JetBlue raised its full-year forecast for unit revenue growth to 13.5% to 14.5% and pointed to $2.2 billion of liquidity and about $7 billion of unencumbered assets. Its TrueBlue-secured notes traded near 47 cents on the dollar on Monday.
JetBlue's shareholders and its bondholders are looking at the same airline and reaching very different conclusions.
The airline raised its full-year forecast for unit revenue growth, measured as revenue per available seat mile, to 13.5% to 14.5%, from 10% to 12.5%, and said it has $2.2 billion of liquidity and about $7 billion of unencumbered assets, Reuters reported. Its chief executive pointed to a "significant disconnect between bond market expectations and our financial performance."
The shares rose 17.8% to $2.79 at about 1:46 p.m. Eastern.
The quarter itself missed. JetBlue reported on Monday a third-quarter adjusted loss of 60 cents a share, wider than the 55 cents analysts expected, according to LSEG, on revenue of $2.81 billion.
The bond market's view
The disconnect is large. JetBlue's TrueBlue-secured notes traded near 47 cents on the dollar on Monday, with yields above 30%, according to Reuters. Prices like that usually mean investors see a real chance of default or restructuring.
The company's message is aimed squarely at that market. Liquidity of $2.2 billion is cash and available credit to meet near-term obligations. Unencumbered assets of about $7 billion are assets not already pledged to lenders, which JetBlue could borrow against if it needs to.
What the stock move does and does not settle
An 18% gain on a $2.79 stock is a vote of confidence, but a small one in dollar terms. The bonds are where the larger capital is at stake, and the question is whether they recover toward the equity's view or the stock gives back its gain.
Two readings
One reading is that the bond market overshot. JetBlue is raising its unit-revenue outlook, has meaningful liquidity and has a large pool of assets it can still pledge, which gives it options before it reaches a crisis.
The other is that bondholders are looking at the losses. The company is still losing money, its loss was wider than expected, a yield above 30% reflects real doubt about repayment, and a better unit-revenue forecast does not by itself fix the balance sheet.
What to watch
The price of JetBlue's secured notes over the coming days, any new financing that uses the unencumbered assets, fourth-quarter guidance on costs and losses, and the full earnings call commentary.