JetBlue Airways Corporation — Q1 2024 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2024, compared with Q1 2023. JetBlue operates passenger air service in the U.S. and internationally. The filing was signed April 25, 2024.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Operating revenue | $2.209 billion | $2.328 billion | Down 5.1% |
| Operating loss | $719 million | $242 million | Operating margin: (32.6)% vs. (10.4)% |
| Net loss | $716 million | $192 million | Loss per share: $2.11 vs. $0.58 |
| Adjusted net loss and EPS | $145 million; $0.43 per share | $111 million; $0.34 per share | Company non-GAAP measures exclude specified special items and investment gains or losses |
| Operating cash flow | $204 million | $405 million | Decrease attributed to working capital changes and Spirit merger termination |
| Capital expenditures | $427 million | $172 million | Investing cash outflow was $399 million |
| Cash and cash equivalents | $1.237 billion | $1.166 billion at Dec. 31, 2023 | Unrestricted cash, cash equivalents and investments were approximately $1.7 billion |
| Debt and finance lease obligations | $5.012 billion | — | Includes $330 million current maturities and $4.682 billion long-term; $395 million of debt and finance obligations had floating rates |
| Working capital | Deficit of $1.9 billion | Deficit of $1.5 billion at Dec. 31, 2023 | Deficit increased $390 million, including from higher air traffic and other accrued liabilities |
Passenger revenue fell 5.8%, reflecting 6.0% fewer revenue passengers and a 3.1% decline in yield per passenger mile. Capacity, measured by available seat miles, declined 2.7%; load factor was 79.7%, versus 79.8%. Fuel expense fell 20.4% to $625 million, while salaries, wages and benefits rose 11.0% to $823 million. Operating expense excluding special items declined 3.7%; CASM ex-fuel rose 7.1% to 10.57 cents.
Material changes and unusual items
- JetBlue terminated its planned Spirit acquisition on March 1, 2024, after a court permanently enjoined the merger. The company recorded $532 million of Spirit-related special costs, including a $69 million breakup fee, write-off of $425 million in total prepayments to Spirit shareholders, a $25 million reimbursement payment, and professional and legal fees. The total also includes $22 million in additional prepayments made during Q1. A $134 million tax valuation allowance related to the transaction was recorded.
- Total special items were $562 million, versus $112 million in Q1 2023. Other Q1 2024 special items included $15 million of voluntary opt-out costs and $15 million of Embraer E190 fleet transition costs.
- Q1 2024 cash from financing was $271 million, mainly reflecting $332 million of sale-leaseback proceeds, partly offset by $58 million of debt and finance lease repayments. These sale-leaseback transactions did not qualify as sales for accounting purposes; associated assets remained on the balance sheet and related liabilities were classified with debt and finance lease obligations.
- Investment losses were $22 million, primarily an unrealized mark-to-market loss on a JetBlue Ventures investment; Q1 2023 recorded a $3 million investment gain.
Outlook, management commentary and risks
- Management said it expects available liquidity to cover needs for at least the next 12 months, using cash, investments, operating cash flows and available financing. It provided no specific forward earnings guidance in the supplied filing text.
- Management cited improved operational reliability and healthy peak demand, while noting industry cost pressures and continued efforts to control costs. It is shifting some routes to seasonal service and leaving certain markets to redeploy aircraft toward markets it considers more profitable.
- Pratt & Whitney engine inspections had grounded nine aircraft at March 31. JetBlue expects an average of 11 aircraft out of service during 2024; each removed engine could take up to 360 days to return to service. Compensation arrangements for 2024 and beyond remained under discussion, and the full operational and financial impact was uncertain.
- Other disclosed risks include aircraft delivery delays and supply-chain disruption; air traffic controller shortages and operating disruptions; fuel-price volatility; labor costs and negotiations; substantial fixed obligations and indebtedness; and competitive, economic, weather, regulatory and legal uncertainties.
- The Northeast Alliance wind-down was described as substantially complete, but remaining impacts could generate additional costs. Putative class actions relating to the NEA remained pending. Motions to dismiss consumer litigation concerning the terminated Spirit merger also remained pending.
- JetBlue reported compliance with debt and lease covenants at March 31. It had $6.867 billion of flight equipment commitments, including 123 firm aircraft orders, and approximately 61% of owned property and equipment and intangible assets at net book value were pledged or committed as collateral.
Most important facts for investors to verify
- Whether passenger demand, yields and revenue recover, and whether route changes improve aircraft utilization and profitability.
- How engine groundings, repair timelines, aircraft delivery delays and any Pratt & Whitney compensation affect capacity, costs and cash flow.
- The composition and cash impact of Spirit-related charges, including the tax valuation allowance, and any remaining merger-related legal or financial exposure.
- Whether operating cash generation and approximately $1.7 billion of unrestricted cash and investments can support the working capital deficit, debt service and aircraft commitments.
- Whether labor negotiations, wage increases, fuel prices and other cost pressures constrain margins beyond the reported quarter.