JetBlue Stock Slides as Higher Cost Outlook Overshadows Revenue Upgrade

Shares of JetBlue Airways (NASDAQ:JBLU) fell more than 3% in Thursday trading despite the carrier raising its third-quarter revenue outlook, as investors weighed the positive update against a warning of sharply higher costs.

A Mixed Financial Forecast

JetBlue announced it now expects third-quarter revenue per available seat mile (RASM) to grow between 17.0% and 20.0% year-over-year. This is a significant increase from its previous guidance of 12.5% to 16.5% growth, reflecting what the company called strong travel demand and healthy booking trends.

However, the improved revenue picture was offset by a bleaker cost projection. The airline now anticipates its cost per available seat mile, excluding fuel (CASM ex-Fuel), to rise by 6.0% to 8.0%, a notable jump from the prior forecast of 2.5% to 4.5%. Furthermore, JetBlue raised its expected fuel price per gallon to $3.96 from a previous estimate of $3.49.

Operational Headwinds Drive Costs

The airline attributed the rising costs to significant operational disruptions during July and August. JetBlue cited severe weather events and air traffic control (ATC) constraints, particularly in the Northeast where its network is heavily concentrated.

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According to the company, severe airport-weather days across the U.S. National Airspace System increased by more than 40% compared to the prior three-summer average. This led to a near-doubling of JetBlue's ATC-related flight cancellations.

Capacity and Spending Adjusted

In response to the operational challenges, JetBlue is trimming its growth plans. The airline reduced its capacity outlook, with available seat miles now projected to grow 1.5% to 3.5% year-over-year, down from the previous range of 3.0% to 6.0%.

JetBlue also slightly lowered its capital expenditures guidance for the year to approximately $275 million from $300 million. The company noted that despite the headwinds, it has not observed any meaningful signs of demand weakness, with early fourth-quarter booking trends remaining encouraging.