JetBlue Airways Corp. debt fell to the lowest levels since it was issued more than two years ago, as the struggling airline burns through cash while short sellers circle its shares.
The airline’s $2 billion bond with a 2031 maturity fell to 72 cents on the dollar on Thursday, the lowest since August 2024, according to Trace pricing data. The bonds, which are backed by collateral tied to the company’s loyalty programs, saw their yield spread relative to the benchmark blowing past 1,000 basis points over the past month. This is a level that typically indicates distress in the market for junk-rated debt.
JetBlue’s average short interest rose from 20% to 29% of float this year, said S3 Partners, a shorts analytics firm. The stock has been under pressure as the airline is trying to navigate a heavy debt load after years of operating losses against a challenging backdrop of rising oil prices. The stock is down about 15% this year.
Short sellers dumping JetBlue are effectively long on oil, S3 said.
The airline, which is saddled with roughly $9 billion in debt, also faces elevated costs and intense competition. If fuel prices remain high, JetBlue may need to shrink from a cash-burning strategy to one where they can generate cash regularly, according to George Ferguson, a Bloomberg Intelligence analyst.
JetBlue burned through $389 million in free cash flow in the second quarter, including $155 million in cash used for operations and $234 million in capital expenditures, underscoring the financial strain facing the carrier as it struggles to return to profitability.
A surge in fuel prices has compounded those challenges. JetBlue paid an average of $4.23 per gallon for fuel during the second quarter, a 76% increase from a year earlier, squeezing margins despite a 14.5% jump in revenue.
The carrier last month cut its third-quarter capacity outlook after weather and air traffic control disruptions snarled operations across its northeastern US network. JetBlue has sought to reassure investors about its longer-term prospects, saying in July that it expects to generate positive free cash flow in 2027 and earn at least $1 a share in 2028.