Good morning. My name is Stephanie, I would like to welcome everyone to the JetBlue Airways Fourth Quarter 2017 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the call over to JetBlue's Director of Investor Relations, David Fintzen. Please go ahead.

Thanks, Stephanie. Good morning, everyone, and thanks for joining us for our fourth quarter 2017 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 President and CEO; Marty St. George, EVP, Commercial and Planning; and Steve Priest, EVP and Chief Financial 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 a 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 President and CEO.

Good morning, everyone. I know it's a busy day for you, so thank you for joining us. I'd like to start by thanking our crew members for their hard work over the past year. We are proud of how our 21,000 crew members rose to each and every challenge, particularly in a historic hurricane season and during the extreme conditions in the Northeast in early January. We are very pleased with the 100% completion factor achieved during the recent holiday peak, another example of the hard work of our teams. Your commitment to JetBlue allowed us to deliver strong fourth quarter and full year results, and we look forward to continuing to live our values in 2018. Turning now to Slide 4 of our presentation. This morning, we reported fourth quarter operating income of $189 million, a pretax margin of 9.7%, and earnings of $2.08 per share. Our results include a $570 million onetime non-cash gain related to tax reform, which equates to $1.76 per share; and also includes the onetime $1000 bonus paid to our crew members. In 2017, we made significant progress in our journey to superior relative margins. On the revenue side, we further developed our network, grew our co-branded credit card and once again exceeded our expectations and refined our Fare Options platform with great success. As a result of our efforts we saw significant top line growth during the last three quarters of 2017. We're now hard at work developing our next set of revenue initiatives. I've been extremely pleased with our progress in structural cost and our fleet review. Our cost reduction efforts are critical to achieving our margin commitments. The financial success of our model is most visible in the results from our largest and most mature Northeast- focus cities. This year, we…

Thank you, Robin. I'll start with our capacity guidance on Slide 7. We expect to continue with our targeted growth set to support our margin commitments, and we anticipate growth in the mid-to-high single digits over the next few years. From a modeling perspective, we expect 2018 flown ASM growth of between 6.5% and 8.5%. This year, we will lap the lower completion factor of 2017. Given the higher oil prices, we plan our 2018, scheduled ASM growth to be between 6% and 6.5%. This will be the third year in a row of sequentially lower scheduled growth. Of course, we will continue to watch the energy markets adjusting our capacity accordingly to meet our margin commitments. For the first quarter, we expect capacity growth between 3.5% and 5.5%. Our growth continues to be focused. In Boston and Fort Lauderdale, we have planned scheduled growth of 13% and 6%, respectively, during the first quarter. These two focus cities are expected to represent nearly 3/4 of the total incremental capacity for the first quarter. During the first quarter, new markets although it is less than one year old, are just 2% of seat miles. Moving on to Slide 8, and an update on the network. We continue our work to develop our Boston and Fort Lauderdale franchises. We are committed to our plan to take these cities to 200 and 140 flights a day, respectively, over the next several years. We plan to begin new service from Boston to Minneapolis in May as we deepen relevance for our corporate customers. As we move into the spring, we expect to accelerate our up gauging of Boston leisure destination with our 200 seat A321s. This aircraft is already proven to be a very effective tool to build margins and to keep low fares…

Thank you, Marty. Good morning, everyone, and thank you for joining us. I'll start on Slide 11 with some highlights from the fourth quarter. EPS was $2.08 per diluted share. This includes $1.76 gain related to tax reform. Excluding this gain, our EPS was $0.32. Our results included $23 million in expenses related to our $1,000 bonus to crew members. This bonus reduced our EPS by approximately $0.04 per share. The fourth quarter was also affected by hurricanes Irma and Maria, which reduced EPS by $0.09. Appendix A of the presentation shows the final hurricane impact for the quarter and for the full year. Pretax margin was 9.7%, down seven percentage points from the fourth quarter of last year. However, excluding the impact of hurricanes and the crew member bonus, our pretax margin was 13.2%. Finally, profit sharing accrued to the full year was $34 million. In the fourth quarter and 2017, we took actions to navigate a complex external environment all aimed at protecting and enhancing our margins. These actions included capacity adjustments and redeployments following a challenging summer and to mitigate the impact of severe hurricanes. At the same time, we are also laying the foundation of what we believe will be superior margins through revenue structures discussed by Marty and the structural cost program. Turning to tax reform. In the fourth quarter, we recorded a $570 million noncash gain related to the revaluation of our deferred tax liability. Looking to 2018, we anticipate that JetBlue's effective tax rate will be between 24% and 26%. As you know, we are adopting new accounting standards on revenue recognition as of January 1, 2018. The guidance we are providing today is under the old accounting standards. However, we do not expect the adoption of the new standard to have a…

