On Monday JetBlue revised its Q4 guidance lower, with bookings remaining “volatile” and demand and revenue recovery maintaining a “non-linear” trend for the quarter. Today the company provided additional details to employees, including news that additional spending cuts are coming later in the week.
We must plan for a choppy recovery, and even when demand is back it will take several years to pay back the money we’ve borrowed to get us through this.– JetBlue CEO Robin Hayes
In a memo to employees reviewed by PaxEx.Aero CEO Robin Hayes notes that the company expanded its debt load by $2.5 billion to close the year around $4.8 billion outstanding. He describes it a “a staggering amount of debt we will have to repay. And he also expects that the debt load will grow to start 2021, not shrink.
To that end he indicated that the company must “pause new expenses where possible.” This will include “a continuation of some of the efforts we have seen this year, and also further measures which we must introduce to offest the considerable financial challenges we are facing.”
Hayes expects the spending cuts to be “difficult and indeed painful” but also hopes that it will help “save jobs as the pandemic drags on.”
Poor Thanksgiving Loads
The SEC filing on Monday noted estimates of a 70% decrease in revenue for the quarter and an increase in cash burn to $6-8 million per day, up from $4-6 million projected. The internal memo also highlighted just how weak the Thanksgiving holiday was for the company.
From Wednesday through Sunday the company operated 2,697 flights, down 47% from 5,130 in 2019. Even more challenging, however, is that the load factor dropped to approximately 50% from 85% in 2019. Extending the math out this suggests JetBlue carried only about 31% of the total travelers as it did a year ago, and likely at much lower fares than the prior year. Compared to an industry-wide range of roughly 39% passenger counts compared to 2019 levels (based on TSA screening numbers for the same period) and it is clear that JetBlue faces a new set of challenges.
Not all doom and gloom
While the memo held an overall negative tone, Hayes still is confident that London service will inaugurate in the new year and that the Mint refresh is on track. Ditto for the American Airlines partnership (that the DOT recently approved by choosing to not challenge it during the prescribed review period) and the introduction of the A220-300 into service.
But the short-term uncertainty remains a challenge for the company, and the cost cutting to reach
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