JetBlue has announced on Monday that it intends to conduct an offering of notes to raise $650 million. The airline is seeking to raise some additional cash, even as bookings start to increase and the potential for a summer surge seems more and more likely.

JetBlue proposes notes offering

The New York-based airline announced it intends to offer a $650 million aggregate principal amount of convertible senior notes due 2026. The carrier also plans to grant the initial purchasers of the notes up to an additional $100 million aggregate principal amount of the notes.

The airline intends to use the net proceeds from the offering for general corporate purposes. Some of it may even go toward paying down some of JetBlue's debt.

Some details are still being hammered out. However, the airline has set a maturity date for the notes of April 1st, 2026, unless repurchased, redeemed, or converted in accordance with their terms prior to maturity. The notes will also be redeemable, in whole or in part, for cash at JetBlue's option at any time, and from time to time, on or after April 1st, 2024, in certain circumstances.

Stay informed: Sign up for our daily and weekly aviation news digests!

JetBlue's cash situation

JetBlue ended 2020 with $4.9 billion of total debt and finance lease obligations, less current maturities and debt acquisition cost; the long-term debt burden for JetBlue as of December 31st, 2020, was $4.413 billion.

JetBlue ended the fourth quarter with $3.1 billion in unrestricted cash, cash equivalents, and short-term investments. This is a fair bit of cash for the airline. Even as the US starts to turn a page on the crisis, airlines are still hoping to carry a little extra cash in 2021, just in case there is another unexpected downturn.

The first quarter of 2021

Just a week ago, JetBlue issued some updated forecasts for the first quarter. Compared to the first quarter of 2019, the airline expects its flown capacity to be down approximately 41%, which compares to the airline's previous assumption of at least a 40% decrease.

Booking trends remain choppy, but there has been an improvement amongst leisure travelers. With this improvement, the airline expects its first-quarter revenue to decline 61 to 64% compared to the same quarter of 2019. Previously, the airline expected revenue to be down 65 to 70% over the same quarter of 2019.

This leads JetBlue to expect an EBITDA for the first quarter of 2021 to range between a loss of between $490 million and $540 million, which is better than the previous assumption of a loss of $525 million to $625 million.

Bookings are encouraging, but revenue is still down

While bookings are up and TSA numbers show consistently high enplanements, there is a gap. Even as bookings climb closer and closer to 2019 levels, those bookings are not generating the same amount of cash as the bookings from 2019.

Revenue is still down as carriers face a dearth of premium business travelers and some markedly lower fares. The other thing for JetBlue is that its largest base of operations, New York City and Boston, are seeing travel come back a little slower than other hubs.

This year, JetBlue is hoping to launch its highly-anticipated flights to London. As the carrier focuses on getting the requisite slots and ground operations, the airline is bullish on European operations. However, it would not be unheard of for the airline to face some early losses and growing to long-term profitability on the routes.

The extra cash can help JetBlue in a variety of ways. It can pay down other debt that matures sooner or else is at a higher cost than some of the debt JetBlue is currently carrying. Until the crisis is well behind the carrier, it makes sense to raise some additional cash as it deems necessary. Even if a summer surge does materialize, having extra cash is a good idea for now.

What do you make of JetBlue's notes offering? Let us know in the comments!