Thanks, everyone. Stephanie, we're now ready for the question-and-answer session with the analysts. Please go ahead with the instructions.

[Operator Instructions] Our first question comes from Helane Becker [Cowen and Company].

Thanks very much, operator. Hi team, thank you very much for the time. As I look at your CapEx budget for the next couple of years, it's something on the order of 14% of revenue, which seems like an aggressive number. But the aircraft portion obviously looks like it's about three quarters. Can you just talk about the plan for the non-aircraft portion?

Thanks Helane. It’s Steve here. I think we've taken a very balanced approach to our capital allocation in order to continue to drive towards superior margins. I think what I would say is that when you look at the CapEx guide through 2018 and beyond, we've clearly shown the aircraft delivery schedule. The other thing that's in there is obviously restyling. So in 2018 is a fair bit of investment in the restyling program, which we're taking inventory, its been to take that. With regard to the non-aircraft CapEx that we've guided today, it's really critical that we continue to invest particularly in technology to make sure that our crew members and our customers have the right tools. So that we continue to drive productivity and efficiency and great customer service in our operations, and we started to do that in earnest at the start of 2018. So when you look through the lens of the non-aircraft CapEx, you should think heavily about investments in technology because we see that as a very important path not only to invest in our revenue initiatives and everything going forward but really to drive and support the structural cost program to ultimately drive those margins.

Okay, thank you very much. The other question I had is with respect to what happened during whatever that storm was Grayson I guess, at JFK specifically. Have you talked to the Port Authority about ways to improve, the way they allocate capacity at the airport when there are irregular operations and whether or not, there can be aircraft moved between terminals in an effort to alleviate some of the weight on the runway and some of the other issues that cropped up during that storm that caused the airport to shut down for such a long period of time?

Hi, Helane. Good morning, it’s Robin. I'll take that. We have a very good partnership with the Port Authority and I know they're very keen to kind of reflect on what work and opportunities there for improvement and they have a review. I think the bigger challenge for the airlines during this event was that JFK was effectively closed for 22 hours from sort of about 10:00 p.m. on – sorry, about 10:00 a.m. on day one to about 8:00 a.m. on the day two. And then there was, as you know, a big influx of international airlines getting effectively a double operation. And there is actually a procedure the port has and did deploy to allow airplanes to use other terminals. But it very, it's not easy because all the terminals are full. And I think the biggest challenge that they had over T4 was the baggage system and then the need to evacuate the terminal. So it was a very – what I'm trying to say is it's a very complex issue. And we'll certainly collaborate and work closely with the port on the lessons learned.

Great. Okay, thanks Robin. I appreciate the time.

Your next question is from Duane Pfennigwerth [Evercore ISI].

Hi, thanks. Just with respect to the cost guidance, and I appreciate the commentary on the second half. But I wonder – I know you're working on a number of initiatives, maybe some of which haven't come home to roost yet. So is there a chance that as we progress through the year the – some of the RFPs, et cetera actually give you some upside relative to that guidance?

Good morning, Duane. It’s Steve here. I'll take that up. We're taking a very rigorous and disciplined approach to how we're going through this process. And as I said at the start, I'm really delighted with the collaboration we're having across the whole of JetBlue. And the excellent results, we've seen so far with the structural cost program that you can all see from our exhibit that we've shown this morning particularly impacting the second half of the year. We aren't changing our guide, Duane, from the $250 million to $300 million. We put that out there at the end of 2016 at the Investor Day. We're completely on track. We're delighted with how things are going. We're taking a very measured approach to that and we'll continue to do that as we go forward. We don't guide any further out. I just want to really make sure that analyst community get a good sense of that absolute confidence around the delivery of this program. But at this stage, we're not going to be guiding anything different as we've already laid out.

