By Mary Schlangenstein | Bloomberg
JetBlue Airways is eliminating unprofitable routes in California and Florida and drop service to several cities in South America, a sweeping overhaul of its network as the carrier looks to cut costs after growth attempts were twice blocked by the US government.
The carrier plans to cut nearly a third of its flights out of Los Angeles International Airport in June, including routes to Las Vegas, Miami and San Francisco, the airline said in a memo Tuesday to employees. Flights between Fort Lauderdale, Florida, and cities including Atlanta, New Orleans and Salt Lake City will also be eliminated.
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“With less aircraft time available and the need to improve our financial performance, more than ever, every route has to earn its right to stay in the network,” Dave Jehn, vice president of network planning and airline partnerships, said in the letter. “It’s more important than ever that we are surgical about every route in our network.”
JetBlue is turning its focus inward after three years of failed legal battles to save an operating partnership with American Airlines Group Inc. in the US Northeast and then to preserve an acquisition of Spirit Airlines Inc. JetBlue Chief Executive Officer Joanna Geraghty has said her top priority is a return to consistent profits, which the carrier hasn’t had since 2019.
The changes are the most significant yet for JetBlue since activist investor Carl Icahn in February revealed a roughly 10% stake and began pushing to boost shareholder value. The company has since given his investment firm two board seats.
In addition to the domestic routes, JetBlue will end service in Bogota, Lima and Quito, Ecuador, on June 13.
“These markets are unprofitable and our aircraft time can be better utilized elsewhere,” Jehn said. It’s also pulling out of Kansas City, Missouri, and will cut routes in June between New York and Detroit.
Some of the Florida reductions will be moved to “top performing” markets in the US Northeast and cities including Cancun, Montego Bay and Punta Cana. The total number of departures from Fort Lauderdale will remain flat, the carrier said. Growth at New York’s LaGuardia and John F. Kennedy International airports will be linked to the availability of flight slots.
JetBlue plans to keep “bread and butter routes” along the US East Coast and to Caribbean vacation destinations and those popular for visits with friends and family. The changes revealed Tuesday won’t affect JetBlue’s full-year flight capacity guidance.
Legal Setbacks
Federal courts blocked both the Northeast Alliance venture with American and the $3.8 billion Spirit purchase, saying they hurt consumers and violated antitrust laws. The defeats, reflecting the Biden administration’s opposition to consolidation in some industries, effectively relegated JetBlue to second-tier status among US airlines with few options to compete broadly with the likes of Delta Air Lines Inc. and United Airlines Holdings Inc.
The forced grounding of some of its planes is also limiting growth. JetBlue has said it expects an average of 11 aircraft to be out of service throughout the year because of a manufacturing defect in engines made by RTX Corp.’s Pratt & Whitney unit, peaking at 13 to 15 parked planes at the end of 2024.
Geraghty in late January outlined “aggressive action” the carrier already had underway to return to profit, including delaying $2.5 billion in planned aircraft spending to 2028 and later by putting off aircraft deliveries.
It’s evaluating deeper cuts beyond its existing expense-reduction plan that it says will provide savings of as much as $200 million by the end of this year.
JetBlue’s shares fell 1% as of 4:25 p.m. after regular trading in New York.
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