JetBlue Airways will open its first airport lounges next year in New York and Boston in a bid to compete with larger airlines for premium travelers.
The airline said Thursday that it will open an 8,000-square-foot lounge at John F. Kennedy International Airport in New York late next year, followed shortly by an 11,000-square-foot one at Boston Logan International Airport.
JetBlue said the lounges will primarily be for top-level members of its TrueBlue frequent-flyer program and those who get a new, premium JetBlue-branded credit card that is not yet available. The airline will also sell day passes if space is available.
Jayne O’Brien, head of marketing and customer support for the New York-based airline, said the lounges are part of building stronger service for premium leisure travelers on the East Coast.
“The lounges are something we have been looking at for a while, and now is the right time to put in these extra benefits for our most valuable customers,” O’Brien said in an interview.
JetBlue declined to say how much it will cost to build and operate the lounges, which are a staple at key airports for American, Delta and United.
Delta and United have reported that revenue from premium passengers is growing faster than other segments.
O’Brien said JetBlue will consider whether to open lounges at other airports after it sees results from JFK and Boston.
Former President Donald Trump and Vice President Kamala Harris face off in the ABC presidential debate on Sept. 10, 2024.
Getty Images
With the U.S. election less than a month away, the country and its corporations are staring down two drastically different options.
For airlines, banks, electric vehicle makers, health-care companies, media firms, restaurants and tech giants, the outcome of the presidential contest could result in stark differences in the rules they’ll face, the mergers they’ll be allowed to pursue, and the taxes they’ll pay.
During his last time in power, former President Donald Trump slashed the corporate tax rate, imposed tariffs on Chinese goods, and sought to cut regulation and red tape and discourage immigration, ideas he’s expected to push again if he wins a second term.
In contrast, Vice President Kamala Harris has endorsed hiking the tax rate on corporations to 28% from the 21% rate enacted under Trump, a move that would require congressional approval. Most business executives expect Harris to broadly continue President Joe Biden‘s policies, including his war on so-called junk fees across industries.
Personnel is policy, as the saying goes, so the ramifications of the presidential race won’t become clear until the winner begins appointments for as many as a dozen key bodies, including the Treasury, Justice Department, Federal Trade Commission, and Consumer Financial Protection Bureau.
CNBC examined the stakes of the 2024 presidential election for some of corporate America’s biggest sectors. Here’s what a Harris or Trump administration could mean for business:
The result of the presidential election could affect everything from what airlines owe consumers for flight disruptions to how much it costs to build an aircraft in the United States.
The Biden Department of Transportation, led by Secretary Pete Buttigieg, has taken a hard line on filling what it considers to be holes in air traveler protections. It has established or proposed new rules on issues including refunds for cancellations, family seating and service fee disclosures, a measure airlines have challenged in court.
“Who’s in that DOT seat matters,” said Jonathan Kletzel, who heads the travel, transportation and logistics practice at PwC.
The current Democratic administration has also fought industry consolidation, winning two antitrust lawsuits that blocked a partnership between American Airlines and JetBlue Airways in the Northeast and JetBlue’s now-scuttled plan to buy budget carrier Spirit Airlines.
The previous Trump administration didn’t pursue those types of consumer protections. Industry members say that under Trump, they would expect a more favorable environment for mergers, though four airlines already control more than three-quarters of the U.S. market.
On the aerospace side, Boeing and the hundreds of suppliers that support it are seeking stability more than anything else.
Trump has said on the campaign trail that he supports additional tariffs of 10% or 20% and higher duties on goods from China. That could drive up the cost of producing aircraft and other components for aerospace companies, just as a labor and skills shortage after the pandemic drives up expenses.
Tariffs could also challenge the industry, if they spark retaliatory taxes or trade barriers to China and other countries, which are major buyers of aircraft from Boeing, a top U.S. exporter.
Big banks such as JPMorgan Chase faced an onslaught of new rules this year as Biden appointees pursued the most significant slate of regulations since the aftermath of the 2008 financial crisis.
