JetBlue stock plunged over 20% on Monday, as it worked to raise $3 billion in fresh capital. $2.75 billion will be backed by its TrueBlue program – which largely means the expected future earnings from its credit card partnership. Meanwhile they’re also raising $400 million in senior secured notes due in 2029. Some of that money will be used to pay down other debt.
All three big credit ratings agencies expressed concerns about the company today amidst this news.
- S&P downgraded from “B” to “B-” noting that they will continue to carry too much debt and are expecting to bleed cash through next year.
- Moody’s downgraded from “B3” from “B2” on the belief that profitability needed to sustain strong credit is years away. They forecast the airline will burn $2.2 billion this year and $1.4 billion next year.
- Fitch re-affirmed JetBlue’s B rating but suggested that an inability to improve financial performance soon could drive future negative ratings.
The airline earned $25 million in the second quarter, and even that was a surprise. It should be their strongest quarter. The airline has underperformed for 15 years, and investors and analysts are fed up. Their CEO is gone, and they’ve been bringing back some veteran talent. Their new plan involves shrinking unprofitable flying – gutting Los Angeles and making cuts to transatlantic flying, as well as eliminating routes and cities. They have already announced they’re pulling out of 15 cities entirely. They’ve also deferred delivery of 44 Airbus planes.
The new focus is leisure and visiting friends and relatives traffic, plus cross country flying from their strongest cities of New York JFK and Boston as well as Florida. They will continue their Puerto Rico and Caribbean flying. But they are no longer chasing corporate travel.
Cutting money-losing activities matters, but their plan to return to health lacks specifics. They promise to improve reliability, but it’s not clear how. They’re going to add a domestic first class, but that’s years away. And they’re going to cut costs further in unspecified ways.
Ultimately JetBlue had a brand and franchise, but over the past 15 years they’ve made themselves into more of a smaller clone of their major competitors like American, Delta and United. They do have more legroom in regular coach like Southwest, and free wifi like Delta. They also have seat back entertainment screens like Delta and increasingly United.
They’re the smaller player and they’re deferring growth, their frequent flyer program isn’t as compelling for redemptions as United’s, isn’t as compelling for elite frequent flyers as Delta’s, and isn’t as compelling for either as American’s. And the federal government tanked their strategies to partner with American and to acquire Spirit. Carl Icahn is breathing down their neck.
Gary…you just recommended quickly converting AMEX points to Qatar and then booking Jetblue to Europe. Doesn’t that run the risk that the Qatar points will be stranded in the event Jetblue cuts their European flights?
Airline financial performance : pay the execs the big bucks and bonuses , then increase the debt . That’s also the Brandon-Camal-a method of government .
Personally I think the problem with all domestic airlines is that they are all trying to be the same. Everyone is chasing the high rollers and flyers that don’t give a shIt about how much a ticket cost. The larger airlines should have left ecomony alone and the smaller airlines should have been the economy airlines. But all trying to chase the same customers makes it difficult for all of them. Expecially today with customer service and loyalty suck.
@Robert … The larger airlines need smaller airplanes , and bigger seats . The smaller airlines need less destinations and less frequency . Reduce the availability and therefore increase the profit .
Always trying to be different.
Ha Ha Ha!
Robert – agree with Alert, the legacy airlines can’t be profitable if they just have 30 or 40 business travelers and first class passengers per flight. They need economy passengers (as well as credit card revenue) to cover their fixed costs.
They should merge with Alaska, if that’s allowed
Sounds like they need to lure Vasu Raja off the sidelines to really push them in the sh*tter.
DunkinDFDubya,
DunkinDFDubya, sorry site won’t show my emojis. LMFAO!!!!
AA and B6 need to merge ( although it probably would never be allowed). B6 needs a partner to survive and AA needs NY.
Thanks Biden economist and Biden / Harris administration to block the NEA with AA this is the consequence now
Another victim of Wall Street analyst short termism. 15 years ago they all applauded their adding junk fees for the first and second bag and making the experience ordinary through “densification”. That was the last time they financially performed well, as they lost all differentiation and brand value. And with no brand goodwill, entrapping people for tens of hours in planes during a snowstorm sealed the deal of future underperformance.