Okay. And then maybe just an update on the tenure of seat densification when that really starts to contribute to the cost structure? Thanks for taking the questions.

No problem. I’ll take that one up again, Duane. I'm pleased to say, as I mentioned in my opening comments that the first A320 has gone in some modification. And the other thing we've done is we've tied that to a heavy check. We've talked about long-term planning tools and taking a very efficient approach to this, so that we only touch the aircraft once. So one of the aircrafts in the shot at the moment, there is some certification work that we're going through, we want to make sure that we have the quality of the product right. And then once we've done that, we will then progress with the rest of the program. We talked about the fact that each aircraft takes around 30 days. And we also historically talked about the fact the overall program will take up to about 36 months. But in our focus around driving the restyling program, doing it in a very, both capital and OpEx efficient way by touching the aircraft once we have rescheduling. We continue to get into the diligence of the planning, and we'll be guided by the most accretive use of timing and we'll continue to update you as the program progresses.

Okay, thank you.

Your next question comes from Michael Linenberg [Deutsche Bank Securities, Inc.]

Two questions here. Robin, just on the – or actually, Marty, sorry. I’m not trying to ditch you, Robin. I just realized it's a Marty question.

No, I get it. I know – so I’ll give it to Marty.

It’s just 2.5 points of the unit revenue benefit that you get in the first quarter because of the shift in Easter. Look the fact is there is sort of end of Easter does fall in the June quarter. So what – how should we think about the June quarter, the potential offset? I suspect it's not a negative 2.5 in the June quarter, maybe it would be a little bit less than that because you do get some Easter benefit in the June quarter. How should we think about that?

Hi, Mike. Thanks for the question. No, the 2.5 is just a simple shift between second and first quarter as the outbound freeze to moves into the quarter and it is more or less linear between the two of them. So that's actually – that’s going to effect a little bit of a net to guide between the two quarters.

So you're saying that in the June quarter would be a negative 2.5 hit, is the way to think about it?

Yes, that’s June…

Okay, so it's equal, okay…

I mean, if you go back historically we've had really big Easter shifts. We've had shifts in the 6% and 7% range before, so I think it's a good indicator that the fact that sort of straddle two quarters.

That’s okay. That's actually a really good point. And then just my second question and I don't know this is a question for you, Robin and/or Steve, when you look at your operational performance over the last year, obviously there were things that were specific to JetBlue just moving aside some of the hurricanes stuff and the fact that a sizable part of your network, you maybe you were disproportionally impacted by some of that. But when we think about the runway work that was going on in New York and also Boston obviously had an impact that past summer. But structurally, when you look at your network today and then markets that you're in, as we look out over the next year or two, can you get back up to the type of operational performance that JetBlue has historically been known for? Or are you forever going to be sort of relegated at best in the middle of the pack on sort of one hand? And on the other hand, how much do you actually have to spend? I mean, is that in your unit cost guidance? Or are you going to have to start to allocate more resources to get JetBlue's operational performance to the level that we had grown used to just a few years back?

