JetBlue reports third quarter of 2022 results

JetBlue Airways Corporation today reported its results for the third quarter of 2022:

Photo JetBlue

• Reported GAAP diluted earnings per share of $0.18 in the third quarter of 2022 compared to diluted earnings per share of $0.63 in the third quarter of 2019. Adjusted diluted earnings per share was $0.21(1) in the third quarter of 2022 versus adjusted diluted earnings per share of $0.59(1) in the third quarter of 2019.
• GAAP pre-tax income of $105 million in the third quarter of 2022, compared to a pre-tax income of $254 million in the third quarter of 2019. Excluding one-time items, adjusted pre-tax income of $118 million(1) in the third quarter of 2022 versus adjusted pre-tax income of $239 million(1) in the third quarter of 2019.

Third Quarter Operational and Financial Highlights

• Capacity was (0.5%) year over three, compared to our guidance for capacity to be between (0.5%) to 0.5% year over three.
• Revenue per available seat mile increased 23.4% year over three, compared to our guidance of an increase of 22% to 24%, year over three. Revenue was above the high-end of our initial outlook as strong leisure and visiting friends and relatives (VFR) demand trends continued through the quarter. Hurricanes Fiona and Ian were a net neutral impact to our unit revenues in the third quarter, as revenue was offset by reduced capacity.

• Operating expenses per available seat mile increased 32.4% year over three. Operating expenses per available seat mile, excluding fuel and special items (CASM ex-fuel) (1) increased 16.3%(1) year over three, compared to our guidance of a 15% to 17% increase year over three.

Balance Sheet and Liquidity

• As of September 30, 2022, JetBlue’s adjusted debt to capital ratio was 53%(1).
• JetBlue ended the third quarter of 2022 with approximately $2.3 billion in unrestricted cash, cash equivalents, short-term investments, and long-term marketable securities, or 28% of 2019 revenue.
• On October 21, 2022, JetBlue amended its revolving credit facility to increase the lending commitments by $50 million to a total of $600 million and extended the maturity date to October 21, 2024.

Fuel Expense and Hedging

• The realized fuel price in the third quarter 2022 was $3.84 per gallon, an 86% increase versus third quarter 2019 realized fuel price of $2.06.
• As of October 25, 2022, JetBlue has entered into forward fuel derivative contracts to hedge an estimated 27% of its fuel consumption for the fourth quarter of 2022. Based on the forward curve as of October 14, 2022, JetBlue expects an average all-in price per gallon of fuel of $3.65 in the fourth quarter of 2022, including hedges.

Unlocking Immense Consumer Benefits Through the Northeast Alliance

• The Northeast Alliance (NEA) continues to unlock consumer benefits by providing customers with more choice as a true third-competitor in the Northeast.
• NEA growth is outpacing overall domestic and international industry capacity growth. Consumers continue to benefit as the NEA is launching new destinations, adding flights to others, enhancing schedules, and allowing our Loyalty customers the ability to benefit from two different programs.
• Consumers further benefit as the NEA has stimulated a clear competitive response. The dominant and entrenched carriers in the Northeast have responded by matching the NEA’s new destinations as well as expanding their own service, boosting competition in the region.

Making Further Progress as an ESG Leader

• We recently announced an agreement with Air Company, a JetBlue Ventures investment, to purchase 25 million gallons of its Airmade sustainable aviation fuel (SAF) over five years targeting delivery starting in 2027. This agreement is an important step in helping us reach our goal of converting 10% of our total jet fuel usage to SAF by 2030.
• We also announced the appointment of Nik Mittal to JetBlue’s board of directors, whose deep expertise in financial strategy and sustainability will bring even more focus on ESG matters at the highest level of company leadership.

Enhancing our Business for the Long-Term

“For the third quarter, we reached an important milestone in our recovery as we generated our first quarterly adjusted profit since the start of the pandemic. Looking ahead, we expect our profitability to carry through to another solid quarter of mid-single-digit pre-tax margins in the fourth quarter, and we’ll look to expand on that further in 2023 as we continue to restore our earnings power,” said Robin Hayes, JetBlue’s Chief Executive Officer.

