JetBlue Airways Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. JetBlue provides air transportation in the United States, Caribbean and Latin America. The company said COVID-19 continued to materially adversely affect revenue and financial position, although leisure demand began improving during the quarter.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 | Change or context |
|---|---|---|---|
| Operating revenue | $733 million | $1.588 billion | Down 53.9% |
| Operating loss | $294 million | $334 million | Reported operating margin: (40.2)%, versus (21.0)% |
| Net loss | $247 million | $268 million | Loss per share: $0.78, versus $0.97 |
| Adjusted net loss, excluding special items | $467 million | $116 million | Adjusted loss per share: $1.48, versus $0.42 |
| Operating cash flow | $177 million | $124 million | Included government payroll-support grant cash flows |
| Free cash flow (non-GAAP) | $(40) million | $(243) million | Operating cash flow less capital expenditures and aircraft deposits |
Q1 2021 operating expenses were $1.027 billion, down 46.6% year over year, but included $289 million of special-item credits: $288 million of federal payroll-support grants used in the quarter and $1 million of employee retention credits. Q1 2020 included a $202 million E190 fleet impairment charge. These items materially affect reported comparisons; excluding special items, operating loss widened to $583 million from $132 million.
Passenger revenue fell 55.7% to $670 million. Capacity (available seat miles) declined 39.0%; revenue passengers fell 45.2%, load factor decreased to 63.9% from 69.8%, and operating revenue per available seat mile fell 24.5% to 8.06 cents. CASM excluding fuel, special items and certain non-airline expenses rose 36.0% to 12.25 cents, reflecting lower capacity and cost absorption.
At March 31, cash and cash equivalents were $2.358 billion and short-term investment securities were $867 million, or approximately $3.2 billion combined. Working capital was $477 million, down from $671 million at year-end 2020. Cash, cash equivalents and restricted cash totaled $2.410 billion. Total debt and finance lease obligations were approximately $5.082 billion, including $463 million current and $4.619 billion long-term; $6.8 billion of assets were pledged as financing collateral. The company reported compliance with debt and lease covenants.
Material changes and financing
- JetBlue issued $750 million of 0.50% convertible senior notes due 2026, receiving approximately $734 million net proceeds. The notes have an initial conversion price of approximately $25.92 per share.
- Payroll Support Program 2 provided $504 million in Q1: $383 million in grants and $121 million in unsecured loans. The grants are recognized as expense offsets as used; the company issued Treasury warrants for approximately 0.8 million shares at $14.43 per share.
- JetBlue repaid $644 million of debt and finance lease principal, including the $550 million balance on its Citibank revolving facility. It also received $270 million from investment-security maturities.
- On April 29, 2021, Treasury provided an additional $76 million of Payroll Support Program 2 funding ($53 million grants and $23 million loans), with additional warrants. JetBlue also said it would not draw the remaining approximately $1.8 billion CARES Act loan capacity.
Outlook, commentary and risks
Management cited a meaningful leisure-demand rebound beginning in February and expected improvement to continue into summer as vaccination increased and travel restrictions eased. For Q2 2021, JetBlue expected capacity to decline approximately 15% and revenue to decline 30%–35% versus Q2 2019; operating expenses were expected to decline approximately 8% versus Q2 2019. These are forward-looking expectations, not guarantees. Management anticipated higher fuel, airport, landing-fee and labor costs as operations ramped up.
The company described plans to expand service, including London flights expected in the second half of 2021, and to grow LaGuardia operations to more than 50 daily departures by summer 2022. It also highlighted its American Airlines alliance, new A220 aircraft and an updated Mint premium product. These plans and timing remain subject to execution and market conditions.
- COVID-19’s duration and effects on travel demand, consumer behavior and the economy remain uncertain; results may fluctuate significantly between quarters.
- JetBlue had no fuel hedges outstanding at March 31, 2021. A hypothetical 10% rise in fuel prices was estimated to increase fuel expense by approximately $159 million over the next 12 months.
- Approximately $17.5 billion of contractual obligations were disclosed, including $7.7 billion of aircraft purchase commitments. JetBlue noted aircraft financing may not be available on attractive terms; an EU aircraft tariff suspension was temporary, and renewed tariffs could raise aircraft costs.
- Other risks include substantial debt and fixed obligations, variable-rate borrowing, competition, labor and union matters, reliance on New York and Boston markets and aircraft suppliers, and operational, weather, cyber and regulatory risks. Legal matters are generally ordinary-course; the filing cautions that outcomes could differ from estimates.
- Government support agreements impose restrictions, including limits on share repurchases and dividends and requirements concerning air service, compensation and use of grant funds. The share repurchase program remained suspended.
Important facts for investors to verify
- Whether demand, fares, load factors and capacity recover as management expected, and how the recovery affects adjusted losses and unit costs.
- The distinction between reported results, which benefited from $289 million of special-item credits, and adjusted results, which showed a substantially larger loss year over year.
- Cash and available liquidity after aircraft spending, debt maturities, collateral requirements and continuing operating losses; assess the terms and potential dilution of convertible notes and government warrants.
- Whether planned aircraft deliveries, London service, alliance expansion and associated financing proceed on schedule and within cost expectations.
- Developments in fuel prices and aircraft tariffs, as well as any material changes in pandemic conditions, government-support restrictions, labor matters or legal contingencies.