Hey, Michael, I'll take that. It's Robin here. That's a really good question. And I'll try and give you a brief answer just out of respect for all of the questions but happy to follow you up – follow-up with you off-line. Operational performance is very important to us. If you actually look at how we're performing on blue sky days, days where we do not have weather and do not have sort of the some of the ATC challenges. We've seen a very nice improvement. I mean, our performance in November, for example, this year – sorry, 2017, which was relatively calm months, was about our best performance for about six years. So we definitely we've made some nice progress on those blue sky days and we have more that we're rolling out this year. And where we were very challenged last year was the combination of, as you know, you mentioned them, two runway closures at the two of the largest airports. If you look at our network, our largest two focus cities are New York and Boston. And so those tend to also be two – airports where we see a lot of weather events. We also suffered from the ATC staffing challenges and 90, which has been New York trade columns, all of those came together. The good news as we think about 2018 is that we don't have those two runways closed. They are open. We are working with the FAA on the ATC staffing. We're still concerned about that, to be honest, but we're working that issue through. And we have made some more investments in our schedule and buffer into 2018 to try and provide us some more – some better performance around some of those peak periods where we traditionally see these challenges. And I'm actually one of the reasons I'm very encouraged with the cost guide we've provided for 2018 is that we've made those investments and managed to deliver the sort of minus 1% to plus 1% that Steve outlined. So happy to a lot more we can say but very pleased with the efforts. It is – and when we look at our relative performance in New York and Boston, we have – we stack up against the other airlines and people buying travel in the Northeast providing your competitive and relative to the other carriers, then I think you have a strong story, but still very committed to maintain those improvements in 2018. Not having the runway closure in JFK and Boston will be a big help.

Okay, very good. Thanks Robin.

Your next question is from Jamie Baker [JPMorgan Securities LLC].

At JPMorgan, good morning, everybody. A question on the pilots, I mean, we have a new contract at Alaska, albeit an arbitrated one. We have an agreement in principle with Spirit. It kind of feels like we know where the market is for aviator wages at least for the more growth oriented airlines like JetBlue, obviously. So would I be mistaken then to assume that you're in the final stretch and we should be modeling for new contract this year?

Hi, Jamie. Good morning, I’ll take that. I'm not – I won't – we're not going to sort of negotiate in public. We've already gave much indication of where we are, just to say that ports continued under mediation. I think the both sides are working through the process. We're working – we've very good faith, in fact, there were discussions going on this week. And I'm very – we all are – we are very proud of the JetBlue pilot air community. But the difference between where we are and the other airlines is that this is our first contract. This is something that we are building from scratch and so it's not just a question of sort of amending a contract and looking at – its actually every single page has to be…

Okay.

It just takes time but we're working through that in good faith.

Okay, that makes sense and a follow-up for Steve. You referred to E190s and slowing that analysis given everything that is going on and that sized aircraft segment. My question actually is on the 321-LR. Given some of the commentary in recent days on middle of the market, some of the chatters coming out of Dublin this week, I mean, should we assume that your transatlantic analysis, which you can see that exists, that might also get slowed until there is more visibility on aircraft in this category? Or are you still proceeding at the same pace on that potential decision?

Yes, thank you, Jamie and good morning.

Good morning.

Just very quickly on the E190s just to – some of you are aware, the evolving OEM landscape, we have sort of obviously taken that into account as we’ve gone through. The team has done a huge amount of work, really terrific progress as we made during 2017 and as we might go to there, we’ll update accordingly. Obviously, there's no significant change in the OEM landscape with regards to this LR. The lens that we're looking through that is Boston and New York focused city strategy. We've had phenomenal success with Mint. We've had phenomenal success in growing those focus cities. And we're looking through any LR decisions through the lens of margins. And this aircraft would have to be the next use of the A321 order book. I'm weighing that up against delighted for Transcon Mint or, as Marty alluded to earlier, that's 200 seat opportunities we have. So there's no slowing down on any review. Again a significant amount of work, we do believe that with what we managed to do from a Transcon perspective in terms of we’re offering fantastic products, fantastic service and great flights for customers and that has been really terrific success for us. We'll look through this lens. And when we have something to update, we'll update you when appropriate.

Excellent. Very helpful, take care everybody.

Your next question is from Hunter Keay [Wolfe Research LLC].

Hi, good morning, guys. Thank you. You’re spending a lot on IT as a lot of airlines are, particularly JetBlue, I think. Steve, do you how roughly how much of your D&A line relates to capitalized IT expense? And is that depreciation part of the nonairline expense you're going to exclude from CASM Ex going forward?

Good morning, Hunter. In terms of a detailed questions about level of hopefully get Dave and the team to pick up with you after this if we getting to that. I just want to ensure that we're aware. With regard to excluding, your specific question about excluding that CASM Ex, no, that is not the case. With regards to the JetBlue Travel products business, the de minimis amount of CASM growth that we're seeing on that side that we've pulled out, as for me, its huge transparency and sets the right guidance framework for us to make those prudent and right capital like investments. We've outlined in the Appendix B of the presentation that we spoke about it this morning that you'll need to update your model. But as I said its very de minimis to the CASM growth guide.

