fuel increased 4.5% year over year within the range we provided last January despite facing an incremental 1.5 points of CASM ex-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 added 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 engines.

While these efforts have yielded additional spares, 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 aren't 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 crewmembers, 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 crewmember 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 E190 fleet with the margin-accretive A220s. We have already achieved $55 million in cumulative cost savings to date, and we continue to plan for all of the E190s to be retired in 2025. In the interim, we will still be operating three suite 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 in a more meaningful tailwind to our costs. This will be further amplified by the fact that the A220s deliver a 20% improvement in ex-fuel unit cost economics compared to the E190.

For the first quarter, we expect CASM ex-fuel to increase between 9% and 11% year over year, which includes impacts from the GTF issues and approximately two points related to wage step-ups in our pilot contract. As we move past the first quarter, we expect absolute CASMx 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 CASMX growth at 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 will result in an adjusted operating margin that is approaching breakeven for the full year. Turning 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 A220 and fleet monetization program as the E190 exit the fleet. We now expect to take -delivery of 27 aircraft in 2024 and 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 levers to partially offset the growth headwinds. Most notably, we have a significant amount of flexibility to extend the life of over 30 A320 aircraft to provide growth tailwinds, and we will continue to explore other cost-effective and capital-light ways to grow our fleet. Turning to 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 financial asset pool of over 10 billion, which includes the TrueBlue loyalty program, the JetBlue brands, 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. Turning 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 toward 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 in May. 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 known for. We are diversifying our revenues with margin-accretive initiatives to grow our TrueBlue loyalty program and JetBlue Travel Products portfolio. And we are executing with continued costs 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 questions.

Questions & Answers:

Operator

Thank you.

Koosh Patel -- Director, Investor Relations

Thanks, Ursula. We are now ready for the question-and-answer session. 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 instructions.

Operator

Thank you, sir. [Operator instructions] Our first question comes from Mike Linenberg, Deutsche Bank.

Mike Linenberg -- Deutsche Bank -- Analyst

Oh, yeah. Hey, good morning, and congratulations, Robin, on your retirement. Congratulations, Joanna, on ascension to the CEO position. Thanks.

You know, Joanna, you laid out a lot of the elements of what, you know, you believe will make JetBlue a successful stand-alone company, notwithstanding, you know, the M&A process, which still has to play out here with Spirit. As you think about, you know, JetBlue over the next several years, though, you know, we still have, call it, a market share relevance or scope issue. Does that still feature prominently, or is that still a priority for JetBlue even at running it as a stand-alone that, you know, still, longer term, it's important for that company to become bigger? What is your thinking on that? How has that evolved as -- as you move into the senior role? Thanks.

Joanna Geraghty -- President and Chief Operating Officer

Thanks -- thanks, Dan. Great -- great question. So, you know, Spirit was about accelerating our organic growth, more JetBlue to more places, more people. And, you know, we still intend to do that.

We're going to do it organically. It will be a bit slower for sure. 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. If you think about some of the unique advantages that JetBlue has, I mean these are -- these are tremendous strengths, and we need to redouble our efforts around amplifying those strengths.

So, our network, obviously. You know, we've got the corner lot at JFK and Boston. These are markets that are constrained, the 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 so that we can start rebuilding top-line revenue. We've already got an extremely strong leisure franchise with a strong premium onboard offering.

You know, 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 of this at the same time. Hence, Dave's focus on delivering, you know, over 300 million of -- of revenue initiatives this year. Loyalty and co-brand is well positioned to be an accelerator JetBlue Travel Products. Likewise, it's had one of its best years yet.

Ursula touched on capital and cost discipline. We need to be unslagging 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 -- the headlines, and then reinvigorating our culture.

So, scale, it 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. So, Ursula touched on the deferrals, but you know, 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 A320 deliveries, which you know, 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, you know we have a short-term priority, but yes, we believe we've got a nice long-term plan as well.

Mike Linenberg -- Deutsche Bank -- Analyst

Oh, great. Thanks for that answer. And then, just a quick follow-up, just, Ursula, on the debt balance sheet. It looked like it was up, I think 47, maybe that was up about 700 million.

Is that mostly aircraft debt? Like, what was the swing there quarter over quarter? Thanks and thanks for taking my questions.

Ursula Hurley -- Chief Financial Officer

Good morning, Mike. Just -- I just want to go back to one of Joanna's comments in regards to the one lever that we have is extending or buying out A320 aircraft so that --

Joanna Geraghty -- President and Chief Operating Officer

Yeah, deferring deliveries and then extending the retirements, yeah.

