JetBlue Shrinking Capacity In 2024 To Refocus After Failed Spirit Airlines Merger

With deferred aircraft deliveries and Pratt & Whitney engine turnaround time issues, JetBlue’s yearly capacity will contract.

JetBlue has published its 2024 annual results, indicating that it plans to shrink its capacity in 2024 as it refocuses following the failure of its attempt to acquire Spirit Airlines in an all-cash deal. At the same time, the airline ended Q4 2023 and 2023 with a net loss.

Writing its next chapter

The airline had a turbulent 2023, with the United States Department of Justice (DOJ) claiming two victories in court against JetBlue, namely in dismantling the Northeast Alliance (NEA) and the Spirit Airlines merger. Nevertheless, JetBlue ended the period with a net loss of $310 million, an improvement compared to the $362 million net loss it suffered in 2022. However, it reversed the $24 million net profit in Q4 2022 to a net loss in Q4 2023 of $104 million, despite Robin Hayes, who still was the chief executive officer (CEO) of JetBlue in 2023, stating that the airline ended the year “on a strong note.”

“Looking ahead, I am confident that the next chapter of JetBlue, under Joanna’s leadership, will deliver a refreshed focus on our core customer, expanded opportunities for our crewmembers, and a return to JetBlue’s historical earnings power for our shareholders.”

Joanna Geraghty, the then-president and chief operating officer (COO) of JetBlue, replaced Hayes as JetBlue’s CEO on February 12, 2024, becoming the first-ever female airline CEO in the US. Geraghty remarked that 2024 will be an important year for the airline, with JetBlue taking aggressive action to return to profitability. The airline also re-hired Marty St. George to become its president, effective February 26.

Revenue initiatives

Geraghty continued highlighting that the airline has launched $300 million in revenue initiatives to return JetBlue to profitability and deliver value for its shareholders. Furthermore, JetBlue is moving forward with “renewed rigor,” according to the current CEO, adding that the carrier will refocus its energy and play to its strengths, which hopefully would deepen its unique competitive positioning.

Explaining the revenue initiatives further, the airline’s financial presentation outlined three fundamental priorities: focus on its core customer, the continuous growth of its loyalty and JetBlue Travel Products brands, and reshaping its cost structure after being thrown into its current operating environment.

In terms of revenues in 2023, the airline earned $9 billion during the year and $2.1 billion in Q4 2023, with the latter number being 4.5% lower Year-on-Year (YOY), as it earned $2.2 billion in Q4 2022. As such, while its yearly operating expenses rose by 4.1%, from $9.4 billion to $9.8 billion, its operating margin has improved by 0.9%, with JetBlue ending 2023 with an operating loss of $230 million. Last year, the carrier’s net operating loss was $298 million.

In total, JetBlue carried 42.5 million passengers in 2023, up 7.5% YoY, with capacity measured in available seat miles (ASM) growing 6.2% to 68.4 billion. However, despite rampant inflation and increasing costs for the airline as well as the whole industry, the carrier’s average fare dropped by 2.4%, with an average passenger paying $211.79 for a ticket.

Meanwhile, the airline’s liquidity metrics were a mixed bag. While its cash reserves and assets increased to $1.1 billion and $13.8 billion, respectively, its debt grew by $1.1 billion to $4.7 billion, resulting in decreased shareholders’ equity metric, measuring $3.3 billion. At the end of last year, JetBlue’s stockholders’ equity, measuring remaining assets available to shareholders after liabilities, was $3.5 billion. Still, the airline has an undrawn $600 million revolving credit facility to utilize.

Re-arranging its network

2023 was difficult for the airline because JetBlue and its partner American Airlines were forced to abandon the NEA, and a US District Judge blocked its merger with Spirit Airlines. As such, the airline said that it would have to reshape its cost structure in its current operating environment, with a slight focus on capital

The carrier plans to defer around $2.5 billion of capital expenditure costs between 2024 and 2027, which means a revised aircraft delivery schedule since airlines’ main capital expenditure costs are aircraft-related payments, including pre-delivery payments to aircraft manufacturers. The airline took delivery of ten Airbus A220 and seven Airbus A321neo aircraft in 2023, resulting in capital expenditures of $1.1 billion, compared to $767 million a year prior. Out of the $1.1 billion, flight equipment capital expenditures totaled $946 million, which included aircraft and spare part purchases, as well as aircraft interior modifications.

On January 26, 2024, JetBlue and Airbus agreed to revise the airline’s delivery schedule. As such, the airline will now receive 90 aircraft, split between 65 Airbus A220 and 25 A321neos, from 2024 to 2027, with 11 A220 and 30 A321neo aircraft delivered after 2027. As of December 31, 2023, JetBlue had 300 aircraft, with an average operational fleet of 282 aircraft in 2023.

The latest Pratt & Whitney engine issues should result in JetBlue not having between 13 and 15 aircraft in service, with estimated engine turnaround times being up to 360 days. As of December 31, 2023, the airline had six aircraft on the ground (AOG).

As a result, with fewer aircraft deliveries, the phasing out of the Embraer E190 fleet, and the Pratt & Whitney PW1000G engine family issues, the airline expects that its capacity, measured in ASMs, will be down in the low single digits in 2024 compared to 2023. Q1 2024 capacity was estimated to be down between -6% and -3%, with the quarter’s revenues declining between 9% and 5%.

Its yearly revenues should stay flat while its cost per ASM (CASM), excluding fuel, will increase by mid-to-high single digits in 2024. However, the company still expected that its operating margin should be approaching breakeven in 2024.


By Rytis Beresnevičius

Source SimpleFlying