JetBlue still evaluating options of Spirit merger, stock drops after earnings

By Tomi Kilgore

JetBlue files to 'expedite' appeal of court ruling to block the Spirit deal, which remains in place 'unless and until' it is terminated

Shares of JetBlue Airways Corp. took a dive Tuesday, after the air carrier provided a somewhat downbeat revenue outlook and said the deal to buy Spirit Airlines Inc. remains in place, for now, which offset fourth-quarter results that beat expectations.

Last week, JetBlue had warned that it may terminate the merger deal as certain closing conditions "may not be satisfied." That followed a court ruling on Jan. 16 that blocked the airlines' merger, which the carriers appealed.

Outgoing Chief Executive Robin Hayes said on the post-earnings conference call with analysts that he strongly disagrees with the court's ruling, and said a motion was filed on Monday to "expedite" the appeal decision.

"We are evaluating our options under the merger agreement, which remains in effect unless and until such time, as the merger agreement is terminated," Hayes said, according to a FactSet transcript.

JetBlue's stock (JBLU) dropped 5.9% in morning trading, which puts it on track to suffer a one-day post-earnings decline for the eighth straight quarter, and for the 13th of the past 14 quarters.

Through Monday, the stock had rallied 12.5% since the court ruled to block the Spirit merger deal.

Regarding JetBlue's fourth quarter, the company swung to a net loss of $104 million, or 31 cents a share, from net income of $24 million, or 7 cents as share, in the same period a year ago.

Excluding nonrecurring items, such as costs associated with the attempt to merge with Spirit Airlines and union contract costs, the adjusted per-share loss of 19 cents beat the FactSet loss consensus of 27 cents.

Revenue fell 3.7% to $2.33 billion, but was above the FactSet consensus of $2.29 billion.

Load factor was down 3.1 percentage points to 80.1%, to miss expectations of 81.6%, as seat supply increased 3.3% to 17.01 billion available seat miles while traffic decreased 0.5% to 13.63 billion revenue passenger miles.

For the first quarter, the company expects first-quarter revenue to decline 5% to 9% from a year ago. Meanwhile, the current FactSet revenue consensus of $2.20 billion implies a 5.5% drop.

"2024 is an important year of change for JetBlue and we are taking aggressive action, including launching $300 million of revenue initiatives, to return to profitability and deliver value for our shareholders," said Chief Operating Officer Joanna Geraghty, who has been tapped to succeed Hayes as CEO on Feb. 12.

She expects revenue growth in the second half of this year to be "much stronger" than the first half, which will be held back by comparisons with the high pent-up demand seen in the first half of 2023.

The stock has soared 23.2% over the past three months, while the U.S. Global Jets ETF JETS has climbed 26% and the S&P 500 has advanced 18.1%.

-Tomi Kilgore

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01-30-24 1113ET

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