Ursula Hurley -- Chief Financial Officer

Yeah. But back to your question, Mike, the increase in debt was driven by the financing of aircraft throughout 2023. So, we raised $1.4 billion against various aircraft as we navigated through last year. So, that's really what's driving the uptick in the debt metrics year over year.

Mike Linenberg -- Deutsche Bank -- Analyst

OK, great. Thank you.

Operator

Our next question comes from Dan McKenzie, Seaport Global.

Dan McKenzie -- Seaport Global Securities -- Analyst

Oh, hey, thanks. Good morning, guys. On the 30 A320s 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 -- Chief Financial Officer

Yeah, hi, Dan. It's a good question. It's definitely an opportunity to backfill some of the loss driven by the GTF. We are still working through the GTF exposure that we have in 2025 and beyond.

So, we look forward to sharing more about our multiyear growth rate projections at Investor Day in May.

Dan McKenzie -- Seaport Global Securities -- Analyst

Hmm, yep, understood. And then, the capital and cost discipline, you know, 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 -- you know, how can we think about that journey?

Ursula Hurley -- Chief Financial Officer

Yeah, so the -- the deferral today, Dan, basically, it has us taking, on average, 24 aircraft over -- each year over the next five years. We prioritize the A220 aircraft as we want to continue with the E190 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 -- that was the essence of why we did the deferral. I think there are other capital-light effective ways that we can continue to grow, and that's a nod to, you know, the 30 aircraft that we could potentially extend or buy out on lease.

So, the way we're going to go about driving a level of growth over the next few years is capital-friendly.

Dan McKenzie -- Seaport Global Securities -- Analyst

Hmm. OK, thanks for the time, you guys.

Operator

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

Duane Pfennigwerth -- Evercore ISI -- Analyst

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

Joanna Geraghty -- President and Chief Operating Officer

Yeah, maybe I'll take it, and then I'll throw it -- throw it over to Dave. So, Caribbean leisure franchise continues to do very nicely. Obviously, there's some near-term routing pressure with the capacity that's floated to 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.

On the good news front, domestic is trending well. Capacity has moderated across domestic, so -- so, that's seeing some nice improvements. And then, New York and -- New York continues to improve. It's most certainly been a bit slower than we'd hoped for, but it continues on a nice trajectory.

And as we think about the future, New York, overall, continues to be a really really important part of part of our network. You know trans-Atlantic, small part, but also doing extremely well. So, we've got a number of kind of core geographies 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 know if you have anything to add.

Dave Clark -- Head of Revenue Planning

Yeah, 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, 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, you know, 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.

Duane Pfennigwerth -- Evercore ISI -- Analyst

OK, 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 -- Chief Financial Officer

Duane, I'm not going to comment on my commercial negotiations with Airbus. We appreciate their partnership. I do believe that this was a win-win for both them and ourselves over the next few years.

Duane Pfennigwerth -- Evercore ISI -- Analyst

OK, appreciate the thoughts.

Operator

Our next question comes from Conor Cunningham, Melius Research.

Conor Cunningham -- Melius Research -- Analyst

Hi, everyone. Thank you. Congrats, Robin and Joanna. Can you -- can you maybe help a little bit in terms of the comments on headcount? I'm just -- you know, you mentioned early outs, but I was just trying to understand a little bit more in terms of actual magnitude and maybe, you know, overall reductions in headcount there? And if you could just maybe speak to the cadence and CASMx as that kind of plays out through the year? Thank you.

Joanna Geraghty -- President and Chief Operating Officer

Sorry, I couldn't hear, I think it's CASMx. I'll throw the second part of the question to Ursula. Just on headcount, we just launched our voluntary -- our voluntary sort of opt-out program. It 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 -- operational groups in the front line.

But it's literally three days old, so we're not really in a position to provide -- provide more details. But we're trying to do it in a thoughtful way and provide, you know, our crewmembers with opportunities outside of JetBlue to the extent that they want to pursue that. Ursula, maybe on the capex question?

Ursula Hurley -- Chief Financial Officer

Thanks, Joanna. Yeah, just on CASMx, you know, I do want to take a victory lap in 2023. We actually hit 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. So, pleased that we delivered and executed on what we said we were going to -- we were going to do in 2023.

In terms of 2024, 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. We have been ruthless in terms of addressing the fixed cost base given we're not growing. 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 e190 exit from a Fleet modernization program. So, when you combine this laser focus across all three initiatives, I'm exceptionally 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, Q1 is slightly elevated in terms of the year over year.

