JetBlue In Talks For Potential $2.75 Million Debt Offering From Lender

Summary

  • JetBlue is reportedly in discussions for a $2.75B loan using a loyalty program as collateral.
  • Airlines leverage loyalty programs as collateral to offset cash crunches.
  • JetBlue focuses on financial recovery, cutting unprofitable routes.

JetBlue Airways has reportedly discussed a possible $2.75 billion loan with lenders, using its loyalty program as collateral. Talks are in the preliminary stage, and the details of the financing may change. Despite this, it makes JetBlue the latest airline to consider such a deal.

Debt refinancing

According to a report by Bloomberg, JetBlue is in talks with Barclays and Goldman Sachs Group on the transaction, which would be a mix of bonds and leveraged loans to refinance its debt.

JetBlue A220

Photo: JetBlue

If the airline decides to pursue a debt deal, it could use its loyalty program,

TrueBlue

, as collateral. Using a loyalty program as collateral has become a common strategy for airlines. Indeed, frequent flier programs have carried some US airlines that had hefty cash crunches because of the global pandemic.

In 2020, the Financial Times reported that airlines like American Airlines, United Airlines, Spirit Airlines, and Delta Air Lines have used the high value of their customer loyalty programs as debt collateral.

Related

Over 400 Monthly Flights: Inside JetBlue’s Transatlantic Network

JetBlue’s largest transatlantic route network operates from its primary base at New York JFK.

Improving its balance sheet

On July 30, 2024, the New York-based airline reported its financial results for the second quarter of the year.

JetBlue

has posted a net profit of $25 million, exceeding its second quarter guidance targets. Operating revenue reached $2.4 billion in Q2. Commenting on the positive results in Q2, CEO of JetBlue, Joanna Geraghty said:

“We closed the first half of 2024 with meaningful year-over-year improvements in our operation and exceeded our second quarter guidance through strong execution, early evidence the changes we are implementing as part of our refocused strategy are yielding positive benefits.”

JetBlue Airbus A321LR at JFK shutterstock_1674185896

Photo: Lukas Wunderlich | Shutterstock

In addition, the carrier has shared more details about JetForward, the airline’s strategic framework to return JetBlue to sustained profitability. As part of the plan, JetBlue is focusing on building the best leisure network on the East Coast, improving products and loyalty perks, and keeping our costs low to offer value and secure JetBlue’s financial future.

Related

JetBlue To Prioritize Airbus A220 Aircraft In ‘JetForward’ 5-Year Outlook

Destined to replace the aging E195 fleet, the A220 provides 90% more premium seats.

The carrier is actively reinvesting in its key areas, such as New York, Florida, Puerto Rico, and New England, while cutting routes that are not financially viable. According to the airline’s report, JetBlue has stopped service in 15 cities and discontinued over 50 routes to reduce unprofitable operations.

Future financial outlook

Looking ahead, swinging back to profitability is JetBlue’s main objective. For the next half, the airline anticipates “sequential year-over-year unit revenue momentum” through “normalization of competitive capacity in our core geographies.” JetBlue’s chief financial officer, Ursula Hurley said:

“We’ve faced a number of unit cost headwinds this year, including approximately one point of pressure from the change in recognition of Pratt & Whitney compensation and one point from lower capacity than planned, yet we are maintaining our full year CASM-ex Fuel guidance and now expect it be in the range of 6.5% – 8.5% for the full year.

“We remain committed to cost execution in the second half of the year, when we expect our structural cost program to ramp to run-rate and we introduce our new cost transformation program as part of JetForward.”

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