JetBlue is looking to raise over $500 million in a new share offering announced on December 1st. The New York City-based airline has been working to boost its liquidity position for the last few months. With the ongoing crisis continuing to hamper passenger numbers across the United States, especially in the Northeast, JetBlue is looking to shore up its liquidity position as much as possible.

JetBlue's offering

At the end of the day on Tuesday, December 1st, JetBlue initially announced a proposed underwritten offering of 35 million shares of common stock. The airline also stated it intended to provide the underwriters a 30-day option to purchase up to 5.25 million additional shares of common stock.

Shortly thereafter, JetBlue increased its proposed offering to 36.5 million shares of common stock at a price of $14.40 per share. The underwriters also have the option to purchase up to an additional 5.475 million shares, also upsized.

The total net proceeds to JetBlue from the offering, after factoring underwriting discounts and other expenses related to the offering, is expected to be a staggering $506,704,000.

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Raising additional capital

Like all airlines, JetBlue is actively trying to manage an ongoing crisis, the likes of which the industry has never seen before. Airlines have no playbook for how to operate during a pandemic, nor has demand recovery been consistent. Choppy is the word that is going around.

After the Thanksgiving holiday season was blunted by a rise in cases and public health experts warning against nonessential travel, JetBlue was quick to note in an update that its cash burn for the fourth quarter was expected to rise to around $6 to $8 million per day. This came as the airline expected revenue, previously to be down 65% of the quarter, to now be down 70% in the quarter year-over-year.

With this ongoing volatility, it makes sense to raise as much capital as possible. JetBlue plans to use the cash for general corporate purposes. Some will go towards managing the ongoing crisis, but it is also possible JetBlue uses the cash to pay for some aircraft it has on order.

Earlier this year, JetBlue used 25 Airbus A321s to secure $115 million in financing. The stock offering will raise nearly five times as much without having to pledge aircraft.

The recovery continues to remain volatile

The company's flown capacity in the quarter is expected to decrease about 45-50% year-over-year, with capacity being assessed and managed on a rolling basis. The near continually changing nature of health guidelines, travel restrictions, and public will to travel means airlines are looking at flights close-in to departure.

JetBlue has heavy exposure in New England, particularly in New York and Boston. New York has one of the strictest entry requirements in the country. After shifting from a quarantine mandate to a short quarantine with negative test results for all incoming travelers, the option opens up more possibilities for people to travel to New York

Nevertheless, with major attractions like Broadway shut down for the foreseeable future and business travel continuing to remain at record-low levels, being based in New York is not much of an asset right now.

JetBlue has, however, leveraged other parts of its network where there are fewer restrictions and a healthy appetite for travel. The airline has continued to expand its domestic network throughout the crisis and worked to use its free aircraft to capture demand wherever possible.

The move to Los Angeles International Airport (LAX) from Long Beach (LGB) means greater opportunities, not just now but even in the future, for the airline to target significant revenue streams from outside its New England home, which will surely be an asset in the long-run. The same is true for its Florida operations.

Are you glad to see JetBlue announce a common stock offering to raise a staggering $506 million? Let us know in the comments!