Key facts
- S&P Global Ratings downgraded JetBlue Airways to 'CCC+' from 'B-', moving it further into junk territory.
- High jet fuel costs are significantly pressuring JetBlue's operating performance, with expectations of continued pressure for at least the next 12 months.
- JetBlue's turnaround plans, including cost cuts and network changes, are complicated by rising fuel prices.
- Budget and low-cost carriers are particularly exposed to fuel price spikes due to limited ability to pass costs to consumers.
- S&P does not expect positive free cash flow generation until 2028 and projects leverage to be about 10x by the end of 2027.
- Fitch Ratings also downgraded JetBlue to 'CCC+' from 'B-' in April, citing operating losses and negative free cash flow.
S&P Global Ratings has downgraded JetBlue Airways to 'CCC+' from 'B-', citing the significant impact of high jet fuel costs on the carrier's recovery and profitability. The agency anticipates JetBlue's operating performance will be substantially pressured for at least the next 12 months due to the ongoing Middle East conflict and the resulting rise in oil and jet fuel prices.
JetBlue's efforts to restore profitability through cost-cutting measures and network adjustments have been complicated by these elevated fuel expenses. Budget and low-cost carriers, like JetBlue, are particularly vulnerable to such price spikes, facing challenges in passing increased costs to consumers in a price-sensitive market. S&P forecasts that JetBlue will not achieve positive free cash flow until 2028 and projects its leverage to reach approximately 10 times by the end of 2027.
This downgrade follows a similar action by Fitch Ratings in April, which also lowered JetBlue's rating to 'CCC+' from 'B-' due to continued operating losses and negative free cash flow. Despite the deeper junk rating, S&P maintained a stable outlook on JetBlue, expecting the airline to retain sufficient liquidity to cover projected deficits through 2027 and anticipating no significant near-term debt maturities or defaults. Earlier this year, JetBlue secured a $500 million debt financing commitment.
In related news, U.S. passenger airlines collectively saw their fuel costs surge 78% in April to $6.5 billion year-over-year, driven by Middle East conflict-related price increases. This surge occurred despite airlines using 2.6% less fuel in April compared to March, with the cost per gallon reaching $4.11. Spirit Airlines ceased operations in May, partly due to rising fuel prices.