Aviation Industry Updates: Jan 23, 2024

JetBlue’s Incoming CEO Clings To Spirit Deal With Few Other Options

KEY POINTS:

• Joanna Geraghty, the next chief of JetBlue Airways, spoke of having “the gift of grit” in a commencement address in 2020. She’s going to need it.
• JetBlue on Friday said it would appeal a federal judge’s decision to strike down its proposed acquisition of Spirit Airlines. The decision to appeal now sets up Geraghty, who officially takes over Jetblue in February, with two seemingly impossible paths: She either prevails over the U.S. government and pushes through a merger with an already hobbled Spirit, or the deal flops and Geraghty has to formulate a whole new strategy to pump life into her own unprofitable and struggling airline.
• The airline last made money in 2019, before the pandemic and a series of legal blows. In addition to a federal judge last week blocking the carrier’s plan to acquire Spirit in a $3.8-billion deal, JetBlue’s route-sharing partnership with American Airlines Group was shot down in the courts last year. Wall Street doesn’t expect the airline to so much as break even until 2025.
• “Joanna’s priority has to be returning JetBlue to solid profitability and mending the balance sheet,” said Savanthi Syth, a Raymond James analyst. Additionally, the airline needs to get its fixed costs under control, she said.
• The new chief executive officer, who takes the job in mid-February, is already familiar with those components of the business. Geraghty, 51, became JetBlue’s president and chief operating officer in 2018. She’s responsible for running the airline’s day-to-day operations and for its commercial performance, network, revenue management, brand and marketing.

United Airlines Sees Stronger Profit In 2024 Despite A Hit From Boeing MAX 9 Grounding

KEY POINTS:

• "Overall demand for travel remains strong and is expected to grow in the years ahead," said Christopher Raite, senior analyst at research firm Third Bridge.
• United, however, expects an adjusted first-quarter loss in the range of 35 to 85 cents a share, assuming all MAX 9 planes remain grounded through the end of January. Analysts expected the company to report a quarterly loss of 21 cents a share.
• United said the grounding will have an impact of about 3 percentage points on its non-fuel operating costs in the first quarter.
• United and Alaska together have 70% of the MAX 9 fleet and have been forced to cancel thousands of flights since the incident.
• The U.S. Federal Aviation Administration (FAA) has said MAX 9 planes would remain grounded until it is satisfied the jets are safe to return to service. United has 79 grounded jets.

Reuters

Struggling Mesa Airlines Reworks United Deal

KEY POINTS:

• Financially struggling Mesa Air Group has reached new agreements with partner United Airlines and continues selling off spare aircraft and engines as the company risks being de-listed from the US stock market. 
• The parent of US regional carrier Mesa Airlines disclosed on 18 January that it has amended its capacity purchase agreement with United to “significantly improve Mesa’s operating income and liquidity”. 
• Mesa has been selling off some of its Bombardier CRJ900s to gain greater financial stability 
  Under the new agreements, United has increased Mesa’s block-hour rate retroactively to 1 October 2023 and extending through 31 December 2024, which Mesa estimates will generate $63.5 million of additional revenue. 
• United has extinguished $12.6 million of Mesa’s debt in exchange for that airline’s equity investment in privately held Heart Aerospace, originally purchased for $5 million. Mesa also released its investment in publicly traded air taxi developer Archer Aviation as collateral. 
• The Phoenix-based company has also been selling off aircraft in an attempt to firm its financial footing. Since September, Mesa has sold or agreed to sell 29 of its “excess” Bombardier CRJ-900 aircraft and dozens of engines for a combined $198 million, which is being used to pay down $174 million in debt.

Flight Global

American Airlines Stock Analyst Unveils Interesting New Price Target

KEY POINTS:

• "Simply put, we are deadlocked on the key issue of economics, and no amount of further bargaining will change that."
• In a statement, American said, "We strongly disagree that a release from federal mediation is warranted at this time as American continues to negotiate with APFA in good faith." 
• "Our focus remains unchanged: Reaching an agreement quickly — one that ensures our flight attendants are paid as well as the best-paid flight attendants in the industry," the airline said.
• The airline industry overall appears to be on the upswing.
• The International Air Transport Association said that it expects the sector’s net profits to reach $25.7 billion in 2024 on a 2.7% net profit margin, a slight improvement from this year’s upwardly revised projections.
• “Considering the major losses of recent years, the $25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience,” Willie Walsh, the group’s director general

The Street

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