JetBlue Airways Corporation — FY2022 Form 10-K
Period: Fiscal year ended December 31, 2022; filed February 27, 2023. This is an annual filing, not a standalone fourth-quarter report. JetBlue operates passenger air service across the U.S., Caribbean, Latin America, Canada and England. The company said demand recovered through 2022 and it returned to profitability in the second half, while reporting a full-year loss.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Operating revenue | $9.158 billion | $6.037 billion |
| Operating expenses | $9.456 billion | $6.117 billion |
| Operating loss / margin | $298 million / (3.3)% | $80 million / (1.3)% |
| Net loss | $362 million | $182 million |
| Loss per share | $1.12 | $0.57 |
| Operating cash flow | $379 million | $1.642 billion |
| Free cash flow | $(544) million | $647 million |
- Revenue rose 51.7% year over year as passenger revenue increased 53.1%; revenue passengers grew 31.5%, average fare 16.4%, and load factor increased 5.5 percentage points to 81.5%.
- Operating expenses rose 54.6%. Fuel expense increased 116.3% to $3.105 billion; fuel was 32.8% of operating expenses, with average fuel price up 79% to $3.69 per gallon.
- Operating revenue per available seat mile (RASM) rose 27.3% to 14.20 cents, while operating expense per available seat mile (CASM) rose 29.7% to 14.67 cents. CASM excluding fuel, special items and non-airline expenses fell 5.2% to 9.59 cents year over year.
- Excluding special items, adjusted operating loss was $185 million and adjusted net loss was $260 million, versus $913 million and $800 million, respectively, in 2021. These are non-GAAP measures.
- Cash and cash equivalents were $1.042 billion; short-term investments were $350 million. Management separately described unrestricted cash, cash equivalents and short-term investments as $1.4 billion. Debt and finance lease obligations were about $3.65 billion, down $359 million from year-end 2021; adjusted debt-to-capitalization was 52%.
- Working capital deficit widened to $1.8 billion from $172 million. Management said airline air-traffic liabilities contribute to working-capital deficits and stated it expected sufficient liquidity for at least 12 months.
Material changes and unusual items
- Compared with 2021, revenue and passenger activity rebounded, but higher fuel costs and operating expenses contributed to a larger reported annual net loss. Revenue exceeded 2019 by 13.1%, while operating expenses were 29.6% higher.
- 2022 special items totaled $113 million, including a $52 million Embraer E190 fleet impairment, $32 million for a pilot contract ratification bonus and related payroll taxes, $28 million of Spirit acquisition costs, and $1 million of inflight contract implementation costs. 2021 included $841 million of net special-item contra-expenses, principally federal payroll support grants and employee retention credits.
- JetBlue paid $297 million toward the Spirit acquisition during 2022, including a $272 million prepayment to Spirit shareholders and reimbursement of $25 million in transaction expenses.
- The company repaid $369 million of debt and finance lease obligations and reported capital expenditures of $767 million plus $156 million of aircraft pre-delivery deposits. It made no share repurchases under its suspended program.
Outlook, risks and contingencies
- For 2023, management forecast capacity growth of 5.5%–8.5%, high-single-digit to low-double-digit revenue growth, and CASM ex-fuel growth of approximately 1.5%–4.5%, including an estimated three-percentage-point effect from the new pilot agreement. Its stated full-year EPS outlook was $0.70–$1.00. Forecasts exclude the Spirit merger.
- Management anticipated approximately $1.3 billion of 2023 capital expenditures and described 148 aircraft on order, with contractual flight-equipment purchase obligations of about $7.9 billion. Aircraft deliveries and capacity plans may be affected by manufacturer delays.
- The proposed Spirit acquisition remained subject to regulatory approvals and other closing conditions. JetBlue had committed a senior secured bridge facility of up to $3.5 billion to finance the deal; consummation could materially increase leverage. The filing describes integration, financing, regulatory, labor and synergy risks, as well as potential termination fees.
- The U.S. Department of Justice and several states’ attorneys general challenged the Northeast Alliance with American Airlines; the court decision was pending. Four putative class actions sought damages related to the alliance; JetBlue said it could not estimate a reasonably possible loss or range.
- Other material risks include volatile fuel prices, labor costs and staffing constraints, operational disruption from weather and congestion, the company’s concentration in the New York market, substantial fixed obligations, cybersecurity and systems risks, and possible restrictions associated with 5G deployment near airports. A 10% fuel-price increase was estimated to add about $304 million to 2023 fuel expense.
- Ernst & Young issued an unqualified opinion on the financial statements and internal controls. The auditor identified loyalty-program breakage estimates as a critical audit matter; the related air-traffic liability was $1 billion at year-end.
Important facts for investors to verify
- Track quarterly revenue, fares, load factor, operating margin and fuel expense against the 2023 outlook; the filing does not provide standalone Q4 financial results in the supplied text.
- Reconcile reported liquidity descriptions with cash, investments, revolving-facility availability and any restrictions or collateral requirements; monitor working capital and cash burn.
- Confirm the timing, regulatory outcome, financing terms and potential break fees for the Spirit transaction, and assess the effect of any additional debt on credit ratings and interest costs.
- Monitor the Northeast Alliance litigation, related class actions and any resulting operational or financial consequences.
- Assess execution of aircraft deliveries and capital commitments, the E190 transition, and cost pressures from fuel, labor, maintenance and airport charges.