JetBlue Airways’ struggles with flight delays and cancellations in the Northeast could escalate this summer as the shortage in air traffic controllers worsens.
“This is going to be a most challenging summer ahead,” JetBlue President Joanna Geraghty said during the carrier’s first-quarter earnings call Tuesday.
The U.S. Federal Aviation Administration, which manages air traffic control, has warned airlines that it is only staffed to 54 percent of target levels in the New York City area, and that could lead to significant flight delays. To limit the potential disruptions, the regulator is allowing airlines to idle up to 10 percent of their slots and runway timings at New York JFK, LaGuardia, and Newark airports from May through September. Slots and runway timings are normally subject to use-it-or-lose-it rules.
JetBlue has reduced its New York-area schedules by 10 percent this summer, Head of Revenue and Planning Dave Clark said Tuesday. Those cuts are focused on “shorter-haul routes, smaller gauge flights and routes that generally we felt would have the least impact of the loss to frequency.” For example, JetBlue has postponed the launch of three new flights between JFK and Washington Reagan National to September from June, reduced its schedule on at least six routes from JFK, including to Dallas-Fort Worth, Miami, Rochester, and Syracuse, and even cancelled JFK-Worcester flights from June 15, according to Diio by Cirium schedules.
The reduction in overall New York-area capacity, in available seat mile (ASM) terms, will be “much smaller” than 10 percent, Clark added.
Despite these cuts, JetBlue executives are setting low expectations for summer operations. The airline is more exposed to any issue in New York or the Northeast than any other U.S. carrier. Roughly half of all of its flights will touch either JFK, LaGuardia, or Newark in June, July, and August, Diio data show. The number rises to 75 percent when including the entire Northeast.
Delays and cancellations spike during “convective” weather events — for example, thunderstorms that are common during the summer — and at peak times, like the evening European departure bank at JFK, Geraghty said.
“This has been an on-going issue for years, [and] it’s gotten worse,” she said, adding that there is no “short-term fix.”
It takes about three years to train and certify a new air traffic controller. The process was paused during the pandemic that, when coupled with retirements, exacerbated what were preexisting staffing issues.
The FAA’s admission of a staffing shortage is significant in its own right. Last year, when executives at Delta Air Lines, JetBlue, United Airlines, and others singled out air traffic control staffing as a significant contributor to flight delays and cancellations, the regulator responded by arguing that most irregular operations last summer were the fault of airlines.
Potential flight disruptions aside, JetBlue is optimistic about its outlook. Travel demand remains strong, particularly among the leisure flyers that make up the bulk of the carrier’s travelers, despite slowdowns in other sectors of the U.S. economy. Corporate demand stood at 80 percent of 2019 levels in the first quarter, and continues to recover. And the airline’s controversial alliance with American Airlines, the update to its TrueBlue loyalty program, and the expansion of JetBlue Travel Products are all “meaningfully,” as Geraghty put it, contributing to its bottom line.
The airline’s European franchise is growing meaningfully. Flights to Paris begin in June, and Amsterdam in August bringing the total number of JetBlue gateways in Europe to four. Clark said that, once it has fully ramped up Amsterdam, Paris, and existing London operations next year, the carrier still has another roughly 15 Airbus A321LRs and A321XLRs on order for further expansion across the water jump. JetBlue will be “more creative in where we want to go” with future markets, he added.
And critically for JetBlue, it is making progress on its program to cut $250 million in annual structural expenses from its business by 2024, Chief Financial Officer Ursula Hurley said. The airline has realized $35 million in annual savings to date, and expects another $70 million — or $105 million total — by the end of the year, she said. JetBlue is on track to hit its target by the end of 2024.
Any structural savings JetBlue can eke out are much needed. The airline expects significant sequential increases in pilot expenses this year under a contract deal ratified in January. In addition, aircraft maintenance expenses jump in the second half of the year. And, further out, its proposed merger with Spirit Airlines — if approved — will add significant costs.
Unit costs, measured in costs per available seat mile (CASM), excluding fuel increased 1.2 percent year-over-year in the first quarter, the low-end of the carrier’s up 1-2 percent guidance. The metric is forecast to increase a further 1.5-3.5 percent in the second quarter, and JetBlue maintains its annual forecast of a 1.5-4.5 percent increase.
JetBlue expects a 4.5-8.5 percent year-over-year increase in revenues, and profit with adjusted earnings per share of $0.35-0.45 in the second quarter. Capacity is forecast to increase 4.5-7.5 percent compared to 2022; this increase stems partly from the operational issues that constrained the airline’s schedule last year.
In the first quarter, JetBlue lost $111 million and had a negative 6 percent adjusted operating margin — not a good result for an airline as heavily invested in warm-weather leisure markets that peak in the winter. Revenues increased 34 percent year-over-year to $2.3 billion, and passenger unit revenues (PRASM) by 25 percent. Capacity was up 9 percent.