JetBlue weighs deeper cost cuts as sales outlook falls short

JetBlue Airways Corp. is evaluating deeper cost cuts, delaying aircraft and reworking its flight network in an effort to return to profitability in the wake of the near-collapse of its planned purchase of Spirit Airlines Inc.

The initiatives, detailed Tuesday in the carrier’s latest financial report, show how incoming Chief Executive Officer Joanna Geraghty aims to bring clarity to JetBlue’s uncertain future. The company forecast a bigger decline in revenue than Wall Street had expected this quarter, even as JetBlue’s sales and earnings beat estimates for the end of last year.

The report highlights the challenges facing many US carriers, including persistently high costs, uneven domestic travel demand, sluggish supply chains and maintenance delays. JetBlue joined Southwest Airlines Co. and Alaska Air Group Inc. in slowing 2024 growth plans in response, with flying capacity down in the low-single digits this year.

JetBlue’s shares fell 6.1% at 9:31 a.m. in New York. The stock had tumbled 31% over the past 12 months through Monday.

The quarterly report was the final one for CEO Robin Hayes, who said earlier this month that he would step down Feb. 12. Geraghty will become the first woman to lead a major US air carrier when she assumes the post.

JetBlue, which has long been hindered by high costs, is taking “aggressive action” to return to profit, Geraghty said in a statement. It’s evaluating deeper cuts beyond its existing expense-reduction plan that it says will provide savings of as much as $200 million by the end of this year. It has also begun $300 million in steps to boost revenue, including shifting more flights to leisure destinations like the Caribbean and the Bahamas and expanded flights to Europe to capitalize on current demand trends.

Revenue will fall as much as 9% this quarter from 2023, the company said. Analysts expected a 5% slide on average in estimates compiled by Bloomberg News. JetBlue didn’t offer per-share earnings guidance for the first quarter, a change from its usual practice. Non-fuel unit costs will climb as much as 11%, including spending for a new pilots’ contract.

“The 2024 guidance looks mixed, with decent full-year revenue expectations, but an ex-fuel cost guide that looks a little weighty,” Stephen Trent, a Citi analyst, said in a note.

Deal Uncertainty

The report largely sidestepped mention of the Spirit deal, which remains in limbo after a federal judge this month blocked the tie-up over antitrust concerns. The carriers had pledged to appeal the ruling before JetBlue last week warned that the merger agreement could be terminated, sparking speculation that JetBlue may be ready to walk away.

On Tuesday, JetBlue and Spirit asked the court to fast-track the appeal.

As part of its cost-cutting efforts, JetBlue reached agreements to defer $2.5 billion in planned aircraft spending to 2028 and later from original plans for the expenses in 2024 through 2027. In addition to shorter term savings, the changes will provide a more consistent level of aircraft deliveries through the end of this decade and flatten annual capital spending to around $1.5 billion, the carrier said.

A manufacturing defect in some Pratt & Whitney engines has grounded seven JetBlue aircraft, a number that will rise to between 13 and 15 out of service by year-end. The problem is raising costs at a number of US carriers, which expect to be compensated by the engine maker, which is owned by RTX Corp.

JetBlue is resizing its operations at New York’s LaGuardia Airport, where it had added flights under an alliance with American Airlines Group Inc. that was dismantled after a judge ruled last year that it violated federal antitrust laws.

JetBlue’s fourth-quarter loss was 19 cents a share, compared with analysts’ average estimate of a 27-cent loss. Revenue was $2.33 billion, while expectations were for $2.29 billion.