Is JetBlue High on Debt or Cash?



A look at debt and cash levels

JetBlue’s (JBLU) debt levels stood at $2,181 million at the end of the first quarter of 2015. The company repaid about $55 million in regularly scheduled debt and capital lease obligations. It expects to pay $216 million in regularly scheduled debt and capital lease obligations during the remainder of 2015.

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Aircraft and engine purchases

In order to improve its network, JetBlue has about $6.67 billion worth of commitments for the future to purchase 127 additional aircraft and ten spare engines through 2023. This would require the company to tap debt markets in order to finance these purchases.

The company ended the quarter with about $1 billion in unrestricted cash and short-term investments. This helped push the total cash and cash equivalents up from $341 million in December 2014 to $599 million at the end of this quarter. The company’s cash flow growth stands at about 17%, which is higher than many of its peers and the industry average.

Peer comparison

JetBlue has a net debt-to-operating cash flow ratio of about 1.6, which is significantly lower than its peer group. The only competitor to outperform JetBlue and the industry majors is Southwest Airlines (LUV), which has a net cash balance of $100 million, which is significantly ahead of its competitors.

JetBlue does not have pension plan contributions like most of its peers, since it doesn’t have a defined benefit pension plan. This has also helped the company in generating significant cash flows.

JetBlue is well positioned against its peers like Spirit Airlines (SAVE), Alaska Air Group (ALK), and American Airlines (AAL), and its debt levels are not threatening. It has a good mix of debt and cash to fuel growth.

Investors can gain access to companies that have a positive growth trend like JetBlue through the iShares Transportation Average ETF (IYT), which holds ~38% in airline stocks.


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