Good morning. My name is Felicia. And I would like to welcome everyone to the JetBlue Airways Fourth Quarter 2018 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions]. I will now like to turn the call over to JetBlue's Director of Investor Relations, David Fintzen. Please go ahead.

Thanks, Felicia. Good morning, everyone, and thanks for joining us for our fourth quarter 2018 earnings call. This morning, we issued our earnings release, our investor update and a presentation that we will reference during this call. All of those documents are available on our website at investor.jetblue.com and have been filed with the SEC. Joining me here in New York to discuss our results are Robin Hayes, our Chief Executive Officer; Marty St. George, EVP, Commercial and Planning; Steve Priest, our EVP, Chief Financial Officer; and Joanna Geraghty, our President and Chief Operating Officer. This morning's call includes forward-looking statements about future events. Actual results may differ materially from those expressed in the forward-looking statements due to many factors and, therefore, investors should not place undue reliance on these statements. For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to our press release, 10-Q and other reports filed with the SEC. Also during the course of our call, we may discuss several non-GAAP financial measures. For 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 would like to turn the call over to Robin Hayes, JetBlue's CEO.

Good morning, everyone, and thank you for joining us. I'd like to start with my thanks to our 22,000 crew members across our network for all their hard work through 2018. I'd also like to congratulate our crew members for operating at the airline at a 100% completion from December 10 through January 11th. This is an impressive achievement as we safely delivered our customers to their destinations during one of the busiest times of the year. We also want to acknowledge the hard work of our federal government partners, especially our partners at the TSA, Customs and Border Protection, and our partners at the FAA and air traffic control for their continued support and professionalism during the shutdown. At this point, we've not seen a significant impact to our operations nor our bookings. However, we are increasingly concerned about the shutdown's consequences for convenient and efficient air travel and for the economy overall. We are close to a tipping point as many of these employees are about to miss a second paycheck. Our crew members and customers are likely to face extended security delays -- extended security lines, flight delays and even cancellations. And the longer this goes on, the longer it will take for the air travel infrastructure to rebound. Our nation believes they must find a resolution to this stalemate today. We will be closely monitoring the events and will provide any updates if needed. During 2018, we continued to work on our plan to strengthen the foundation of JetBlue and position the company to thrive. In bringing this very busy year to a close, I could not be proud of our accomplishments. Just to mention some of them. We executed on our cost guidance, taking a strong step towards our 0 to 1% CASM CAGR goal,…

Thank you, Robin. Let me start with the capacity outlook on Slide 6. During the fourth quarter, our flown capacity growth was 9.3%, which is above the midpoint of our guidance range of 7.5% to 9.5% due to strong completion in the quarter. We call it in the fourth quarter of 2017, flown capacity was 2.5 points above scheduled growth due to the impact of hurricane in 2017. For the first quarter 2019, we expect capacity growth between 7.5% and 9.5%, and continue to plan for 5% to 7% growth in 2019. Our sweet spot for growth remains in the mid to high single-digit range. And our target in 2019 remains to be on the low half of that range. To be clear, we continue to manage our business out of the assumption of higher fuel prices. We believe that the at a mid to high single-digit growth rate, we can continue to build and strengthen relevance in our focus cities, while still growing our margins. We aim to sustain a solid revenue trends and convert capacity growth to EPS as we improve our CASM ex-fuel performance. Moving to our network. Early this month, we implemented the second phase of our network reallocation building block as discussed at Investor Day and redeployed underperforming routes. We expect this building block will support our RASM and further improve margins in our focus cities. As a reminder, the January network changes followed redeployments from Long Beach to transcon markets which took effect during the third and fourth quarter of 2018. During the fourth quarter, we also continued upguage routes from our 2 largest focus cities, New York and Boston, with a margin accretive A321 all-core aircraft and our newly restyled A320s. We are delighted that once again and for the 7th consecutive quarter,…

