$354 million loss for JetBlue - First Quarter 2020 Results

JetBlue Airways Corporation has released its first-quarter 2020 results,  with a pre-tax loss of $354 million.

• Reported GAAP loss per share of ($0.97) in the first quarter of 2020 compared to a diluted earnings per share of $0.14 in the first quarter of 2019. Adjusted loss per share was $0.42(1) in the first quarter of 2020 versus adjusted diluted earnings per share of $0.16(1) in the first 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 ($354) million in the first quarter of 2020, compared to a pre-tax income of $58 million in the first quarter of 2019. Excluding the one-time items, adjusted pre-tax loss of ($152) million(1), versus adjusted pre-tax income of $70 million(1) in the first quarter of 2019.
• GAAP pre-tax margin of (22.3%) in the first quarter of 2020, down 25.4 percentage points from a pre-tax margin of 3.1% in the first quarter of 2019 due to the impact of COVID-19. Adjusted pre-tax margin of (9.5%)(1), a decline of 13.2 percentage points year over year from adjusted pre-tax margin of 3.7%(1), exclusive of the one-time costs.

Operational Highlights from the First Quarter

• First-quarter 2020 revenue declined 15.1% year over year as a result of a 52% decline in March revenue due to the impact of COVID-19, resulting in both lower demand volumes and a very challenging fare environment following a very solid start to the year.
• Reduced March capacity by 19% year over year and took aggressive action to reduce second quarter 2020 schedules to mitigate cash burn. Our ability to adjust March schedules was limited to close-in cancellations.
• Operating expenses increased 7.1% year over year. Excluding special items, adjusted operating expenses(1) declined 3.6% year over year. We successfully removed ~$150 million from our planned cost base in the first quarter driven by variable cost reductions, mainly through capacity cuts in March and fixed costs reductions achieved by adjusting work schedules where possible and eliminating some discretionary spend.
• Increased cash, cash equivalents and short-term investments from $1.3 billion at the end of 2019 to approximately $1.8 billion at the end of the first quarter of 2020. We further increased our liquidity to $3.1 billion as of April 30, 2020, resulting from additional financing transactions and full disbursement from the CARES Act Payroll Support Program of $936 million.

Balance Sheet and Liquidity

• JetBlue ended the first quarter with approximately $1.8 billion in unrestricted cash, cash equivalents, and short-term investments, or 22.2% of 2019 revenue.
• JetBlue repaid $102 million in regularly scheduled debt and finance lease obligations during the first quarter of 2020.
• JetBlue has taken the following measures to-date to bolster liquidity:
  • Raised $1.0 billion under a secured, 364-day term loan.
  • Drew down $550 million under the existing credit revolver.
  • Negotiated with business partners to extend payment terms and reduce expenses.
  • Revised order book with Airbus, resulting in a $1.1 billion reduction in aircraft capital expenditures through 2022.
  • Deferred plans to take delivery of four leased aircraft announced in January.
  • Paused A320 cabin restyling program, having completed over half of our fleet.
  • Suspended all non-essential projects across the organization.
  • Ceased share repurchases until further notice.
• Resulting from the actions taken, JetBlue expects to reduce its daily cash burn from an average of $18 million in the second half of March to just below $10 million in May, excluding the CARES Act support of approximately $5 million per day through the end of the third quarter.

CARES Act

• JetBlue reached an agreement with the Department of Treasury to receive $936 million under the Payroll Support Program of the CARES Act. The payment consists of $685 million in grants and $251 million in an unsecured term loan.
• In consideration for the payment, we issued approximately 2.6 million warrants to the Department of Treasury.
• In late April, JetBlue applied for the Loan Program of the CARES Act, which would provide up to $1.14 billion in additional liquidity, if needed.

Fuel Expense and Hedging

The realized fuel price in the quarter was $1.86 per gallon, a 9.3% decline versus first quarter 2019 realized fuel price of $2.05.

The decline in average fuel prices reduced the Company's first quarter 2020 fuel expense by approximately $46 million versus our January 2020 guidance. The reduction in fuel consumption driven by capacity cuts reduced the Company’s first quarter 2020 fuel expense by approximately $40 million versus our January 2020 guidance.

JetBlue has entered into forward fuel derivative contracts to hedge its fuel consumption for the second, third, and fourth quarter of 2020. Based on the forward curve as of April 24th, JetBlue expects an average all-in price per gallon of fuel of $0.76 in the second quarter of 2020.

Protecting our Stakeholders

“I could not be prouder of our JetBlue family – not just over the past two decades – but for their service to each other, our customers, and our communities as they provide an essential service during the coronavirus pandemic,” said Robin Hayes, JetBlue’s Chief Executive Officer.

“We entered this crisis with the second strongest balance sheet among U.S. airlines. In the past two months, we have moved quickly to both protect and strengthen our liquidity position. Since the beginning of March, we have made decisive changes to our growth plan to minimize cash burn, including deep capacity cuts to our schedules. We have now reduced our CAPEX plan by $1.3 billion between now and the end of 2022, and by the end of May, we anticipate we will have lowered our operating expenses by approximately 50% year over year.

As we move towards recovery, we have three priorities. The first is the immediate need to protect the safety of our Crewmembers and Customers. The second is to minimize cash burn. The third priority is to set JetBlue up for future success by restoring Customer confidence, by returning to cash generation, and by rebuilding our margins and balance sheet.

We believe that, not only will we get through this crisis, but we will ultimately emerge as a stronger JetBlue. JetBlue has been a force for good for our industry, and we have been resilient through crises for over 20 years.”

Action Plan, Revenue and Capacity

“Our first priority since the onset of the pandemic has been to ensure the safety of our customers and crewmembers. We have responded quickly to changing conditions, and overseen the rapid evolution of policies and programs designed to address the threats to crewmember and customer safety posed by this virus,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.

“Although the overall number of bookings remained extremely limited, we believe that we reached the bottom in terms of demand around mid-April, and expect to have a better sense of third and the fourth quarter of 2020 by early summer.

Our March capacity declined 19% year over year, as a result of scheduled reductions and close-in cancellations. Our working assumption for the second quarter is for capacity to be down about 80% compared to our original plan.

While much of our team is focused on navigating the near-term challenges, we are focused on how the business will look for customers and crewmembers as we transition to recovery. We believe our inherent strengths as a trusted brand with an unparalleled culture and superior product will serve us well, as customers evaluate their air travel options. We plan to continue to be thoughtful as we adapt to changing customer needs.”

Cost Performance and Outlook

“Thanks to our continued focus in managing JetBlue to investment grade metrics, building a strong balance sheet, improving our cost structure and strengthening our margins, we believe we are in the best position of any time in our 20-year history to effectively weather this crisis and emerge even stronger,” said Steve Priest, JetBlue’s Chief Financial Officer.

“From a financial perspective, we are focusing our efforts over the coming months on three key areas: preserving our liquidity, reducing operating expenses, and managing our capital expenditures.

We started the year with $1.3 billion in cash, cash equivalents and short-term investments. By the close of April, our liquidity position reached $3.1 billion, or ~38% of our 2019 revenue, including the payroll support through the CARES act.

In addition to successfully raising liquidity in a short period, we have acted with urgency to minimize our cash burn, reducing our expenses and re-working our plan for capital expenditures. We lowered our cash burn from an average of $18 million per day during the second half of March, to just under $10 million per day by May, excluding proceeds from the Payroll Support Program. We are leaving no stone unturned to protect the financial security of JetBlue.”

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