Like many of its competitors, JetBlue Airways has faced a slate of problems over the past year.
Increased competition has plagued it (and the industry) and JetBlue was left with hefty legal fees after a federal judge — citing potential harm to consumers from losing a low-cost rival — rejected its plan to acquire rival Spirit Airlines. (SAVE)
Meanwhile, Spirit continues to tiptoe around bankruptcy proceedings, recently avoiding it until at least year-end by refinancing some of its $3.3 billion debt. (Some analysts still say the company might have to reorganize.)
Despite those struggles, some see potential in JetBlue as it navigates past a string of unprofitable quarters.
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For instance, in February, billionaire investor Carl Icahn disclosed that he bought a 10% stake in JetBlue, saying that the stock was significantly undervalued and had the potential to soar.
JetBlue's making progress, but there's a problem
On Oct. 29, JetBlue reported quarterly earnings that surpassed analysts' consensus expectations.
The New York carrier posted a third-quarter loss of 16 cents a share, narrower than the 25-cent loss in a survey of analysts by FactSet.
Revenue of $2.37 billion also beat the $2.34 billion consensus estimate.
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Investors were unimpressed by the losses and management's guidance despite gains this year following Icahn's purchase.
JetBlue stock closed down 17% at $6.07 after reporting its results, and on Oct. 30, it was off another 7% to $5.63.
The reason? Chief Executive Joanna Geraghty said the carrier had "significant work ahead on a path toward full-year profitability."
The biggest hits to third-quarter earnings, she said, were its inability to increase capacity after a recall of Pratt & Whitney engines that could keep certain planes grounded until 2026. It also suffered from demand hits due to Hurricanes Helene and Milton, the effects of which will also be reflected in the current quarter's results.
"Not having a clear line of sight on our long-term capacity is certainly frustrating," Geraghty told investors.
Capacity, in terms of planes and seats, is a key determinant of revenue growth.
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JetBlue raised funds, embarks on a new strategy
While JetBlue remains unprofitable and faces headwinds, Geraghty pointed out that it met all its financial targets for Q3 "and progressed on the implementation of our JetForward strategy."
In the plus column, it raised $3.2 billion to retire current debt, fund capital spending in 2024 and 2025, and support its JetForward strategy. That strategy focuses on improving on-time performance, optimizing its network to its strongest routes, and enhancing perks and overall value for passengers.
The company's operating profit margin widened 5 percentage points but remained negative at 1.6%. Operating expenses fell 4.2% for the quarter. Customer satisfaction rose double-digits from a year earlier, she said.
One reason for the better margins: fuel prices in Q3 were lower than the company had originally projected. Management expects those costs to drop further in Q4.
The performance may suggest that JetBlue is turning a corner, but plenty more work remains to be done.
Geraghty warned that hurricane season and uncertainty about the presidential election will affect the airline's revenue in the coming months.
Many passengers are putting off travel plans until after the election, while general uncertainty about the country's path forward continues to ripple through the industry and wider market, she said.
JetBlue estimates that fourth-quarter revenue will fall 3% to 7% from the year-earlier period.
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