What do you call it when you initiate a $3.8 billion hostile takeover of a rival company, get them to abandon a merger they had been planning with a different company, give up a sweet longtime revenue-sharing agreement with a business partner, get sued by the government, then abandon your takeover plans because a judge said you’d have controlled too much of the market?
According to JetBlue Airways CEO Joanna Geraghty, you call it “three years of distractions.” The executive’s comments came during an interview at the JP Morgan Industrials Conference on Tuesday. Between Spirit, where investors are bracing for a crash landing after the nixed tie-up, and JetBlue, the latter is the financially healthier of the two. It was, after all, the one that started all this. But it still has some work to do to get back to business.
“Obviously, the Northeast Alliance with American Airlines, which didn’t work out as we had hoped, followed by the Spirit transaction, which also did not work out as we had hoped, all focused on trying to create a larger and more relevant JetBlue and an airline that could compete with the large legacy carriers,” Geraghty said. “But now, our focus, after spending three years trying to do those things, is returning to the business fundamentals.”
New money from old friends
One business fundamental is always pay your debts, and JetBlue has a big $750 million payment coming due in a couple years. Without the greater fiscal clout that would have come with a successful Spirit merger, JetBlue has to figure out how it will take care of that. One gambit might be to lean on an early pandemic-era move used by the likes of Delta Air Lines and others: Cashing in on its loyalty program, TrueBlue.
“We have $10 billion of unencumbered assets and about half of the $10 billion is our loyalty program,” CFO Ursula Hurley said at the conference. “We’re one of the only airlines out there that hasn’t yet levered up the loyalty program.”
Airlines make money on their loyalty programs by selling the points to other companies, like hotels and credit card companies. JetBlue brought in more than $400 million through points sales last year, according to its annual report.