JetBlue eyes deeper cuts as costs rise and revenues fall

By Rajesh Kumar Singh and Shivansh Tiwary

(Reuters) -JetBlue Airways said on Tuesday it was evaluating deeper cost cuts after the company forecast a fall in revenue and higher costs in the first quarter as it grapples with uneven travel demand.

The New York-based carrier is looking to plot its path forward after a U.S. federal judge blocked its planned $3.8-billion acquisition of ultra-low-cost carrier Spirit Airlines.

In a joint court filing late Monday, JetBlue and Spirit sought an expedited appeal aimed at reversing the lower court’s verdict, saying the ruling “disregards the benefits of the transaction to the majority of the flying public.”

Outgoing CEO Robin Hayes said the company was evaluating its options under the merger agreement and has informed Spirit that certain conditions to close the transaction might not be satisfied before the deadline. But the merger agreement remains in effect, he said.

“Unless and until such time as the merger agreement is terminated, JetBlue will continue to fully abide by all of its obligations,” Hayes said on the company’s earnings call.

Many analysts, however, are questioning the merits of the deal amid mounting concerns about Spirit’s finances.

JetBlue’s shares were down about 5% in morning trade.

Meanwhile, wild swings in travel demand between peak and off-peak travel periods are forcing airlines to adjust their network even as overall demand remains strong. Excess industry capacity in the domestic market has weakened their pricing power.

Southwest Airlines last week said it has cut more flights on Tuesdays and Wednesdays when passenger volumes tend to be lower.

JetBlue said it will move underperforming capacity to premium leisure and popular markets.

“Demand during peak periods remains strong, and we have better matched our capacity to demand during off-peak,” Joanna Geraghty, JetBlue’s incoming CEO, said.

The company is also dealing with engine issues related to Pratt and Whitney’s Geared Turbofan engines that multiple JetBlue aircraft use.

The carrier currently has seven aircraft out of service and the number is expected to be between 13 and 15 by the end of 2024.

JetBlue expects first-quarter revenue to fall between 9% and 5%, while full-year revenue is expected to be flat compared with last year.

Non-fuel costs are expected to jump by as much as 11% in the March quarter from a year ago and by a mid-to-high single digit percentage during the year.

JetBlue said it will defer about $2.5 billion in planned aircraft capital expenditure to 2028 and later, adding it was also “carefully” evaluating deeper cuts to the costs it can control.

The company reported an adjusted fourth-quarter loss of 19 cents per share compared with a loss of 28 cents expected by analysts in a LSEG survey.

(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru; Editing by Shounak Dasgupta, Louise Heavens, Mark Potter and Tomasz Janowski)