“We continue to see a growing appetite for JetBlue’s unique customer value proposition of low fares and great service. With ample runway for growth ahead of us, we remain focused on execution and value creation for all our stakeholders.

I’m also pleased that last week Spirit shareholders overwhelmingly voted to approve our proposed acquisition. Together, we’ll build a truly national low-fare challenger to the dominant Big Four airlines and expand our compelling combination of award-winning service and low fares to more Customers across more destinations.”

Revenue and Capacity

“I’m proud of our team for their dedication in delivering the JetBlue experience to our customers through a very challenging summer and the most recent hurricanes. For the fourth quarter we expect capacity to be up 1% to 4% year over three, a modest sequential step-up versus the third quarter,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.

“Throughout the quarter, strong leisure and VFR demand trends carried through the peak summer and into the fall trough period. We see that continuing here in the fourth quarter, and we’re confident in the demand backdrop for the year-end holiday peaks. For the fourth quarter, we expect unit revenue to increase between 15% and 19% year over three.”

Financial Performance and Outlook

“I’m pleased with the team’s execution in delivering our first quarter of profitability since the pandemic, an important milestone for us. We exceeded our original revenue guidance, maintained controllable costs in-line with our initial outlook despite the impact from hurricanes, resulting in a solid pre-tax margin result,” said Ursula Hurley, JetBlue’s Chief Financial Officer.

“The hurricanes negatively impacted CASM ex-Fuel by roughly one point to CASM-ex in the third quarter with no impact to the fourth quarter. Given the continued fragile aviation ecosystem, we are taking a cautious approach to operational investments and more conservative planning assumptions that we put in place for the summer.

For the fourth quarter, we are forecasting CASM ex-Fuel(2) to increase 8.5% to 10.5% year over three. This represents a sequential improvement of approximately 7 points, driven by efficiencies as we scale capacity up as well as early progress on our recently announced structural cost program.

In the third quarter, we paid down $66 million dollars of debt, funded $260 million dollars in capital expenditures, and paid $25 million dollars related to the Spirit transaction. The favorable Spirit shareholder vote on October 19 also triggered the prepayment of $272 million dollars in the fourth quarter under the terms of our merger agreement. Looking ahead, we remain focused on maintaining a healthy liquidity position.”

Notes

(1) Non-GAAP financial measure; Note A provides a reconciliation of non-GAAP financial measures used in this release and explains the reasons management believes that presentation of these non-GAAP financial measure provides useful information to investors regarding JetBlue's financial condition and results of operations.

(2) With respect to JetBlue’s CASM ex-fuel guidance, JetBlue is unable to provide a reconciliation of the non-GAAP financial measure to GAAP because the excluded items have not yet occurred and cannot be reasonably predicted. The reconciling information that is unavailable would include a forward-looking range of financial performance measures beyond our control, such as fuel costs, which are subject to many economic and political factors. Accordingly, a reconciliation to CASM is not available without unreasonable effort.

JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
		Three Months Ended								Nine Months Ended
		September 30,						Percent		September 30,						Percent
			2022			2021		Change			2022			2021		Change
	OPERATING REVENUES
	Passenger	$	2,415		$	1,856		30.1		$	6,319		$	3,913		61.5
	Other		147			116		27.1			424			290		46.4
	Total operating revenues		2,562			1,972		30.0			6,743			4,203		60.4
	OPERATING EXPENSES
	Aircraft fuel and related taxes		825			443		86.0			2,305			973		137.0
	Salaries, wages and benefits		675			620		8.9			2,058			1,718		19.8
	Landing fees and other rents		131			182		(27.9)			412			470		(12.5)
	Depreciation and amortization		147			140		5.2			435			398		9.4
	Aircraft rent		30			25		20.7			83			76		10.0
	Sales and marketing		81			60		35.4			216			130		66.6
	Maintenance, materials and repairs		178			205		(13.0)			492			472		4.0
	Other operating expenses		343			297		15.4			1,026			768		33.5
	Special items		13			(186)		(106.8)			57			(841)		106.8
	Total operating expenses		2,423			1,786		35.7			7,084			4,164		70.1
	OPERATING INCOME (LOSS)		139			186		(25.4)			(341)			39		(970.2)
	Operating margin		5.4%			9.4%		(4.0)	pts		-5.1%			0.9%		(6.0)	pts
	OTHER INCOME (EXPENSE)
	Interest expense		(44)			(42)		5.0			(121)			(153)		(21.3)
	Interest income		11			3		321.7			24			9		164.1
	Gain (loss) on investments, net		-			54		(100.7)			(4)			54		(107.9)
	Other		(1)			(11)		(90.7)			(1)			(49)		(97.7)
	Total other income (expense)		(34)			4		944.7			(102)			(139)		26.4
	INCOME (LOSS) BEFORE INCOME TAXES		105			190		(44.6)			(443)			(100)		343.7
	Pre-tax margin		4.1%			9.6%		(5.5)	pts		-6.6%			-2.4%		(4.2)	pts
	Income tax (benefit)		48			60		(20.3)			(57)			(47)		23.8
	NET INCOME (LOSS)	$	57		$	130		(55.9)		$	(386)		$	(53)		623.0
	EARNINGS (LOSS) PER COMMON SHARE:
	Basic	$	0.18		$	0.41				$	(1.20)		$	(0.17)
	Diluted	$	0.18		$	0.40				$	(1.20)		$	(0.17)
	WEIGHTED AVERAGE SHARES OUTSTANDING:
	Basic		323.9			318.0					322.5			317.3
	Diluted		325.0			321.3					322.5			317.3

JETBLUE AIRWAYS CORPORATION
COMPARATIVE OPERATING STATISTICS
(unaudited)
		Three Months Ended								Nine Months Ended
		September 30,						Percent		September 30,						Percent
			2022			2021		Change			2022			2021		Change
	Revenue passengers (thousands)		10,502			9,075		15.7			29,075			21,476		35.4
	Revenue passenger miles (millions)		13,963			12,913		8.1			38,857			29,524		31.6
	Available seat miles (ASMs) (millions)		16,217			16,168		0.3			48,005			38,902		23.4
	Load factor		86.1%			79.9%		6.2	pts.		80.9%			75.9%		5.0	pts.
	Aircraft utilization (hours per day)		10.1			10.1		-			10.1			8.3		21.7
	Average fare	$	229.95		$	204.50		12.4		$	217.34		$	182.22		19.3
	Yield per passenger mile (cents)		17.30			14.37		20.4			16.26			13.26		22.7
	Passenger revenue per ASM (cents)		14.89			11.48		29.7			13.17			10.06		30.9
	Revenue per ASM (cents)		15.80			12.20		29.6			14.05			10.80		30.0
	Operating expense per ASM (cents)		14.94			11.04		35.3			14.76			10.70		37.9
	Operating expense per ASM, excluding fuel (cents)(1)		9.69			9.39		3.2			9.78			10.29		(5.0)
	Departures		84,805			76,918		10.3			246,653			188,220		31.0
	Average stage length (miles)		1,191			1,320		(9.8)			1,218			1,293		(5.8)
	Average number of operating aircraft during period		286			276		3.7			284			270		5.0
	Average fuel cost per gallon, including fuel taxes	$	3.84		$	2.08		84.0		$	3.68		$	1.94		89.4
	Fuel gallons consumed (millions)		215			213		1.1			626			501		25.1
	Average number of full-time equivalent crewmembers										20,013			16,088		24.4

(1) Refer to Note A at the end of our Earnings Release for more information on this non-GAAP financial measure. Operating expense per available seat mile, excluding fuel (“CASM Ex-Fuel”) excludes fuel and related taxes, other non-airline operating expenses, and special items.