Those efforts threaten tens of billions of dollars in industry revenue by slashing fees that banks impose on credit cards and overdrafts and radically revising the capital and risk framework they operate in. The fate of all of those measures is at risk if Trump is elected.
Trump is expected to nominate appointees for key financial regulators, including the CFPB, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation that could result in a weakening or killing off completely of the myriad rules in play.
“The Biden administration’s regulatory agenda across sectors has been very ambitious, especially in finance, and large swaths of it stand to be rolled back by Trump appointees if he wins,” said Tobin Marcus, head of U.S. policy at Wolfe Research.
Bank CEOs and consultants say it would be a relief if aspects of the Biden era — an aggressive CFPB, regulators who discouraged most mergers and elongated times for deal approvals — were dialed back.
“It certainly helps if the president is Republican, and the odds tilt more favorably for the industry if it’s a Republican sweep” in Congress, said the CEO of a bank with nearly $100 billion in assets who declined to be identified speaking about regulators.
Still, some observers point out that Trump 2.0 might not be as friendly to the industry as his first time in office.
Trump’s vice presidential pick, Sen. JD Vance, of Ohio, has often criticized Wall Street banks, and Trump last month began pushing an idea to cap credit card interest rates at 10%, a move that if enacted would have seismic implications for the industry.
Bankers also say that Harris won’t necessarily cater to traditional Democratic Party ideas that have made life tougher for banks. Unless Democrats seize both chambers of Congress as well as the presidency, it may be difficult to get agency heads approved if they’re considered partisan picks, experts note.
“I would not write off the vice president as someone who’s automatically going to go more progressive,” said Lindsey Johnson, head of the Consumer Bankers Association, a trade group for big U.S. retail banks.
Electric vehicles have become a polarizing issue between Democrats and Republicans, especially in swing states such as Michigan that rely on the auto industry. There could be major changes in regulations and incentives for EVs if Trump regains power, a fact that’s placed the industry in a temporary limbo.
“Depending on the election in the U.S., we may have mandates; we may not,” Volkswagen Group of America CEO Pablo Di Si said Sept. 24 during an Automotive News conference. “Am I going to make any decisions on future investments right now? Obviously not. We’re waiting to see.”
Republicans, led by Trump, have largely condemned EVs, claiming they are being forced upon consumers and that they will ruin the U.S. automotive industry. Trump has vowed to roll back or eliminate many vehicle emissions standards under the Environmental Protection Agency and incentives to promote production and adoption of the vehicles.
If elected, he’s also expected to renew a battle with California and other states who set their own vehicle emissions standards.
“In a Republican win … We see higher variance and more potential for change,” UBS analyst Joseph Spak said in a Sept. 18 investor note.
In contrast, Democrats, including Harris, have historically supported EVs and incentives such as those under the Biden administration’s signature Inflation Reduction Act.
Harris hasn’t been as vocal a supporter of EVs lately amid slower-than-expected consumer adoption of the vehicles and consumer pushback. She has said she does not support an EV mandate such as the Zero-Emission Vehicles Act of 2019, which she cosponsored during her time as a senator, that would have required automakers to sell only electrified vehicles by 2040. Still, auto industry executives and officials expect a Harris presidency would be largely a continuation, though not a copy, of the past four years of Biden’s EV policy.
They expect some potential leniency on federal fuel economy regulations but minimal changes to the billions of dollars in incentives under the IRA.
Both Harris and Trump have called for sweeping changes to the costly, complicated and entrenched U.S. health-care system of doctors, insurers, drug manufacturers and middlemen, which costs the nation more than $4 trillion a year.
Despite spending more on health care than any other wealthy country, the U.S. has the lowest life expectancy at birth, the highest rate of people with multiple chronic diseases and the highest maternal and infant death rates, according to the Commonwealth Fund, an independent research group.
Meanwhile, roughly half of American adults say it is difficult to afford health-care costs, which can drive some into debt or lead them to put off necessary care, according to a May poll conducted by health policy research organization KFF.
