JetBlue seems to be inching ever-closer to a Chapter 11 bankruptcy protection filing. The airline hasn’t turned a profit since before the pandemic, and it seems like such a filing is inevitable, as debt will need to be restructured. The company’s CEO has promised it won’t happen in 2026, though I’d be shocked if it doesn’t happen in 2027. Along those lines, there’s a noteworthy update, as clearly there’s a recent vibe shift among creditors…
JetBlue creditors hire advisers as stock & bonds sink
The Wall Street Journal reports how a group of senior creditors to JetBlue is working with a financial adviser and law firm, as the airline grapples with cash burn and increased jet fuel prices. JetBlue’s stock is trading at new lows in recent days, and closed Friday at $2.62, well under 50% of where it was trading under three months ago.
Not only that, but bonds are trading down as well. The company’s $2 billion notes due in 2031 fell to 42 cents on the dollar earlier this week, compared to trading near 80 cents on the dollar earlier this month.
In a statement, JetBlue simply shared that the company “remains confident in its JetForward strategy and the progress being made toward returning to sustained profitability.” Of course that says nothing about the possibility of filing for Chapter 11 bankruptcy. Quite to the contrary, a Chapter 11 filing is almost certainly a key part of what will allow the airline to have a chance of success in the long run.
JetBlue will be fine, but a restructuring is necessary
As mentioned above, JetBlue hasn’t turned a profit since before the start of the pandemic. The airline has also had a series of setbacks, ranging from its partnership with American being blocked by regulators, and then its merger with Spirit also being blocked by regulators. All the while, executives at the airline did nothing to actually improve the carrier’s independent prospects.
Fortunately that’s starting to change, as leadership increasingly puts effort into its TrueBlue program, introduces first class while reconfiguring planes more efficiently, and opens lounge.
I trust that JetBlue will eventually be fine. The issue is, the airline now has close to $9 billion in debt. So even if the airline could at some point turn an operating profit, servicing that amount of debt while being a relatively small carrier seems like a hurdle that’s not easy to overcome.
Just to put that into context, Delta only has about double as much debt as JetBlue, despite having around seven times as much revenue. Meanwhile Southwest has materially less debt than JetBlue, despite having more than three times as much revenue.
For years we’ve known that United is at least in theory interested in JetBlue in some form… mainly its presence at New York (JFK). While for a while it sure seemed like United wanted a merger with JetBlue, clearly management has decided against that with current debt levels. If JetBlue does enter bankruptcy protection, though, I wouldn’t be surprised if United is part of some long term deal.
Bottom line
A group of JetBlue creditors have hired advisers, as the carrier’s stock and bonds sink. JetBlue hasn’t been in a good spot in a long time, as the company hasn’t turned a profit since before the pandemic. But we’re getting to the point where JetBlue can’t keep reporting operating losses while also having such a big debt burden.
JetBlue’s CEO had promised there wouldn’t be a bankruptcy filing in 2026, but it seems like the goal has almost been to just wait and see if any airline tries for a merger. With the current debt levels, it seems that even United isn’t interested, but I imagine that could change once the carrier is in Chapter 11.
How do you see this JetBlue situation playing out?
Why do you trust that JetBlue will eventually be fine? I mean, that would be my preferred result, I just don't see it.
@ Peter_ -- I'm not saying JetBlue will definitely have an independent future, but as 1990_ points out, I am saying that the airline has some valuable assets, and also operates in some potentially lucrative markets. The point is, the airline actually has some value beyond the typical ULCC model, where they just try to come into every market imaginable and undercut the competition.
Bt aren't those assets used to secure debt? If so, then those assets are really under the control of the debt holders/lenders. Valuable assets do not mean diddly if there's no viable business.
Those assets could be valuable to other airlines but other airlines do not want to assume the debt that secures those assets.
George, like usual, you're over-simplifying this. JetBlue still holds billions in unpledged assets (planes, slots, engines) not tied to debt. Plus, buyers in Ch. 11 don't assume bad debt; assets are sold free and clear while debt gets written down. Lenders don't want grounded planes; they'd rather restructure terms. Demand in NYC/BOS remains strong; fix the balance sheet and the core business still flies.
Are the valuable assets and lucrative markets in the room with us? My understanding (maybe incorrect) is that domestic yields from highly contested markets like NYC are not great due to high costs and low fares, and Caribbean flying is also low-yield. The JFK slots belong to the Port Authority, and while JetBlue might keep them through bankruptcy or acquisition, they also might not. Their fleet and frequent flyer program are pretty leveraged, though 286...
Are the valuable assets and lucrative markets in the room with us? My understanding (maybe incorrect) is that domestic yields from highly contested markets like NYC are not great due to high costs and low fares, and Caribbean flying is also low-yield. The JFK slots belong to the Port Authority, and while JetBlue might keep them through bankruptcy or acquisition, they also might not. Their fleet and frequent flyer program are pretty leveraged, though 286 owned Airbus out of 296 planes is definitely not nothing. I believe the TrueBlue program is valued at less than half of Atmos and a sixth of SkyMiles.