The 9% to 11% guide includes two points of pilot pay and given that contract is lapping here in the January and February time frame. As we navigate through the rest of the year, from a pure CASMx extent perspective, we're essentially flat every quarter throughout the year. So, the progression improves from a CASMx 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 -- Melius Research -- Analyst

Oh, OK, that's helpful. And then, on the deferral versus lease extension comment, I'm a little confused there. I would have thought that the change in deferrals meant you were pivoting to slower growth until margins improved to some level. Can you -- can you just help to play out the scenarios between maybe low single-digit growth to, like, your historical range of mid to high in 2025 and beyond? Thank you.

Ursula Hurley -- Chief Financial Officer

Yeah, the deferral, we believe, was imperative because the No. 1 priority is getting this business back to sustain 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 the capital 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. We honed in on -- on the A220. We protected that delivery schedule so that we can continue to exit the E190. And 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 again and to overcome the GTF challenges that we're seeing. So, we do look forward to sharing you the multiyear growth plan at the Investor Day in May.

Conor Cunningham -- Melius Research -- Analyst

OK, thank you.

Operator

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

Jamie Baker -- JPMorgan Chase and Company -- Analyst

Oh, hey, good morning, everybody. First, for -- for Ursula, I'm just trying to reconcile the unencumbered asset disclosure. So, for -- for the bridge loan, can you remind us what was pledged there and -- and 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 -- Chief Financial Officer

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

Jamie Baker -- JPMorgan Chase and Company -- Analyst

OK, OK, thank you for that. And then, second, for Joanna. Let's see, how do I ask this? If plan A was the pre-merger 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 interpret today's deck? I guess -- I guess put differently, are the adjustments you're announcing today consistent with the merger plan, you know, meaning in a scenario where if the merger doesn't go through, we should be prepared for further revisions. Does that make sense?

Joanna Geraghty -- President and Chief Operating Officer

Yes, it does. Yeah, so the plan that we're talking about today is our organic plan without a Spirit acquisition. Given the -- the appeal that's pending given the outcome of the judge's decision, you know, we'll see that process play 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 this, I call it the plan B, actually, building this plan B, which is the kind of super-sized organic plan, you know, in case Spirit does not happen. So, that's what you heard about today.

From a resources perspective, there is a team that has been working through the Integration Management Office on the Spirit plan. 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 -- JPMorgan Chase and Company -- Analyst

OK, that's perfect. Thank you very much. Take care.

Joanna Geraghty -- President and Chief Operating Officer

You're welcome.

Operator

Our next question comes from Catherine O'Brien, Goldman Sachs.

Catie O'Brien -- Goldman Sachs -- Analyst

Good morning, and congrats to Robin and Joanna again. I just wanted to dig in a bit on your comments on reshaping the cost structure to address cost convergence that was in -- in the presentation. You know, what -- what types of initiatives are you looking at to achieve this? And I know you've been talking about being relentless on -- on fixed costs, and you gave a few examples on the voluntary opt-outs that are in the early innings, and a few other things. But could you just -- could you just give us a little bit more color on -- on what exactly you're looking at? And I guess, you know, on the cost convergence front, you know, where do you see yourself kind of fitting in versus the bigger, more premium guys and maybe the lower cost? How do you view your performance over the last couple of years within that context? Thanks.

Ursula Hurley -- Chief Financial Officer

Hi, Catie, thanks for the question. So, a couple of thoughts. Definitely, on the labor front, costs have obviously converged as we've navigated through COVID. I'm very hopeful that the peak is behind us.

Hopefully, from a pilot labor perspective, attrition has been lower and that environment has been tightening up. And so, I feel confident that the peak of labor rates across some of these larger front-line 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 for success in terms of how we recover the network, but also ensure that our front-line crewmembers have the tools that they need to do their jobs easier. And essentially, that will result in productivity efficiencies going forward.

So, you know, like I said, I am very pleased with our controllable cost execution in 2023. And I do believe that this is a competitive kind compared to the peer set in light of us not growing this year. And, you know, I fully expect to deliver on our full-year guide again.

Catie O'Brien -- Goldman Sachs -- Analyst

Great. And maybe just one for Dave. Can you just drill in a little by region for both fourth-quarter unit revenue performance, and how those trends are evolving into the first quarter? You know, you mentioned as well as your peers, that sounds like there's been a bit of an inflection in domestic. You know, LatAm, you know, close -- or LatAm near is perhaps a bit more challenged just given some of the industry capacity, you know, what are you seeing? What did you see in fourth quarter? And what -- what underlies that 1Q guide? Thanks.

Dave Clark -- Head of Revenue Planning

Yeah, hi, Catie. Thanks for the question. We're seeing some really positive trends. Demand is certainly remaining healthy.

