JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the third quarter 2020:
- Reported GAAP loss per share of ($1.44) in the third quarter of 2020 compared to a diluted earnings per share of $0.63 in the third quarter of 2019. Adjusted loss per share was ($1.75)(1) in the third quarter of 2020 versus adjusted diluted earnings per share of $0.59(1) in the third quarter of 2019. Note A to this earnings release includes the GAAP to Non-GAAP reconciliation between reported and adjusted diluted earnings per share.
- GAAP pre-tax loss of ($578) million in the third quarter of 2020, compared to a pre-tax income of $254 million in the third quarter of 2019. Excluding one-time items, adjusted pre-tax loss of ($690) million(1) in the third quarter of 2020 versus adjusted pre-tax income of $239 million(1) in the third quarter of 2019.
Operational Highlights from the Third Quarter
- Third quarter 2020 revenue declined 76% year over year as a result of the impact of COVID-19. The decline is better than our initial planning assumption for the quarter of 80%, as a result improving leisure and visiting friends and relatives (“VFR”) travel trends throughout the quarter.
- Reduced third quarter 2020 capacity by 58% year over year compared to an initial planning assumption of a decrease of at least 45%, as a result of actions taken to manage cash burn and protect liquidity.
- Operating expenses declined 45% year over year. Excluding special items, adjusted operating expenses(1)declined 39% year over year. We successfully reduced our third quarter expenses by taking capacity actions to reduce variable costs and reducing fixed costs by adjusting work schedules and eliminating discretionary spend.
Balance Sheet and Liquidity
- JetBlue ended the third quarter with approximately $3.1 billion in unrestricted cash, cash equivalents, and short-term investments, and restricted cash for CARES Act Payroll Support Program (“PSP”), or 38% of 2019 revenue.
- JetBlue repaid $95 million in regularly scheduled debt and finance lease obligations during the third quarter of 2020.
- In the third quarter the U.S. Treasury updated the amount of the CARES Act Loan Program facility to $1.95 billion, and allocated JetBlue an additional amount of $27 million related to the original PSP allocation of $936 million.
- JetBlue has taken the following measures in the third quarter to manage liquidity:
- Refinanced the $1 billion 364-day term loan maturing in early 2021 with EETC transactions.
- Executed over $300 million under sale-leaseback transactions for new aircraft and existing aircraft in our fleet.
- Drew $114 million from the CARES Act Loan Program facility.
- Continued to execute significant variable and fixed cost savings through aggressive capacity management and adjusted work schedules.
- Redeployed assets to capture short-term, tactical cash generation opportunities.
- Resulting from the actions taken, JetBlue’s average daily cash burn in the third quarter was $6.1 million, ahead of the $7 to $9 million range expected in late July. JetBlue expects average daily cash burn in the fourth quarter to range between $4 and $6 million.
Fuel Expense and Hedging
The realized fuel price in the quarter was $1.23 per gallon, a 40% decline versus third quarter 2019 realized fuel price of $2.06.
JetBlue has entered into forward fuel derivative contracts to hedge its fuel consumption for the fourth quarter of 2020. Based on the forward curve as of October 19th, JetBlue expects an average all-in price per gallon of fuel of $1.23 in the fourth quarter of 2020.
Our Recovery Plan and Actions Taken to Position JetBlue for Future Success
“Day in and day out, our crewmembers continue to deliver on our mission - to Inspire Humanity. Their dedication and passion for delivering outstanding service has been remarkable, especially as we work to restore our customers’ confidence in air travel,” said Robin Hayes, JetBlue’s Chief Executive Officer.
“Our efforts to raise liquidity, reshape our network, and reduce costs, are bearing fruit, and have helped us navigate the immediate crisis. We are confident that our low-cost, low fare leisure model, with the best crewmembers in the industry, and a brand that customers trust, will all help JetBlue emerge stronger from this crisis.
In the near term, we continue to manage our daily flying and take tactical actions to ensure we generate cash as demand recovers. We are also executing revenue and cost initiatives, redeploying our aircraft to new, cash accretive markets, and setting JetBlue up for a strong rebound. Naturally, we aim to be free cash flow positive, with the goal of repairing our balance sheet over the coming years.”
Action Plan, Revenue and Capacity
“In the third quarter, our revenue declined 76% year over year, a welcome improvement compared to our initial expectation. We saw a modest, sequential improvement in August and September demand as new case counts decreased, and quarantine restrictions in some states were eased. Our Northeast geography continues to be disproportionately impacted, though we believe it will undoubtedly rebound as it always has with past challenges,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.
“Our planning assumption for the fourth quarter is a revenue decline of approximately 65% year over year. Although there still quite a lot of uncertainty about the evolution of the coronavirus, we are starting to see the booking curve extend slightly into the upcoming Thanksgiving and December holiday travel period, and we are encouraged by Customers responding positively to our promotional activity including an early holiday sale in late September. For the fourth quarter, our current planning assumption is for capacity to decline approximately 45% year over year, given our current expectations for improved bookings.”
Financial Performance and Outlook
“Our average daily cash burn for the third quarter was $6.1 million dollars, ahead of the $7 to $9 million dollarrange we anticipated 3 months ago. This was the result of a modest improvement in demand, beginning in August, variable cost savings achieved through a balanced approach to capacity, and the many actions we took to minimize fixed costs across our business. For the fourth quarter, we estimate our daily cash burn to be between $4 and $6 million dollars,” said Steve Priest, JetBlue’s Chief Financial Officer.
“Earlier this month, we reached a second negotiated agreement with Airbus to defer additional aircraft and associated capital expenditure over the next few years. Since the beginning of the crisis we have reduced aircraft and non-aircraft CAPEX by approximately $2 billion dollars between 2020 and 2022.
At the end of September, our total liquidity was approximately $3.1 billion dollars. During the quarter, we refinanced our $1 billion dollar 364-day term loan and continued our focus on maintaining liquidity. We have approximately $1 billion dollars of traditional unencumbered assets, excluding the value of our TrueBlue loyalty program and our subsidiaries.
As we navigate the current environment with a steady hand, we are shifting our work to rebuilding our margins. We are taking an aggressive approach to improving our cost structure, better aligning our fixed and variable cost base, to temporarily lower revenue and capacity. We believe that our work will return JetBlue to profitability with structurally better margins, and our ultimate intention is to achieve superior pre-tax margins versus the industry.”
Earnings Call Details
JetBlue will conduct a conference call to discuss its quarterly earnings today, October 27, 2020 at 10:00 a.m. Eastern Time. A live broadcast of the conference call will also be available via the internet at http://investor.jetblue.com.
For further details see the Third Quarter 2020 Earnings Presentation available via the internet at http://investor.jetblue.com.