JetBlue Stock Tumbles After Earnings. Things Are Going From Bad to Worse.

“While we have been able to offset some of the costs associated with the challenging operational backdrop, the sheer magnitude of air-traffic control and weather-related delays has been staggering,” Chief Financial Officer Ursula Hurley said in a statement.

For the full year JetBlue now sees a net loss per share of 45 cents to 65 cents, while analysts had been expecting a loss of 25 cents. JetBlue’s previous outlook was for a profit per share of 5 cents to 40 cents, which itself had been cut from a previous range of 70 cents to $1.

It also forecast a wider-than-expected loss for the fourth quarter, saying the figure is likely to come in between 35 cents and 55 cents. The consensus call on Wall Street was for a loss of 15 cents.

While low-cost airlines have been facing turbulence for months, challenges such as cost pressures are continuing to mount. JetBlue, like all other airlines, sees higher fuel prices in the current quarter.

Discount airlines would typically counter higher costs by flying more planes, and filling them up. But that is proving difficult—Chief Operating Officer Joanna Geraghty said industry capacity is currently outpacing domestic demand during off-peak travel periods. There are also the air-traffic control and weather issues that Hurley referred to as “staggering.”

Growth in the current quarter will be predominantly driven by international travel, Geraghty said. But the airline’s international footprint, while expanding, is smaller than
United Airlines Holdings
(UAL),
Delta Air Lines
(DAL), and
American Airlines Group
(AAL).

Continuing problems with engines from Pratt & Whitney, an issue other airlines have cited as well, will continue to hurt JetBlue’s growth in 2024, the company said. Six of the company’s aircraft are currently out of service, but the number could rise to the high single digits or low double digits by the end of 2024. As a result, JetBlue’s capacity is likely to be down slightly from a year earlier in the first quarter, executives said on a call to discuss the  results.

RTX, Pratt & Whitney’s parent company, said in September that 600 to 700 engines will have to be removed for “shop visits” over the next three years.

On the positive side, management flagged an acceleration in corporate travel bookings since Labor Day.

The earnings news comes as the company is due in court to face off against the Justice Department, which is suing to block its proposed $3.8 billion merger with
Spirit Airlines
(SAVE). The antitrust trial begins in U.S. District Court in Boston after a two-week delay. 

JetBlue stock, which is off 54% since its July peak and 35% for the year, as of Monday’s close, needs a boost. Its earnings look likely to keep the stock under the pressure, but the trial could eventually provide a lift for the shares.

In its lawsuit, the government opposes the merger on the grounds that it would hurt competition. Prices would increase and travelers would have fewer choices for routes nationwide, according to the Justice Department.

JetBlue disagrees and has tried to ease the government’s concerns, including voluntary agreements to divest Spirit holdings in Boston, Newark, and at New York’s LaGuardia Airport if the deal is allowed to go through.

In a separate case, JetBlue was ordered to end its alliance with American Airlines in the Northeast. The company opted not to appeal the decision, essentially in a bid to save the Spirit merger. The alliance formed a key part of the government’s complaint about the proposed Spirit deal.

Still, the Justice Department is pressing ahead with its Spirit case despite termination of the alliance and JetBlue’s voluntary divestiture agreements.

JetBlue told Barron’s it is ready to present its side. Spirit didn’t respond to a request for comment.

“We look forward to presenting our case in court as we strongly believe our combination with Spirit is the best opportunity to disrupt the industry by increasing competition and choice, creating a long overdue national low-fare challengers to the dominant Big Four airlines,” JetBlue said in an email.

But with the trial expected to last 20 days, and a decision unlikely for another few months, JetBlue’s third-quarter earnings look set to keep the stock under pressure.

Write to Callum Keown at [email protected]