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    JetBlue Airways Corp (JBLU)

    Q2 2024 Earnings Summary

    Reported on Mar 11, 2025 (Before Market Open)
    Pre-Earnings Price$5.93Last close (Jul 29, 2024)
    Post-Earnings Price$6.21Open (Jul 30, 2024)
    Price Change
    $0.28(+4.72%)

    What went well

    • JetBlue expects to achieve $800 to $900 million of incremental EBIT by 2027 through its JetForward plan, focusing on network adjustments, preferred seating, product changes, and cost reductions.
    • Management is confident that cost initiatives under the JetForward plan will result in unit cost growth better than mid-single digits in 2025, despite flat capacity, demonstrating effective cost control and improving profitability.
    • JetBlue has a strong unencumbered asset base of $11 billion, including about half attributed to its loyalty program, providing financial flexibility to address financing needs and manage debt without letting the convertible debt go current.

    What went wrong

    • Flat capacity growth in 2025 due to Pratt & Whitney engine issues, leading to limited revenue growth opportunities. JetBlue expects "roughly flat year-over-year capacity in 2025" as a result of engine groundings increasing to "mid- to high teens" average grounded aircraft in 2025.
    • Rising unit costs with no capacity growth: JetBlue anticipates mid-single-digit CASM ex-fuel growth in 2025 due to flat capacity and ongoing cost pressures, which could negatively impact margins.
    • Refinancing risk associated with upcoming convertible debt maturity: The company needs to address its convertible notes ("the convert") before they go current early next year, potentially leading to higher financing costs and impacting liquidity.

    Q&A Summary

    1. 2025 Profitability Outlook
      Q: Can JetBlue achieve profitability in 2025?
      A: JetBlue aims to reach a breakeven operating margin for the full year 2025. While it's early in the planning cycle, they are focused on building a plan to achieve this goal, assuming a mid- to high-teens impact from Pratt & Whitney engine issues and a competitive macro environment.

    2. Pratt & Whitney Engine Impact
      Q: How are engine issues affecting operations?
      A: Ongoing challenges with Pratt & Whitney's GTF engines are causing increasing Aircraft on Ground (AOG) counts, expected to reach mid- to high teens in 2025. This transitory issue is frustrating and impacts JetBlue's capacity and scheduling, but they are working with Pratt & Whitney to mitigate damages.

    3. CapEx Reduction and Fleet Deferral
      Q: What are the plans for capital expenditures?
      A: With aircraft deliveries decreasing from 27 this year to 24 next year, CapEx is expected to be a few hundred million dollars lower year-over-year. JetBlue is deferring Airbus A321neo deliveries, which helps offset near-term capital commitments and reduces the need to ground new aircraft shortly after delivery due to engine issues.

    4. Convertible Debt Management
      Q: How will you handle the convertible debt due next year?
      A: JetBlue does not intend to let the convert go current. They have an $11 billion unencumbered asset base, half of which is their loyalty program, and are assessing financing options across markets to address the debt proactively.

    5. Network Realignment for Profitability
      Q: Are you changing your network strategy?
      A: JetBlue is refocusing on profitable routes by exiting underperforming markets and increasing service in East Coast leisure destinations like Boston, Providence, and others. While most significant changes have been made, they will continue to optimize the network to support profitability goals.

    6. Premium Cabin Performance
      Q: How is the premium segment performing?
      A: The Mint and Even More Space products are showing strong demand. Even More Space Revenue per Available Seat Mile (RASM) is up double digits, and premium cabins account for about 25% of ASMs. This growth is driven by high-end leisure travelers and underscores JetBlue's ability to cater to customers willing to pay more for added value.

    7. Unit Cost Expectations
      Q: What are the unit cost trends for 2025?
      A: With capacity growth flat next year, JetBlue targets a mid-single-digit increase in unit costs. They aspire to outperform this target through their JetForward cost initiatives, aiming for improved efficiency despite the lack of capacity growth.

    8. Managing Demand and Capacity
      Q: How do you view current demand and capacity?
      A: Demand remains stable, with the trough performing better than expected and peaks as anticipated. The main issue has been overcapacity in certain markets, but JetBlue is adjusting its own supply. In September, ASMs were proactively reduced by 10% to better align with demand, and fourth-quarter ASMs are expected to be down mid-single digits.

    9. Corporate Travel Trends
      Q: What is happening with corporate travel demand?
      A: Despite pivoting away from a heavy corporate focus, contracted corporate customer revenue is up high single digits. JetBlue continues to serve business travelers but is not designing the network specifically around corporate demand as before.

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