And I would say the unit revenue is being driven by both that healthy demand as well as capacity movements. So, for example, in Q1, we expect our domestic unit revenue to be positive year over year. I know for the system we're still slightly negative, but domestically, we expect it to be positive as that demand remains very healthy, and we optimize our own capacity to align with demand and we see the industry come down a bit as well. Looking internationally, LatAm remains very strong. We've been adding to it to really increase our focus and service of those markets.

That always pressures unit revenue a bit, and it will take a little while to absorb. But those are our bread-and-butter markets for us, and we remain extremely committed to them. I'd also note, internationally, trans-Atlantic continues to perform really well. As Joanna mentioned earlier, fourth-quarter RASM 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.

Catie O'Brien -- Goldman Sachs -- Analyst

Thanks so much.

Operator

Our next question comes from Helane Becker, TD Cowen.

Helane Becker -- TD Cowen -- Analyst

Thanks very much, operator. Hi, everybody, and thank you for the time. And, yes, I will add my congrats to Robin and -- and Joanna too. And on Slide 10 -- or slide, you talk about capex and it looks like it accelerates through the year.

So -- so, is that an increase in -- in just the way the cadence of the way it's working, or is it an increase in -- in -- in PDPs? Or how should we think about the way the -- the -- the way that grows?

Ursula Hurley -- Chief Financial Officer

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

Helane Becker -- TD Cowen -- Analyst

Got it, that's very helpful. And then, just for my follow-up question, how are you thinking about like -- like, raising capital going forward? Would -- would you -- I mean at these -- at these levels, I don't think you would do equity, but -- but would you consider doing more leasing of aircraft or-- or doing, I don't know, testing the ABS market again or doing something, you know, to -- to -- to maybe grow debt but get yourselves in a position where you can generate positive cash flow at some point?

Ursula Hurley -- Chief Financial Officer

So, in 2023, 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 debt over time. And so, we are, as I mentioned, in the market at the moment, 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.

Helane Becker -- TD Cowen -- Analyst

OK, that's really helpful. Thank you.

Operator

Our next question comes from Savi Syth, Raymond James.

Savi Syth -- Raymond James -- Analyst

Hey, good morning, everyone. And, Robin, it's been a pleasure, and wish you the best on the next chapter here. And congrats to Joanna and Warren. Joanna, you mentioned premium gaps.

I was wondering if you can elaborate on that. I'm guessing one of them was probably the -- the select seating that you are introducing in 1Q, but just wondering if you can elaborate a little bit more on what you mentioned there.

Joanna Geraghty -- President and Chief Operating Officer

Yeah, 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 markets, 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 -- and we are focused particularly with a 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.

Savi Syth -- Raymond James -- Analyst

Understood. And if I might on the -- this kind of refocusing on the high-value leisure, premium leisure passenger and -- and your kind of fleet mix, and, you know, what's the role that the A220 plays in this? And do you can expect -- you know, 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 -- President and Chief Operating Officer

So, you know, 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. You know, I mentioned over 25% of our seats fall into either in the Even More Space or the Mint category. If you look at the A220, it's got 90% more Even More Space seats than the 190. 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 to those customers to the extent we have a schedule that works for them.

So, we'll continue to -- to invest in sort of the broad array. But, you know, this -- this quarter, in particular, we had an extremely strong premium offering. Both Even More Space and Mint did exceptionally well from a revenue perspective. And so, you know, 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 customers.

Savi Syth -- Raymond James -- Analyst

Appreciate it. Thank you.

Operator

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

Andrew Didora -- Bank of America Merrill Lynch -- Analyst

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

Ursula Hurley -- Chief Financial Officer

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

Andrew Didora -- Bank of America Merrill Lynch -- Analyst

OK, that's all I had. Thank you.

Operator

Our next question comes from Stephen Trent, Citi.

Stephen Trent -- Citi -- Analyst

Good morning, everybody, and -- and congrats as well to Robin and Joanna 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. You know, how are you guys feeling about your supply of mechanics, you know? And I'm just trying to think through, you know, maybe who might be departing and where you -- you might still have a big need. Thank you.

Joanna Geraghty -- President and Chief Operating Officer

Sorry, yes, you said supply of mechanics? Sorry, apologies. Yeah, so we have a healthy pipeline of mechanics. We've spent a lot of time building out gateway programs so that we can actually provide opportunities for crewmembers and other departments to obtain an A&P license and become a JetBlue mechanic. We also have programs with local schools, aviation high school, and others to name a few.

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 we're through that COVID -- COVID cycle where -- where it was just, you know, a much more challenging period where we were doing a lot of hiring. So, that -- that's all balanced out. So, we're in a good place there.

