Debt and future obligations
JetBlue’s (JBLU) debt and capital leases totaled $2,386 million in 2Q14. This was 7.7% lower than in December 2013. The company’s debt as a percentage of total capital has decreased to 50.8% from 54.8% in FY13. Since airline companies require substantial capital to finance aircraft purchases, they generally have high leverage.
JetBlue’s peers Delta (DAL) and Southwest (LUV) had lower debt as a percentage of capital of 45.8% and 26.8%, respectively. But American (AAL) and United (UAL) had higher leverage levels of 80.8% and 78.6%, respectively.
The estimated future contractual obligation with respect to debt and lease commitments totals $4,645 million. Of this, $370 million is due in 2014 and $590 million is due in 2015.
Aircraft-related and other obligations add up to a total of $10,850 million. Of this, $950 million is due in 2014 and $1,250 million is due in 2015. See the table below for further details regarding future contractual obligations.
The earnings–to–fixed charge ratio
The earnings–to–fixed charges ratio measures a firm’s ability to meet its fixed charges, including interest and lease expenses. JetBlue’s earnings–to–fixed charge ratio has improved to 6.43. Excluding the one-time gain on the sale of a subsidiary, the ratio increased to 2.58 in 2Q14 from 1.85 in 2Q13.
The company’s reduction of debt and improvement of its earnings–to–fixed charges ratio is a positive development in the second quarter with regard to JetBlue’s financial position.