JetBlue shares rally after airline flags "disconnect" between earnings and bond rout

Oct 27 — JetBlue Airways extended its early gains to surge 20% on Tuesday, after the airline ​said there was "a significant disconnect" between its third-quarter earnings and a recent bond sell-off.

The carrier raised its full-year seat revenue growth forecast to ‌13.5%-14.5% from 10%-12.5%, banking on strong fares and growth in Fort Lauderdale, but flagged fuel costs as ⁠a drag.

It also ended the quarter ​with $2.2 billion in liquidity, including a $600 ⁠million undrawn credit facility, and about $7 billion in unencumbered assets — $2.8 billion of ‌which are aircraft and ‌engines, following updated appraisals.

"I think there's a significant disconnect between the narrative ⁠and the bond market and what our ⁠financial results are demonstrating," JetBlue CEO Joanna Geraghty told analysts, pointing to the financial flexibility to bridge to the 2028 EPS goal.

JetBlue's TrueBlue senior secured note, a bond backed by the airline's loyalty program, came under heavy selling pressure this month, with the price halving to about $47 and ‌yields surging to distressed levels above 30% as of ​October 26.

The industry's quarter was weighed down by surging fuel prices tied to the ongoing war in Iran, which has forced airlines to take measures such as raising fares, cutting capacity or taking on more debt.

The fuel headwinds, along with weather and air traffic control disruptions earlier this year, have wiped away roughly 48% of JetBlue's share value, dropping its valuation ​to $894.23 million and making it the worst-performing US carrier.

"Liquidity and $2.8 billion of aircraft assets could ‌provide runway, but ‌the path ⁠to profitability hinges on fuel," analysts at TD Cowen said.

Fuel costs surged for JetBlue in the third quarter, with the airline paying $3.91 per gallon, up 57% from a year earlier.

By comparison, unit revenue increased 18.4%, highlighting the pressure rising fuel ‌expenses continue to place ​on margins despite stronger pricing.

Short interest in the ‌stock is currently at ⁠25%.

(Reporting by ​Kanishka Ajmera, Nathan Gomes and Nandan Mandayam in Bengaluru, Doyinsola Oladipo in New York; Editing by ​Vijay Kishore)

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