JetBlue defers 44 A321neo aircraft deliveries to 2030 and beyond

JetBlue has deferred 44 of its A321neo aircraft deliveries that were originally scheduled to be delivered from 2025 through to 2029 it said in its second quarter 2024 results on July 30, 2024. After reaching an agreement with Airbus on July 26, 2024, the 44 aircraft deliveries have been revised to 2030 and beyond. JetBlue CEO Joanna Geraghty said in an earnings call: ""We simply cannot continue to invest in capital intensive assets that must be financed upon delivery and that are subsequently unable to produce a return because they have to be parked due to required maintenance and lengthy wait times.” The airline said it is ""pursuing capital-light growth through extending the lives of approximately 30 A320 aircraft"", it said in its report. In addition, management said the deferred aircraft will “reduce our upcoming capital expenditures by $3bn, helping us to improve our free cash flow outlook and restore our balance sheet health of our business.” Geraghty said the deferred aircraft were the most impacted by the Pratt & Whitney GTF engine issues. ""Our challenges are clear,"" said Geraghty in an earnings call. ""The Pratt & Whitney engine related aircraft groundings which are significantly impeding our growth rate and pressuring our profitability, as well as industry wide cost inflation and persistent air traffic control issues, all of which are headwinds we're working hard to overcome."" It added that the continued powdered metal issues with the Pratt & Whitney engines, which powers its A220 and A321neo fleets, and the required inspections, has resulted in 10 aircraft on the ground (AOG) due to the lack of engine availability as of June 30, 2024. It expects each engine to take around 360 days to complete shop visits and return to a serviceable condition. It had an average of 11 AOG as of June 30, 2024. Geraghty added: “In addition to powder metal related inspections challenging our engine capacity, we’ve experienced a number of other unscheduled engine maintenance visits that resulting in GTF engines coming off wing much sooner than anticipated – some after just a year of flying. In fact, a majority of the 11 average AOG this year are due to inspections outside of powder metal.” The airline said it expects AOG in 2025 to be in the mid-to-high teens and will drive “roughly flat year-over-year capacity in 2025. Geraghty commented that there is “greater uncertainty in 2026 and beyond”. In addition to the deferred aircraft, JetBlue president Marty St. George said the airline has “shifted capacity out of corporate focused routes and into leisure and VFR [visiting friends and family] routes.” JetBlue has closed over 50 route exits and 15 of its ‘BlueCity’ focus cities so far in 2024 as it works to make “significant network changes”. The focus will be on New York, New England, Florida, and Latin leisure flying origins. “Every route and station needs to earn its way into our network,” explained George. “Our push for profitability has lessened our patience for underperforming routes.” Geraghty added: “At the end of the day, our revenue growth has not been enough to outpace our cost challenges and we need to fix that.” The airline’s revenues were down roughly 7% in the second quarter to $2.4bn, compared to the same financial quarter last year. Passenger revenues were down around 8% to $2.3bn. Its total operating expenses were flat for the quarter at $2.4bn. As a result, its operating income was down 75.9% compared to $57 million, compared to last year’s second quarter of $235 million in operating income. Its net profit was $25 million, or seven cents per share, down nearly 82% from last year’s $138 million. Geraghty said its profit “won’t be enough to offset projected losses generated in the other three quarters. We’ve remained steadfast in our urgency to return to full year profitability.” It updated its full year outlook with capacity to be down between 2.5-5%, originally estimating it to be “down low single digits”. It also originally estimated the same for its full year revenue but had further clarified it to be down 4-6% in comparison to 2023’s revenues. Its CASM ex-fuel expenses are set to be up 6.5-8.5%, in line with its original estimate of it being up mid-to-high single digits. Fuel price per gallon is set to be between $2.80 and $3. It also provided its third quarter outlook, anticipating capital expenditures of around $365 million. Furthermore, capacity is set to be down between 3% and 6% in the third quarter, compared to the same period last year. Revenue for the period is expected to decline 1.5-5.5%. CASM ex-fuel is forecast to increase around 6% and 8%, while fuel is predicted to cost around $2.82 and $2.97 per gallon. As of June 30, 2024, its cash and cash equivalents were $1.3bn and total assets were valued at approximately $14bn. In addition, total debt was at $5.4bn and stockholders’ equity at $2.7bn. As of 11:30am GMT, JetBlue's shares were up nearly 18% after it beat initial estimates.