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.