Deep Dive: JetBlue Airways Warns of Weaker Demand

JetBlue Airways Corp. plans to hasten cost cuts by eliminating some flights, ending service to a number of cities and restructuring its leadership ranks as economic uncertainty feeds weaker-than-expected demand for travel, the company said in an internal memo.   

The carrier will eliminate underperforming routes and plans to announce network changes in coming weeks, according to the memo from Chief Executive Officer Joanna Geraghty seen by Bloomberg on Tuesday.   

JetBlue implemented budget reductions at support centers and is assessing hiring, spending on business partners and vendors and will combine or restructure some leadership roles. The carrier has halted cosmetic refreshes of four out of its 10 legacy Airbus A320 aircraft used for flights and will park the planes at the end of summer.   

For more on JetBlue, Carol Massar and Tim Stenovec speak with Bloomberg's Mary Schlangenstein.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios podcasts, radio news, The.

Speaker 2 (00:08):
Stock Movers podcast, your roundup of companies making moves in
the stock market, harnessing the power of Bloomberg Data.

Speaker 3 (00:17):
I'm Carol Masser along with Tim Stent of It. Let'stical
look at some stocks on the move. Jet Blue plans
to hasten cost cuts by eliminating some flights, ending service
to a number of cities, and restructuring its leadership ranks
as economic concertain defeats weaker than expected demand for travel.
I don't think I'm talking out of turn. You and
I came back on a red eye on Jet Blue.

Speaker 2 (00:38):
It was in Mint.

Speaker 1 (00:39):
Carol mass your fancy well, I.

Speaker 3 (00:42):
Remember when they introduced it. It was a big deal
in their business class or first class, and it's really
nice for if you're going across the country. Having said that,
mine had a piece missing on the side and it
was taped, and it just reminded me. And I want
to bring in our Mary Schlangnstein, who's Bloomberg News USA
Airlines reporter there in our Dallas bureau. Mary reminding me,

(01:02):
I remember when all of Jet Blue planes were spanking
new and it was interesting. Yeah, it was really cool.
And the endless snacks even if you weren't in business.
But it was just interesting for me to be sitting
in that plane and there was a piece missing, and
then they had taped over another part, and I thought, Wow,
times have changed. They've got more legacy issues than they

(01:23):
did certainly when they started. But give us some context
and kind of where Jet Blue is when it comes
to all the major carriers that are out there.

Speaker 4 (01:30):
Well, because Jet Blue is primarily focused on US the
US market, it's suffering, just like a lot of other
carriers are, from a downturn in demand in the US.
And this really started earlier in the year and was
a big surprise to airlines that had expected a really
profitable and strong demand year in twenty twenty five. But
when Trump imposed the tariffs and people became very worried

(01:53):
about a recession, about inflation, about trade wars, the domestic
demand really fell off a cliff. And that was in April.
A lot of the carriers came out and they withdrew
their full year guidance because things were so uncertain. And
so basically what Jet Blue's saying is, this hasn't gotten
any better for us, and we're going to have to
take more steps to cut costs.

Speaker 1 (02:14):
Hey, you know a question that I have about this
Mary is really when it comes to what is unique
about Jet Blue and why it's struggling so much. Yes,
there's been a couple failed types. The Spirit thing didn't
work out, the American Airlines thing didn't work out. It's
trying to do something with United that's going to be
over the next few years. What is the is the

(02:36):
challenge to meant that it's like, it's not an ultra
low cost carrier, but it's also not one of the
big three. Is that the problem?

Speaker 4 (02:42):
That's part of the problem. It's you know, it's not
it's also not, you know, a full service global airline,
although it has some international routes, but it's kind of
stuck in the middle. It's really a niche player, and
that's what it was trying to get away from when
it tried to acquire Spirit and did the alliance deal
with America. It really needed more heft to compete with
the bigger players in the US industry. Of course, it

(03:05):
didn't get that, and so Joanna Garrett has been trying
to restructure the operations at Jet Blue. She's pulled them
back to their original focus areas of the US Northeast
and along the East coast, and the situation in terms
of demand has just really been tough in those areas,
all right.

Speaker 3 (03:20):
So I don't know what are you hearing, Like what's
the outlook? I mean, how much time do you give?
I mean, litter's.

Speaker 1 (03:26):
Running on borrowed money right now?

Speaker 2 (03:28):
Well that's there, you.

Speaker 3 (03:29):
Know, like how long do they have no right right?
I mean, when companies are going through changes, you give
them a little bit of time. But Tim makes a
really good point. You know, you got to look at
the balance sheet and wonder what kind of pressures they
have right now.

Speaker 4 (03:41):
Yeah, there really hasn't been that long since Joanna Garretty
took over. But you know, they do have this United
plan doing the partnership with United, which they expect to
really help them a lot. That's going to give United
access to some routes at JFK, going to give Jet
Blue access to some slots at Newark, and so they
expect a lot out of that. They're also partnering on

(04:01):
their travel bookings of venture that Jet Blue has, which
should bring a lot of added revenue into Jet Blue.
But you have to remember that you know, their executive
spent a lot of time focusing on these failed deals
and they're really having to go back and focus on
basic operations at Jet Blue, and it's just a tough
time to have to do that.

Speaker 3 (04:19):
I'm so glad you went there that with United because
United was down as well. Is it because of the
Jet Blue news? And there's some kind of read into
all right, if jet Blue's having issues, does that mean
United is too? Help me tie that up now?

Speaker 4 (04:33):
I think really, you know, if you look, all the
airlines are down by a pretty good amount, and so
I think it's probably broader market forces that work here,
things that are affecting a lot of variations of stocks
and not just the airlines.

Speaker 1 (04:45):
Okay, so obviously a lot of headwinds facing the entire industry.
Totally moving forward, it sort of builds on what Carol
was asking about. When it comes to the future of
this company. Is this I'm not going to ask you
to make predictions, because that's not the business that we're in.
But is this a company that analysts say can succeed

(05:05):
in its current iteration or is it going to have
to become part of something else?

Speaker 4 (05:10):
No, I don't think anybody's predicting or forecasting that they're
going to have to become part of something else. You know,
Merger and acquisition talk in the airline industry is non ending.
It's always going on. But I haven't seen really anybody
focusing on the fact that Jet Blue needs to get
a deal done as soon as possible. Again, I think
the alliance with United the scene is a big feather

(05:32):
in their cap and something that is going to pay
off for them.

Speaker 2 (05:35):
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