JetBlue credit rating cut deeper into junk as fuel costs strain recovery

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JetBlue credit rating downgrade

Highlights

S&P downgrades JetBlue to 'CCC+' from 'B-' due to expectations that high fuel prices will pressure operating performance for at least 12 months.
S&P projects JetBlue's leverage will reach about 10x by end-2027 and does not expect positive free cash flow until 2028.
JetBlue faces higher borrowing costs following deeper junk ratings from both S&P and Fitch in 2024, despite securing $500 million in debt backed by 22 aircraft.

Ratings action and liquidity outlook

As reported by Reuters, S&P Global Ratings said on Monday it downgrades JetBlue to "CCC+" from "B-", citing expectations that higher oil and jet fuel prices significantly pressure the airline's operating performance over at least the next 12 months.

The New York-based carrier is trying to restore profitability through cost cuts, network changes and efforts to improve operational reliability, but higher fuel prices complicate its turnaround plan. S&P said it no longer expects the airline to generate positive free cash flow until 2028 and projects leverage at about 10x by the end of 2027.

S&P keeps its outlook on JetBlue stable, reflecting its view that the airline maintains enough liquidity to cover projected free cash flow deficits through 2027. The agency also says it does not anticipate a default or restructuring over the next 12 months and notes there are no significant near-term debt maturities.

Fuel shock raises pressure on low-cost airlines

Budget and low-cost carriers are particularly exposed to the recent fuel-price spike linked to the Iran war, with limited room to pass higher costs on to travelers without hurting demand in a price-sensitive market.

A deeper junk rating can raise JetBlue's borrowing costs and constrain access to capital markets at a time when additional liquidity may be needed to fund operations. Earlier this year, the airline secures a $500 million debt financing commitment backed by up to 22 aircraft, with an option to raise an additional $250 million.

In April, Fitch also downgrades JetBlue to "CCC+" from "B-", pointing to continued operating losses and negative free cash flow. The back-to-back rating cuts underscore how fuel costs and weak cash generation continue to weigh on the carrier's recovery.

In our earlier article on American Airlines and United’s stance on sector consolidation, we noted that elevated fuel prices could intensify competitive pressure and prompt United to pursue opportunistic purchases of airport slots, gates, or other assets rather than a full merger. The piece also highlighted mixed technical signals for AAL, with the stock holding above key moving averages but showing uneven momentum that could worsen if industry cost pressures build.

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