Bankruptcy is inevitable but I don’t see who’d want to take a chance on acquisition, given that in this decade, the JetBlue model is only proven to be very good at losing money. The only obvious reason to jump in would be to prevent a competitor from getting stronger (e.g. because JetBlue’s total collapse would improve competitor yields).
@Peter_ Thing is... JetBlue isn't asset-poor; their JFK slots, Boston gates, and modern fleet still count. With their cash cushion, they have moves left to make, even if it eventually means a structured Chapter 11 to wipe out debt rather than liquidation. Like you, I really hope they can navigate this and remain independent.
Sure, but chapter 11 doesn't just magically wipe out debt. Especially debt that is held in various tranches and secured by different things. Much will depend on the terms of the DIP financing and what the creditors steer the ship towards. Many creditors simply do not want to convert their debt into equity and would rather take a cents on the dollar payout. These things are just never straightforward even if there are assets at...
Sure, but chapter 11 doesn't just magically wipe out debt. Especially debt that is held in various tranches and secured by different things. Much will depend on the terms of the DIP financing and what the creditors steer the ship towards. Many creditors simply do not want to convert their debt into equity and would rather take a cents on the dollar payout. These things are just never straightforward even if there are assets at play.
40 years ago companies might have just filed for bankruptcy, used cash on hand during the bankruptcy, and started the negotiations with their creditors while they were in bankruptcy. Today that's nearly impossible to do because the costs of bankruptcy are just too high (ironic perhaps). So if they don't go in with a deal with their major creditors in-hand, whether prepackaged, pre-negotiated, what have you - watch out.
JetBlue is the next big US carrier to go under. They are not fine. They carry a ton of debt. Their business model is focused on leisure travel and they refocused themselves around Northeast to Florida and Caribbean markets, with a handful of vanity TATL routes thrown in. Not a recipe for success. B6's corporate traffic is insignificant. It operates hubs in high cost spaces like JFK and BOS. It paid a fortune to secure...
JetBlue is the next big US carrier to go under. They are not fine. They carry a ton of debt. Their business model is focused on leisure travel and they refocused themselves around Northeast to Florida and Caribbean markets, with a handful of vanity TATL routes thrown in. Not a recipe for success. B6's corporate traffic is insignificant. It operates hubs in high cost spaces like JFK and BOS. It paid a fortune to secure NK's LGA slots for reasons that really make no sense. The FLL build up was inevitable, but FLL is not MIA and it doesn't really command a yield premium. JetBlue is at best, six months away from bankruptcy and / or liquidation.
CHAP-TER SEV-EN!! Clap clap clap clap clap.
Death to Noo Yawk and all who claim it. Death to Neelzebub and all his works. Mint Is Shint, so bury it.
I totally disagree with your perspective and wishes, but, I must ask, were you doing the 'Cha Cha Slide'? "Everybody clap your hands..."
No, but I was putting a bottle of good champagne on chill mode.
Well then, please do save one especially good bottle for when he is finally ‘out’ (no, not B6, or DL, or Tim, you know who...)
Already assumed, but drinking it is conditional on Hillbilly Bear or Little Ricky not winning on November 7th, 2028.
They really need to break the debt.
I can see AS being spoiler here and go with B6 as a packaged bankruptcy. AS will take B6 and be thier east coast airline in Atmos.
Do you think AS has the appetite for that after Hawaiian?
If the creditors are getting ready for a chapter 11 bankruptcy, that means they are willing to take a haircut in order to minimize their losses.
For those who don’t know, chapter 11 allows them to restructure debts (read have the court wipe them out, this includes all shareholders stock). Chapter 7 is when a company ceases operations (Spirit’s 3rd bankruptcy).
I suspect they will emerge with less debt, but still enough to not make them enticing to others.
Been interesting to see B6 add new transfer partners (Rove and now Bilt); seems clear that they’re trying to get a cash infusion into TrueBlue through points purchases via transfer.
But it does make me wonder if Bilt will offer a Rent Day transfer bonus to TrueBlue, considering the potential (maybe?) risks with the valuation of points from a Chapter 11. I’m personally hoping Bilt looks elsewhere, since I have no interest in a TrueBlue...
Been interesting to see B6 add new transfer partners (Rove and now Bilt); seems clear that they’re trying to get a cash infusion into TrueBlue through points purchases via transfer.
But it does make me wonder if Bilt will offer a Rent Day transfer bonus to TrueBlue, considering the potential (maybe?) risks with the valuation of points from a Chapter 11. I’m personally hoping Bilt looks elsewhere, since I have no interest in a TrueBlue transfer bonus and would like to burn some Bilt Cash before the end-of-year expiration.
if we dont get a flying blue bonus before EOY im gonna rage
Jetblue was profitable when they had the largest legroom, no bag fees and free snacks.
Turning into another legacy carrier without the network was obviously a bad decision
Even with a Ch. 11 filing, they will still be saddled with approx 5 billion dollars of debt. I am not so positive on B6's future as a stand alone carrier, even after a Ch. 11 restructuring.
As AA learned the hard way it's better file Chapter 11 now than wait several years. Some of AA's problems go back to waiting too long to file. Right now a Chapter 11 Reorganization is the airline's only hope. Thinking FLL is the savior is laughable.