JetBlue Posts $450 Million Second Quarter Loss

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JetBlue’s second-quarter results were no big surprise. A pre-tax loss of $450 million was to be expected but compared poorly against a $236m profit in the same quarter last year. Despite revenue declining around 90% year over year, the airline believes that the worst is over, reporting an uptick in passenger volume throughout May and June.

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It’s been a tricky quarter for JetBlue, but the airline is positive about the future.. Photo: JetBlue

A challenging quarter, but things are looking up

The pre-tax loss of $450 million is to be expected from JetBlue when the challenges of this quarter are taken into consideration. Excluding one-time items (non-GAAP, such as the CARES Act funding), the loss was significant, at $754 million.

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In line with other airline perceptions, JetBlue saw April as the lowest point in the crisis. Traffic and yields have been steadily picking up through May and June, indicating a more positive outcome for the rest of the year.

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Strong cost reduction has served to mitigate cash burn. Photo: JetBlue

The airline managed an impressive capacity reduction of 85% and cost reduction of more than $900 million as a result of what it calls “aggressive action to mitigate cash burn.” In a statement seen by Simple Flying, CEO Robin Hayes commented,

“In the past two months, we made progress in reducing our cash burn, and have been quick to resize our operations to the very dynamic demand environment. While demand has improved materially from the lows we saw in April, bookings remain choppy, and we remain focused on addressing changing trends as we progress through the summer.

“As we move into recovery, we have laid out a three-step framework to set JetBlue up for success and emerge stronger. The first is to reduce our cash burn. The second step is to rebuild our margins. The third and last step is to repair our balance sheet.

“We have been nimble and managed the short term with a sense of urgency, to reduce our cash burn and build liquidity. We are confident that our actions to protect the health and safety of our Customers and Crewmembers, our network changes, and focus on costs will help us rebuild our margins faster.”

The airline’s average daily cash burn was $9 million in May, which was lower than its previous estimates of $10 million. By the end of June, this had further reduced to under $8 million, and the airline is taking steps to further drive this down to between $7 million and $9 million during the third quarter.

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JetBlue will continue to strive to drive down its cash burn. Photo: Getty Images

Bookings recovering

During the quarter, JetBlue carried 616,000 passengers. This was in stark contrast to the more than 11 million carried in 2019. Available seat miles were down almost 85%, and load factors were eye-wateringly poor – 33.8% in 2020 compared with 86% in the same quarter last year.

However, the airline believes things are looking up going forward. COO and President Joanna Geraghty said that JetBlue is “laser-focused” on managing the low demand with which it is faced. She says that the airline’s strategy of adding tactical point-to-point flights and responding to pent up demand in leisure and visiting friends and relatives market is supporting the cash generation efforts of the airline.

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Tactical additions of new routes are keeping cash coming in. Photo: JetBlue

Longer-term, she sees a strong recovery, built on the opportunities presented out of JetBlue’s focus cities. Passenger volumes are steadily increasing, and the L-shaped recovery that the airline previously forecast is largely following that path. However, Geraghty noted that the choppy recovery that has been evident in the US domestic market is likely to continue. She said,

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“We expect demand trends will continue to be volatile and recovery will not be linear. Given the choppiness in demand, we will continue to take a conservative approach in planning capacity and forecasting revenue.

“As we see booking trends beginning to improve after bottoming out in April, we believe capacity will lead the way to demand and revenue recovery. That said, our guiding criteria is cash generation, and we will continue to be nimble in reacting to changes in demand trends.”

For now, JetBlue’s focus on revenue generation and driving down cost is putting it in a strong position to recover from the crisis.

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