When the founder of an airline declares that it is in severe difficulty, it is unlikely to be a rumor. David Neeleman, who started JetBlue and is currently the CEO of Breeze Airways, has recently made one of the most direct statements concerning the financial situation at JetBlue in the aviation industry.

In his internal interview with Breeze pilots, Neeleman did not beat around the bush. As Neeleman explained, the airline finds itself in a "tough, tough situation," and the most talked-about rescue option for JetBlue, namely a takeover by United Airlines, may never happen at all.

Why Would Even a Well-Positioned Airline Not Want to Buy JetBlue?

For a company to be considered as a takeover target, there needs to be a good reason for doing so. In this case, such reasons are the aircraft gate and slot rights and airport terminal capacity that JetBlue has in place. These are JetBlue's most valuable assets and would serve as the main attractions for any prospective buyer. However, there is one factor that may prevent some companies from even considering purchasing JetBlue, and it has little to do with its operational capabilities.

As mentioned earlier, Neeleman cites JP Morgan analyst Jamie Baker's estimates according to which the loss for JetBlue this year could amount to $1.3 billion based on the price of jet fuel being around $4.50 per gallon. Based on this estimate, it follows that the total debt level of JetBlue will increase to $9 billion, which would require the company to pay around $800 million in interest charges annually.

It becomes clear now why a well-capitalized airline like United may decide not to buy JetBlue. Managing the company's debt would be too complicated a task given the challenging business conditions at present. Thus, while the airline would have to spend millions of dollars servicing its loans, it would still have to manage its regular operations. This situation looks increasingly untenable since other airlines would be able to take advantage of their superior financial position.

United Is Not Coming To Save The Day

While some experts believe that United is interested in acquiring JetBlue because it would give them an opportunity to expand their operations and enter new markets, they fail to consider several critical aspects. First, the United management team has repeatedly indicated that they would not be able to merge with American Airlines due to antitrust issues. This means that United may not need any more assets to increase their presence in certain markets.

According to Neeleman, United is aware of JetBlue's financial troubles and would not want to acquire the airline in its current state. This fact alone may be enough for JetBlue to start looking for alternative solutions. In addition, other major airlines like Southwest and Alaska have stated their lack of interest in merging with JetBlue.

Why United Would Not Need to Acquire JetBlue

As previously stated, United has its own strategies of expanding its operations and increasing its presence in the most profitable markets. However, it would not necessarily mean that United would not be interested in acquiring JetBlue's assets. Indeed, if JetBlue filed for bankruptcy protection, it would be easier to acquire such assets as slots and gates at John F. Kennedy International Airport, where JetBlue has the greatest concentration.

Such airports offer limited opportunities for organic expansion, and acquiring JetBlue's assets would provide the necessary boost. In addition, JetBlue's debt burden would remain the same; however, the airline would not have to purchase it. Instead, JetBlue could sell individual assets and thus obtain funds for settling their debt obligations. For this reason, United has every reason to wait until the most profitable opportunities arise.

The Founder of JetBlue Is Concerned About the Company

For all the professionalism and expertise Neeleman showed when discussing his former company's situation, there was one aspect of his speech that cannot be overlooked. Namely, even after analyzing JetBlue's financial situation and identifying the most realistic scenarios, Neeleman admitted that he wants nothing but the best for JetBlue. After all, he had started the airline from scratch, which implies that Neeleman still has an emotional connection to JetBlue.

However, it is also important to recognize the professional qualities Neeleman possesses. He flew on JetBlue a day before the interview and described his experience positively. According to him, everything went smoothly and the people at the airline were kind. Therefore, one can conclude that although Neeleman is genuinely worried about JetBlue, he remains rational in his decisions.

How Did JetBlue End Up in This Situation?

JetBlue's current financial problems developed gradually over several years. In particular, the following circumstances negatively impacted the company's operations:

• Cancellation of the merger with Spirit Airlines due to antitrust concerns, which prevented JetBlue from acquiring an ally and increasing its profitability.

• Pratt & Whitney engine recall, resulting in the grounding of several planes in JetBlue's Airbus fleet and subsequent cancellation of flights and increased expenses for the airline.

• Higher post-pandemic operating costs for JetBlue compared to other airlines, largely due to its inability to generate high-margin revenues from premium classes and loyalty programs.

• Repositioning towards Fort Lauderdale with the aim of developing it as the airline's second hub Although none of the above-listed events is fatal for an airline, taken together, they could cause the debt spiral described by David Neeleman in his recent interview.

Final Thought

David Neeleman is the founder of multiple successful airlines, including JetBlue, and has vast experience in managing and growing companies. Therefore, his statement concerning the financial situation at JetBlue deserves serious consideration from the industry's point of view. Judging by the reaction of experts and stakeholders, they took it very seriously.

Unfortunately, JetBlue's chances of becoming an attractive acquisition target without going bankrupt are virtually nil. On the one hand, its debt burden is too heavy to be considered as a potential purchase, whereas, on the other hand, its assets, such as aircraft and gate slots at John F. Kennedy International Airport, have substantial value. Thus, JetBlue is in a peculiar position in the airline industry.