JetBlue Airways Corp. (JBLU) experienced its most significant stock surge in nearly four years as the company’s new chief executive officer, Joanna Geraghty, laid out a comprehensive plan to revitalize the airline’s operations and enhance profitability.
The plan, which was unveiled alongside a surprising second-quarter profit report, includes significant strategic shifts and cost-cutting measures.
One of the cornerstone elements of Geraghty’s strategy is a realignment of JetBlue’s focus towards leisure travelers in key markets such as New York, New England, Florida, and Puerto Rico. These regions have historically been strongholds for the airline, and by honing in on these areas, JetBlue aims to capitalize on its established customer base. This pivot is expected to be complemented by improvements in on-time performance and the enhancement of loyalty programs, which together are projected to generate between $800 million and $900 million in additional pretax profits from 2025 through 2027.
In a move to streamline operations and reduce costs, JetBlue plans to defer approximately $3 billion in aircraft purchases until 2030 and beyond. This decision involves renegotiating the delivery schedule with Airbus SE, pushing the arrival of 44 A321neo aircraft to 2030 or later. This delay is part of a broader strategy to manage capital expenditures more efficiently in the face of economic pressures and a challenging operating environment.
JetBlue also announced a significant network restructuring, including exiting 15 cities and cutting more than 50 routes to eliminate unprofitable operations. This realignment is designed to focus resources on the most profitable and strategic routes, ultimately driving the airline toward consistent profitability. “As difficult as it is for us to make decisions for closing markets and closing routes, at the core our goal is to move to profitability as quickly as we can,” stated JetBlue President Marty St. George during the company’s earnings call.
Geraghty, who assumed the CEO role from Robin Hayes earlier this year, has prioritized returning the airline to consistent profitability, a state it has not achieved since 2019. She is also navigating pressures from activist investor Carl Icahn, who disclosed a roughly 10% stake in JetBlue in February and has been advocating for actions to increase shareholder value. In response, JetBlue has added two board seats for representatives from Icahn’s investment firm.
The second-quarter earnings report showed a profit of 8 cents per share, surpassing Wall Street’s expectations of a loss. However, JetBlue also projected lower-than-expected revenue and higher non-fuel unit costs for the current quarter and the entire year, indicating ongoing financial challenges. The company anticipates that flying capacity will remain at 2024 levels through the next year, as more jets will be grounded for extensive engine repairs.
The grounded aircraft issue stems from defects in the geared turbofan jet engines produced by RTX Corp.’s Pratt & Whitney unit. The number of affected aircraft is expected to rise from approximately 11 to the mid-to-high teens next year, which Geraghty described as “incredibly frustrating.”
JetBlue’s path forward is further complicated by its inability to expand through acquisitions. Recent federal court rulings have nullified a regional alliance with American Airlines Group Inc. and blocked JetBlue’s planned $3.8 billion acquisition of Spirit Airlines Inc. These legal setbacks limit JetBlue’s growth options, forcing the airline to focus more intensively on optimizing its current operations and strategic initiatives.
Despite these challenges, the market responded positively to the new strategic direction, as evidenced by JetBlue shares rising as much as 23% by midday in New York, marking the biggest intraday gain since November 2020. The stock had already climbed more than 6% this year through the previous close, reflecting investor optimism about the company’s new leadership and strategic plan.
Click here to access JetBlue’s Latest Quarterly Results