Okay, yes, sorry to put you in the spot with that, just given the context of the long-term CASM guide. I wasn't sure if this is a really needle moving issue but I can follow up with Dave afterwards.

Not at all, Hunter, its not needle moving issue.

And Hunter, if I can just kind of add to that. Hi, it’s Robin, good morning. I think in terms of when we think about IT investments. And we see the benefits that we see from rolling out better self-service tools, I mean we rolled out a number of enhancements recently. We have more to come. All of this will be completely supportive with our structural cost program. It will take transactions out of airports. It will mean less cost into customers support. We've already seen some very good results. We're very encouraged with the channel shift that we are seeing on the jetblue.com. And so all of those things contribute to that $250 million to $300 million goal and the investment in that is included in our CASM guidance.

Okay, thanks both. Another one, not sure if this as a Marty question or not, but if I look at Slide 13, I can see that distribution pie chart is almost filled up. So maybe that's the answer in itself. But how did that move away from some of those smaller OTAs go, were you able to redirect those bookings to other OTAs or to direct channels? And if you were successful on that, does that – was that an experiment to try something more ambitious with distribution? Or was that kind of just a one-off thing and we're almost done with it? Thanks.

Hi Hunter thanks for the question. First of all, the fact that, that pie is almost filled should mean nothing as far as their ambitions. I fully expect that we'll continue to progress to try to get even more cost savings out of the distribution line. And yes, I'm very, very, very, very, happy with how the first move went with removing some of the low value OTAs. We went to the assessment of each individual distribution partner. And I’ll remind you that our No. 01 goal is a direct relationship with customers. Those who were not providing value really don’t fit very well into our strategy. So I don't want to use the word experiment because that makes it seem like there wasn't a strategy behind it. I would call it a first step, though.

Okay, thanks a lot.

Your next question is from Brandon Oglenski, [Barclays].

Hi, good morning everyone and thanks for taking my question. Robin I guess I just want to come back to this focus on improving long-term profitability and relative margins for JetBlue. It's no surprise that fuel prices are up and I think even up again today. And yet, we haven't seen JetBlue's capacity change, and, obviously, capacity is in the focus on other airline costs here as the sector trades off for two days in a row. So how can you give your investor base some confidence that, we've heard it in other calls. I'm sure you guys would say the same thing. At this fuel level, we need to see higher fares. What can be done to get higher fares as opposed to just asking people to pay you more?

Well, hi Brandon, I’ll take that. Appreciate the question. Obviously I’m not going to comment on the – comment around the fare that is a decision that the airline has to make its own decisions this fall. But in terms of higher fuel, I think we’ve – if you look at out capacity growth over a couple of years, it has come down. As you look at that number for next year, remember we have quite a bit of capacity that we didn’t apply last year because of the hurricane events. And I think as we've always shown, we are flexible and we will adapt. And so our focus is on driving those margins, having the right amount of capacity in the market to support those margins. And if we see sort of higher cost of providing that capacity, then we will make adjustments. But I think we've demonstrated that we've done that. We did that in 2017 as we moved into the year not for fuel because we have – we saw some revenue challenges and you can always count on JetBlue to look at things in a very prudent margin-driven way.

Appreciate that feedback. And can – sorry, because there's been a lot of conference calls this morning. But did you guys talk about the recovery in San Juan specifically and some of the other Caribbean destinations that were impacted last year? And maybe how the efforts to redistribute that capacity have been playing out at JetBlue?

Hi, Brandon. It is Marty, thank you for the question. We did talk a little bit about it. I can reiterate a little bit of what was in the script and maybe give you some more color. We actually had a very strong recovery in San Juan. We were very quick to remove capacity and redeploy it to other destinations, Dominican Republic, Jamaica, et cetera. And overall, not only are we seeing a very, very nice recovery in San Juan based on our current capacity level. We've also seen outstanding RASM performance from the rest of the region. In fact, we specifically called out the Latin region overall as being a standout as far as our current RASM performance. So I think if you go back a quarter, when the hurricane was fresh and there is a lot of the unknown. You go back to the call, we basically said we've been through hurricanes before. We know what to do in these situations. Let's be confident, and I think it's very much played out in the results we have seen. We are actually very bullish in the Caribbean. We have been for many, many years, and we will be for many years going forward.

