What's Going Wrong at JetBlue?

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Gordon and Jay open with JetBlue's latest quarterly results, unpacking what's behind the airline's struggles and what it might take to get back on course. Then they turn to Norwegian, where a strong set of numbers tells a very different story.

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Transcript of This Conversation

This transcript is generated by artificial intelligence.

Hello and welcome to the Airline Weekly Lounge. I'm your host, Gordon Smith, and I'm joined as usual by co-host Jay Shabat.

In part one, we're getting you up to speed on JetBlue's latest financials, and in part two, we're crossing the Atlantic for a check-in on Norwegian. Hey, Jay, how's it going?

All right, Gordon, we have one good news story we'll discuss today, and then we have one bad news story. Which one do you want to do first? One glowing, one a little bit more cheerful.

I'm pretty happy we've got any good news stories around in a minute, so I'll take one.

That's better than none.

Okay, well, why don't we start with Norwegian then? That's the good news story that we have for everyone.

You know what, I love Norwegian, but I think there's gonna be more listeners who secretly think, give me the bad news first. Give me the grisly bits. And frankly, JetBlue is an airline that means more to more people, isn't it?

You think we have a lot of dark and gloomy listeners, pessimistic listeners?

A lot of realistic listeners, I think.

Be the pessimists, be the optimists, whatever they are. I think they're realistic. But I think it's also a case that we've got a lot of people who have been following JetBlue in a bit of detail, maybe a little bit more detail in Norwegian.

So let's kick things off with JetBlue with the promise that better days are ahead. Because you are literally just off the earnings call we're recording here on April 28th.

We had the numbers in earlier this morning, but we've just had, like I said, that leadership call with Joanna and team. What was the mood music like in JetBlue Towers?

1:44

JetBlue Losses

Well, I said this was a bad new story for a reason.

JetBlue is an airline that has lost money now for six consecutive years. I mean, every year of the 2020s. And they were hoping that 2026 might be the year that things start turning around.

And unfortunately, the first quarter, things only went backwards. I don't necessarily fault JetBlue itself. It's, of course, the fuel situation.

We'll talk a little bit about some other reasons why JetBlue's momentum is just not moving in the right direction. And here, the numbers for context. So JetBlue reported a negative 10% operating margin in the first quarter.

We remember, I think we spoke about, did we talk about Alaska last week? Or certainly, that was a feature story of the issue of Airline Weekly last week. I can't remember if we, was that our topic last week for the Lounge Podcast?

We were talking about a bit of everything last week.

It was a bit of a smogsboard, but we're looking at United, we're looking at Spirit, and certainly our Alaska feature last week was in the Airline Weekly newsletter.

Yeah, my memory only goes like a few days. We're talking about last week, forget it. I don't remember what we were talking about.

But anyway, so Alaska had a negative eight, actually 7.5. So we talked about how Alaska was suddenly having issues. Well, JetBlue, I mean, negative 10% is pretty bad.

And then last year in the first quarter, they had a negative 8%. And this year included Easter in the first quarter, parts of Easter, the beginning of the Easter travel period.

So, you know, under just considering that, you would think they would have improved. But I have a few reasons to discuss today about why JetBlue is struggling to, you know, just move forward.

And the fuel price is the obvious one, but of course, they're not alone in facing that. I was surprised to see that JetBlue paid an average price for fuel of $2.96 per gallon which was basically what Alaska paid. Alaska was $2.98.

Now, Alaska is in a unique situation.

They're paying kind of more than most because of their exposure to the West Coast and also their practice of sourcing fuel from Singapore, where prices have just, you know, gone up even more than the worldwide average.

So JetBlue is exposed to something that's of that sort. You know, they're probably filling up in markets where the price is a little bit higher than usual. So $296, whereas, you know, Delta only $262.

And you say, well, yeah, they had a refinery that helped them out, but even United $278, Southwest $273. So we can start there that JetBlue is paying higher than most US airlines save Alaska on its fuel.

We did have some uniquely bad weather in the Northeast, and weather seems to hit JetBlue more than any other airline because they're so Northeastern heavy. And then, you know, you get into the fall and they get the Florida hurricanes.

