Categories Analysis, Industrials

JetBlue Airways (JBLU) expects to achieve profitability in the third quarter

For Q3, the company expects unit revenues to increase 19-23% compared to 2019

Shares of JetBlue Airways Corporation (NASDAQ: JBLU) were down 5% on Tuesday after the company delivered disappointing results for the second quarter of 2022. The stock has dropped 43% year-to-date. The airline posted a higher-than-expected loss and missed revenue estimates for the second quarter but it expects to achieve profitability in the third quarter.

Quarterly numbers

Total operating revenues for Q2 2022 were $2.45 billion, reflecting a growth of 63% year-over-year and 16% compared to the second quarter of 2019. Despite the growth, the top line missed consensus estimates. JetBlue delivered an adjusted loss of $0.47 per share for the quarter compared to EPS of $0.60 in the second quarter of 2019. The adjusted loss was wider than what analysts had predicted.

Trends

In Q2, capacity was up 20% YoY while load factor was 85.1%. Passenger revenue per available seat mile (ASM) was up 35% while operating expense per ASM, excluding fuel, was down 3.6% YoY. During the quarter, higher costs took a toll on profits. Operating expenses per ASM was up nearly 35% while CASM ex-fuel was up 14.5% compared to 2019. Fuel price in Q2 stood at $4.24 per gallon, which was up 97% versus Q2 2019.

Spirit deal

Last month, JetBlue announced that it would acquire Spirit Airlines for $3.8 billion. The deal is expected to accelerate JetBlue’s organic growth plan with more than 1700 daily flights to over 125 destinations in 30 countries based on December 2022 schedules. The combined airline will have a fleet of 458 aircraft on a pro forma basis.

The combined company is projected to have annual revenues of approx. $11.9 billion based on 2019 revenues. JetBlue expects to achieve $600-700 million in net annual synergies once integration is complete. It also expects the transaction to be significantly accretive to EPS in the first full year after close.

Outlook

JetBlue expects to achieve profitability in the third quarter of 2022, which would be its first quarterly profit since the start of the pandemic. For Q3 2022, the company expects capacity to be flat to negative 3% compared to the same period in 2019 and for unit revenues to increase 19-23%. CASM ex-fuel is expected to increase 15-17%. For the full year of 2022, capacity is expected to grow 0-3% while CASM ex-fuel is estimated to increase 11-14% versus 2019.

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