Thanks Marty.

Your next question is from Kevin Crissey [Citibank]

Hey good morning everybody. I apologize for it is going to be a little bit long introduction to the question but I think it sets the background. So on the cost guide, you have 0 to 1 CAGR, which including the pilots. If I look and that was set a while ago, if I look at that seems – I know there's concern from investors that that's an aggressive goal. And when you set that since that time, you've had pilot pay move higher probably then you may have expected, your capacity being lower including a delay of the 320 additional seats. You have this more operational investment here given the challenges in 2017. So the question comes down to is one of the cost lines that you have opportunity is the RFP for maintenance. You have some challenges probably, I assume, given the age of your fleet with some life-limited parts. The crux of the question is I want to make sure that one of the solutions to fixing maintenance and life-limited parts cost inflation might be an aircraft order, which allows you to push some of those cost inflation down the road into the new planes. I want to just confirm that, that's not part of a 0 to 1 process to get to that kind of CAGR. Thanks.

Good morning Kevin, Steve here I will take that one. You are correct. It's not. We are really, really happy with the progress that we've made, and we remain very confident about the 0 to 1 CAGR. If you think about – we announced at the back end of 2016, and plans will continue to evolve and things will continue to move. The traction that we've made on the structural cost program has been terrific. We obviously took a very short delay on the A320 restyling. But as I mentioned this morning, we have an aircraft in the shot, and we're going through that side of things and we will look at the timing of that. So we laid out a plan. We were pretty specific about the plan, and we continue to execute against it. And I'm particularly excited with the RFPs that we're looking out with our existing fleet. I'm particularly excited about the contribution that can bring for us to drive towards superior margins. And we've been incredibly disciplined and diligent about making sure that we extract so much value out of that so that we will hit the 0 to 1 CAGR.

Thank you. And this is for Marty and/or Dave Clark, I don’t know if he is in the room as well. But with the change of frequent flier accounting, does it have any revenue management implication as to the way you might release inventory or change any strategies at all?

Hi, Kevin I will take that one. I think the simple answer is no. If you look at the TrueBlue program, it's somewhat unique when you compare it to the other legacy airline programs in that it's a revenue-based earning system and a revenue-based redemption system. So it will have no impact whatsoever with respect to the availability of our award seats. We make every single seat available for awards just at a sliding scale prices and that pricing structure is not expected to change.

Thank you. Thanks guys.

Your next question is from Savi Syth [Raymond James]

Hey good morning. I wonder if I can kind of turn over to Mint a little bit. Just kind of curious how many Mint aircraft you're expecting here year in 2018. And then also, as you think about the kind of the timing of the new Mint markets that you opened last year, how long will it take to mature? And as they mature, should we expect them to kind of reach the same level of – operating margin level as you are seeing in the kind of the New York and Boston to L.A. San Francisco routes, which seem to be kind of well above the system?

Hi, Savi thanks for the question. First issue is for 2018, we were originally planning to take three airplanes this year. We took one of them actually at the very end of 2017, so there were two Mint airplanes coming in 2017 assuming 2018 and that's to complete the conversion of New York and Boston to Seattle, as we mentioned in the script. After that, the next several airplanes will be the 200 seat high-density A321s. And frankly, I think it goes back to a point that we've mentioned several times. The A321 is an extremely successful airplane for JetBlue both in the Mint configuration and in high-density configuration. We absolutely have increased opportunities for the high-density A321. We talk how specifically getting it into Boston leisure markets, where we think it's a great tool to keep our fares low and continue to increase margins. With respect to the future run rate for Mint, we haven’t announced anything for some of the later airplanes in the year, and I'm not really ready to announce that now. But I would say every single airplane we go through and try to make that distinction between whether we want a Mint plane or high density. And we go back and forth. With respect to maturing of markets, I think if you look at the sort of the progress we have made in growing Mint and go back over the last several years, as we’ve talked about the evolution of Mint. I don’t think we ever would have communicated Mint to be as big as it is right now and that's specifically due to the success we've seen in the market place. We're extremely happy with some of the numbers we've seen on the new routes. With respect to ramping, we continue to see RASM improvements on the core routes of New York and Boston to L.A. and San Fran but also very happy with the ramping we're seeing on some of the new routes, especially markets like Las Vegas, San Diego, where I think there is I lot of -- or should I say there was some skepticism as to whether we could get enough premium demand in those markets. And I think if you look at the value proposition of Mint, which is the best premium product in North America at a very fair price, I think that customers have responded to that everywhere we put it.

