JetBlue Airways Corporation faced a setback on Tuesday as it revised its annual revenue forecast downwards following lackluster first-quarter results, primarily due to challenges in the Latin American market. The news led to a more than 12% premarket drop in the airline’s shares.
At the time of publishing, JetBlue stock was priced at $6.24, marking a significant decline of 16.91% from the previous day’s close.
Struggling to return to profitability, JetBlue recently announced plans to cut unprofitable routes and reallocate resources to more lucrative markets. This included the discontinuation of services to Bogota, Colombia, and Lima, Peru.
While the carrier observed healthy demand during peak periods and positive performance in premium seating options, it highlighted the issue of oversupply in the Latin American market, which is expected to impact its business throughout the year.
According to a regulatory filing, the Caribbean and Latin American regions accounted for over 33% of JetBlue’s overall capacity in 2023, underscoring the significance of these regions to the airline’s operations.
JetBlue now anticipates a low-single-digit percentage decline in fiscal 2024 revenue, a revision from its earlier forecast of revenue being roughly flat. Analysts had previously expected full-year revenue to dip marginally to $9.61 billion.
For the second quarter, the airline forecasts revenue to fall between 6.5% and 10.5%, compared to estimates of a nearly 4% drop.
“The Q2 and full-year revenue guide looked a little worse than expected … not nearly as strong as recently reported results from some of the carrier’s full-service peers,” commented Citi Research analyst Stephen Trent.
JetBlue’s disappointing report had a ripple effect on other airline stocks, despite positive current-quarter forecasts from United Airlines and Delta Air Lines in recent weeks. American Airlines and Southwest Airlines, both set to report quarterly earnings later this week, saw their shares fall by about 3% and 1%, respectively. United Airlines, Delta Air Lines, and Alaska Air also experienced declines of around 1% each.
Despite the challenges, JetBlue’s efforts to reduce costs seem to be yielding results. The airline reported an adjusted per-share loss of 43 cents in the first quarter, beating estimates of a 52-cent loss. Total operating revenue fell 5.1% to $2.21 billion, in line with estimates.
JetBlue Airways Corporation faces turbulence as it adjusts its revenue forecast downwards, citing challenges in the Latin American market. The airline’s strategic shift and revised outlook have implications not only for its own performance but also for the broader airline sector. As JetBlue navigates through these challenges, attention turns to its cost-cutting efforts and the impact on its bottom line.
