JetBlue Deferring Aircraft Amid Cost Cuts

JetBlue Airways is among a group of low-cost airlines deferring aircraft deliveries to cut costs. The airline is seeking to return to profitability after a period of low fares and high costs. The airline is also facing the impact of engine repairs, which have grounded some of its aircraft.

• JetBlue is deferring 44 Airbus A321 airplanes through 2029, opting to extend some aircraft leases.
• The airline estimates that it will save about $3 billion by deferring these deliveries.

JetBlue's Cost-Cutting Measures

JetBlue is implementing a number of cost-cutting measures, including deferring aircraft deliveries, exiting unprofitable routes, and extending aircraft leases.

• The airline is also grappling with grounded jets from a Pratt & Whitney engine recall.
• JetBlue CEO Joanna Geraghty said in a note to employees on Aug. 19 that deferring so many aircraft is a "double-edged sword."
• "We need planes to grow, but taking delivery of aircraft that end up sitting on the ground after we've paid for them significantly worsens the problem," she said. "In addition, given our growing debt, we just can't afford to buy so many planes."

Spirit Airlines' Cost-Cutting Measures

Spirit Airlines is also deferring aircraft deliveries as it fights to turn the company's deep losses around. The airline has been especially hard hit by the Pratt & Whitney engine recall.

• Spirit earlier this month reported an 11% drop in revenue and a $192 million loss, compared with a roughly $2 million loss a year earlier, and said it would furlough some 240 pilots in the coming weeks.
• The airline said it was deferring all the Airbus planes it has on order from the second quarter of next year through the end of 2026 until at least 2030.

Frontier Airlines' Cost-Cutting Measures

Frontier Airlines is also deferring aircraft deliveries, citing the high cost of new aircraft and the need to smooth out delivery delays.

• Frontier earlier this month said it is deferring 54 Airbus aircraft to at least 2029.
• Frontier CEO Barry Biffle said, "You have too much supply, so it's natural for us as an industry to reduce the supply."

Aircraft Leasing

Some airlines are opting to lease aircraft instead of buying them outright. This allows airlines to generate cash and avoid the large upfront costs associated with purchasing new aircraft.

• Airlines can lease aircraft from companies like Air Lease or AerCap, paying monthly rent.
• Some airlines, like Frontier, have been active in sale-leasebacks, in which they sell planes to generate cash and lease them back.

Demand for New Aircraft

Despite the cost-cutting measures of low-cost airlines, demand for new aircraft remains strong.

• Lease rates for new Airbus A320s and the larger A321s hit fresh average records in July of $385,000 a month, and $430,000 a month, respectively.
• Leases for new Boeing 737 Max 8 aircraft are near a record at $375,000 a month.

Boeing and Airbus Production Challenges

Boeing and Airbus, the world's two main suppliers of commercial aircraft, are struggling to increase output.

• The companies are facing skilled worker shortages and supply shortfalls.
• Airbus recently cut its delivery target for the year, while Boeing is limited from ramping up output as it tries to work through a safety crisis.

Impact on Airlines

The aircraft shortage is having a significant impact on airlines.

• Airlines are having to slow or halt hiring and other growth plans.
• Southwest Airlines has offered some staff voluntary leave programs to mitigate cost pressures related to Boeing delivery delays.