Both Harris and Trump have taken aim at the pharmaceutical industry and proposed efforts to lower prescription drug prices in the U.S., which are nearly three times higher than those seen in other countries.
But many of Trump’s efforts to lower costs have been temporary or not immediately effective, health policy experts said. Meanwhile, Harris, if elected, can build on existing efforts of the Biden administration to deliver savings to more patients, they said.
Harris specifically plans to expand certain provisions of the IRA, part of which aims to lower health-care costs for seniors enrolled in Medicare. Harris cast the tie-breaking Senate vote to pass the law in 2022.
Her campaign says she plans to extend two provisions to all Americans, not just seniors: a $2,000 annual cap on out-of-pocket drug spending and a $35 limit on monthly insulin costs.
Harris also intends to accelerate and expand a provision allowing Medicare to directly negotiate drug prices with manufacturers for the first time. Drugmakers fiercely oppose those price talks, with some challenging the effort’s constitutionality in court.
Trump hasn’t publicly indicated what he intends to do about IRA provisions.
Some of Trump’s prior efforts to lower drug prices “didn’t really come into fruition” during his presidency, according to Dr. Mariana Socal, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.
For example, he planned to use executive action to have Medicare pay no more than the lowest price that select other developed countries pay for drugs, a proposal that was blocked by court action and later rescinded.
Trump also led multiple efforts to repeal the Affordable Care Act, including its expansion of Medicaid to low-income adults. In a campaign video in April, Trump said he was not running on terminating the ACA and would rather make it “much, much better and far less money,” though he has provided no specific plans.
He reiterated his belief that the ACA was “lousy health care” during his Sept. 10 debate with Harris. But when asked he did not offer a replacement proposal, saying only that he has “concepts of a plan.”
Top of mind for media executives is mergers and the path, or lack thereof, to push them through.
The media industry’s state of turmoil — shrinking audiences for traditional pay TV, the slowdown in advertising, and the rise of streaming and challenges in making it profitable — means its companies are often mentioned in discussions of acquisitions and consolidation.
While a merger between Paramount Global and Skydance Media is set to move forward, with plans to close in the first half of 2025, many in media have said the Biden administration has broadly chilled deal-making.
“We just need an opportunity for deregulation, so companies can consolidate and do what we need to do even better,” Warner Bros. Discovery CEO David Zaslav said in July at Allen & Co.’s annual Sun Valley conference.
Media mogul John Malone recently told MoffettNathanson analysts that some deals are a nonstarter with this current Justice Department, including mergers between companies in the telecommunications and cable broadband space.
Still, it’s unclear how the regulatory environment could or would change depending on which party is in office. Disney was allowed to acquire Fox Corp.’s assets when Trump was in office, but his administration sued to block AT&T’s merger with Time Warner. Meanwhile, under Biden’s presidency, a federal judge blocked the sale of Simon & Schuster to Penguin Random House, but Amazon’s acquisition of MGM was approved.
“My sense is, regardless of the election outcome, we are likely to remain in a similar tighter regulatory environment when looking at media industry dealmaking,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.
When major media, and even tech, assets change hands, it could also mean increased scrutiny on those in control and whether it creates bias on the platforms.
“Overall, the government and FCC have always been most concerned with having a diversity of voices,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investment. “But then [Elon Musk’s purchase of Twitter] happened, and it’s clearly showing you can skew a platform to not just what the business needs, but to maybe your personal approach and whims,” he said.
Since Musk acquired the social media platform in 2022, changing its name to X, he has implemented sweeping changes including cutting staff and giving “amnesty” to previously suspended accounts, including Trump’s, which had been suspended following the Jan. 6, 2021, Capitol insurrection. Musk has also faced widespread criticism from civil rights groups for the amplification of bigotry on the platform.