Thank you, Marty. Good morning, everyone. I'll start on Slide 9 with some highlights from the fourth quarter. Revenue was $2 billion, up 12% year-over-year. Adjusted pretax margin was 10.4%, up 0.7 points from the fourth quarter of last year, mainly due to non-fuel cost control and strong revenue performance through the quarter. We reported a $0.55 GAAP EPS. Adjusted EPS was $0.50 per diluted share. This includes onetime costs related to the E190 fleet transition and the recently signed pilot contract as well as an $18 million benefit principally related to the Tax Cuts and Jobs Act that was signed into law at the end of 2017. Our adjusted effective tax rate this quarter was 24%. We expect our effective tax rate to be approximately 26% for 2019. Moving to Slide 10. Executing on our cost initiatives remains my #1 business priority. Exactly 1-year ago, we laid our 2018 cost guidance, including the second half inflection in our underlying CASM ex-fuel growth. I'm delighted to say, we exceeded our plan and reported underlying CASM ex-fuel growth below the midpoint of our full year guidance. We successfully mitigated, added unit cost pressures from lower capacity, executing our cost-reduction efforts according to plan in both the first and second half of 2018. I'm pleased we ended our fourth quarter below our initial guidance. The team did a phenomenal job managing through a very active 2018 winter, mitigating capacity adjustments to manage ATC risks and higher fuel prices, and continuing to execute our structural cost program. I want to thank all teams within JetBlue for their hard work and finding additional opportunities to mitigate these pressures and deliver their budgets. Moving on to Slide 11. During the fourth quarter, CASM ex-fuel decreased 3.6% year-over-year, below the low end of our guidance of…

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

[Operator Instructions]. Our first question comes from Jamie Baker of JP Morgan.

Can you help us better understand the degree to which your assumptions on IROPs influence the ex-fuel CASM outcome? So if I think about the 1.5% to 3.5% ex-fuel CASM guide for the first quarter, is it a foregone conclusion that if we don't see another flake of snow in the Northeast, then capacity will come in at the high end and the 1.5% is achieved. I'm just never really understood the degree, if any, that how much influence the weather really has on that cost range and how we think about that as we live through the weather ourselves as the quarter moves on, any color?

Hi, Jamie. Steve here. I'll pick this one up. Jamie, we are very used to inclement weather during the winter in the Northeast based on our focus cities and the network that we fly, and we generally budget for a typical winter in the Northeast. So when you think about a normal winter with a number of seasonal storms, that's what we plan for and that's what we budget for. The only time you would see us guide anything differently and change capacity guidance, if we saw a prolonged challenging winter and then you would see us call out a specific item. But I think what you should think about is, it is a pretty standard winter. We have normal weather patterns that we'd expect. That's all included in our capacity guide and our CASM guide that we put out for quarter 1 of 2019.

So that would imply sort of a midrange outcome if we have one of those typical winters more or less?

Yes, absolutely correct.

Okay, that helps. And second question, On Fare Options 2.0, how should we be thinking about execution risk? I mean, 1.0 went smoothly, but it didn't introduce any lower price points. 2.0 specifically does identify lower price offerings. I realize you may have some of those fares out there and ultra low-cost carrier overlap markets already. I realize basic economy has been accretive for others. I'm just trying to assess how likely it is that 2.0 for JetBlue is similarly accretive. Also does it go live systemwide all at once or does it roll out in phases?

Jamie, it's Marty. Thanks for the question. We've looked at the execution of these different price points by other carriers, and we're very comfortable with our guide that we gave at Investor Day as far as the benefits of Fare Options 2.0. From an execution risk perspective, I'll speak from the economic side, which is, I just love having more price points with the [indiscernible] segment, the customer base. I was very successful in Fare Options 1.0 as far as how we created the bundles that would help customers get the most value. And I'm looking forward for different combination in 2.0.

And you will roll out all at once?

Well, again. I think going back to what we had said earlier, it's really a fourth quarter '19 event going forward and it's like most initiatives of JetBlue. We'll test and learn in individual markets, just like we do with pricing today. It's sort of normal course of business for us, just with different bundles.

Your next question comes from Duane Pfennigwerth with Evercore.

Just on your JetBlue vacations that you've split off. Can you give us an update on where you are in ramping that revenue backup? And what the longer-term opportunity you see with respect to attach rates, et cetera?

Duane, it's Robin. I'll take that. I think as we highlighted previously, we were challenged in 2018 with a cutover that we had in the middle of the year. We definitely had some issues with that, we were transparent. The good news is that we've now cycled against that and we are sort of back as we look at, sort of, Q1, 2019. We are back where we were and can look to build forward. Andres, who is our president of our tech -- travel products has now hired his team, they've taken some space. There is a number of different sort of new businesses that we're working on, and we're very comfortable that we're in a trajectory to hit the numbers that we shared as part of our 2020 EPS goal.

And then, sorry, could you update us on where attach rates are today and where you think you can get them to?

