JetBlue Falls as Air Travel Stays Off Our Vacation Lists

© Reuters.

By Christiana Sciaudone — JetBlue Airways Corp (NASDAQ:) tumbled more than 5% after saying it will likely fly at 45% to 50% capacity in the fourth quarter compared to last year. It’s also burning through more cash than expected.

The airline had previously expected a decrease of about 45%. Quarterly revenue is set to decrease approximately 70% year-over-year, as compared to the previous planning assumption of a decrease of approximately 65% year-over-year, JetBlue said in a statement.

The company plans to continue to manage capacity and align with demand on a rolling basis. Given recent booking trends, the company now expects its average daily cash burn in the fourth quarter to be in a range of $6 million and $8 million, compared to its prior expectation of a range between $4 million and $6 million.

Shares fell more than 60% from January to March, when the Covid-19 pandemic prompted governments around the world to issue stay-at-home mandates to prevent the spread of the illness. Months later, and amid a second wave of infections, airlines have laid off tens of thousands of employees as demand has plummeted and the future remains unclear. At least three vaccines have proved to be effective, but they must now be approved and distributed globally. Those challenges have yet to be tackled.

Booking (NASDAQ:) trends remain volatile, and JetBlue continues to believe demand and revenue recovery will be nonlinear through the fourth quarter and beyond. “We cannot predict changes due to additional COVID-19 related disruptions or other issues,” the company said.

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Operating expenses for the fourth quarter should drop at least 30%, and will continue to fluctuate based on flown capacity. 

Separately, Raymond James’s Savanthi Syth downgraded Southwest Airlines Company (NYSE:) and American Airlines (NASDAQ:), saying that “While there could be upside, we are maintaining the trajectory in our revenue recovery forecasts, which already reflected a widely available vaccine by YE21,” Syth said in a note, according to StreetInsider. She did upgrade United Airlines Holdings Inc (NASDAQ:).

“United appears to be taking a different approach from its legacy peers, creating flexibility (e.g., pilot agreement spanning towards the end of 2022 that provides more cost variability, no permanent fleet retirements) to be ready for a faster than anticipated recovery that could lead to market share gains (vs. competitors that would require more time to bring capacity back online),” Syth wrote.   

Syth has a hold rating on JBLU.  

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