JB reports 1Q 2024 earnings

[WeAAsles]

JetBlue is not to be conflated with the historical debt servicings at Delta, American or United - all of which occurred during or shortly after their business operations (not airline operations) had merged. .

JetBlue is attempting to sell its debt in the "Junk Bond" market. Here's some questions for you:

#1: Do you know what a "Junk Bond" is?
A: "A junk bond is a corporate bond that has a high risk of the underlying company defaulting. Companies that issue junk bonds are typically struggling financially. Junk bonds carry much risk since investors are unsure whether they will be repaid their principal and earn regular interest payments. As a result, junk bonds pay a higher yield than their safer counterparts to help compensate investors for the added level of risk. Companies are willing to pay the high yield because they need to attract investors to fund their operations." In short, it is the "payday loan" of the corporate world.

#2: Do you know why JetBlue is packaging this debt on the Junk Bond market?
A: They cannot raise the capital in the traditional marketplace. Meaning: The money from traditional sources has dried up, like the Sahara. JetBlue cannot issue investment-grade bonds any longer due to their poor credit rating and limited cash flow - facts.

#3: Do you know what JetBlue is pledging as collateral to secure this Junk Bond funding?
A: Their loyalty program, which is all they have left to leverage. The remainder of the airline is already pledged as collateral to service current debt.

#4: What happens if JetBlue *cannot* raise the funding through their Junk Bond sale?
A: I'll let you formulate that answer, as it is anyone's guess.

The credit markets in 2024 have evolved. As Bloomberg, Quartz, CNBC, and SEC filings clearly demonstrate, JetBlue's debt structure, its packaging, and its holding mechanisms are fundamentally distinct from any airline operating today. Delta, American and United, as, were not in this position when they packaged their debt decades ago

Bloomberg full article through Yahoo

JetBlue in Talks to Sell Junk Bonds Yielding Up to 10%

(Bloomberg) -- JetBlue Airways Corp. is in discussions with lenders to sell $1.5 billion of high-yield bonds that would yield about 9.5% to 10%, according to people with knowledge of the matter.Most Read from BloombergHow a Tiny Midwestern Town Became a Mecca for Modern ArchitectureAfrica’s...

finance.yahoo.com

 

[WeAAsles]

Unit Costs Rise in 2024, Moderate Thereafter: JetBlue expects non-fuel unit costs to rise in the mid-to-high single digits for the year, which will strain profitability. However, the bulk of the increase is expected in the first half with improving trends thereafter. JetBlue is implementing cost cuts aimed at run-rate savings of $175 million by YE 2024, consisting of improvements in automation, maintenance planning and staffing efficiencies.

The company will also gain fleet benefits when it fully retires its remaining E-190s in 2025. Headwinds include potential pilot wage increases as the contract became negotiable following the termination of the Spirit merger agreement. Unit costs may also be pressured by limitations on the company's growth depending on the availability of Pratt & Whitney engines going forward.

Unencumbered Assets Support Financial Flexibility: Fitch believes that JetBlue has better financial flexibility than lower rated peers, which supports the 'B' rating. As of 3/31/2024 the company reported holding roughly $10 billion in 'financeable' assets, roughly half of which consisted of its loyalty program and the remainder consisting of aircraft, engines, and slots, gates and routes.

Loyalty program assets are largely intangible, but have been used successfully by the airlines in recent years to sizeable debt issuances. JetBlue's debt maturities are limited in 2024 and 2025 before stepping up to $1.0 billion in 2026 when its $750 million converts come due. Fitch expects JetBlue to maintain cash in the near-term by financing upcoming aircraft deliveries, allowing it to address the 2026 maturity via cash on hand and potential capital markets transactions.