So we talked before about sort of our attach rate in very low single-digits. Of course, the 1.5%. I think, we said 1.4% at Investor Day. So you should take 1.5% as rounding, Duane, and not sort of me signaling a incremental improvement already. But I do think that -- now that's an average, and so on certain Caribbean markets the attach rate is higher than that. But that's where we see the opportunity and certainly the focus of the team in the first year or 2 is to increase those attach rate. It's very low hanging fruit. We know the customers. We have the customers. They're buying this product today. We just have to do a better job converting them over to JetBlue product other than the flight. And so that's what the focus is on, we've seen upside to that attach rate.

And then just for my follow-up, and I apologize if you said it already. But how many A320s are restyled currently? And how do you see that progressing over the course of the year? So what's that number by the fourth quarter of this year?

Duane, it's Steve here. As of the end of the year, we completed 10 restyled aircraft. We now have 11 done. We got 4 lines running. And by the end of 2019, we will have completed an additional 60 aircraft. So you can expect 17 total by the year-end.

Your next question comes from Catherine O'Brien with Goldman Sachs.

Maybe a question just on the complexion of your capacity growth for this year. What's really driving that? Is it gauge, destination, the combination of both? And then maybe some color on how to think about that on domestic versus International would be helpful?

Cate, it's Matty. Thanks for the question. So I think if you look at our 2019 growth and especially in light of some of the fleet plan changes that Steve announced little bit earlier on the call, our growth this year is definitely focused on gauge and to a lesser extent stage. And from a direction geographically, still very much focused on Caribbean, Florida and transcon. I will mention that we took our last Mint configured 321 at the end of last year for a while. This year, the planes we are getting will be the all-core configuration. I think, as Steve had said earlier, both of those plans are our highest margin airplanes and very happy with how Mint has grown. I think we're going to take some of the all-core planes for a while before we switch back to more Mint at some unannounced point in the future.

Okay, got it. And maybe one for Steve. So what are the biggest buckets left on your cost program to get from $199 million run rate you've locked in now to the full $250 million to $300 million? And when should we expect update on these main items?

Catherine, thanks very much for the question. I firstly wanted to say, I've been delighted with the progress that we've made. And I just refer back to my prepared comments where we basically had $200 million in terms of run rate for 2020. And there's a 160 initiatives that we've completed all are underway. We continue to execute against those significant items. And if you refer to Page 13 of our deck, you can see a little bit of color on those. I think the 2 -- a couple of the bigger areas that we continue to progress forward with, one is, I suppose, one of the final pillars of technical operations, which are the RFP that we've got out on the V2500 engines that power our 193 Airbus aircraft, and also around components where we will be doing more work as we progress through 2019. The other area continues to be excited about is in distribution. We've told you before on our earnings calls and with investors about the CSS RFP that we've got going forward, so that's well underway. And then from the core pillar, we've invested heavily in our outsourcing -- our strategic sourcing team and the leadership, and they've made tremendous progress over 2017 and 2018, and there's more to come in 2019 as we go through that. So I am confident in the glide path that we have to get to the $250 million to $300 million. There's plenty of initiatives to go, and we're well on track in terms of going forward.

Your next question comes from Michael Linenberg of Deutsche Bank.

Two questions here. I guess, first to Robin. Robin, as you think about launching transatlantic, and I think 2019 is maybe the decision year for that or at least as it pertains to, I guess, the longer haul version of the Airbus narrow body. As you think about that and you sort of see some of the commentary coming up from some of the other carriers talking about may be some softness that we're seeing in transatlantic and then some of the data points that we're hearing from there as well, as well as the geopolitical issues. Does that give you pause? And I'm also sort of asking this within the context of hitting that $2.50 to $3 EPS target for 2020. You sort of put all that together. Does that give you pause? And if you do consider the Atlantic, it's something that's going to be a 2022, 2023 phenomenon? How do you think about it given just all those moving parts?

