JetBlue Announces Second Quarter 2020 Results

JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the second quarter 2020:

• Reported GAAP loss per share of ($1.18) in the second quarter of 2020 compared to a diluted earnings per share of $0.59 in the second quarter of 2019. Adjusted loss per share was ($2.02)(1) in the second quarter of 2020 versus adjusted diluted earnings per share of $0.60(1) in the second quarter of 2019. Note A to this earnings release includes the GAAP to Non-GAAP reconciliation between reported and adjusted diluted earnings per share.
• GAAP pre-tax loss of ($450) million in the second quarter of 2020, compared to a pre-tax income of $236 million in the second quarter of 2019. Excluding one-time items, adjusted pre-tax loss of ($754) million(1) in the second quarter of 2020 versus adjusted pre-tax income of $238 million(1) in the second quarter of 2019.

Operational Highlights from the Second Quarter

• Second quarter 2020 revenue declined 90% year over year as a result of the impact of COVID-19. Traffic volumes and yields improved in May and June from an April trough.
• Reduced second quarter 2020 capacity by 85% year over year as a result of aggressive action to mitigate cash burn.
• Operating expenses decreased 66% year over year. Excluding special items, adjusted operating expenses(1) declined 50% year over year. We successfully reduced our second quarter costs by over $900 million driven by variable cost reductions through capacity cuts and fixed cost reductions achieved by adjusting work schedules where possible and eliminating discretionary spend.

Balance Sheet and Liquidity

• JetBlue ended the second quarter with approximately $2.9 billion in unrestricted cash, cash equivalents, and short-term investments, or 36% of 2019 revenue. Including the CARES Act PSP proceeds, our liquidity was $3.4 billion at the end of second quarter 2020, or 42% of 2019 revenue.
• JetBlue repaid $78 million in regularly scheduled debt and finance lease obligations during the second quarter of 2020.
• JetBlue has taken the following measures in the second quarter to manage liquidity:
  • Raised $750 million under a secured term loan.
  • Executed approximately $120 million under sale-leaseback transactions, and entered a binding agreement for three additional sale-leaseback transactions for upcoming deliveries. In addition, we have entered into two other binding sale-leaseback agreements for aircraft already existing in our fleet.
  • Achieved significant variable and fixed cost savings through aggressive capacity reductions and adjusted work schedules.
  • Redeployed assets to capture short-term, tactical cash generation opportunities.
• Resulting from the actions taken, JetBlue's average daily cash burn in May was $9 million vs its prior expectations for just below $10 million. Average daily cash burn in the second quarter was $9.5 million vs its prior expectations for $11 million, and the daily cash burn at the end of June was just under $8 million. JetBlue continues to expect average daily cash burn in the third quarter for a range of $7 to $9 million.

Fuel Expense and Hedging

The realized fuel price in the quarter was $0.96 per gallon, a 55% decline versus second quarter 2019 realized fuel price of $2.16.

JetBlue has entered into forward fuel derivative contracts to hedge its fuel consumption for the third and fourth quarter of 2020. Based on the forward curve as of July 17th, JetBlue expects an average all-in price per gallon of fuel of $1.24 in the third quarter of 2020.

Our Recovery Plan and Actions Taken to Position JetBlue for Future Success

"For the past 20 years we have succeeded against the odds, and we firmly believe that we are laying the foundation and repositioning JetBlue to come out of this historic crisis as a stronger, global player in the years to come," said Robin Hayes, JetBlue's Chief Executive Officer.

"In the past two months, we made progress in reducing our cash burn, and have been quick to resize our operations to the very dynamic demand environment. While demand has improved materially from the lows we saw in April, bookings remain choppy, and we remain focused on addressing changing trends as we progress through the summer.

As we move into recovery, we have laid out a three-step framework to set JetBlue up for success and emerge stronger. The first is to reduce our cash burn. The second step is to rebuild our margins. The third and last step is to repair our balance sheet.

We have been nimble and managed the short term with a sense of urgency, to reduce our cash burn and build liquidity. We are confident that our actions to protect the health and safety of our Customers and Crewmembers, our network changes, and focus on costs will help us rebuild our margins faster."

Action Plan, Revenue and Capacity

"We are laser-focused on managing the current environment of low demand," said Joanna Geraghty, JetBlue's President and Chief Operating Officer. "In the short term, we have added tactical point-to-point flights, responding to unserved demand in leisure and VFR markets and supporting our cash generation efforts. In the long term, our actions help us solidify our network strategy to improve our position in our Focus Cities. We are taking advantage of unique opportunities presented by the pandemic to allow us to rebuild our margins when demand returns.

Volumes have increased since demand bottomed out in April, and during the second quarter our revenue broadly tracked to our L-shaped recovery forecast. We expect demand trends will continue to be volatile and recovery will not be linear. Given the choppiness in demand, we will continue to take a conservative approach in planning capacity and forecasting revenue.

As we see booking trends beginning to improve after bottoming out in April, we believe capacity will lead the way to demand and revenue recovery. That said, our guiding criteria is cash generation, and we will continue to be nimble in reacting to changes in demand trends."

Cost Performance and Outlook

"We continue to manage through this fluid environment with a near-term focus on preserving liquidity. Just as importantly, we are positioning JetBlue to thrive as we emerge from the pandemic," said Steve Priest, JetBlue's Chief Financial Officer.

"Last month we raised approximately $750 million with a new term loan backed by JFK, LaGuardia and Washington Reagan slots, as well as by our JetBlue brand. We also entered into sale-leaseback transactions that raised nearly $120 million during the quarter. Our liquidity equated to $3.4 billion at the close of June, or 42% of our 2019 revenue.

Our daily cash burn improved every month since April, to under $8 million at the end of June. The improvement during the quarter came mainly from our efforts to manage capacity, reduce our cost base and manage payment terms. Improvements in revenue trends during the quarter also contributed to our progress in cash burn.

Looking into the third quarter, we continue to estimate our daily cash burn between $7 and $9 million, mainly driven by a continuation of our work to reduce our cost base, and capacity actions to respond to changes in demand. Where we fall within the range will depend on the revenue environment during the third quarter."

Note A - Non-GAAP Financial Measures

JetBlue sometimes uses non-GAAP financial measures in this press release. Non-GAAP financial measures are financial measures that are derived from the consolidated financial statements, but that are not presented in accordance with generally accepted accounting principles in the United States, or GAAP. We believe these non-GAAP financial measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. The information below provides an explanation of each non-GAAP financial measure and shows a reconciliation of non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures.

Operating expense per available seat mile, excluding fuel and related taxes, other non-airline operating expenses, and special items ("CASM Ex-Fuel")

Operating expenses per available seat mile, or CASM, is a common metric used in the airline industry. We exclude aircraft fuel and related taxes, operating expenses related to other non-airline businesses, such as JetBlue Technology Ventures and JetBlue Travel Products, and special items from operating expenses to determine CASM ex-fuel, which is a non-GAAP financial measure. In 2020, special items include contra expenses recognized on the utilization of payroll support grants received under the CARES Act and the impairment charge of our Embraer E190 fleet. Special items for 2019 include one-time costs related to the Embraer E190 fleet transition as well as one-time costs related to the implementation of our pilots' collective bargaining agreement. We believe that CASM ex-fuel is useful for investors because it provides investors the ability to measure financial performance excluding items beyond our control, such as fuel costs, which are subject to many economic and political factors, or not related to the generation of an available seat mile, such as operating expense related to certain non-airline businesses. We believe this non-GAAP measure is more indicative of our ability to manage airline costs and is more comparable to measures reported by other major airlines.

Operating Expense, Income before Taxes, Net Income and Earnings per Share, excluding special items

Our GAAP results in the applicable periods were impacted by charges that are deemed special items. We believe the impacts of these items make our results difficult to compare to prior periods as well as future periods and guidance. In 2020, special items include contra expenses recognized on the utilization of payroll support grants received under the CARES Act and the impairment charge of our Embraer E190 fleet. Special items for 2019 include one-time costs related to the Embraer E190 fleet transition as well as one-time costs related to the implementation of our pilots' collective bargaining agreement. We believe the impacts of these items distort our overall trends and that our metrics and results are enhanced with the presentation of our results excluding the impact of these items. The table below provides a reconciliation of our GAAP reported amounts to the non-GAAP amounts excluding the impacts of these items.