Musk has publicly endorsed Trump, and was recently on the campaign trail with the former president. “As you can see, I’m not just MAGA, I’m Dark MAGA,” Musk said at a recent event. The billionaire has raised funds for Republican causes, and Trump has suggested Musk could eventually play a role in his administration if the Republican candidate were to be reelected.
During his first term, Trump took a particularly hard stance against journalists, and pursued investigations into leaks from his administration to news organizations. Under Biden, the White House has been notably more amenable to journalists.
Also top of mind for media executives — and government officials — is TikTok.
Lawmakers have argued that TikTok’s Chinese ownership could be a national security risk.
Earlier this year, Biden signed legislation that gives Chinese parent ByteDance until January to find a new owner for the platform or face a U.S. ban. TikTok has said the bill, the Protecting Americans From Foreign Adversary Controlled Applications Act, which passed with bipartisan support, violates the First Amendment. The platform has sued the government to stop a potential ban.
While Trump was in office, he attempted to ban TikTok through an executive order, but the effort failed. However, he has more recently switched to supporting the platform, arguing that without it there’s less competition against Meta’s Facebook and other social media.
Both Trump and Harris have endorsed plans to end taxes on restaurant workers’ tips, although how they would do so is likely to differ.
The food service and restaurant industry is the nation’s second-largest private-sector employer, with 15.5 million jobs, according to the National Restaurant Association. Roughly 2.2 million of those employees are tipped servers and bartenders, who could end up with more money in their pockets if their tips are no longer taxed.
Trump’s campaign hasn’t given much detail on how his administration would eliminate taxes on tips, but tax experts have warned that it could turn into a loophole for high earners. Claims from the Trump campaign that the Republican candidate is pro-labor have clashed with his record of appointing leaders to the National Labor Relations Board who have rolled back worker protections.
Meanwhile, Harris has said she’d only exempt workers who make $75,000 or less from paying income tax on their tips, but the money would still be subject to taxes toward Social Security and Medicare, the Washington Post previously reported.
In keeping with the campaign’s more labor-friendly approach, Harris is also pledging to eliminate the tip credit: In 37 states, employers only have to pay tipped workers the minimum wage as long as that hourly wage and tips add up to the area’s pay floor. Since 1991, the federal pay floor for tipped wages has been stuck at $2.13.
“In the short term, if [restaurants] have to pay higher wages to their waiters, they’re going to have to raise menu prices, which is going to lower demand,” said Michael Lynn, a tipping expert and Cornell University professor.
Whichever candidate comes out ahead in November will have to grapple with the rapidly evolving artificial intelligence sector.
Generative AI is the biggest story in tech since the launch of OpenAI’s ChatGPT in late 2022. It presents a conundrum for regulators, because it allows consumers to easily create text and images from simple queries, creating privacy and safety concerns.
Harris has said she and Biden “reject the false choice that suggests we can either protect the public or advance innovation.” Last year, the White House issued an executive order that led to the formation of the Commerce Department’s U.S. AI Safety Institute, which is evaluating AI models from OpenAI and Anthropic.
Trump has committed to repealing the executive order.
A second Trump administration might also attempt to challenge a Securities and Exchange Commission rule that requires companies to disclose cybersecurity incidents. The White House said in January that more transparency “will incentivize corporate executives to invest in cybersecurity and cyber risk management.”
Trump’s running mate, Vance, co-sponsored a bill designed to end the rule. Andrew Garbarino, the House Republican who introduced an identical bill, has said the SEC rule increases cybersecurity risk and overlaps with existing law on incident reporting.
Also at stake in the election is the fate of dealmaking for tech investors and executives.
With Lina Khan helming the FTC, the top tech companies have been largely thwarted from making big acquisitions, though the Justice Department and European regulators have also created hurdles.
Tech transaction volume peaked at $1.5 trillion in 2021, then plummeted to $544 billion last year and $465 billion in 2024 as of September, according to Dealogic.
Many in the tech industry are critical of Khan and want her to be replaced should Harris win in November. Meanwhile, Vance, who worked in venture capital before entering politics, said as recently as February — before he was chosen as Trump’s running mate — that Khan was “doing a pretty good job.”