So there were snowstorms that hit some of these big operations like Boston and JetBlue, probably more than others. The TSA disruptions as well during the first quarter, that again, you know, did it hurt JetBlue more than other airlines? Probably not.

One interesting, you know, theory is that maybe JetBlue suffered a bit from Southwest reforms.

Now, we wrote about last week, if you've seen, or the current week, the current issue of Airline Weekly has a lot on Southwest Airlines and how they've, their first quarter was somewhat of a miraculous turnaround.

They performed extremely well, relatively speaking. They earned the same operating margin as Delta. Delta was tops among all US airlines.

So their 5% operating margin in the first quarter, compared to negative 2% last year. So Southwest by far and away made some miraculous improvement in year-over-year operating margins.

Some meaningful change.

A meaningful change, absolutely, and meaningful change stemming from meaningful changes. They've actually made a ton of changes, as we've talked about, adding the back fees, and now offering premium seats, and etc.

Maybe that took some business away from JetBlue. They don't overlap a ton. I mean, Southwest is not really in some of those big transcon markets.

Some Northeast of Florida for sure. Obviously, Southwest are not a JFK airport. So I don't know, maybe that's only a marginal thing.

There may have been some people that, oh, I won't fly Southwest because they don't give me assigned seats. And now they do. So there might have been some of that.

Take that for what it's worth. Spirit, they've been so distressed that they've just been offering really, really low fares, and maybe that fare competition has hurt JetBlue in Florida, or Orlando.

There could have been some of that explaining JetBlue's weakness.

But then, some of the more general stuff, that JetBlue does have a weaker loyalty plan in terms of revenue generation than the Big Three for sure, but even in Alaska, I think they've admitted that too.

They're making some important changes to try to make that TrueBoot program more lucrative, the United Alliance being probably the most important one. But they don't have that.

They don't have as much of the premium demand as the Big Three, so that's the market that's still performing best.

Then obviously, the big investment that they're making in Fort Lauderdale, they insist that Fort Lauderdale is going very, very well for them in terms of just having added a ton of new capacity and still seeing pretty solid resin performance, unit

revenue performance. But again, you're putting that much new capacity, there's going to be a lot of routes or at least several routes, some routes that are losing money initially.

You can consider that capacity increase in investment more than overnight addition to the bottom line. A lot of stuff going on there. The last thing they said interesting is, and again, how much does this impact first quarter results?

Probably not much, but they're going in now and cutting capacity as almost all airlines are doing, they're trimming capacity in reaction to the higher fuel prices.

But one place where they're very reluctant to do that, well, let's say two places where they're reluctant to do that. One is Fort Lauderdale because they want to grow it.

They won't admit this, but they're trying to basically put spirit out of its misery. And the second place where they're reluctant to cut is JFK Airport because if they cut too much, they're going to lose access to valuable slots there.

And on the call, management was very clear that they don't want to do that. They're not willing to sacrifice those JFK slots. So, you know, I said a lot there, but the bottom line is that JetBlue's bottom line is not good.

Their balance sheet, you know, I have a quote here from their chief financial officer. The balance sheet isn't where we want it to be. Are they, you know, at risk of going bankrupt tomorrow or no?

I mean, they were clear that they have a lot of assets that they can still use as collateral for finance, additional financing, they're cutting costs, you know, they're doubling down on some of their cost-cutting programs.

So this is not an imminent, a case of imminent bankruptcy. But, you know, this six straight years of losses, another really rough first quarter to 2026, negative cash flows. It's not a pretty situation.

Not a pretty situation, Jay.

Thanks for that really comprehensive overview. There are a few themes that I want to pick up on. So I think it will have twigged the ears of our listeners there.

The Chasm, I think, is a really interesting thing. The ChasmX Fuel for Q1, that increased by 6.6% year over year, including around four points of pressure driven by operational disruptions.

So, you know, they were able to quantify the fact that, you know, these aren't just arbitrary queues or weather situations or anything else. You know, they are having a real impact on the bottom line there.

An interesting around Fort Lauderdale, Madison George, JetBlue's president, I know a familiar face to many people listening to the podcast.