As JetBlue tried to become a copy of the US legacy majors by ditching the differences that made it special compared to other US airlines, it failed to do what else it would take to get the airline to be more like the other airlines in terms of financial performance. For example, JetBlue has long seemed weaker with feeding its hubs with connecting traffic than the US legacy majors.
Could not agree more with the last 2 posts. Ever since they brought in a CEO that made pleasing Wall Street its top priority it has been down hill. Boeing, AA Jet Blue all have the same thing in common. Wall Street priority CEOs that have destroyed the company.
I travel a lot for work. Years ago, I used to use JetBlue all the time. I now only use JetBlue occasionally, and use mainly Delta. Why? They hardly go anywhere you need to go for work. They discontinued most of the routes and/or the frequency. They go to Dominican Republic, to Haiti, to every Caribbean vacation spot. Did someone tell them, those are all booked way in advance and are some of the lowest fares? The way you make most of your money on an airline is last minute travel with repeat customers, not someone flying every few years to some vacation spot or to visit their Latin American family.
Be advised: Qatar program super difficult to work with (and $) in the event of even minor changes. Booking tech seems ok at first glance, but after three hours of my life just yesterday of being an involuntary beta tester, I can testify otherwise.
Only go after B6 (or any other) tix you are willing to throw away.
The economy is pausing, PAX will be more discretionary. Maybe now is a good time to hoard cash via the loyalty program.
My wish list would be for lounges in NYC, BOS, SJU, & FLL. Should AA win its appeal, the NEA would provide needed incremental revenue.
Just sticking with the East Coast will only get you so far. Need a battle cry of “Go West” in the next few years or be subject to purchase by another airline. Should the Democrats win, then its another 4 years to get your battle plans in order. Should the Republicans win, get ready to be merged or go buy another airline (Breeze??) to fend off the suiters.
Lots of chess pieces in play in the next few years.
Steve is 100% correct. It’s all about pleasing Wall St. The recent facts prove it.
” They do have more legroom in regular coach like Southwest, and free wifi like Delta. They also have seat back entertainment screens like Delta and increasingly United.”
This is factually incorrect. JetBlue has had more legroom in the base product (even in the least expensive seats), than Southwest and other US carriers. 32.3″ versus 31.8″ JetBlue had live television and Sirius XM almost 20 years ago, long before anyone else had it. And to be sure, they also had free wi-fi (branded Fly-Fi), many years before Delta.
So while their operational performance has suffered mightily, and they’ve suffered the indignities of a mega-meltdown, like their peers have (the most recent being Delta and Southwest, in reverse order), Leff should at least attempt to be precise in his assertions. Then again, this is more of a credit card blog and not a news site.
Airline stocks haver never been a good investment, nothing new here.
@ Tony N:
You must be thinking of Bob Crandall, former chairman of AA who stated:
“I’ve never invested in any airline. I’m an airline manager. I don’t invest in airlines. And I always said to the employees of American, ‘This is not an appropriate investment. It’s a great place to work and it’s a great company that does important work. But airlines are not an investment.'”
They deserve the trouble they are having. They have the worst customer service and they make communication impossible. I recently flew Mint from NYc to LA because I had heard so many good things about it. I had plenty. Of miles on other airlines but wanted MInt. Going over there was no entertainment, perfunctory service, and the seat which red¡ined was like a stone slab. Coming back after I checked in I was told shortly thereafter at the gate that the flight was cancelled . Since it was a weather issue Jetblue extended no compensation, no vouchers, no meals, no hotel . I had to find my own bag and pay an additional $600 to stay overnight etc. oh, a
So they have no lounges. This was supposed to be premium service. . They need total reorganization and a recognition that their health lies with the good will,of the passengers. Mine has been totally destroyed.
It seems that JetBlue has a major mess to clean up
Nit to pick, but have you seen United’s redemptions lately? Ouch.