JetBlue reduces profit outlook due to shifting travel demand; shares sink

JetBlue Airways has lowered its full-year profit forecast due to the termination of its alliance with American Airlines and a shift in travel demand towards long-haul international destinations. The New-York based carrier is also facing a shortage of air traffic controllers, which is affecting its operations. As a result, the broader NYSE Arca Airline index fell by 8.4% in midday trade, and JetBlue's shares were also impacted.


Recent fare data shows that ticket prices for domestic travel have peaked, causing investors to worry about the strength of demand. Carriers have been relying on strong demand to offset higher costs. On an earnings call, JetBlue stated that it is facing a difficult comparison in terms of revenue year-on-year. While passenger volumes remain high, fares are returning to their pre-pandemic levels.


JetBlue, like Alaska Air, has experienced a decline in domestic travel due to the increasing demand for long-haul international trips. Although JetBlue expects this trend to improve around the winter holidays, it is still expected to impact the company's full-year earnings. The company's revised full-year adjusted profit forecast is now between 5 cents to 40 cents per share, compared to the previous forecast of 70 cents to $1 per share. It also warned of an adjusted loss of up to 20 cents per share in the third quarter.


JetBlue also anticipates a hit from the termination of its three-year-old alliance with American Airlines, which allowed the two carriers to coordinate flights and pool revenue. In the second quarter, profit came in at 45 cents per share, slightly higher than analysts' average estimate of 44 cents per share, according to Refinitiv data. JetBlue is planning to redeploy capacity to high-margin leisure destinations and has already made some adjustments to its capacity in Boston. It also plans to cut some flights from New York. The company is also dealing with issues related to RTX's Pratt & Whitney engines that power Airbus' popular A320neo jets. JetBlue stated that it has a few engines that will need to come off-wing by mid-September, resulting in a doubling of the number of its grounded aircraft this year. Chief Financial Officer Ursula Hurley mentioned that the company is still working with both Airbus and Pratt & Whitney to assess the impact on its aircraft deliveries next year.

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