Shares of jetblue plummeted as much as 18% in Monday
morning trading after ratings agencies S and P and Moody's
downgraded the airline due to concerns over its financial health
. The downgrades come after jetblue unveiled plans to raise
more than$3 billion in debt, most of which
will be backed by its true blue loyalty program.
S and P downgraded the carrier from A B to
B minus saying it expects a key debt ratio used
to assess financial risk to remain in the low single
digits through 2025 with negative net cash flow from business
operations. Moody said that restoring jetblue's operating profit and
cash flow to levels that would lead to stronger credit
metrics will require several years. It expects the airline
to burn$2.2 billion in cash in 2024 and$1.4
billion in 2025 leveraging loyalty programs as collateral has become
a popular strategy for airlines to boost liquidity. Delta
and United both employed the tactic when travel was restricted
during the pandemic. Jetblue has been trying to control
costs including deferring deliveries of 44 new jets from Airbus
reducing its planned capital expenditure by about$3 billion through
2029. Its planned merger with Spirit Airlines was abandoned
in March after being blocked by a judge due to
antitrust concerns.