JetBlue Downgraded by 'Big Three' Ratings Agencies

By Dean Seal

The three biggest ratings firms have downgraded the credit ratings of JetBlue Airways, pointing to a weakening outlook for airlines.

The so-called Big Three--S&P Global Ratings, Moody's Investors Service and Fitch Ratings--each released ratings for JetBlue on Monday morning that offered a dim overview of its near-term headwinds.

S&P said it expects JetBlue's operating environment to remain tough for the next year or two, while Moody's said it would take the airline "a number of years" to get operating profit and cash flow back up to the levels that would bring them stronger credit metrics.

JetBlue stock fell 13% to $5.28 in early trading. Shares are now trading in negative territory year-to-date.

Moody's has lowered JetBlue's corporate family rating to B3 from B2 and downgraded its probability of default rating and existing senior secured bank credit facility rating. JetBlue's earnings will continue to face pressure from rising competition and a shortage of air traffic controllers in key East Coast markets, the agency said.

Higher demand for premium products is weighing on profits too, Moody's said, and the company is struggling to match cost inflation with revenue growth. The firm expects JetBlue to log negative free cash of $2.2 billion this year and $1.4 billion in 2025, driven in part by $3 billion in cumulative capital investments in the next two years.

S&P meanwhile lowered JetBlue's issuer credit rating to B- from B. Excess industry capacity in many of the airline's key domestic routes will pose a challenge, as will higher labor costs and infrastructure-related constraints, along with capacity growth limitations due to engine issues, S&P said.

S&P also highlighted JetBlue's issuance of $2.75 billion in debt secured by its TrueBlue loyalty program as a drag on free cash flow.

Both Moody's and S&P said they maintain stable outlooks for JetBlue, given the adequate liquidity it now has through 2025 as a result of the debt issuance and cost-cutting initiatives it has undertaken.

Fitch affirmed JetBlue's long-term issuer default rating of B, citing healthy liquidity and manageable near-term debt maturities. But it downgraded the company's existing senior secured debt ratings to BB- from BB, noting that margins are going to be pressured at least through 2025.

Earlier on Monday, JetBlue said it intends to offer $400 million in convertible senior notes, due in 2029, to repay other bonds that come due in 2026.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

August 12, 2024 10:49 ET (14:49 GMT)

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