JetBlue Airways (NASDAQ:JBLU) shares slid more than 10% Tuesday after CEO Robin Hayes announced that he will resign in February and analysts at Bank of America hit the company with a downgrade.
Hayes will be succeeded by Joanna Geraghty, JetBlue’s president and a 20-year employee of the airline, starting on February 12. Geraghty will become the first woman to be CEO of a major US airline.
Meanwhile, the domestic environment hasn’t gotten any easier for JetBlue amid the legal battle over its attempted acquisition of fellow budget airline Spirit, BofA analysts wrote in a note to clients.
The firm lowered its rating for the company to Underperform and its price target to $3 from $6. JetBlue shares closed Tuesday at $5.17.
“We expect the tough domestic airline industry backdrop we outlined in our Year Ahead report this morning coupled with GTF engine issues that will pressure growth and costs in 2024 to continue to hurt the post-pandemic earnings recovery,” the analysts wrote, referencing a line of potentially defective engines that grounded planes starting in October.
Then there’s the Spirit acquisition, which the Department of Justice is fighting to block.
“We think there is further execution risk as the market awaits the judge's ruling in JBLU's lawsuit with the DoJ with regards to purchasing [Spirit],” analysts wrote.
“If the deal is approved as is, JBLU would pay about $29.70 per share (after pre-payments and ticking fees paid, implying a $3.7 billion equity value and $9.5 billion enterprise value) for an airline that we estimate will generate about $400 million of EBITDAR in 2024 (compared to $927M in 2019).”
“If the deal is not approved, there is likely near-term relief in JBLU's share price, but our Underperform rating is based on a stand-alone JBLU entity with SAVE acquisition and integration risk an incremental negative,” they added.