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JetBlue Airways Corp. (JBLU) experienced its most significant share price surge in nearly four years following the announcement of a strategic overhaul aimed at revitalizing the airline’s operations and profitability. The new CEO, Joanna Geraghty, outlined a comprehensive plan to restructure the carrier’s focus, which includes deferring substantial aircraft purchases and shifting its market emphasis towards leisure travelers.

In a statement released on Tuesday, JetBlue reported a surprising second-quarter profit and revealed plans to scale back its presence in several cities. The airline is set to delay approximately $3 billion in new aircraft acquisitions until 2030 and beyond, renegotiating its delivery schedule with Airbus SE to push out the arrival of 44 A321neo aircraft to 2030 or later.

JetBlue’s strategic pivot will concentrate on markets where it has traditionally been strong, such as New York, New England, Florida, and Puerto Rico. This shift, coupled with enhancements in on-time performance and loyalty programs, is projected to generate an additional $800 million to $900 million in pretax profit between 2025 and 2027. The announcement led to JetBlue shares rising by as much as 23% in New York trading, marking the biggest intraday gain since November 2020.

The moves are part of Geraghty’s broader efforts to turn around JetBlue’s fortunes amid ongoing high costs and limited growth prospects following the dissolution of several key partnerships. The airline plans to exit 15 cities and has already cut over 50 routes to eliminate unprofitable flights. Marty St. George, JetBlue’s President, emphasized the airline’s commitment to quickly returning to profitability, even if it means making tough decisions about market exits and route closures.

Geraghty, who succeeded Robin Hayes as CEO earlier this year, has prioritized restoring the airline to consistent profitability, a milestone not achieved since 2019. She faces additional pressure from activist investor Carl Icahn, who acquired a roughly 10% stake in the company in February and secured two board seats for his investment firm.

JetBlue’s second-quarter earnings came in at 8 cents per share, surpassing Wall Street’s expectations for a loss. However, the airline also forecasted lower revenue and higher non-fuel unit costs for the current quarter and the full year. Additionally, JetBlue’s capacity is expected to remain stable at 2024 levels through next year due to a significant number of jets being sidelined for extensive engine repairs. The number of aircraft affected by defects in geared turbofan engines made by RTX Corp.’s Pratt & Whitney unit is projected to increase to the mid- to high-teens next year, up from around 11 currently.

The airline also faces challenges in growing without acquisitions, as federal courts have struck down a regional alliance with American Airlines Group Inc. and blocked JetBlue’s proposed $3.8 billion acquisition of Spirit Airlines Inc.

Despite these hurdles, the positive market response to JetBlue’s recent announcements indicates investor confidence in the new strategic direction and the leadership’s commitment to enhancing shareholder value.

Key Points:

i. JetBlue shares surged up to 23% following the announcement of a strategic overhaul.

ii. The airline plans to delay $3 billion in aircraft purchases and exit 15 cities.

iii. The focus will shift to leisure travelers in key markets like New York and Florida.

iv. JetBlue’s second-quarter earnings exceeded expectations, reporting an 8 cents per share profit.

v. The airline faces ongoing challenges, including engine repairs and the blocking of key acquisitions.

Conner T – Reprinted with permission of Whatfinger News