Negative FCF expected: Fitch expects JetBlue's 2024 FCF to be negative by more than $1 billion. FCF is expected to improve through the forecast, but to remain sharply negative as the company invests in fleet renewal. Fitch views JetBlue's January 2024 agreement with Airbus, deferring some deliveries from the 2024-2026 timeframe, as a positive as it relieves some pressure on cash flows, nevertheless, negative FCF is expected to continue to constrain JetBlue's credit profile. JetBlue estimates that its aircraft deferral will reduce capital spending by $2.5 billion between 2024 and 2027.

https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-jetblue-to-b-outlook-stable-17-05-2024#:~:text=Profit%20Performance%20Drags%20on%20Credit,low%20double%20digits%20in%202025.

 

[WeAAsles]

Now Spirit on the other hand

RECOVERY ANALYSIS​

Fitch's recovery analysis assumes Spirit would be reorganized as a going concern (GC) in bankruptcy rather than liquidated. The analysis incorporates a going-concern EBITDA estimate of $220 million and a 5x multiple.

Fitch's GC EBITDA estimate of $220 million is a downward revision from prior estimates and reflects Spirit's recent track record of operating losses and uncertainty around its turnaround plans. The GC EBITDA assumption is below levels generated through the pandemic downturn and forecast EBITDA for 2024. Fitch believes that pandemic period profits through 2023 are temporarily depressed due to a confluence of factors but profits may continue to be constrained by intense competition and rising costs.

The choice of this multiple considered the following factors:

--Historical bankruptcy case study exit multiples for peer companies ranged from 3.1x to 6.8x.

--Spirit's 5x multiple is at the mid-point of the range, which given the company's potential growth over time, is offset by profitability and competitive headwinds.

--The value available to holders of the loyalty program assets is dependent upon the size of Spirit's loyalty member base and associated cash flows. Actions that cause loyalty cash flows to decline, including a shrinking footprint, asset sales, etc. may cause the value available to the loyalty program debt to decrease which could impact the recovery rating over time.

https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-spirit-airlines-to-ccc-07-05-2024#:~:text=Fitch%20Ratings%20%2D%20Chicago%20%2D%2007%20May,%2D'%2F'RR1'.

 

[SWAMECH]

So your smarter then all the industry experts?

Where did you get your degree in Journalism, Businees and/or your MBA?

Never said I was. Like I said, "I was pointing out a positive, instead of dwelling on all the negative as you do and continue to do."

 

[CorvetteMan]

https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3228399

 

[CorvetteMan]

Dwelling on reality and what is really happening, not painting a fake rosy narrative like yourself

 

[WeAAsles]

Today’s reality.

 

[CorvetteMan]

Never said I was. Like I said, "I was pointing out a positive, instead of dwelling on all the negative as you do and continue to do."

Here you go Bud.

“JetBlue Airways Corp.'s stock slid another 2% early Tuesday after a record selloff on Monday, as the big three credit rating agencies downgraded the company further into junk territory on news it is issuing more than $3 billion in debt.”

https://www.morningstar.com/news/marketwatch/2024081359/jetblue-downgraded-by-all-three-ratings-agencies-after-announcing-debt-offering

 

[Jalsporteam]

Give Southwest a couple of years under the same ceos, they'll run into the same category. And the final word of the day, irony as it seems the company that never lays off people, will end up liquidating everyone. Only time will tell, but my future bet is the days of low cost budget airlines are over. Over capacity, the big boys sell tickets 2x cheaper and with a credit card you get the same free baggage as the southwest motto "bags fly for free" "except in 2024 we charge 2x more than our competitors." 😂

Just wait for the next big issue with the 737 max, its game over then. Its also too late to modernize and revolutionize the airline service industry. Jetblue tried, that market seems hard to profit off, especially when the big 3 offers thoe cheap fares as well.

 

[CorvetteMan]

JetBlue making more cuts.

JetBlue Cutting a Fourth of Its Washington Reagan Winter Flights

JetBlue is cutting roughly a fourth of its winter flights from Washington Reagan (DCA) as the airline attempts to recover financially.

upgradedpoints.com