Mike, thanks for the question. As I said before, ultimately what will guide us is margin. And when we talked about our transatlantic thoughts, it's very much geared around how we think about Boston and New York, how we build out relevance. And some of these the European markets like London and now some of the largest markets in Boston that we don't serve. And so that is the context. But we really take that decision in the same way we look at any other new route that we may add at any important time. What is the choice that's going to drive the most margin. Obviously, if we do take a decision to fly to Europe, there are number of other issues that we need to work through in terms of airport access and ETOPS certification, those things take time. Now I expect that during the course of the year, we will sort of communicate a decision on most of these, not ready to say anything now. Clearly, we're mindful of sort of economic factors that come. And but these things do tend to be cyclical. And I think if we were to fly transatlantic, the opportunity we have is to offer a very strong premium offering and at a much lower fare than people are paying -- a significant number those customers are paying today. And as we saw on the Mint -- when we launched Mint on the transcon in 2014, that in itself has a stimulation effect on the market. So all of those things that will put into a big part, we're constantly evaluating them. But even if we were to go, it would still remain a relatively small part of our overall ASM and cost structure.

Okay, great. And just my second question to either Robin or maybe even Joanna as it relates to ops. So I think over this past week, we had storms come through in Northeast. And I noticed, I think, JetBlue basically canceled all of its Boston on one of the days and the others did not. I mean, I think most other carriers tried to maintain some semblance of a schedule, but I know it was still bit of a challenge. The fact that your -- for all intents and purposes, the North Eastern centric carrier, do you -- when weather comes through, do you have to take a more conservative approach given that a lot of your traffic, a lot of your assets flow through Boston and New York. And is that what drove Boston, the shutdown that day or was it just somebody moved maybe a little bit more quickly and maybe afterwards they realized they probably were too conservative in dealing with it?

Thanks so much for the question. So we plan our cancellation strategy based upon the forecast known at the time. And that's what guides us in those decisions. And based on the forecast for the Boston area, we believe the decision to cancel our Boston plane on Sunday was the correct decision. And I think if you actually look at some of the challenges other carriers faced when trying to operate portions of their schedule, you saw delays that exceeded 8, 9, 10, 11 hours. And from a customer perspective, that's a rather unpleasant experience. So we plan our operation based on the forecast. We plan our operation based upon the resources that we have. Robin and I were actually up in Boston over the weekend and into Monday, so we saw firsthand. And I think if you look Boston, the Boston struggled with the recovery given the weather conditions that continue in terms of some of the icing challenges. So other carriers cancel a lot on Sunday as well. Unfortunately, a lot of those ended up being real time, which is not optimal for anybody.

Michael, just to bit on Joanna's point because we were up there. Monday was actually the biggest challenge, because it was slow to get the field open and back to running. And during the day, we had 7 hours ground delay programs. And so this does become a judgment call as to whether you should cancel in advance, and we protect customers into other flights or whether you want them to come to the airport and experience long delay. So we have a very experienced team looking at that. I think we've been through this more than anybody else because of our geography, and our team overall did a very, very good job balancing all of these factors.

Your next question comes from Brandon Oglenski with Barclays.

I guess, Robin, when we look at the outlook here through 2020, there is a lot of positive aspects to the story here on the revenue side, the cost side. But -- and I don't want to focus on the single quarter. But the metrics here, with RASM potentially down, CASM up, maybe a little bit higher than we initially thought. I mean it just feels like the initial step here is in the wrong direction. So how do we reconcile this? And do we think we get a lot of this revenue back in second quarter, and so should just view this more as timing than anything?

Brandon, I want to throw that out to Steve because he hasn't answered a question in a few, and he's thinking to answer it. Steve?

Brandon, a couple of things. From the RASM standpoint, let's not forget about the Easter and Passover shift that moves 2 points from quarter 1 to quarter 2. So the Q1 RASM side of the house is purely timing. And Marty, soft of -- you heard Marty's prepared comments earlier about the current environment. I think it's probably worth spending a little bit of time explaining the CASM trajectory for the full year on what's happening in the quarter because candidly, it is a little bit of choppiness. The first thing I do want to say is that I have been very pleased with the impact of structural cost program has had on our underlying cost performance. And when I do look at Q1, it is in line with where we need to be to hit that 2019 plan, which delivers underlying negative CASM and keeps us on the path to our 0 to 1 CAGR commitment that we've laid out. The choppiness is really around the time and materials elements for our Airbus engines and that maintenance CASM does move around from quarter-to-quarter. And so the savings that you see on a quarter-to-quarter basis are not equally shown. I would encourage you to take a look at our 2018 unit maintenance costs on a quarter-by-quarter basis and see how they progressed as a reference point. And that's why we laid out both Q1, H1 and a H2 guide for both 2018 and 2019. As we showed in Slide 10 of the deck, which really clarifies that sort of choppiness. So I would encourage you to look at H1 versus H2 from that standpoint for each quarter. It's exactly the process we laid out in 2018, and it's exactly how we delivered. And you look at 2019, and we're doing exactly the same. So I'm very, very pleased with what we delivered in '18. I'm very pleased with the cost trajectory for '19 and the guide outlines exactly the progression that we're going to make as we go through the year.

