JetBlue Airways Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Comparisons are with Q1 2022 unless otherwise noted. Amounts are in U.S. dollars; financial statement figures are in millions except per-share data.
Business context and results
JetBlue provides air transportation in the United States, Caribbean, Latin America, Canada, and England. Management cited strong travel demand, higher revenue, and improved operating performance, alongside elevated fuel costs, operational constraints, and merger-related uncertainty.
| Metric | Q1 2023 | Q1 2022 / change |
|---|---|---|
| Operating revenue | $2,328 | $1,736; up 34.1% |
| Operating expenses | $2,570 | $2,103; up 22.2% |
| Operating loss and margin | $(242); (10.4)% | $(367); (21.1)% |
| Net loss | $(192) | $(255) |
| Diluted loss per share | $(0.58) | $(0.79) |
| Operating cash flow | $405 | $247 |
| Free cash flow, company-defined non-GAAP | $233 | $113 |
Revenue, costs, and operating metrics
- Passenger revenue rose 36.1% to $2,182 million; other revenue rose 9.4% to $146 million. Revenue growth reflected 24.6% more passengers and a 9.2% higher average fare.
- Capacity, measured in available seat miles, increased 9.0%; load factor improved to 79.8% from 71.0%. Operating revenue per available seat mile rose 23.0% to 13.88 cents.
- Operating expense per available seat mile rose 12.1% to 15.32 cents. CASM ex-fuel, a company-defined non-GAAP measure that excludes fuel, specified non-airline expenses, and special items, increased 1.2% to 9.99 cents.
- Fuel expense increased 34.1% to $765 million; average fuel cost increased 20.8% to $3.50 per gallon. Salaries, wages, and benefits rose 7.7% to $741 million.
- On-time performance improved to 70.4% from 65.6%; completion factor increased to 98.8% from 94.9%.
Liquidity, debt, and capital commitments
- Cash and cash equivalents were $1,333 million at March 31, up from $1,042 million at year-end. JetBlue reported approximately $1.7 billion in cash, cash equivalents, short-term investments, and long-term marketable securities.
- Operating cash flow was $405 million; capital expenditures were $172 million. Investing cash flow was $(40) million and financing cash flow was $(74) million. Cash, cash equivalents, and restricted cash totaled $1,479 million at quarter-end.
- Current assets were $2,098 million and current liabilities $4,010 million, a $1.9 billion working-capital deficit. Management said such deficits are customary in the airline industry, principally because of current air traffic liabilities, and expects sufficient liquidity to meet cash requirements for at least 12 months.
- Long-term debt and finance lease obligations totaled $3,579 million, including $263 million in current maturities. JetBlue made $109 million of principal payments and reported compliance with debt and lease covenants. It had no borrowings under its $600 million Citibank facility or approximately $200 million Morgan Stanley line of credit.
- Contractual obligations totaled approximately $15.0 billion, including $7.7 billion of flight-equipment purchase commitments. The company had 146 Airbus A321neo and A220 aircraft on order; delivery delays affected capacity planning.
Material changes and unusual items
- Q1 2023 included $112 million in special items: $95 million for pilot contract ratification and related benefit accrual adjustments, and $17 million of Spirit acquisition costs. There were no special items in Q1 2022.
- Excluding special items and net gains on investments, JetBlue reported an adjusted net loss of $111 million and adjusted loss per share of $0.34, versus adjusted net loss of $256 million and adjusted loss per share of $0.80 in Q1 2022. These are non-GAAP measures.
- Air traffic liability increased to $1,926 million from $1,581 million at year-end, reflecting stronger bookings for future travel.
- During the quarter JetBlue paid $33 million in additional prepayments to Spirit shareholders; total prepayments reached $330 million and were included in other assets.
Outlook, risks, and contingencies
- For Q2 2023, management forecast revenue growth of 4.5%–8.5% and capacity growth of 4.5%–7.5% year over year. Full-year 2023 capacity growth was forecast at 5.5%–8.5%. CASM ex-fuel was expected to increase 1.5%–3.5% in Q2 and 1.5%–4.5% for the year.
- Management cited air-traffic-controller shortages in the Northeast, supply-chain and spare-parts constraints, aircraft delivery delays, maintenance challenges, and new-technology engine reliability issues. These factors had caused, and were expected to continue causing, delays, cancellations, and grounded aircraft.
- A 10% increase in fuel price from the March 31 level would, after hedging, raise estimated fuel expense by approximately $282 million over the next 12 months. JetBlue had hedged 30.5% of projected Q2 fuel use, 30.1% for Q3, and 20.0% for Q4.
- The proposed Spirit acquisition remained subject to regulatory and legal proceedings. The DOJ and state attorneys general lawsuit was set for trial beginning October 16, 2023; adverse outcomes could prevent the merger or its expected benefits. The DOJ’s separate challenge to the Northeast Alliance with American Airlines also remained pending, as did private lawsuits.
- JetBlue disclosed $7.7 billion in aircraft commitments and said future aircraft financing may not be available on attractive terms. Other risks include fuel-price volatility, competition, weather, labor and maintenance costs, and operational disruptions.
- After quarter-end, the board approved transaction incentive awards for named executive officers related to the proposed merger. The filing also disclosed post-quarter executive retention payments and an increase in the CFO’s target compensation.
Most important facts for investors to verify
- Whether revenue and operating improvements persist after accounting for fuel prices, special items, and capacity growth.
- Whether the Q2 and full-year capacity and CASM ex-fuel outlook is achievable amid operational and aircraft-delivery constraints.
- Available liquidity, cash generation, debt service, and financing terms needed for the substantial aircraft order commitments.
- The outcome and timing of litigation involving the Spirit merger and Northeast Alliance, including potential termination costs or lost benefits.
- Whether pilot, maintenance, engine-reliability, and supply-chain pressures lead to additional costs, flight disruptions, or changes to planned capacity.