Khan, whom Biden nominated in 2021, has challenged Amazon and Meta on antitrust grounds and has said the FTC will investigate AI investments at Alphabet, Amazon and Microsoft.
A Spirit commercial airliner prepares to land at San Diego International Airport in San Diego, California, U.S., January 18, 2024.
Mike Blake | Reuters
Spirit Airlines shares tumbled to a record low on Friday after a report that it’s exploring Chapter 11 bankruptcy protection. The carrier faces a deadline this month to renegotiate more than $1 billion in debt.
A bankruptcy filing would mark a dramatic turn for the carrier with its iconic yellow planes that caters to budget-conscious travelers.
Profitable and punctual before the pandemic, Spirit’s no-frills service became a punchline for late-night comedians and a thorn in the side of big network carriers, enticing customers with double-digit fares and fees for everything else from seat assignments to carry-on luggage.
But big airlines soon successfully copied much of that business model with their lowest bare-bones fares. And a federal judge at the start of the year blocked Spirit’s planned acquisition by JetBlue Airways on antitrust grounds, halting what both carriers argued was a key avenue to compete with larger rivals. The scuttled dealleft Spirit on its own to struggle with a Pratt & Whitney engine recall, shifting consumer travel patterns and higher costs.
After the JetBlue deal fell apart, Spirit said in January that it was looking at options to refinance its debt.
Spirit has $1.1 billion in loyalty-program backed debt that is due next September. It has until Oct. 21 to refinance or extend those secured notes.
The carrier has been losing money since 2020 and has reported disappointing results this year, including a nearly $193 million loss in the second quarter. The company has spent much of this year scrambling to cut costs, including furloughing pilots, slashing flights and deferring Airbus jetliner orders.
Spirit reduced its November and December capacity growth plans by about 17%, Barclays airline analyst Brandon Oglenski said earlier this week.
“As we’ve said, Spirit has been implementing a comprehensive plan to help us better compete, strengthen our balance sheet, and return to profitability,” CEO Ted Christie said in a note to staff on Friday. “We remain engaged in productive conversations with our bondholders, and we’re focused on securing the best outcome for the business as quickly as possible.”
A Spirit spokesman declined to comment on a the Wall Street Journal report that the carrier is considering a bankruptcy filing. Spirit adviser Perella Weinberg Partners declined to comment.
Spirit’s stock price dropped more than 24% Friday to a record low of $1.69. Shares are down nearly 90% so far this year.
Shares of Frontier Airlines, which originally planned to merge with fellow budget airline Spirit before JetBlue swooped in in 2022, surged 16% on Friday. Shares of other airlines also rallied.
A pilot performs a walkaround before a United Airlines flight
Leslie Josephs/CNBC
U.S. passenger airlines have added nearly 194,000 jobs since 2021 as companies went on a hiring spree after spending months in a pandemic slump, according to the U.S. Department of Transportation. Now the industry is cooling its hiring.
Airlines are close to their staffing needs but the slowdown is also coming in part because they’re facing a slew of challenges.
Annual pay for a three-year first officer on midsized equipment at U.S. airlines averaged $170,586 in March, up from $135,896 in 2019, according to Kit Darby, an aviation consultant who specializes in pilot pay.
Since 2019, costs at U.S. carriers have climbed by double-digit percentages. Stripping out fuel and net interest expenses, they’ll be up about 20% at American Airlines this year and around 28% higher at both United Airlines and Delta Air Lines from 2019, according to Raymond James airline analyst Savanthi Syth.
It is more pronounced at low-cost airlines. Southwest Airlines‘ costs will likely be up 32%, JetBlue Airways‘ up nearly 35% and Spirit Airlines will see a rise of almost 39% over the same period, estimated Syth, whose data is adjusted for flight length.
Friday’s U.S. jobs report showed air transportation employment in August roughly in line with July’s.