It is helpful and can you talk a little bit about competitive capacity in your kind of focus markets? It seems like maybe some trends are going well and some maybe going the other direction. But just high level what you're seeing?

So competitive capacity. We're not really seeing anything significant in competitive capacity as far as the change in trend. We tend to float around 5% competitive capacity growth in our focus areas and that is more or less what we are seeing right now. It ebbs and flows by city. I think if you look at the network strategy we communicated over the last seven or eight years, we have been very, very consistent as far as how we want to develop our network. We have six focus cities. The majority of the growth is going to three of them. It's frequency engaged and Boston and Fort Lauderdale and it's gauged in New York due the slot resections. And we are steady she goes in that course, we're very happy with the results we're getting. We obviously monitor competitive capacity very, very closely, but we're not really seeing anything in that space that’s concerning us at all.

Helpful thank you.

Your final question comes from Joseph DeNardi [Stifel Nicolaus]

Yeah, thank you very much. Robin just on the decision to set-up the organizational structure of the travel business and to ensure that it's not under invested in. There are a number of airlines outside of the U.S. have applied that same logic to the loyalty program. So can you just talk about why that is the right decision to make for this travel business and why it is not the right decision for the loyalty program.

Thanks, appreciate the question. I’ll may be – take the travel part off and I’ll get Marty to answer the loyalty piece because I know it's something he thinks about a lot. Look, I think that we had great success with our ancillary revenue growth. But I'm the first admit that when I think about the power of our brand, that there is more opportunity. So by creating this sort of a separate entity to focus on that, I really do believe it can be another building block in terms of as we continue to drive our revenue initiative. And it's not lost to us in terms of how other airlines have started to think about loyalty and customer data and things like that. So, Marty, I'll slide it over to you maybe on that piece.

Sure thank Robin. So Joe let me start by saying, a lot of this comes from an assumption upfront on what is core and non-core to the airline. We think there are a lot of opportunities to leverage our current customer relationships through travel products with some more dedicated resources, which we're very excited about. We have resources dedicated to loyalty. And I think if you look at their ancillary performance in 2017, it's a good example as far as how we've been able continue to drive the incremental contribution from royalty. But at the same time I think, we also look at that customer relationship and the customer data as being really core to JetBlue. We do not look at customers like a wallet to be extracted from. I mean, this is customer relationship is really, really important to us. And I would never say never about changing something structurally with loyalty but it is definitely something that we think that, that core relationship is central to what JetBlue is about. So it's definitely not in the radar right now.

That’s fair and Marty just one last one. You said $27 in ancillary per packs in 2017. You did guys do about $10 per passenger, I think, in bag and change fee revenue just based on what you reported to the DOT. You set another $6 from the Even More product. I mean, are there other buckets in their other than the card that we think about or is the remainder that per passenger primarily the card revenue.

Well, Joe we’ll take it offline and try to go through it in detail. I will say that we look at every individual element of that ancillary line as an opportunity to provide better service to our customers, better products to our customers and also increasing margins. So I think Travel products is one example, but there are many more. And we'll follow up after.

Alright, I gave it a shot, thank you.

Thank you.

And that concludes our fourth quarter 2017 conference call. Thanks for joining us. Have a great day.

And again, that does conclude today's conference call. We thank you for your participation and you may now disconnect.