JetBlue Airways ( NASDAQ: JBLU ) shares lost altitude on Tuesday after the air carrier posted a wider than expected loss and forecast further cost increases.
The prospective Spirit Airlines ( SAVE ) acquirer misses analyst estimates on EPS by a wide margin, posting an adjusted loss of $0.47 per share as compared to the expectation of an $0.11 loss. A 97% increase in fuel prices from 2019 was cited as a key factor that severely hampered bottom line performance. For reference, average fuel costs increased to $4.24 per gallon for the quarter, up from $2.16 in 2019.
Meanwhile, a 63.3% increase in revenue came up just $10M short of the analyst consensus for the quarter. The carrier noted that a modest increase in capacity was achieved in the quarter, with a 2.3% increase coming in-line with management forecasts.
Shares of the New York-based airline fell 2.56% in premarket trading.
“We reported a record-breaking revenue result for the second quarter, and we’re on pace to top it again here in the third quarter and drive our first quarterly profit since the start of the pandemic,” CEO Robin Hayes said, emphasizing the potential for the airline to rise into the black for the third quarter. “We’ve entered the third quarter with some solid momentum that we expect to carry through to a sustained profit inflection.”
He added that the carrier expects unit revenue to increase between 19 and 23%, to “the highest absolute levels in our history as strong demand combined with a tight supply backdrop help offset the high price of fuel.” That factor was cited as a key to buoying optimism into the fall.
Still, costs per available seat mile, excluding fuel, are set to increase 15 to 17% in the third quarter despite cost-cutting measures.
Elsewhere, the airline addressed its proposed takeover of Spirit Airlines ( SAVE ) after outbidding Frontier Air Group ( ULCC ).
“JetBlue expects to achieve $600-700M in net annual synergies once integration is complete, driven in large part by expanded customer offerings resulting from the greater breadth and depth of the combined network,” a company statement noted. “JetBlue expects the transaction to be significantly accretive to earnings per share in the first full year following closing.”
Post-transaction leverage is anticipated to reach a range of 3.0-3.5x. The airline’s total debt stood at about $3.8B at the close of the second quarter.
Read more on the prospects for the JetBlue-Spirit merger .
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JetBlue stock slips as earnings miss highlights elevated costs