JetBlue plans capacity cuts, fare hikes as high fuel costs widen quarterly loss

By Doyinsola Oladipo and Shivansh Tiwary

April 28 (Reuters) - JetBlue Airways JBLU.O said on Tuesday it plans to slow hiring, cut capacity and hike fares to soften the blow from soaring jet fuel costs after it reported a bigger first-quarter loss that threatens to derail the carrier's turnaround efforts.

The airline also suspended its prior full-year outlook due to external factors, CEO Joanna Geraghty said on an earnings call.

The U.S.-Israeli attack on Iran has closed the critical Strait of Hormuz, disrupting nearly a fifth of global oil and gas supplies. Rising fuel costs heighten the pressure on smaller carriers like JetBlue, which have limited financial flexibility and greater exposure to uncertainty.

"The three primary levers available to us are adjusting fares to better align with input costs, moderating unproductive capacity and pursuing additional cost savings opportunities," Geraghty said.

Shares of the carrier were up more than 4% in late morning trading as the carrier saw its pricing power improve during the quarter due to healthy demand, strength in premium segments and its expansion in Florida.

JetBlue said it will continue to look for additional ways to strengthen its revenue performance for the rest of the year.

The airline reduced capacity during the first quarter by 1.7% year-over-year and said it plans to further cut capacity during off-peak and shoulder periods in the second quarter and in the latter half of the year after the height of summer travel.

JetBlue said it is also slowing hiring to match capacity expectations, and expects to save on maintenance and landing fees with less flying.

The airline plans to recoup 30% to 40% of the increased fuel costs in the second quarter, and recover all of it by early 2027.

The New York-based carrier expects an average fuel price per gallon of $4.13 to $4.28 in the second quarter, compared with $2.40 per gallon during the same period last year.

Operating revenue during the first quarter rose 4.7% year-over-year to $2.24 billion and revenue per available seat mile, an industry metric commonly considered a proxy for pricing power, increased 6.5% in the same period.

"While the demand outlook is encouraging and JetBlue is doing everything it can to manage (costs), we expect concerns around the competitive implications of a White House bailout of the ultra-low-cost-carrier segment to weigh on the shares," TD Cowen analyst Tom Fitzgerald said in a note.

The airline said regardless of a potential bailout of Spirit Airlines FLYYQ.PK, it will continue to expand its footprint in South Florida as it has taken advantage of gate availability.

Geraghty told employees last week that JetBlue was not considering bankruptcy, according to a memo seen by Reuters, adding the carrier had ample liquidity and access to additional capital.

The airline recently secured a $500 million debt financing commitment, with an option to raise an additional $250 million using more planes as collateral.

JetBlue reported an adjusted loss of 87 cents per share, compared with analyst expectations of a 71-cent loss.