Stephen Trent -- Citi -- Analyst

OK, great, appreciate that. And just one very quick follow-up. I believe you mentioned a shift toward adjusted EBIT margin as we -- as we move forward and would just want to understand, high-level, sort of, you know, what your view is on that. Thank you.

Ursula Hurley -- Chief Financial Officer

Yeah, so 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 helpful metric in regards to where we are and driving the core business to profitability. So, that was the essence of honing in on operating margin. Obviously, we will progress what we provide guidance to as we navigate and get this business back to sustained profitability.

Stephen Trent -- Citi -- Analyst

OK, appreciate that, and thanks for taking my questions.

Operator

Our next question comes from Scott Group, Wolfe Research.

Scott Group -- Wolfe Research -- Analyst

Hey, thanks. Good morning. So, I want to just clarify one thing on the cost guidance. So, I thought you were saying that absolute CASM stays sort of flat throughout the year, which I think would imply something higher than the 5% to 9%.

But maybe I'm just taking some of that comment a little too literally, so just any color would be helpful.

Ursula Hurley -- Chief Financial Officer

Yeah, so what we highlighted in the deck is -- we said roughly flat absolute CASM ex-fuel throughout 2024. So, from a pure CASMx sense perspective, that's what that means. So -- so, flat throughout the year. The year-over-year comps will improve beyond the first quarter.

Scott Group -- Wolfe Research -- Analyst

OK.

Ursula Hurley -- Chief Financial Officer

And that will result in the up to mid-high single digits on a full-year basis. So, Q1 is an outlier in terms of a year-over-year comp.

Scott Group -- Wolfe Research -- Analyst

OK. And then, I'm wondering -- maybe it's just too early, but do you guys have any visibility to second-quarter unit revenue yet, right? So, I mean you guys, a lot of other airlines, are 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 we have visibility that this positive RASM continues into Q2 or maybe it's just too early?

Dave Clark -- Head of Revenue Planning

Hi, 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 are at a higher load factor build 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 then the comp, which is much more difficult in the first half of the year than the second half of the year, we expect both of those to drive significantly meaningful revenue improvement in year-over-year unit revenue as we go through the year.

Scott Group -- Wolfe Research -- Analyst

Helpful. Thank you, guys.

Operator

And our final question comes from Chris Stathoulopoulos, Susquehanna International Group.

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

Good morning, everyone. Thanks for taking my question. I'll keep it to two. Robin, congrats, and best of luck.

And, Joanna, congrats on the promotion. 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 in leisure and VFR markets where those are. And then, two, on your trans-Atlantic product, if you could comment on what you're seeing with respect to competitive capacity and fares and -- and just summarize your -- I guess your -- your value proposition here or kind of how you see this evolving particularly as a network carriers here continue to emphasize that market? Thank you.

Joanna Geraghty -- President and Chief Operating Officer

Sure, I'll take the Caribbean VFR piece. So, you know, 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 in -- 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 from those locations. In terms of trans-Atlantic, 4% of our seats. So, it's a relatively small footprint. We've got a great value proposition over there with Mint and our core product.

And maybe I'll let Dave kind of pick up from there.

Dave Clark -- Head of Revenue Planning

Sure, I'll just add, we're getting, you know -- 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 had quite a bit of relevance to our New York and Boston-focused cities, adding in these major European destinations as part of our larger network portfolio. So, we're very pleased with the ramp-up that we've had and see multiple benefits strategically with these markets.

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

OK, thank you.

Operator

That concludes today's questions. I'd now like to turn the call back over to Koosh Patel for any closing remarks.

Koosh Patel -- Director, Investor Relations

Thanks, Travis. That concludes our fourth-quarter 2023 earnings call. Thank you for joining us and have a great day.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Koosh Patel -- Director, Investor Relations

Robin Hayes -- Chief Executive Officer

Joanna Geraghty -- President and Chief Operating Officer

Ursula Hurley -- Chief Financial Officer

Mike Linenberg -- Deutsche Bank -- Analyst

Dan McKenzie -- Seaport Global Securities -- Analyst

Duane Pfennigwerth -- Evercore ISI -- Analyst

Dave Clark -- Head of Revenue Planning

Conor Cunningham -- Melius Research -- Analyst

Jamie Baker -- JPMorgan Chase and Company -- Analyst

Catie O'Brien -- Goldman Sachs -- Analyst

Helane Becker -- TD Cowen -- Analyst

Savi Syth -- Raymond James -- Analyst

Andrew Didora -- Bank of America Merrill Lynch -- Analyst

Stephen Trent -- Citi -- Analyst

Scott Group -- Wolfe Research -- Analyst

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

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