I appreciate that, Steve. And I guess, maintenance was a big portion of that tech ops savings that you guys highlighted even 2 years ago and recently at the analyst meeting. Do you believe that you have the contracts in place to deliver on those 2020 goals and to get CASM lower?

We have, I would say, disproportionately focused over the last 18 months on maintenance, firstly because it's a significant cost for the business. And as we laid out at Investor Day, we have seen significant percentages of CASM increase over a number of years. The journey is not over yet, Brandon. Again, we made significant progress both through the initiatives we've done with the NEO's and the A320s. And when we strategically been looking at those, we have been bearing in mind our existing fleet be it with our CF34 engines on the E190s and our V2500 engines on the Airbus fleet. The good news on the Airbus fleet and actually on the GE fleet as we go forward. We have not only been using some leverage from those bigger deals, but we're more been using a proportion of used materials and some generic parts, which we call them PMA. In addition to looking at both scope optimization with the MRO's who are servicing those engines. So there is more to come. And we are, as I mentioned earlier, in a large RFP for the V2500 engines going forward, which is nicely on track. As I've said before, we're not going to rush it for our quarter-to-quarter CASM savings because we are resetting the cost trajectory for the long-term. But look at 2018 maintenance CASM. Look at what we're laying out for maintenance CASM for 2019. I'm confident in the path, and I'm confident in the team to execute what we need to deliver.

Your next question comes from Kevin Crissey with Citi Group.

My line cut off, so I apologize. I doubt this one is a repeat. Maybe it's for Marty or Dave Clark, if he is in the room. Talking about revenue management evolution, I see you have hiring for a position with NextGen revenue management tools as part of the, kind of the essential responsibilities as well as something called revenue integrity robotics. Would you be able to talk about kind of the things that you're doing in the revenue management, obviously, without giving away any competitive information?

No. Thanks for the question. Listen, I think from a JetBlue perspective, when it comes to things like pricing and revenue management, we have a different model than most of our competitors. We're primarily a point-to-point airline, carry very little number of [indiscernible] customers. We spent a lot of years working with relatively simplistic models. We started a effort last year -- earlier last year about trying to figure out what the future would be of pricing and again, I think, the one thing I would say is my view of revenue management is, it's all encompassing, its pricing, it's inventory, it's the sizing of what's in our individual customer bundles and we see a lot of opportunities there. I think that because we are not sort of a follower like a lot of our competitors are, and we do our own things, we think there is a great opportunity here. I don't really have any details to announce. I mean, but we are very optimistic about it. I think it's going to be an awful lot of upside. We realize that the world of machine learning and AI is much, much bigger than we would even imagine. We made a lot of progress in that, but we're not going to announce right now.

Okay. I know it's difficult question to answer. Do I remember an RFP for reservation system or something like that or maybe I missed an update on that or maybe I'm just totally wrong.

Kevin, it's Steve here. As I -- unfortunately you dropped off. Catherine had asked a similar question about what the opportunities are. So we don't know RFP at the moment and when we have anything to announce we certainly will.

Your next question comes from Savi Syth with Raymond James.

I just wanted to clarify little bit on the core RASM trends. You are seeing it go from 2.4% to 1.75%, even though you have the kind of network and ancillary contribution. Is that really driven by kind of higher capacity growth because I think last quarter, there was some of the capacity was not real capacity growth, but schedule-to-schedule issues. Just kind of curious about the sequential trend there on the core side?

Savi, it's Marty. I think if you look at the guidance we've laid out and look at our performance across 2018, I think it was actually very consistent with sort of that two handle on our RASM growth. We're basically all cleaned in the midpoint of our first quarter guidance is 2.25%, which is more or less where we've been for the entire year other than in blip in the third -- fourth quarter. We're really not seeing material slowing in our view. This is sort of chugging along just like we thought it was.

That's helpful. And then just on the kind of focus city breakout. I was just kind of curious on the transcon. Mint now is probably kind of fully in there. And I know you called out kind of the trends are strong. Are you seeing kind of unit revenue is that trend accelerating, just similar, consistent or is it decelerating because of the Mint contribution is going to lapping itself?