He said, we're particularly pleased with the revenue trends and customer response we're seeing in Fort Lauderdale. All of our second quarter capacity growth is driven by Fort Lauderdale.

We plan to continue building upon our leadership position in this key focus city, Jay. It does make you wonder how much of that growth is driven by spirits weakness.

And if spirits, there's a huge if here, if spirit gets onto stronger footing and doubles back down on Fort Lauderdale, it could get pretty messy down there.

Right. And we should talk a moment about spirit.

As we're talking today on Tuesday morning, April 20th, Tuesday morning, New York time, April 28th, there is still this looming possibility of a federal bailout of spirit that Washington come in, take ownership, provide new capital.

There's also some talk. I know our colleague Meghna has reported on the Low Fares Association.

Association of Value Airlines.

Oh, yeah. Thank you.

AVA.

Yeah, I'm thinking of the European one, and I think it's called the European Low Faire. So I'm getting a mixed up here. But thank you, Gordon.

Yeah, the AVA, Association of Value Airlines, they are negotiating collectively for perhaps some sort of relief from fuel prices, taxes. We don't know. That's still open ended right now.

I should say, by the way, Association of Value Airlines does not conspicuously, conspicuously include JetBlue. They're not part of that. Doesn't include Breeze either.

There's five airlines that are in the AVA that are members. Spirit, Frontier, Avelo, very small, and then Allegiant, Sun Country, which are becoming one. So those are the AVA airlines.

But that aside, you know, Spirit does face a potential bailout, which I'm going to go into a little bit of an aside here. It's very, very unusual for the federal government to bail out a company like Spirit.

You know, perfectly normal and a lot of precedent for the federal government taking stakes or providing some sort of financial relief to systemically important companies, companies that if they were to fail, that would have a very substantial impact

on the larger national economy, the larger national workforce. And you can go back, you know, the 1960s, Lockheed Martin was bailed out. You know, 1970s, or let's jump, 1980s was Chrysler was a big one. And then, you know, you can go every decade.

During the 2000s, you remember the auto bailouts. During COVID, you had the airline bailouts. You know, there was an entire industry being bailed out.

And even, you know, Intel most recently with obviously semiconductors, very systemic and important.

But for a small airline like Spirit, it should be, you know, I can't think of another example where the government would come in and rescue a company with such a relative insignificance to the economy.

And yeah, you're, you know, saving a few thousand jobs at Spirit, but you're also putting the jobs of Frontier at risk and JetBlue at risk. And so, you know, how wise of a policy that you can, you know, determine that on your own.

I mean, people have different opinions about that. But obviously, JetBlue would be, you know, livid. I think even United used the word irate.

JetBlue would be irate about, you know, something like that. JetBlue already has the bad memories of government policy messing with their joint venture with American, messing with their attempts to merge with Spirit.

So to have another very adverse government policy would be just really, really, really frustrating on their end. So that was a little bit of a tangent there.

But, you know, they are, they still hope that they can dominate, JetBlue does hope that they can dominate in Fort Lauderdale, kind of push Spirit out and we'll, you know, see how that progresses over time.

Also, you know, Orlando is a big market where they overlap as well. Fort Lauderdale is a big one. JetBlue is just, you know, all in, all in on growing that market.

14:50

JetBlue Strategy Response

Frequent listeners, readers, viewers will recall that we've discussed the JetForward program in a bit of detail, both in the issue and on the podcast, Jay.

Joni Gerrity in one of her prepared statements said this morning, quote, we are seeing clear evidence that JetForward is on track and working, and we remain confident it is the right plan to transform our business and get us closer to our financial

priorities. You said at the start of the conversation, six straight years of losses.

There's going to come a point internally and externally when you wonder, this has got to really speed up in terms of the rate of change, because investors and other stakeholders will only have so much patience.

Yes, there will be some, I think, sympathy for the JetBlue management team that they have come straight into 2026, into a bit of a storm, but that is, as we've discussed again, affecting most if not all carriers to a lesser degrees.

How much of this comes down to internal accountability for changes that need to be made? And how much of it could just be written off as yet another black swan?

