JetBlue shares slide as much as 16% as creditors hire restructuring advisers, then bounce after Q3 results

JBLU shares fell as much as 16% to $2.22 on the morning of Monday, October 26, after reports that a creditor group including holders of the airline's senior bonds and a first-lien loan had brought in restructuring advisers, while UAL rose 3% and DAL about 2%. According to The Wall Street Journal, as relayed by TheStreet and The Motley Fool, the senior creditors engaged financial adviser PJT Partners and law firm Akin (Akin Gump Strauss Hauer & Feld). The stock closed down 9.71% at $2.37.

As The Motley Fool noted, creditors frequently turn to advisers when they fear a borrower might struggle to repay debt. TheStreet reported the group advises on about $2 billion of senior notes due 2031, which FINRA data showed trading as low as 42 cents on the dollar on October 22, after changing hands near 80 cents earlier in the month (TheStreet). JetBlue responded to the report by saying it is focused on growing revenue and reaching profitability.

JetBlue then pulled its third-quarter release forward from Tuesday's open to Monday afternoon. Per its earnings release, operating revenue rose 21.1% to $2,812 million, with RASM up 18.4%, while the GAAP net loss widened to $257 million, or $0.68 per share. Excluding special items, the loss was $0.60 per share, wider than the $0.54 estimate cited by Investing.com and the $0.55 Zacks consensus; revenue of $2.81 billion missed the roughly $2.83 billion consensus. Average fuel cost $3.91 per gallon, 57% higher than a year earlier.

On guidance, JetBlue expects 1 to 2 points of year-over-year operating margin expansion in the fourth quarter, with RASM up 18.0% to 22.0% despite fuel forecast at $4.64 per gallon, and a full-year adjusted operating margin of (4.5%) to (6.5%) (release). It ended September with $2.2 billion of liquidity, including a $600 million undrawn credit facility, against total debt of $8,393 million, and expects another $250 million of aircraft-backed financing in the fourth quarter. The often-quoted $8.8 billion of long-term borrowings and roughly $2 billion of cash are June 30 figures. Shares rose 11.24% to $2.64 after hours (Investing.com).

What to watch: the October 27 earnings call for any comment on the creditor group, whether the $250 million financing funds as planned, and how the bonds trade. Management says it has "the liquidity and financing options" to bridge to at least $1 of EPS and positive free cash flow in 2028 (release).