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**Disclaimer: All of this information was checked for errors but some may exist. Take this at your own discretion, this is an opinion of a regard on WSB. I own puts on JBLU which I might close at any time or maybe I diamond hand them until they expire worthless. If you decide to establish a position similar to mine or contrary to mine, that's on you and you alone. This is not investment advice, I don't like the stock.**
Airlines, who cares about airlines? Isn't that the industry where companies are always declaring bankruptcy like some kind of scene from The Office? Yes, yes it is and here is why JBLU might be next on that illustrious list.
TLDR : They are loaded to the gills with debt and the historic spike in jet fuel prices will likely push them to file Chapter 11 this year and as soon as this month.
https://preview.redd.it/3murkxk6tfng1.png?width=736&format=png&auto=webp&s=e4e4a20ef1b657561658663bd1d87fade4395e26
**Setting the Stage**
JBLU entered 2026 after reporting a net loss of $602 MM in 2025 and a net loss of $795 MM in 2024. Their CFO Ursula Hurley stated on their Q4 earnings call that "we're actually very excited about 2026. This is gonna be our year." The goal for 2026 was to achieve a break even operating margin that they could continue to build on. They entered the year with $2.5 billion of liquidity but needed perfect execution to turn the company around. Little did they know that 2026 was the year Iran would get liberated and jet fuel prices would climb the stairway to heaven.
**2026 Guidance - Hope Springs Eternal**
Airlines use industry jargon like ASM, RASM, and CASM to baseline their business on Available Seat Miles (ASM). RASM is how much revenue they get per mile flown and CASM is the cost per available seat mile.
In JBLU’s 10-K, 4Q25 Earnings Presentation, and 4Q25 Earnings Call they outlined that they had $2.5 billion of liquidity not including a $600 million line of credit. They guided 2026 as below:
https://preview.redd.it/fhuj8laktfng1.png?width=1600&format=png&auto=webp&s=57a3f113aa38f9fb90c510f0a5bbaafd5cf12886
Source : JBLU 4Q25 Earnings Presentation
Let's take a look at what that guidance actually means for 2026 by pulling in 2025 actuals.
|**Line Item**|**2026 Guidance**|**2025**|
|:-|:-|:-|
||||
|Available Seat Miles (ASM)|67,282,245,000|65,007,000,000|
|Revenue Per ASM \[cents\]|14.43|13.94|
|Revenue \[MM\]|9,707|9,062|
|Cost (Ex Fuel) Per ASM \[cents\]|11.4|11.2|
|Cost (Ex Fuel) \[MM\]|7,686|7,281|
|Operating Margin (Ex Fuel)|2,021|1,781|
Source : JBLU 10K and JBLU 4Q25 Earnings Presentation \*Note that some are estimated per guidance as they weren't explicitly provided.
JBLU was guiding to have $9.7 billion in revenue for the 2026, up from $9.1 billion in 2025. Excluding fuel they would have an operating margin of just over $2 billion which seems pretty good. Unfortunately, fuel is a big expense for an airline and they were entirely unhedged.
**2026 Current Forecast - The Well Runs Dry of Jet Fuel**
In the table below you can see how the fuel cost is calculated for 2025, the 2026 guidance, and what the current snapshot of fuel prices are as I type this. Some of the data was not explicitly provided but I backed into values based on their guidance and filings (Fuel Consumption, Fees/Taxes, etc).
|**Line Item**|**2026 Current**|**2026 Guidance**|**2025**|
|:-|:-|:-|:-|
|||||
|Fuel Consumption \[gallons\]|828,612,968|828,612,968|826,000,000|
|Oil Price \[$/BBL\]|$80.00|$55.00|$69.00|
|Crack Spread \[$/BBL\]|$93.50|$26.00|$21.00|
|Raw Jet Fuel Price \[gallon\]|$4.13|$1.93|$2.14|
|Fees/Taxes \[gallon\]|$0.35|0.35|$0.35|
|Total Jet Fuel Price \[gallon\]|$4.48|$2.28|$2.49|
|Fuel Expenses \[MM\]|3,713|1,888|2,059|
|Total Expenses \[MM\]|11,399|9,574|9,340|
|**Operating Margin \[MM\]**|**-1,692**|**133**||
Source : JBLU FY2025 10K, JBLU 4Q25 Earnings Presentation, Argus Market News ([https://www.argusmedia.com/en/news-and-insights/latest-market-news/2797249-us-gulf-coast-jet-fuel-prices-at-44-month-high](https://www.argusmedia.com/en/news-and-insights/latest-market-news/2797249-us-gulf-coast-jet-fuel-prices-at-44-month-high))
JBLU explicitly guided to breakeven or better operating margin for 2026. That scenario is in the middle of the table. Unfortunately as of today **without any further run up in commodity prices or further blowout of crack spreads JBLU should have an operating margin of -1692 MM for 2026.** Here is their disclosure in their 10-K filing:
https://preview.redd.it/8ittcx8ttfng1.png?width=1389&format=png&auto=webp&s=ee87d01292cad26bdfa40f25e4dfe333c1927b54
Source: JBLU 10K
By removing DD&A from operating margin we can get a proxy for cashflow from operations since that's non-cash. In 2025 their reported DD&A was $688 MM which was used for the determining their liquidity position at the end of the year assuming no additional debt was raised. You read the waterfall chart below from left to right where you start with the initial liquidity and then remove or take away cash ultimately ending with final liquidity. The 2026 guidance is first where you can see that the cash from operations is around $700 MM. In the guidance scenario the final liquidity position for the year would be around $900 MM. **$900 MM IS VERY IMPORTANT AS IT'S THE LIKELY LIQUIDITY TRIGGER FOR CREDIT CARD HOLDBACKS THAT ARE DISCUSSED IN THE NEXT SECTION.**
https://preview.redd.it/6j4b3syvtfng1.png?width=1107&format=png&auto=webp&s=902697b17ff548f1584a059177ab279fdde4e0b6
Chart Data Source : JBLU 10K, JBLU 4Q25 Earnings Presentation, and calculation from above
Now let's take a look at the same waterfall chart on today's pricing. **Instead of ending the year with $900 MM of liquidity, JBL ends the year $940 MM in the hole and insolvent without raising more debt.**
https://preview.redd.it/it4ymp3xtfng1.png?width=1098&format=png&auto=webp&s=ecdd5f7b48060909212d4013ecd94484693992c4
Chart Data Source : JBLU 10K, JBLU 4Q25 Earnings Presentation, and calculation from above
**Credit Card Processors - Judge, Jury, and Executioner**
When a customer purchases a ticket with their credit card the credit card processor pays the money to the airline and acts as an unsecured guarantor of the airline’s future performance. If an airline goes into bankruptcy and does not provide the flight that customers paid for, the processor is liable for the refund request. To make sure they are protected from this liability the processor typically tracks things like the airline's minimum liquidity, deteriorating ability to service debt, inability to refinance, and credit rating downgrades.