Yeah, well, obviously, this black swan event of JEP fuel prices skyrocketing heightens the urgency here. I think the Jet Forward plan is perfectly respectable plan. I think they've done a good job.

They've had a lot of good ideas. I mean, they couldn't get their deal with American, ultimately approved, but they made the best of bad situation and turned to United, and that's a looser alliance, but that seems to be off on the right track.

They were talking in the call about how they're getting some people.

They mentioned there was one person that they gave an example of a person in Boston who was flying to Asia and they normally would have flown Delta because JetBlue doesn't fly to Asia and Delta does, but this person was a JetBlue loyalty plan member.

And so they said, you know what? I'll book United to Asia and then I'll get my JetBlue points. So an example of where that's helpful.

They're certainly excited about adding domestic first class to just that. You know how it is. I mean, at this juncture, anything you can do to get more premium seats on those airplanes, you do it.

So they'll have that coming. They recently opened a airport lounge at JFK. I think Boston is coming next.

They've done some changes with their basic blue fares. You can go on. There's a lot of stuff.

They basically, they said this. They said, look, there's a lot beyond our control, but we have three things that we have in our hands, that we control.

And the three things are fares, which they're raising fares like everybody else right now, and it's sticking, and they can control capacity. They're cutting capacity, and expect them to cut more too.

Even in Fort Lauderdale, if fuel prices are this high two, three months from now, they'll have to even look at that. I think the last thing they'll do is cut JFK to the point where they're losing slots.

I don't think you'll see that, but they'll cut more. And then I said fares, I said capacity. A third didn't make controls their costs.

And they're doubling down on that too. I think they said they're having a hiring freeze or maybe just cutting back on their plans to hire. So yeah, they're doing what they can, but it is a difficult situation.

Just one last point here. They mentioned how when they were doing their business plan for this year, I suppose maybe for this past quarter, I don't know what it was, but you have to make some sort of assumption on what the fuel price will be.

So their assumption was that the price of oil, the Brent price of oil was going to be $63. Well, I just checked this morning, it was $112. So pretty much double their assumption.

So you can see what airlines are dealing with right now. Now, on the other side of the ledger, all these airlines are just extremely thankful that demand remains very, very, very, very strong. That's true for JetBlue as well.

They said domestic, international, it's all good right now. They're raising fares and people are still buying. So that's the situation.

It's a race to the heavens, right? The costs are going way up, but the fares are going way up. So your costs are going up.

So who's going to win the race?

Your guess is as good as mine, Jay. It's going to be a wild one, but fascinating to watch certainly from an observation perspective, lots more detail we could go into, lots more detail we will get into in the next issue of Airline Weekly.

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20:06

Norwegianʼs Recovery

Hello and welcome back to the Airline Weekly Lounge. I'm Gordon Smith, joined as usual by co-host Jay Shabat. Part one, we were discussing mostly JetBlue, a few other assorted themes, so in there.

Now we're turning our attention to Norwegian, Jay, because we've had fresh quarterly numbers out of them as well. A little bit of a scene setter.

This is not the Norwegian that maybe some of our very long-time listeners might have known about back in the mid-2010s, I should say, into the pre-COVID era. This is a very different animal now.

This is largely shaped in and around Norwegian, like you would expect an airline called Norwegian to be, frankly, no heading over to Oakland or Bangkok or down to Argentina. But it's still a notable carrier, and it's one that's turned itself around.

One that's not been amiss to a bit of merger and acquisition opportunity as well, the Videro. But we've had some good numbers out of them today or just in the past 48 hours as we're recording here. Tell our listeners what they need to know.

Sure.

So yeah, Norwegian, as you rightly described, that is a very positive turnaround story. Norwegian, as Gordon just explained, they were doing all sorts of silly long-haul flying that never made any money.

They were overly ambitious with aircraft ordering, et cetera, et cetera, and wound up in bankruptcy during COVID, which no shame in that a lot of even good airlines wound up in bankruptcy during COVID, but they were probably destined for bankruptcy,

even if COVID never came. So they made the best of their bad situation in bankruptcy. They really cut costs, they really turned things around.

