JetBlue Airways senior creditors have hired restructuring advisers, including PJT Partners and law firm Akin, after bonds backed by the carrier’s frequent flyer program plunged to 42 cents on the dollar, deepening financial distress ahead of its third-quarter earnings report.
A group of senior creditors holding JetBlue Airways debt has enlisted financial adviser PJT Partners and law firm Akin as the carrier grapples with mounting cash burn and soaring fuel costs, according to people familiar with the matter cited by the Wall Street Journal. The mobilization of bankruptcy and restructuring specialists marks a concrete escalation in distress for the carrier, whose shareholders have already watched their investments sink.
Collapsing Bonds and Record-Low Shares Ahead of Earnings
The financial pressure on the carrier intensified dramatically this week as shares and debt hit record lows. JetBlue stock closed at $2.63 on Friday, leaving the airline with a market capitalization below $1 billion, according to data from View from the Wing. Short interest surged beyond 30% of the company’s float ahead of its third-quarter earnings announcement scheduled for October 27, as tracked by GuruFocus.
The creditor group includes holders of a $742 million first-lien loan and $2 billion in bonds due in 2031 that are backed by the airline’s TrueBlue frequent flyer program. Those 2031 notes plummeted to 42 cents on the dollar, down sharply from trading near 80 cents earlier in the month, before rebounding slightly into the mid-40s by Friday.
Debt and Fuel Costs Strain JetBlue Balance Sheet
The carrier’s financial vulnerabilities stem from a combination of elevated debt obligations and volatile operating costs. JetBlue’s balance sheet as of June 30 showed $8.5 billion in total debt and finance lease obligations, alongside $1.66 billion in cash and cash equivalents, according to Reuters. Analysts and industry observers point out that the airline has not turned a profit since before the pandemic.
Unlike competitors that maintained forward contracts, JetBlue’s decision to cease using forward contracts for jet fuel left it directly exposed to soaring energy prices. Jet fuel costs have climbed following geopolitical conflicts, including tensions involving the Iran war. During the second quarter, JetBlue recorded a $247 million net loss as aircraft fuel costs spiked, even though overall quarterly revenue rose 14.5% year-over-year to $2.7 billion. According to International Air Transport Association statistics highlighted by Benzinga, worldwide carriers now face a severe obstacle in mounting fuel expenses, with mean jet fuel costs surging to $458 per barrel—marking a 4.3% increase compared to the prior month and a 113% jump year-over-year. U.S. fuel prices rose to $194 a barrel, while Brent crude ended the week at $117 and West Texas Intermediate rose to $103.
JetForward Strategy Aims to Stem Airline Losses
Management has attempted to stem losses through its JetForward strategy, launched in July 2024 under Chief Executive Officer Joanna Geraghty. The turnaround plan focuses on refining the East Coast leisure network, improving operational reliability, expanding premium cabin offerings, and driving credit card revenue. To preserve cash, the airline also deferred 44 Airbus A321neo deliveries to 2030 and beyond.
Despite these operational initiatives, lenders are moving to protect their claims against the carrier’s most valuable assets. Roughly 67% of JetBlue’s assets at book value are already mortgaged, though the airline claims $6 billion in unencumbered assets.
The mounting distress has fueled speculation across the aviation industry about potential acquisition interest from major carriers like United Airlines, particularly regarding JetBlue’s positions at New York JFK and Fort Lauderdale. When asked about potential involvement, United CEO Scott Kirby stated he had nothing new to add on that,
maintaining caution amid current debt levels. Starting in 2027, JetBlue is slated to grant United access to slots covering up to seven round-trip flights daily, pursuant to the carriers’ Blue Sky pact.
JetBlue remains confident in its JetForward strategy and the progress being made toward returning to sustained profitability.
JetBlue Airways, via Reuters
