JetBlue: Despite April Disruptions, Profitability Expected in June

JetBlue started April with a bumpy takeoff. It had already begun to reduce its May schedule and planned further summer-season capacity cuts, while bad weather and other factors caused the carrier to cancel hundreds of flights through April 10, according to a CNBC report.

Beyond weather, pilot attrition, training pressures, air traffic control disruptions and crew shortfalls contributed to the carrier’s around 90 percent completion factor in the first three weeks of April versus its historical 99 percent average, according to JetBlue.

“We’re reducing capacity even further as we plan more conservatively for the summer,” JetBlue CEO Robin Hayes said Tuesday during JetBlue’s first-quarter earnings call, while noting the potential of the carrier’s Northeast Alliance with American Airlines.

“We absolutely recognize the short-term margin impact of the April disruption and the operational investments we are making for spring and summer,” Hayes said, “but they are essential to restore all of our customers’ confidence and drive the higher revenue mix enabled. by the [Northeast Alliance] through the better schedules and benefits that will appeal to corporate and high-value leisure customers. “

And yet, the airline made a competing bid to acquire Spirit Airlines in the middle of its April disruptions and expects to be profitable in June, according to JetBlue CFO Ursula Hurley. Further, “the strength in bookings is driving revenue in the second quarter that is expected to be up 10 percent to 15 percent compared to 2019, which will set a new high-water mark for quarterly revenue in JetBlue’s history,” Hurley added.

The company would not comment on the Spirit offer other than for Hayes to say, “We are very pleased by the determination of the Spirit board that our offer could reasonably likely lead to a superior proposal in recognition of the compelling value for all stakeholders that JetBlue has offered. ” He also noted that the outlook presented Tuesday did not take into account a possible transaction with Spirit.

As for the operational glitches, “Severe weather compounded by [air traffic control] challenges particularly across Florida and the Northeast have had an outsized impact on our operation where 95 percent of our daily flights operate, “JetBlue president and COO Joanna Geraghty said.” Despite being well on track with our summer operational preparations, we have re-evaluated our capacity planning assumptions for the summer in light of these challenges. “

Still, the company continued to see corporate demand return during the first quarter. JetBlue exited 2021 with the segment about 50 percent restored to 2019 levels, and those were about 75 percent restored at the end of the first quarter, Geraghty said. “We expect a continued acceleration in Q2 and beyond, especially as we drive improvements in our operation,” she added.

JetBlue plans to maintain its hiring pace for the summer despite the lower capacity outlook, to get ahead of supply chain pressures by pre-purchasing key supplies and additional ground equipment for airport and technical operations teams and to make infrastructure investments throughout its network, Geraghty said .

Hayes noted that the company was reducing its flights in and out of Newark, “so we do have slightly less dependency in the New York airspace than we did before.” But he added that JetBlue also has plans to ramp up to 300 flights per day in the New York area, compared to about 200 pre-pandemic daily flights, “to ensure we have more capacity to recover quickly from weather events.”

Performance and Outlook

JetBlue reported $ 1.74 billion in total revenue, a 140 percent increase from the $ 670 million reported one year prior, and just 7 percent shy of 2019’s $ 1.87 billion. Total passenger revenue for the first quarter was $ 1.6 billion. The company reported a quarterly net loss of $ 255 million, compared to Q1 2021’s loss of $ 247 million.

First-quarter capacity declined 0.3 percent versus Q1 2019, compared with guidance that capacity would decline 1 percent. The company’s guidance for second-quarter capacity is between even and 3 percent growth compared with 2019. Full-year capacity growth now is projected in the range of even to 5 percent compared with 2019.

On Tuesday, sustainable aviation fuel supplier Aemetis announced that JetBlue had signed an agreement with the company to acquire 125 million gallons of blended SAF to be delivered over 10 years. The “blend” will be 40 percent SAF and 60 percent Petroleum Jet A. The value of the contract is approximately $ 530 million, according to Aemetis. Delivery is scheduled to begin in 2025, and it will be used for flights out of San Francisco International Airport and other California airports.

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