JetBlue Airways ( NASDAQ: JBLU ) shares dipped 6.4% on Tuesday after posting a wider than expected loss in premarket hours.
The New York-based air carrier posted an adjusted loss of $0.47 per share as compared to the expectation of just an $0.11 loss, which was already below prior forecasts by management suggesting a turn to profits for Q2. A 97% increase in fuel prices from 2019 was cited as a key factor that severely hampered bottom line performance and prompted the airline to come up short of its prior outlook. For reference, average fuel costs increased to $4.24 per gallon for the quarter, up from $2.16 in 2019.
While the airline expects to turn to profits in the third quarter, costs are expected to remain a high profile problem. In fact, even excluding fuel, costs per available seat mile are set to increase 15 to 17% in the third quarter despite cost-cutting measures and capacity adjustments currently underway.
The persistent losses add noise to the bottom line as the company anticipates significant expenditure to close its proposed acquisition of Spirit Airlines. 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 as it faces regulatory review.
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Why did JetBlue shares lose altitude on Tuesday? Cost pressures impact earnings