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JetBlue Could Raise Up to $2 Billion on TrueBlue Loyalty Program

JetBlue Could Raise Up to $2 Billion on TrueBlue Loyalty Program
Joe Cortez

The bad financial news continues to roll in for JetBlue, as they post their second straight quarter of losses spurred by the COVID-19 pandemic. The airline had a GAAP pre-tax loss of $578 million, but are exploring the opportunity to raise up to $2 billion on the strength of their loyalty program.

As JetBlue reports their second straight quarter of historic losses, the airline now says they could be exploring an option to use the TrueBlue loyalty program to raise capital. The comments came from the New York-based carrier’s chief financial officer, Steve Priest, during the airline’s third quarter earnings report call.

JetBlue Reports GAAP Pre-Tax Loss of $578 Million, But Sees Opportunity

Overall, the airline reported a GAAP pre-tax loss of $578 million over the three months ending on Sept. 30, 2020, which translates to a loss of $1.44 per share. Over the same period in 2019, the airline reported a diluted earnings per share of 63 cents.

Yet, some of the talk among JetBlue executives and others on the call was focused on the airline’s loyalty program, TrueBlue. In his opening remarks, Priest noted the carrier was considering using it to potentially raise $2 billion in capital. This was touted as a flexibility play, noting the airline would not necessarily be tied to additional government bailout funds to stay alive.

“Obviously, if we decide to go forward, then we determine we need actual liquidity and go forward in the public markets then we’d obviously look at pledging the loyalty program in the public markets,” Priest said, responding to an analyst question. “But I think the overall message I would give the analysts and the investor community is that we’ve built flexibility, both in terms of the path we take but also in terms of assessing whether we need the liquidity or not in terms of the provisions we’ve put in place to go forward.”

When asked about how their loyalty program would tie-in to their planned partnership with American Airlines, the executives couldn’t say much about their plans, as the alliance is still under review by the U.S. Justice and Transportation Departments. Instead, they focused on how the plan would drive growth in the Northeast.

“Our focus, obviously, is bringing low fares and growth to the Northeast points and a faster recovery,” said Scott Laurence, head of revenue and planning for JetBlue. “So again, I think it’s sort of what we could do. We’re moving toward, I think, a close on this. And I think we’ll be in a better position to kind of move forward more holistically.”

“VFR” Strategy Could Reinforce Finances in Fourth Quarter

Looking ahead to the fourth quarter, JetBlue predicted their “VFR” strategy – short for “visiting friends and relatives” as opposed to “visual flight rules” – would continue to gain momentum into the end of the year. Despite the rising number of COVID-19 cases across the United States, the airline said they were starting to see increased bookings for the Thanksgiving and December holiday period.

Despite the optimism, their current planning assumption would see revenue growth drop by 65 percent in the fourth quarter. The situation would create three straight losing quarters, after JetBlue dropped 90 percent in the second quarter and 76 percent in the third quarter.

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