JetBlue has revised its second-quarter fuel cost projections upward, driven by persistent shipping disruptions in the Strait of Hormuz that continue to pressure the global aviation sector amid escalating jet fuel prices.
The critical Strait, a crucial conduit for nearly a fifth of the world's oil and gas, has been impacted by US-Israeli actions against Iran. Before these strikes in February, jet fuel averaged $85 to $90 a barrel. By late May, it had surged to approximately $142 per barrel, according to the International Air Transport Association.
This volatility has compelled airlines worldwide to increase passenger fares and baggage fees to offset rising expenses, alongside reducing flight frequencies and routes to conserve fuel. Smaller carriers like JetBlue are particularly susceptible to these elevated fuel costs, given their more constrained financial flexibility and increased exposure to market uncertainties.
JetBlue now anticipates fuel expenses to range from $4.26 to $4.36 per gallon for the second quarter, an increase from its previous estimate of $4.13 to $4.28 per gallon. Despite this, the airline expressed confidence in its ability to 'recapture 40% or more of increased fuel costs in the quarter,' attributing this to consistent operational performance.
Company shares saw a marginal rise in pre-market trading. JetBlue also upgraded its forecast for revenue growth per available seat mile, a key indicator of pricing power, to between 9% and 12%, up from an earlier projection of 7% to 11%.
In related news, competitor American Airlines indicated last week that robust demand is expected to help mitigate the impact of higher fuel costs. JetBlue further noted 'outperformance' on routes formerly served by Spirit Airlines after that carrier ceased operations. 'Although it remains early in the third quarter booking curve, we are encouraged current trends may carry-forward,' JetBlue stated in a regulatory filing.