And they, going into this year, it was big, especially in the past month, how is the crisis in the Middle East, the fuel crisis going to affect them, and they reported very encouraging results. It was a lot.

I mean, this is first quarter, so it was a loss, but their negative 7% operating margin compared to negative 13%, last year.

So Norwegian will take that any day, any day, negative 7% for the first quarter, which is really, really bad in a place like Norway. I don't know about you, Gordon, but I don't want to visit Oslo in January.

Happy to go in July, but not January or February. So yeah, that was good. Very, very encouraging.

I should say they do nicely disclose the different margins for both the quarter Norwegian operation and then Videro, which as you just said, that an airline that they purchased recently, a regional airline, 2023 was it, maybe 24.

The quarter Norwegian loss did a negative 11%. They did negative 17% last year, so still improvement. Videro actually made money, 2% operating margin, a positive 2%.

So clap your hands for that. That's impressive. They are a little bit less seasonal because they handle more corporate business, which is not the leisure stuff, so not a huge surprise.

But they lost money last year, Videro, so negative one. So all around, good turnaround. You did have Easter this year, so keep that in mind.

But even there's some other things going on here, and I'll discuss them now, if I may, Gordon.

So one of the things that's important to understand why Norwegian is also a good start in 2026, is that the Norwegian currency has been stronger versus the dollar. That's been helpful on the cost side.

That's right off the bat, it's important to mention. Boeing is delivering planes on schedule now. Norwegian is a big buyer of Maxis, 737 Maxis.

So that has been helpful. They can do their planning. With this fuel spike, a lot of Norwegian's rivals have been cutting very aggressively.

And if you think about SAS, they mentioned in their call, Norwegian's call, that SAS caught a thousand routes? No, a thousand flights. It must be flights.

It says routes, but it's got to be flights. Lufthansa had that 20,000 flights announcement that I think you wrote about, Gordon, that it's over a long period of time, but still.

Yeah, context is key. I was in Berlin last week at the CAPA Summit, and there were Lufthansa executives around, as you would expect in a German aviation conference, the first conference held in Berlin.

And they said, yes, this is not a significant number, but we have a million flights a year, 20,000 is still going to be disruptive to those who were booked, one of those 20,000 that have to be rebooked.

But some of the tabloid headlines, even the broadsheet headlines that suggest that your entire summer schedule is not going to happen because you've got 20k out of the system, it doesn't quite add up.

But nonetheless, we are still seeing meaningful capacity cuts at SAS and others, and you suggest, Jay, that that's helping Norwegian.

Yeah, they seem to think so. They also mentioned in Poland, which is a big market for Norwegian, that there's a lot of cancellations there.

Yeah, I think their quote is, Sharon, I looked for you, it says, you know, quote unquote, it's probably having an effect, difficult to say how much.

So it's probably something when you're, particularly SAS, I mean, there's a ton of overlap between Norwegian SAS.

Norwegian, I think, has been winning corporate share, too, from SAS, especially since they bought Videro, which, you know, provides a lot of niche regional routes in Norway.

So that's, I buy it when they say that, you know, as some of these, that they're winning share from some of these rival airlines. Norwegian, in addition, has fuel hedges. That's been helpful.

They have currency hedges, too. They say demand is very good. And, you know, Norwegian is the second European airline to report their first quarter results.

We had FinAir last week, another Nordic airline, which also reported very encouraging results for different reasons. You know, they're very Asia heavy, and they were getting a lot.

They reported a lot of strong demand on Asian routes from customers that might have otherwise gone through the Gulf hubs. So you have that.

Now, Norwegian said that they suspect that customers that, in Europe, they might have, let's say, vacationed Dubai, Tel Aviv, Doha, some of the places down in the Middle East. They're going to southern Mediterranean now.

So I said western and southern part of Europe. So those routes are really, really strong. So that's another contributor to Norwegian strong results there.

And, you know, we can mention a few others just real quick in passing. They do have a cost savings program that seems to be, you know, take taking a lot of that's achieving a lot of savings. They have a loyalty program seems to be going well.

