JetBlue’s $3.15 Billion Frequent Flyer Bet Backfires, Stock Spirals 18%

Well, JetBlue’s Monday morning is off to a turbulent start. After the New York-based airline announced its grand plan to raise $3.15 billion through debt offerings, investors bolted for the exits like they were fleeing a burning building. The stock, which had already been having a rough day (and week, and year…), is down 18%.

Let’s break this down. JetBlue isn’t just raising a few million here; they’re going “full Monty”—$3.15 billion in capital. The plan? Sell $1.5 billion in senior secured notes and raise another $1.25 billion through a term loan. 

And if that wasn’t enough to make you choke on your in-flight snack, they’re also tossing in an extra $400 million through convertible notes. Because, why not? When you’re deep in debt, might as well go big or go home (or maybe both?).

Oh yeah, and before I forget, they’re not just asking investors to take their word for it. JetBlue is backing most of this debt with their TrueBlue loyalty program—because nothing says “trust me” like pledging future frequent flyer miles as collateral. After all, leveraging your loyalty program has become the new “when in doubt, mortgage your house” for airlines, with big players like Delta and United having done it during the pandemic in 2020.

As you’d expect the market decided JetBlue wasn’t worth its salt. This wasn’t exactly shocking, given that ratings agencies S&P and Moody’s were already side-eyeing the airline like a disapproving mother-in-law. Both downgraded JetBlue even further into junk territory.

Moody’s went full Debbie Downer, predicting JetBlue will burn through $2.2 billion in cash this year and another $1.4 billion in 2025. S&P wasn’t much kinder, dropping the airline’s rating from ‘B’ to ‘B-‘. If JetBlue were a Netflix series, this would be the point where you’d start questioning whether you should stick around for the next season.

To add to the drama, JetBlue’s announcement comes right after a fresh batch of bad news. Just days ago, the airline was slapped with a lawsuit by a woman who broke her ankle on a flight to the Bahamas. And, as if the timing wasn’t ironic enough, this all comes exactly 17 years after JetBlue was immortalized as Springfield’s official airline in The Simpsons Movie. 

(Source: Inc. Magazine)

JetBlue’s CFO, Ursula Hurley, tried to calm the nerves by pointing out that the company has $11 billion in assets ready for use. The only problem is half of that is tied up in their beloved TrueBlue frequent flyer program.

So, what’s next for JetBlue? Well, if you’re a betting person, now might be a good time to hedge your bets. The airline is desperately trying to control costs by deferring deliveries of new jets and cutting capital expenditures. But with planes grounded and debt piling up faster than holiday travel complaints, JetBlue’s future looks as shaky as a Jenga tower on game night.

Stock.News has positions in United Airlines and Netflix.