Cash, capital spending, and free cash flow
As of December 2013, JetBlue Airways (JBLU) had cash and cash equivalents of $225 million. JetBlue’s cash position has improved by 24% from $182 million in 2012 but has reduced by 67% from $673 million in 2011. The cash decrease was due to increased capital spending and pre-delivery deposits for flight equipment of $1.5 billion and the repayment of more than $1.7 billion of debt and capital lease obligations in 2012 and 2013. Also, cash and marketable securities as a percentage of revenue has decreased to 13.6% from 17.4% in 2012 and 28% in 2011.
JetBlue has benefited from the repayments. It has improved its leverage by decreasing its debt-to-capital ratio. The increased capital spending has increased revenue. But, JetBlue still has to improve its liquidity position to enable future expansion plans and to meet $15.3 billion of its future contractual obligations arising out of debt, lease, flight equipment, and other obligations.
Free cash flow is a measure of the cash available to repay debt and provide returns to shareholders after the company meets its working capital and capital spending requirements. JetBlue’s free cash flow—calculated as operating cash flow, $758 million, minus capital expenditure and pre-deliver deposits, $637 million—has improved to $121 million in 2013 from a negative balance of $127 million in 2012.
As of the first quarter in 2014, JetBlue’s debt-to-capital ratio was 54.8%, compared to Delta Air Lines’ (DAL) 49.3%, Southwest Airlines’ (LUV) 27.8%, American Airlines Group’s (AAL) 119%, and United Continental Holdings’ (UAL) 80.6%.