JetBlue has become the latest airline to announce route cuts, and to reveal just how dire of a situation they’re in. These updates come in the form of a note to employees, which JetBlue has published for the public to see as well.
JetBlue describes the situation to employees, noting that they’re not going to sugarcoat it, and that “demand continues to worsen, and the writing is on the wall that travel will not bounce back quickly.”
How bad is JetBlue’s situation?
JetBlue revenue has fallen to less than $4 million per day
To give a sense of how bad things are, JetBlue reveals that:
- In March 2019, the company took in an average of about $22 million per day from bookings and ancillary fees
- In the last several days, the company has taken in under $4 million per day, while also issuing $20 million per day in credits to customers for canceled bookings
As the airline describes it, this is being driven by fewer new bookings, much lower fares, and a customer cancel rate more than 10x the norm. $4 million per day doesn’t come anywhere close to covering JetBlue’s daily expenses.
JetBlue reducing flying by at least 40%
JetBlue has revealed that they intend to cut capacity by at least 40% in April and May, and also expect substantial cuts in June and July. While no numbers have been given, the airline also expects to ground some aircraft, which will impact hours for frontline employees.
The company will be notifying customers of cancelations in a phased approach so that they don’t overwhelm customer support as they continue to receive exponentially more calls than they ever have before.
JetBlue slowing down new aircraft deliveries
While details are still being worked out, JetBlue notes that in collaboration with Airbus, they are looking for the opportunity to slow aircraft deliveries and reduce aircraft pre-delivery payments, as a way of reducing capital expenditures.
The airline will also defer the four previously used airplanes that were announced earlier this year. JetBlue has nearly 150 aircraft on order, including 70 A220-300s, 50 A321neos, 13 A321LRs, and 13 A32XLRs.
JetBlue was planning on launching flights to Europe in 2021 using A321LRs, so we’ll have to wait and see how those plans are impacted by this situation.
JetBlue increasing cash reserves
With a drastic decrease in revenue, JetBlue is having to dip into cash savings. The airline came into this with about $1.2 billion, but expenses total millions of dollars each day. The company has secured a new liquidity facility, allowing the airline to borrow $1 billion.
Even with that extra credit line, the company will need significant government support to get through these losses.
Other capital and operational spending cuts
JetBlue is reducing spending where they can, with the CEO taking a 50% pay cut during the crisis. On top of that, JetBlue has paused more than 75% of projects related to investing in infrastructure, technology, and real estate.
JetBlue is calling on the government to help
As is the case with other US airlines, JetBlue is calling for a government bailout of the airline industry. As that’s described:
“We have been coordinating with Airlines for America (A4A) and other U.S. airlines to ensure government leaders understand the threat to our global economy if air travel is not supported. When this pandemic passes – and it will – air travel will play a major role in getting life back to normal and supporting economic recovery. We are going to need significant government help to do that.”
Bottom line
So far JetBlue’s cuts aren’t as deep as some other airlines. What I find most interesting though is that they’ve given some concrete numbers to show just how bad the situation is — they’ve gone from an average of $22 million in revenue per day, to under $4 million in revenue plus $20 million in canceled flights in the past several days…
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