With respect to our regional performance, the transcon is doing well both in Mint and non-Mint markets. One thing -- the one thing I'll give you about Mint, specifically about Mint premium travel. Our Mint RASM is up 6% and the capacity growth is in the mid-to high-teens. We continue to see amazing demand for this product for any of you who have flown it, I think you've recognized why. You have a combination of the best product in the industry and everyday low pricing and no upgrades. It has absolutely been really great margin builder for us. And frankly, with the service delivery that our crew members provide both on the ground and in the air, we've had no trouble maximizing and using that as an opportunity to get RASM up.

Your next question comes from Hunter Keay with Wolfe Research.

Robin, you guys have been pretty vocal in your opposition to U.S. airlines forming JVs with foreign airlines. And I'm kind of curious if that's going to dovetail with your own International plans. Obviously, I know, the difference in a JV and a codeshare, but does the opposition to International JV, sort of, preclude you guys from pursuing that path down the road when you decide to do it?

Hunter, thanks for the question. Actually, just to clarify, we've actually -- my comments are public in a number of talks I've given. What we said is we're not necessarily opposed to JVs, but they need to have better conditions to promote and allow new entrant competition around it. So if you look, for example, our Delta Aeromexico filing, there were 3 remedies that we proposed that landed up being in the final order. The first was to remove the exclusivity provisions because we believe that those act as a barrier to competition. Now we have other airlines come us, who are in JVs, who want to work with us, but they were unable to do so. Secondly, to put a time line around it because these things get approved and they are forever. Other regulatory authorities don't do that and so, again, we proposed a 3 to 5-year time line, 5-years was actually adopted in the Delta Aeromexico joint venture. And the third thing is, when these joint ventures fly into congested airports, that slot needs to be divested to promote competition. And so, again, we are very clearly with our language. It wasn't sort of a no per se. It was a -- if they continue, there needs to be better protection so that new entrants and other airlines can compete against the JVs and have a chance of being successful. Hope that helps in clarifying comments on that.

That's good. I appreciate it. And then question for Steve. On Slide 13, I'm kind of curious to know why you dropped in this multiyear contract with an IFE system for new aircraft into the distribution bucket. I mean, it's a mistake, and I don't really see it is related unless there is some angle that I'm missing and something unique you guys are doing, maybe something NDC related. But can you help me understand why that is there?

Hunter, great question. We're not being cute at all, Hunter. The key thing for us is that we laid out 4 pillars of the Structural Cost Program back in December 2016. And not all initiatives fits perfectly into each of those pillars. And so you're going to see a couple of outliers in terms of the descriptions. So the last thing we want to do is to stop confusing our investors, and you guys have noticed as analysts. So it is what you would expect it to be. It's an IFE system, RFP that we went out with. We're pleased with the results of it. So nothing to see here. It's just a initiative that happens to be under that specific pillar.

Your next question comes from Helane Becker with Cowen.

So if I look at page -- slide 15 on your balance sheet, and as we think about 2019 and the CapEx you have for this year as well as natural, I guess, debt repayment. So two questions. One, are you thinking of financing aircraft deliveries in the market or are you thinking of paying cash? And two, how should we think about the slide, a year from now, after your CapEx decisions and your other priority investments.

Helane, the first thing I would say is how pleased and proud I am of the shape of the balance sheet. I mean, when I look at the peer set across the U.S., first to have a balance sheet with the 33% adjusted debt-to-cap and sort of between the 10 to 12 liquidity level, it's certainly a place of strength that I would like to see JetBlue in. To be honest, when we think about aircraft purchases, it's our normal course of business. I'm pleased to say in 2018, we delivered free cash flow as you'll start to see in our results when we close the K. We continue to forecast and expect continued free cash flow generation during 2019 and 2020. We will, as we throw cash of the business, we're thinking about the best deployments of that. So really as ever we continue with the balanced approach to capital allocation. You could continue to expect a blend of cash and sort of debt raises to purchase aircraft going forward. But again, I'm very, very happy and confident with the trajectory of JetBlue's balance sheet. And as things progress going forward, we'll continue to keep the markets updated.

Your next question comes from Joseph DeNardi from Stifel.

Marty, it seems like we've heard some positive commentary from other airlines about Latin, South America RASM trends. Just given your exposure there, can you comment on kind of what your expectation from that piece of your business are going forward. The exposure you guys have in Puerto Rico, makes it a little bit unique, but just maybe talk about what you're seeing there and what your expectations are?

