JetBlue will reduce summer capacity due to shortage of air traffic controllers

Warning that it expects “challenges in the operating environment this summer” due to air traffic controller shortages, JetBlue will reduce capacity for the peak summer period, the carrier’s executives said Tuesday during JetBlue’s first-quarter earnings call.

JetBlue is one of multiple carriers to take advantage of the FAA’s voluntary 10% slot reductions for the peak summer period, particularly for the New York region, where air traffic control staffing is at 54% of the FAA’s 2014 target, JetBlue president and COO Joanna Geraghty said.

The 54% is “far short of where it needs to be to avoid significant disruptions and to accommodate the industry’s growth,” she said, noting that the carrier is “fine-tuning” its summer capacity plans. But even with the cutbacks, “we still expect challenges in the operating environment this summer.

The FAA has said that delays are expected to vastly increase year over year. With our large footprint in the Northeast, JetBlue is disproportionately exposed to these challenges.”

To help mitigate problems, the carrier further is investing in technology to aid recovery during irregular operations, protecting scheduled maintenance time, and enforcing the schedule and network planning processes, Geraghty said.

“We continue to plan the operation with conservatism, with schedule buffers and elevated crew reserve levels,” she added.

Domestic demand remains strong

JetBlue continues to see overall strong domestic demand throughout the United States, while business travel recovery has been steady. Business travel was about 80% recovered for the first quarter, with sequential improvement expected into the second quarter, Geraghty said. There was a brief drop in corporate demand following the collapse of Silicon Valley Bank in March, but it has since recovered, she said.

As noted by other carriers, seasonality is “returning towards normalcy,” said JetBlue head of revenue and planning Dave Clark, “with just the peaks a bit higher, and then the troughs obviously have a bit of a headwind from corporate travel, which as mentioned before is about 80% recovered. So it’s creating a bit more of a peak-to-trough ratio than we saw before, but in general, [we’re] feeling really good about demand throughout the network.”

Northeast Alliance flourishing

The carrier continues to see “strong revenue streams” from its Northeast Alliance with American Airlines. With the alliance, JetBlue has grown flights in New York City by more than 25% versus pre-pandemic levels, Geraghty said. JetBlue expects a “year-over-year margin tailwind in New York” as the NEA markets continue to mature.

Update on Spirit merger

JetBlue remains “fully committed” and is moving ahead with its planned acquisition of Spirit Airlines despite the U.S. Department of Justice lawsuit, said JetBlue CEO Robin Hayes. “In fact, we are more convinced than ever of the strategic logic of the combination.”

Hayes noted that support for the combination has “continued to grow,” including from the state of Florida, which declined to participate in the DOJ lawsuit and is now promoting the merger, “which is expected to result in the biggest transformation in air travel that Florida has ever experienced,” Hayes added.

JetBlue Q1 metrics

JetBlue reported a first-quarter net loss of $192 million on total revenue of $2.3 billion, the highest first-quarter revenue figure in the company’s history. The loss compares with a net loss of about $255 million reported a year prior, while revenue increased 34.1% versus Q1 2022.

First-quarter passenger revenue was up 36.1% year over year to $2.2 billion. The quarter’s capacity increased 9% from a year prior. Average fuel costs were $3.50 per gallon.

The carrier issued guidance for second-quarter capacity to increase 4.5% to 7.5% year over year, with full-year 2023 capacity up 5.5% to 8.5%. JetBlue forecasts second-quarter revenue to increase 4.5% to 8.5% versus last year, with full-year revenue up in the high single-digit to low double-digit percentage points. Second-quarter per-gallon fuel costs are expected to be $2.75 to $2.90, with full-year prices coming in at $2.95 to $3.15.

Source: Business Travel News

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