S&P and Moody's downgrade JetBlue, shares fall

STORY: Shares of JetBlue plummeted as much as 18% in Monday morning trading, after ratings agencies S&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 TrueBlue loyalty program.

S&P downgraded the carrier from a 'B' to 'B-', 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's 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.