Sure. I think when we look at Latin overall, I think the only real story for 2019 is, we have seen some capacity come into the region. It's really -- it's sort of spotty in different places. It's non-hurricane markets or not hurricane-impacted markets, some hurricane markets. Certainly the high point of our performance for several years has been Caribbean. We're very optimistic on our position there. It's a bit of a mix bag now. But again, capacity ebs and flows. So I don't think we look at any of this as a market-term trend.

Okay. And then, Steve, just on the CapEx profile. Can you give us, just based on your current order book, when and what peak CapEx is just given that book?

Yes, it's a very, very good question. Obviously, we're moving through that. We're sort of -- I think what you should think about is how the order book progresses as we navigate through the replacement of the E190 fleet in addition to our organic growth. That delivery schedule is laid out in appendix C of our presentation this morning. I think you can start to see in 2023 and 2024, where that peaks as we transition from the E190 to the incredibly accretive from both the margin and revenue standpoint of the A320s. So it will ramp a little bit. And I think you're probably thinking about peak in '23, 2024. The other thing that we've looked at and we've presented in the deck is, and I alluded to in my prepared comments, was the shift in the NEO aircraft that we're seeing in 2019, 2020. And we've given sort of CapEx guide, which is directional with a minimum of 6 aircraft. So as we continue to work with Airbus as we progress through '19, you'll get a sense of that. But it should in some way peak in '23, '24 as we go forward.

Steve, is the expectation that the business is going to be -- the business environment and the just performance of JetBlue is going to be -- have to be good enough to generate enough cash to support that CapEx or are you willing to use the balance sheet to finance that order book?

As I've mentioned in a previous question that sort of came today, I think it was from Helane about the foundation of the balance sheet for JetBlue is incredibly important. And we're absolutely focused on that. We laid out a very compelling plan through to 2020, and I would encourage you to look at macro associated with that. I was even talking about a fuel environment with 233 jet in it. So we're confident about the path. We'll obviously continue to keep a close eye on the macro environment. The other thing, I would say, we have a significant level of flexibility in our order book. So we'll continue to look at that. And then finally, the key thing that JetBlue is going to drive is margin. And so we will make the right CapEx investments and the right fleet investments to make sure that we're driving both relative and absolute margins going forward. So that plays into the decisions that we'll navigate as we progress through the next few years.

[Operator Instructions]. Your next question comes from Joe Caiado with Crédit Suisse.

First question I have is a follow-up on something Kevin was asking about earlier. At Investor Day, you said you're working on new revenue management tools to help with merchandising, but also to enable some of these new product offerings, the Fare Options, basic economy. And you're also investing in a new distribution capability. Marty, I recognize you've got nothing new to announce right now, but should we think about the timing of the launch of basic economy in Q4 as tied to the successful development and implementation of those new tools?

Joe, thanks for the question. I would not tie those things together explicitly. I would say, we're already doing some dynamic work with some of the modeling that we're doing. So there's not going to be a big bang launch of everything. I would call this an evolution rather than revolution, but we're very optimistic about the opportunities we see out there. And again, I think, I'd go back to the opportunity that we have as primarily direct business, primarily leisure business. We don't really necessarily have to follow some of the same orthodoxy that our competitors do. So we think there is a great opportunity for us here.

Got it, thanks. And then my second question is a big picture kind of long-term also focused on a potential expansion into the transatlantic. So you've got the A220s coming beginning next year, and that's obviously going to replace the E190 fleet. Your comments around potential transatlantic expansion all focused on the A321LR platform, if you decide to go ahead and pull the trigger, I know you're not ready to announce anything. But I was just wondering, given the recent ETOP certification for the A220 and its ability to fly transatlantic, could you consider deploying that platform into the transatlantic market? Do you consider that kind of fleet flexibility as you evaluate the potential for European service or am I just way off here?

No. Thanks for the question. So, Robin, I'll take that. As we said the primary role of the A220 is to replace the 190. And so that is the focus. Most of our thinking around a potential European expansion from our focus cities of Boston and JFK have really been around the 321LR platform. I think in the -- beyond that there may be lots of different opportunities that emerge, but that's so far into the future that at this time we're spending a lot of active time considering.

And that concludes our fourth quarter 2018 conference call. Thanks for joining us. Have a great day.

And that concludes our fourth quarter 2018 conference call. Thank you for your participation.