JETBLUE AIRWAYS CORPORATION
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in millions)
	September 30,			December 31,
		2022			2021
	(unaudited)
Cash and cash equivalents	$	1,401		$	2,018
Total investment securities		867			863
Total assets		13,330			13,642
Total debt		3,759			4,006
Stockholders' equity		3,507			3,849

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE, (LOSS) INCOME BEFORE TAXES, NET (LOSS) INCOME, AND (LOSS) EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS AND NET GAIN (LOSS) ON INVESTMENTS
(in millions, except per share amounts)
(unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2022			2019			2022			2019
Total operating revenues	$	2,562		$	2,086		$	6,743		$	6,063
Total operating expenses	$	2,423		$	1,839		$	7,084		$	5,490
Less: Special items		13			-			57			14
Total operating expenses excluding special items	$	2,410		$	1,839		$	7,027		$	5,476
Operating (loss) income	$	139		$	247		$	(341)		$	573
Add back: Special items		13			-			57			14
Operating (loss) income excluding special items	$	152		$	247		$	(284)		$	587
Operating margin excluding special items		5.9%			11.8%			-4.2%			9.7%
(Loss) income before income taxes	$	105		$	254		$	(443)		$	548
Add back: Special items		13			-			57			14
Less: Net gain (loss) on investments		-			15			(4)			15
(Loss) income before income taxes excluding special items and net gain (loss) on investments	$	118		$	239		$	(382)		$	547
Pre-tax margin excluding special items and net gain (loss) on investments		4.6%			11.4%			-5.7%			9.4%
Net (loss) income	$	57		$	187		$	(386)		$	408
Add back: Special items		13			-			57			14
Less: Income tax (expense) benefit related to special items		1			-			7			3
Less: Net gain (loss) on investments		-			15			(4)			15
Less: Income tax (expense) benefit related to net gain (loss) on investments		-			(4)			-			(4)
Net (loss) income excluding special items and net gain (loss) on investments	$	69		$	176		$	(332)		$	408
(Loss) earnings per common share:
Basic	$	0.18		$	0.63		$	(1.20)		$	1.36
Add back: Special items, net of tax		0.03			-			0.16			0.03
Less: Net gain (loss) on investments, net of tax		-			0.04			(0.01)			0.04
Basic excluding special items and net gain (loss) on investments	$	0.21		$	0.59		$	(1.03)		$	1.35
Diluted	$	0.18		$	0.63		$	(1.20)		$	1.35
Add back: Special items, net of tax		0.03			-			0.16			0.03
Less: Net gain (loss) on investments, net of tax		-			0.04			(0.01)			0.03
Diluted excluding special items and net gain (loss) on investments	$	0.21		$	0.59		$	(1.03)		$	1.35

Adjusted debt to capitalization ratio

Adjusted debt to capitalization ratio is a non-GAAP financial metric which we believe is helpful to investors in assessing the company's overall debt profile. Adjusted debt includes aircraft operating lease liabilities, in addition to total debt and finance leases, to present estimated financial obligations. Adjusted capitalization represents total equity plus adjusted debt.

NON-GAAP FINANCIAL MEASURE
ADJUSTED DEBT TO CAPITALIZATION RATIO
(in millions) (unaudited)
	September 30, 2022			December 31, 2021
Long-term debt and finance leases	$	3,235		$	3,651
Current maturities of long-term debt and finance leases		524			355
Operating lease liabilities - aircraft		216			256
Adjusted debt	$	3,975		$	4,262
Long-term debt and finance leases	$	3,235		$	3,651
Current maturities of long-term debt and finance leases		524			355
Operating lease liabilities - aircraft		216			256
Stockholders' equity		3,507			3,849
Adjusted capitalization	$	7,482		$	8,111
Adjusted debt to capitalization ratio		53%			53%