JetBlue Airways (JBLU) Posts Q2 Loss, Suffers Weak Load Factor

Adding to investors’ pessimism, JetBlue Airways (NASDAQ:JBLU) JBLU reports loss in second-quarter 2020 results.

With this underperformance, the company joins its peers Alaska Air (NYSE:ALK) Group ALK, Spirit Airlines (NYSE:SAVE) SAVE and Southwest Airlines (NYSE:LUV) LUV, which too suffered the same setback this earnings season.

All the above-mentioned stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The airline incurred a loss (excluding 84 cents from non-recurring items) of $2.02 per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of $1.86. Results were hurt by the coronavirus-induced weakness in air-travel demand. However, sentiments were bullish in the year-ago period when the company delivered earnings of 60 cents per share owing to strong air-travel demand.

Moreover, operating revenues of $215 million plunged 89.8% year over year and also lagged the Zacks Consensus Estimate of $220.1 million. This steep year-over-year fall was due to the 91.6% decrease in passenger revenues, which accounted for bulk (79.1%) of the top line. Revenues from other sources declined 39.7% to $45 million.

Notably, revenue per available seat mile (RASM: a key measure of unit revenues) in the reported quarter dropped 32.2% to 8.91 cents. Passenger revenue per available seat mile (PRASM) fell 44.3% to 7.06 cents. Average fare at JetBlue during the quarter increased 50% to $276.35. Yield per passenger mile rose 41.5% year over year to 20.86 cents.

Capacity, measured in available seat miles, contracted 84.9% year over year. Meanwhile, traffic, measured in revenue passenger miles, deteriorated 94.1% due to softness in air-travel demand. Consolidated load factor (percentage of seats filled by passengers) slumped to 33.8% from 86% a year ago as traffic decline was more than the capacity reduction in the reported quarter.

In the second quarter, total operating expenses (on a reported basis) decreased 66.3% year over year, mainly owing to the 94% plummet in aircraft fuel and related taxes. With major part of the fleet remaining grounded/under-utilized, fuel gallons consumed tanked 86.7% to 30 million. Average fuel cost per gallon (including fuel taxes) declined 55.4% year over year to 96 cents. JetBlue’s operating expenses per available seat mile (CASM) shot up more than 100% to 25.9 cents due to capacity cuts. Excluding fuel, the metric escalated more than 100% to 36.95 cents.

JetBlue exited the quarter with cash and cash equivalents of $2,561 million compared with $959 million at the end of 2019. Total debt at the end of the reported quarter was $4,776 million compared with $2,334 million at 2019 end. Including the financial aid under the CARES Act, JetBlue’s liquidity stood at $3.4 billion at the end of the June quarter.

Management stated that due to various measures undertaken to combat the current pandemic-inflicted crisis, the company successfully lowered its cash burn from $18 million per day, on average, during the second half of March to $9 million in May. Average daily cash burn in the second quarter was $9.5 million and the daily cash burn at the end of June was just below $8 million.

Outlook

Revenues for the third quarter are expected to tumble approximately 80% year over year. Capacity is anticipated to contract at least 45% year over year in the third quarter. JetBlue still expects average daily cash burn for the September quarter in the $7-$9 million band. Average fuel cost per gallon (including fuel taxes) is estimated to be $1.24.

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