Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JetBlue Airways Corp (JBLU, Financial) reported $34 million of adjusted pre-tax income for the second quarter.
- The company exceeded its second-quarter guidance ranges for key operational metrics.
- Premium product offerings showed strong performance, with unit revenue up double digits year over year.
- JetBlue Airways Corp (JBLU) realized approximately $140 million of top-line benefit in the first half of the year from its $300 million revenue initiatives.
- The company has a clear strategy, 'Jet Forward,' aimed at delivering an incremental $800 million to $900 million of EBITDA contribution by 2027.
Negative Points
- Pratt & Whitney engine-related aircraft groundings are significantly impeding growth and pressuring profitability.
- Industry-wide cost inflation and persistent air traffic control issues are ongoing headwinds.
- Revenue growth has not been sufficient to outpace cost challenges.
- The company expects flat year-over-year capacity in 2025 due to engine availability issues.
- JetBlue Airways Corp (JBLU) is deferring 44 Airbus A321neo aircraft deliveries, reducing capital expenditures but also impacting growth plans.
Q & A Highlights
Q: Looking ahead to 2025, is JetBlue aiming for profitability in each quarter despite the Pratt & Whitney challenges?
A: Joanna Geraghty, CEO: We are focused on achieving profitability as soon as possible. Our goal is to build a plan that will deliver a breakeven operating margin for the full year of 2025, assuming mid to high 10s for Pratt & Whitney and a competitive macro backdrop.
Q: Can you share the financial impact of the Pratt & Whitney engine issues?
A: Joanna Geraghty, CEO: We won't break out the specific impact, but it's a significant and frustrating issue. It's a transitory problem expected to cycle through over the next few years, with a more impactful stage in 2025.
Q: How does the order deferral affect JetBlue's international ambitions, particularly in Europe?
A: Joanna Geraghty, CEO: The deferral of the A321XLR will impact growth in the transatlantic market, but it's not a retreat. We continue to optimize these routes to ensure profitability and contributions to our loyalty program.
Q: How is JetBlue addressing the convertible notes that will become current in April 2025?
A: Ursula Hurley, CFO: We are assessing all markets to find the most effective funding options. We do not intend to let the convert go current and are exploring various financing opportunities.
Q: What is the current demand environment, especially in the core cabin?
A: Martin St. George, President: The demand environment is stable, with peaks performing as expected. The real issue has been supply misalignment, which is now correcting. We are seeing better alignment of supply and demand.
Q: How should we think about unit cost trends in 2025 given flat capacity growth?
A: Ursula Hurley, CFO: Historically, with mid to high single-digit growth, we targeted flattish unit cost growth. With flat growth next year, we are targeting mid-single-digit unit cost growth, with aspirations to improve further through our Jet Forward initiatives.
Q: What are the plans for the E190 retirements and the performance of the A220s?
A: Martin St. George, President: The E190s will be retired by the end of 2025. We are very happy with the A220s, despite some reliability issues, and they are not as affected by the GTF engine problems as the A320neo family.
Q: How does JetBlue plan to achieve the $800 million to $900 million EBIT improvement by 2027?
A: Joanna Geraghty, CEO: The improvement is based on a breakeven baseline, with contributions from various initiatives, including network adjustments, product enhancements, and cost-saving measures. We are focused on executing these plans to drive profitability.
Q: How is JetBlue handling the overcapacity in Latin markets and the build-out in Puerto Rico?
A: Joanna Geraghty, CEO: We are the largest carrier in Puerto Rico and have strong support from the local community and airport authority. We continue to optimize our network to address overcapacity and focus on profitable routes.
Q: What is the outlook for free cash flow and capacity growth beyond 2025?
A: Joanna Geraghty, CEO: We are not providing capacity projections beyond 2025 due to the volatility of the Pratt & Whitney issue. Our priority is to return to consistent profitability and then deliver positive free cash flow, which will be used to deleverage the balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
