JetBlue Reveals Diminished First Quarter Earnings

On Tuesday, JetBlue announced that it has adjusted its annual revenue forecast. The carrier announced that its revenue will be down between 6.5% and 11.5% in the second quarter relative to last year, more than double the 3.8% drop analysts expected. Annual revenue is expected to be in the low single digits, and sales for the year are expected to be flat.

“We’ve got to get the business back to profitability,” JetBlue finance chief Ursula Hurley said during an earnings call. The company was profitable in March, Hurley said, but it is difficult to know whether it will break even in the second half of the year.

Profitability would mean free cash flow, Hurley said, which would allow the airline to pivot to paying down its debt.

The financial difficulties JetBlue is facing are due mainly to “significantly elevated capacity” in its flights to Latin America. The region is critical to the company, accounting for more than ⅓ of its capacity.

“[Latin America] is a very strong market for JetBlue from a margin perspective,” CEO Joanna Geraghty told analysts. “These headwinds are transitory, and we will continue to double down in this area.”

“We have full confidence that continuing to take action on our refocused standalone strategy is the right path forward to ultimately return to profitability again,” Geraghty continued

JetBlue has continued to struggle since its deal to acquire low-cost competitor Spirit was blocked by a federal judge. JetBlue has left multiple markets and reduced its capacity on others in an attempt to shift focus toward profitable measures.

Shifting Priorities

In Tuesday’s earnings call, Geraghty emphasized that JetBlue is working to ensure it is focused on the right type of customer. JetBlue’s core geographies and customers have changed significantly since the pandemic. Most significantly, JetBlue says it is shifting to focus more on leisure travel than on corporate fliers.

“Leisure travel remains an increasing priority for customers, and there is no longer the same divide between corporate and leisure travel as more people can take advantage of the ability to work from anywhere,” Geraghty said.

“However, that also means most of the industry has shifted a portion of their flying to meet this increasing demand for leisure travel, allocating capacity to many of JetBlue’s bread and butter routes,” she continued.

Other airlines, such as United and Delta, have reported strong demand, especially among business and international travelers. Though JetBlue is focusing on leisure travel at the moment, it continues to expand its international offerings to take advantage of new market shares it did not have just a year or two ago.

Pratt & Whitney Difficulties

Equally important to JetBlue is the operational issues that have arisen with Pratt & Whitney’s Geared Turbofan (GTF) engines. Issues with these engines arose last year and have impacted the global Airbus A220 and A320 fleets, among others, meaning that nearly ⅔ of JetBlue’s aircraft are impacted. Longer engine inspections mean aircraft are not flying as much, which consequently means they do not earn as much money.

JetBlue is seeking compensation from Pratt & Whitney for the engine issues, adding that the situation is “frustratingly fluid.” It plans to buy outright 12 leased jets originally set to be returned to their owners in order to maintain capacity.

“A key component of our work to return our business to profitability is ensuring we maintain a low-cost base in a year where we are not growing,” Geraghty said.

According to Reuters, the carrier’s investor meeting has been moved from May to the fall.

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John McDermott

John McDermott is a commercial pilot pursuing a career in professional flight. His passion for aviation began in an Ann Arbor bookstore with a tale of enemy pilots during World War 2, and he hasn't looked back. Besides flying and writing for AirlineGeeks, John volunteers with Professional Pilots of Tomorrow and travels whenever he gets the chance.

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