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CHICAGO (Reuters) – JetBlue Airways (NASDAQ:JBLU) on Tuesday slashed its full-year profit forecast, citing a hit from the termination of its alliance with American Airlines (NASDAQ:AAL) and a shift in travel demand away from domestic trips to long-haul international destinations.
The New-York based carrier said its operations are also suffering due to a shortage of air traffic controllers.
The news sent its shares tumbling 8.4% in midday trade, dragging down the broader NYSE Arca Airline index.
Investors have been jittery about the strength of domestic travel demand, as recent fare data shows ticket prices have peaked. Carriers have been relying on strong demand to offset higher costs.
On an earnings call, JetBlue said its revenue was facing a difficult year-on-year comparison. The company said while passenger volumes remain “very strong”, fares are moving back towards their pre-pandemic levels.
Like leisure carrier Alaska Air (NYSE:ALK), JetBlue said soaring demand for long-haul international trips has led to a drop in domestic travel.
While JetBlue expects the trend to improve in the fourth quarter, around the winter holidays, it is still estimated to hurt the company’s full-year earnings.
JetBlue now expects full-year adjusted profit of 5 cents to 40 cents per share, compared with its previous forecast of 70 cents to $1 per share. It warned of an adjusted loss of as much as 20 cents a share in the third quarter.
The company also forecast a hit from the unwinding of its three-year-old alliance with American Airlines, which allowed the two carriers to coordinate flights and pool revenue.
Profit for the second quarter came in at 45 cents per share, compared with analysts’ average estimate of 44 cents per share, according to Refinitiv data.
JetBlue said it is looking to redeploy capacity to high-margin leisure destinations. It has already made some adjustments to its capacity in Boston and plans to cut some flights out of New York.
Separately, the company is facing issues with RTX’s Pratt & Whitney engines that power Airbus’ popular A320neo jets. JetBlue said it has a handful of engines that will have to come off-wing by mid-September.
As a result, it expects the number of its aircraft on the ground to double this year. Chief Financial Officer Ursula Hurley said the company was still working with both Airbus and Pratt & Whitney to assess the impact on its aircraft deliveries next year.
