JetBlue Stock Sinks, Bond Yields Surge as Creditors Hire Advisors Amid Higher Jet Fuel Prices

JetBlue Airways (NASDAQ:JBLU) shares came under further pressure this week, hitting a record low as concerns over the aviation industry deepened amid soaring jet fuel prices. The airline’s bond yields also kept climbing, prompting its creditors to hire advisors as the risks mounted.

JetBlue Airways is Facing Pressure as Jet Fuel Prices Jump

Investors are getting worried about JetBlue Airways as jet fuel prices surge. IATA data shows that the average jet fuel price jumped to $458 a barrel, up by 4.3% from the same period last month and 113% from a year earlier. In the US, fuel prices rose to $194 a barrel. 

Jet fuel prices will likely continue rising in the coming weeks because of rising oil prices. Brent, the global benchmark, ended the week at $117, while the West Texas Intermediate (WTI) rose to $103. These prices will keep rising as the US and Iran plot an escalation, possibly after the midterm elections.

The rising jet fuel prices are having an impact on JetBlue and other airlines, especially those that have not hedged. Its last earnings report showed that its revenue rose by 14.5% in the second quarter to $2.6 billion. Its aircraft fuel costs rose to $911 million, pushing its net loss to $247 million.

Analysts expect the upcoming earnings to show that its revenue jumped by 21% to $2.8 billion, while its loss-per-share rose to 55 cents. 

Top American airline companies have warned about the impact of the ongoing fuel surge. In a statement this week, United Airlines (NYSE:UAL) said that, while airfares were rising, fuel prices were soaring at a faster pace. United and Delta all slashed their profits forecasts.

JetBlue Airways Stock and Bonds are Cratering

It is against this backdrop that JetBlue stock has plunged to a record low, with its valuation moving from a peak of over $2.4 billion to $990 million. At the same time, its bonds have moved further into junk category, with those maturing in September 2021 yielding 34%. The yield traded at 8.4% last year.

JetBlue stock and bond yield | Source: TradingView

As a result, the company’s senior creditors have hired advisors, including PJT Partners and Akin, a law firm. The goal is to find a solution, and possibly help the company avoid bankruptcy because of its substantial debt burden. It ended last quarter with $1.65 billion in cash and equivalents and over $16.37 billion in total assets against a total debt of $8.4 billion. 

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