(Bloomberg) -- JetBlue Airways Corp.’s shares tumbled the most in more than two months after a worse-than-expected sales forecast suggested a recovery will take some time.
Fourth-quarter revenue will be down as much as 7% from a year ago, the carrier said Tuesday in a statement that also detailed results for the prior three-month period. Analysts had expected a decline of less than 1% on average in estimates compiled by Bloomberg.
The outlook hints at slow progress in the carrier’s efforts to reduce expenses and boost sales in the wake of a failed expansion. JetBlue was dealt back-to-back setbacks when federal courts blocked its planned acquisition of Spirit Airlines Inc. and broke up a joint venture with American Airlines Group Inc. Under new Chief Executive Officer Joanna Geraghty, JetBlue has said it will pull back to core markets in the northeast and southeast US and Puerto Rico.
“The results and guide looked mixed,” Stephen Trent, a Citibank analyst, said in a note. He cited cuts to unprofitable routes and progress in improving unit revenue, while non-fuel costs to fly each seat a mile will climb as much as 15% this quarter.
The airline’s shares fell as much as 17% in New York, the biggest intraday decline since Aug. 12. Rival Frontier Group Holdings Inc., which also reported uneven results Tuesday, plunged 22%, the most since it started trading in 2021.
JetBlue isn’t interested in reconsidering a potential acquisition of Spirit, Geraghty said on a conference call with analysts. Still, that doesn’t necessarily preclude a smaller deal if Spirit sells assets while trying to fix a liquidity crisis that was exacerbated by the dissolution of the JetBlue tie-up.
“If opportunities come up with assets that are reasonable and may allow us to grow in a capitally prudent manner, obviously we’d consider and evaluate those,” she said.
Bloomberg reported last week that Spirit was in talks with Frontier about filing for bankruptcy to facilitate a takeover. Spirit has been working to restructure its debt. On Oct. 24, it announced an agreement to sell 23 planes to raise cash.
Election, Hurricane Impacts
JetBlue cited challenges this quarter from an election-related travel decline and impacts from Hurricane Milton. Returning to operating profitability remains JetBlue’s “No. 1 goal,” Marty St. George, the company’s president, said in the statement.
JetBlue revealed an adjusted third-quarter loss of 16 cents a share, better than the average 23-cent deficit estimated by analysts. Revenue was $2.37 billion, little changed from a year ago and roughly in line with expectations.
Sales for the full year will fall as much as 5% from 2023, while Wall Street expected a 3.3% drop.
Separately Tuesday, Frontier reported a third-quarter loss of 5 cents a share, compared with an average 3-cent deficit expected by analysts. Revenue of $935 million fell slightly short of the $939.9 million expected by Wall Street.
Industry capacity reductions put in place as summer travel waned helped boost fares starting in mid-August, CEO Barry Biffle said in a statement. Non-fuel unit costs will fall about 1% in 2024 from last year, compared with an earlier outlook for a decline of as much as 2%, because of lower capacity on days with weaker demand.
On a conference call, Biffle declined to comment on any potential merger talks.
The deep-discount carrier recently entered into a $205 million revolving credit facility secured by its loyalty program and brand-related assets. The amount can be increased to $500 million under certain terms, Frontier said, and allow the airline to use the assets for additional debt that “may provide significant incremental liquidity.”
(Updates with CEO comment in sixth paragraph)
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