JetBlue Slashes Earnings Forecast; GTF Issue To ‘Double’ Grounded Aircraft

JetBlue Airways expects more of its Airbus narrowbodies to be grounded by the latest Pratt & Whitney geared turbofan (GTF) issue as the dismantling of its alliance with American Airlines and shifting demand patterns have forced the airline to slash its earnings forecast for 2023. 

In July, Pratt said it was revamping inspection protocols on certain PW1100G GTFs, stating roughly 200 engines would be removed for enhanced inspection. 

Prior to the latest development, many airlines using the engines were battling durability issues and premature engine removals. During an Aug. 1 earnings discussion, JetBlue CFO Ursula Hurley said the airline had two A321neos on the ground for the last couple of months “due to various engine issues.” 

“We have been notified by Pratt & Whitney over the last few weeks that we have a handful of engines that will be impacted and have to come off wing by mid-September,” Hurley said. “We expect the number of aircraft that we have on the ground through the end of the year to approximately double from what we have today.”

JetBlue president Joanna Geraghty said the company is attempting to take whatever self-help measures are available “to obtain additional engines on the leasing market, but as you know that supply is pretty constrained at this point.”

The airline is still working through any potential impact on the GTF engines powering its A220 fleet, Hurley noted.

New York-based JetBlue took delivery of four aircraft in the second quarter (Q2), bringing total deliveries for 2023 to seven. Hurley said the airline expects to take delivery of 12 additional aircraft through year-end. At the end of Q2, JetBlue had a fleet of 291 aircraft.

Hurley said that no impact from the additional grounded aircraft was included in JetBlue’s updated financial guidance. The airline has slashed its earnings per share projections for 2023—from $0.70 to $1.00 previously down to a range of $0.05 to $0.40. 

Roughly $0.20-$0.25 of the impact stems from the wind down of JetBlue’s Northeast Alliance (NEA) with American after a judge found the partnership to be anticompetitive in May of 2023 and ordered the carriers to end the arrangement. American has said it will appeal the decision while JetBlue said it is terminating the NEA to focus on its merger with Spirit Airlines, which is subject to litigation by the U.S. Justice Department (DOJ). The DOJ was also the plaintiff in the lawsuit to dismantle the NEA. 

“Our decision to terminate the NEA will result in near-term drag on margins as we lose key codeshare revenue,” JetBlue CEO Robin Hayes said. 

Another $0.20 to $0.25 of the EPS reduction is attributed to weather disruptions and air traffic control challenges in the U.S. Northeast in summer 2023. The remaining $0.15 to $0.20 cut to the earnings per share guidance is a shift in demand to long-haul markets. 

JetBlue noted it was “reallocating capacity from underperforming NEA routes to higher value leisure opportunities,” with improvement starting in the first quarter of 2024. 

Offering a bit of insight into the wind down of the NEA, JetBlue Head of Revenue and Planning Dave Clark said the airline has already made some initial adjustments in Boston, “where we don’t have to work through slot issues and constraints.” 

Prior to the NEA’s launch, JetBlue operated 16 daily round trips from New York LaGuardia, Clark said. Under the alliance, that number grew to 52. 

“As we go into the winter season, you’ll see a step-down by about a handful of flights in LaGuardia,” Clark said. Starting in mid-spring for the 2024 summer season, “you’ll see us flying less than half of those 36 growth round trips ... so it will be an orderly wind down.” Under the NEA, JetBlue was also leasing slots at New York JFK from JetBlue; the total number of slots it has on lease from American at both New York airports is roughly 100. 

Although JetBlue has made significant cuts to its 2023 earnings outlook, its operating revenue in Q2 grew 6.7% year-on-year to $2.6 billion as operating expenses fell 7.2% to $2.4 billion. Its net income was $138 million versus a loss of $188 million the year prior.