Summary
- Despite showing poor performance in Q2, I stand with my belief that JetBlue will be one of the first airlines to recover from the current crisis.
- The airline has enough liquidity to stay afloat for more than a year in the current environment.
- I’m long JetBlue.
Despite showing poor performance in Q2, I stand with my belief that JetBlue (JBLU) will be one of the first airlines to recover from the current crisis and thrive once this is all over. JetBlue was one of the first airlines to experience the negative effect of COVID-19, since New York and Boston, from where JetBlue operates most of its flights, became the epicenters of coronavirus at the beginning of the pandemic in the United States. However, the airline managed to survive the first wave of a pandemic and there’s a strong indication that it will successfully weather the storm, as it has enough liquidity to stay afloat for more than a year in the current environment. JetBlue also implemented several successful cash preservation measures and it has a number of advantages to tackle the disruption that will be caused by COVID-19 in the upcoming months until we find a vaccine against the virus. For that reason, I continue to hold my long position in JetBlue and have no plans to sell it anytime soon.
Liquidity is Everything
Since JetBlue operates the majority of its flights from two of its hubs in JFK and Boston Logan, the airline quickly experienced the disruption that COVID-19 caused to its operations at the beginning of March, when the virus started to spread in New York and Massachusetts. While the company’s Q1 results were disastrous, its performance in the Q2 was even worse. In its latest earnings report, which was released this week, JetBlue said that its revenues from April to June decreased by 89.8% Y/Y to $215 million, while the capacity was down 85% Y/Y. The company also had a total load factor of only 33.8% and its RASM (revenue per available seat) declined by 32.2% Y/Y. The only positive thing was that JetBlue managed to do is to decrease its daily cash burn to $9.5 million, below its previous estimates of $11 million. Other than that, there was nothing else positive about the results and the company needs to adapt to the current environment to survive this crisis. The same is also true for every other airline since the stock performance of other major airlines deteriorated since March and their shares will likely continue to trade in a distressed territory in the foreseeable future.
Source: Bloomberg
The good news is that JetBlue managed to survive the initial wave of the pandemic and the company’s management clearly understands the need to adapt to this new environment until things get back to normal. During the latest conference call, JetBlue’s CEO Robin Hayes laid down the company’s next steps:
