JetBlue Airways has recently been downgraded to a Sell rating by UBS due to concerns about its financial outlook. UBS highlights capacity constraints and high inflation as major challenges for the airline.
These factors have led to overly optimistic expectations for revenue per available seat mile (RASM) growth, which JetBlue may struggle to meet. UBS forecasts a more modest RASM growth of approximately 4.5%, resulting in an estimated operating margin of -0.9% for 2025.
The competitive landscape for JetBlue is becoming increasingly difficult, particularly on key routes from New York and Florida to Latin America. This heightened competition could hinder JetBlue's ability to accelerate RASM growth.
Goldman Sachs has also resumed coverage on JetBlue with a Sell rating, citing ongoing operational challenges and a higher-than-industry leverage ratio. JetBlue is grappling with grounded aircraft due to necessary accelerated engine maintenance and staffing shortages in air traffic control. The airline has also had to suspend all flights to and from Haiti due to recent security instability.
Despite these challenges, JetBlue is attempting to navigate its financial difficulties through strategic initiatives. Citi has revised its outlook on the airline, acknowledging the potential of JetBlue's strategic initiative, JetForward. However, Citi emphasizes the necessity for JetBlue to establish a clearer path toward consistent and positive free cash flow.
In the third quarter of 2024, JetBlue reported a five-point increase in its operating margin year-over-year, alongside a 4.3% rise in unit revenue. However, the airline anticipates a decrease in capacity and revenue for the fourth quarter.
JetBlue's current market capitalization is $2.12 billion, and it has negative earnings indicators. The company's price-to-earnings (P/E) ratio stands at -2.48, with an adjusted P/E ratio of -5.72 for the last twelve months as of Q3 2024. JetBlue's operating income margin is -1.59%, indicating difficulties in achieving profitability. The airline operates with a significant debt burden, raising concerns about its ability to meet interest payments.
JetBlue's future trajectory in the aviation market will depend on its ability to address these challenges and achieve profitability.