Not knowing the actual terms of JBLU’s credit card processor, we are going to assume that they have an industry standard liquidity requirement of 10% 2025’s revenue. **With 2025 revenue at roughly $9 billion, the minimum liquidity would be $900 million (the same as the 2026 guidance).** When that liquidity minimum is breached, the processor can start withholding the payments in escrow which starve the airline of cash but protects the processor from a potential bankruptcy. Note that this risk was disclosed in their 10-K:
https://preview.redd.it/f76y9zlftfng1.png?width=1106&format=png&auto=webp&s=fbdae7a21a93a0696e1f53831c07ec9f48f1a18c
Source : JBLU 10K
The cashflow forecast with current pricing shows that JBLU will be well below the liquidity requirement triggering credit card holdbacks. Let's take a look at the range of fuel prices that would cause credit card holdbacks. (Note that the difference between the price highlighted in the chart and the previous table is that the Colonial pipeline price of $4.13 still needs to be transported on the line and then the $0.35 of taxes/fees added)
https://preview.redd.it/o43xw37dtfng1.png?width=1026&format=png&auto=webp&s=5715e10f2dfbb3f59b4489ed4942d642a753d279
Source : JBLU FY2025 10K, JBLU 4Q25 Earnings Presentation, Argus Market News ([https://www.argusmedia.com/en/news-and-insights/latest-market-news/2797249-us-gulf-coast-jet-fuel-prices-at-44-month-high](https://www.argusmedia.com/en/news-and-insights/latest-market-news/2797249-us-gulf-coast-jet-fuel-prices-at-44-month-high)), Calculations noted previously
The graph above shows that credit card holdbacks are likely for all scenarios where jet fuel pricing plus taxes/fees is above $2.50/gallon. The current jet crack spread is around $90/bbl and is headed higher by the day. **The current spread plus the historic taxes/fees alone are \~$2.50/gallon and then you have to add the actual cost of the crude to the equation.** In my opinion, there is not one scenario where JBLU does not trigger credit card holdbacks this year unless they have a massive debt raise.
**JBLU's Zero Dollar Debt Raise**
JBLU understood they needed to raise cash in the beginning of 2026 with Ursula Hurley stating, "To address cash needs, we intend to raise approximately $500 million in new financing" on the JBLU earnings call in January. As of today there have been no notifications that they successfully raised the debt which means that they are trying to raise money at a time when their business is facing a cashflow crisis and private equity is facing a host of potential bad loans.
**JBLU's Dilemma**
JBLU has their own cashflow models for the remainder of 2026 and their numbers should look much like mine. March and April are the first two critical months for the company as March is a large interest payment month and April 1st is when they have to pay back the remaining $325 MM residual balance of JetBlue's 0.50% Convertible Senior Notes. JBLU has already slashed 2026 CAPEX to the bone and has roughly another $430 MM in principal payments due throughout the year.
**On the current trajectory I think that they will likely trigger the credit card holdback provision around June or July of 2026.**
It's my opinion that the best move for JBLU the company is to enter Chapter 11 in March before the cash outlay of the interest payments and the $325 MM residual balance. My understanding is that the $325 MM was unsecured and the company is better off having that debt converted to equity in the new entity. The cash burn JBLU is facing due to the jet fuel price shock is existential. **Unfortunately what's good for the company in this case is terrible for the current shareholders.**
An alternative option is that JBLU's management team may decide to kick the can down the road and completely zombify the company by using unencumbered collateral for a highly punitive debt raise. It's my opinion it will merely delay the inevitable. The suffocating interest expense and the accelerating operating losses from the severe spike in jet fuel will ultimately bleed the equity to zero.
As noted above, **it's my opinion that JBLU enters Chapter 11 this year and I own puts on JBLU.**
P.S. I don't like this stock.
Positions:
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