And they do have those, you know, merger synergies that are building with Vitoro. So I think now they were talking about you can on the website, you can book an itinerary combining Norwegian and Vitoro.

They don't have that up on the they don't have that functional for the app yet. But that's coming. So you can see there's, you know, merger synergies building there too.

So, yeah, I think that's, you know, kind of gives a shed some light on why Norwegian is off to a good start. And we'll see if that is the same situation true for other European airlines.

We're going to get Air France KLM Thursday, I think, which is when many of you will be listening to this podcast. So, you know, pay attention to Air France KLM. I think we have Icelandair as well, too.

They're a little bit niche, but yeah, it's Europe. Europe is looking encouraging.

Yeah, you know, always a mixed bag is Europe, but certainly some of the early frontrunners are looking more positive than maybe you might expect given the headlines, Jay.

I thought it was interesting Norwegian as well saying that they're going to be evaluating additional lease extensions depending on the market development and profitable growth opportunities. So that's always a good sign.

If you're choosing to extend a lease, then that means that the numbers add up somewhere. So encouraging signs there.

Just to fact check our earlier comments around SAS, it was canceling around 1,000 flights in just the month of April, and that was citing high fuel prices. So many other points we could touch on, but I feel like time is getting a little ahead of us.

Anything you want to mention before we wrap up?

28:33

European Aviation Trends

Just a final note about jet fuel supplies because that's been a big issue in Europe and Asia and some other parts of the world.

It seems to be that European airlines are relatively comfortable with the situation at disjuncture.

Norwegian made it clear that we don't have, I read the quote here, when it comes to availability of fuel, I've been reading a lot in the media lately about how big of a problem this is going to be.

Looking at the situation today from Norwegian's point of view, we are quite confident that we will get the fuel we need as long as we have visibility today.

That was the CEO, CEO or CFO, I'm not sure, talking, but you're hearing that from other European carriers too, that we're okay. I think you spoke with Wizz Air this week as well. Is that right, Gordon?

So we had a Wizz Air press briefing this morning, with the Wizz Air CEO at the CAPA events last Thursday in Berlin.

And you can imagine, we had the CEOs of Condor and a number of other big airlines there, plus Chief Commercial Officer from Reiner. One of the key questions without doubt on every session was, fuel, fuel, fuel.

And the general message was, we're obviously keeping an eye on it. It's obviously unhelpful with the prices it is. But in terms of supply for European airlines, it's not quite where you might think it is based on some of the headlines.

And more broadly over at that Berlin CAPA event, what was the mood music, to use your term more broadly, just about demand and the outlook in general?

Did you get a sense of gloominess or did you get a like, oh, we've got this when the demand is great and we're going to be good?

Yeah.

What's really interesting, Jay, is sometimes you get one position on stage, and then you can speak to the exact same person over by the coffee machine or after hours at a reception, off the record, of course, and they'll tell you something quite

different. They'll have the corporate line and then they'll have the honest line. I actually spoke to a good number of people off stage and listened to a good number of sessions on stage, and they were pretty well matched. There is caution out there.

There is trepidation out there. There's no room for complacency, but when is there ever in the airline business?

But demand, like you said, is still really, really strong, and those airlines that are putting up the fares, they are finding that there's not a huge amount of consumer resistance right now for those higher fares.

So as long as that continues, I think it's still going to be okay.

We'll see what Air France has to say in a couple of days, and then beyond that, the other big guys like IAG, Lufthansa, Ryanair, EasyJet, etc.

All the good stuff. Absolutely. All right.

Well, thanks Jay for running us through JetBlue and also Norwegian. Much more detail with the latest earnings and financial results in the next issue of Airline Weekly. A reminder of our email address, podcast.skift.com as well.

If you've got any questions or comments for us, we'll be happy to give you a different suggestion for a topic for a future episode. We've got our chips stacked high over the next few weeks with earnings season.

But as things come down there, we turn our attention to topics that are maybe less discussed. If you have any ideas, suggestions there, then do let us know. Thanks to Jay for joining me this week.

Thanks as always to our producers, Sean, Monica, and Will. Wherever you are in the world, thanks for listening, and we'll catch you next time. Bye for now.

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