But there have been pullbacks. In the most severe case, Spirit Airlines furloughed 186 pilots this month, their union said Sunday, as the carrier’s losses have grown in the wake of a failed acquisition by JetBlue Airways, a Pratt & Whitneyengine recall and an oversupplied U.S. market. Last year, even before the merger fell apart, it offered staff buyouts.
Other airlines are easing hiring or finding other ways to cut costs.
Frontier Airlines is still hiring pilots but said it will offer voluntary leaves of absence in September and October, when demand generally dips after the summer holidays but before Thanksgiving and winter breaks. A spokeswoman for the carrier said it offers those leaves “periodically” for “when our staffing levels exceed our planned flight schedules.”
Southwest Airlines expects to end the year with 2,000 fewer employees compared with 2023 and earlier this year said it would halt hiring classes for work groups including pilots and flight attendants. CFO Tammy Romo said on an earnings call in July that the company’s headcount would likely be down again in 2025 as attrition levels exceed the Dallas-based carrier’s “controlled hiring levels.”
United Airlines, which paused pilot hiring in May and June, citing late-arriving planes from Boeing, said it plans to add 10,000 people this year, down from 15,000 in each 2022 and 2023. It plans to hire 1,600 pilots, down from more than 2,300 last year.
It’s a departure from the previous years when airlines couldn’t hire employees fast enough. U.S. airlines are usually adding pilots constantly since they are required to retire at age 65 by federal law.
Airlines shed tens of thousands of employees in 2020 to try to stem record losses. Packages of more than $50 billion in taxpayer aid that were passed to get the industry through its worst-ever crisis prohibited layoffs, but many employees took carriers up on their repeated offers of buyouts and voluntary leaves.
Then, travel demand snapped back faster than expected, climbing in earnest in 2022 and leaving airlines without experienced employees like customer service agents. It also led to the worst pilot shortage in recent memory.
In response, companies — especially regional carriers — offered big bonuses to attract pilots.
But times have changed. Even air freight giants were competing for pilots in recent years but demand has waned as FedEx and UPS look to cut costs.
American Airlines CEO Robert Isom said in an investor presentation in March that the carrier added about 2,300 pilots last year and that it expects to hire about 1,300 this year.
“We will be hiring for the foreseeable future at levels like that,” he said at the time.
Despite the lower targets, students continue to fill classrooms and cockpits to train and build up hours to become pilots, said Ken Byrnes, chairman of the flight department at Embry-Riddle Aeronautical University.
“Demand for travel is still there,” he said. “I don’t see a long-term slowdown.”
A Spirit Airlines aircraft undergoes operations in preparation for departure at the Austin-Bergstrom International Airport on February 12, 2024 in Austin, Texas.
Brandon Bell | Getty Images
Spirit Airlines said on Friday it will get a monthly credit from International Aero Engines through the end of 2024 as compensation for Spirit being unable to use aircraft with engine issues.
The carrier said in a filing with the U.S. Securities and Exchange Commission the agreement would boost liquidity by between $150 million and $200 million. The engine maker is an affiliate of RTX Corp’s Pratt & Whitney.
The impact to Spirit’s liquidity will be determined by the number of days in 2024 in which Spirit aircraft are unavailable due to engine issues, according to the filing.
Under the agreement, Spirit agreed to release IAE and its affiliates from claims related to the impacted engines that have accrued or may accrue prior to Dec. 31, 2024.
Spirit intends to discuss arrangements with Pratt & Whitney for any Spirit aircraft that remain unavailable after the end of the year, the company said in the filing.
Spirit removed engines from service and grounded some of its A320neo aircraft for inspection after Pratt & Whitney notified it of a rare condition in the powdered metal used to manufacture certain engine parts in July last year that would require removal, replacement or further inspection.
Rising operating costs and persistent supply chain problems have the ultra low-cost carrier grappling with liquidity issues and struggling to return to sustainable profitability. That has raised concerns about the company’s ability to repay debt due to mature next year.
Spirit’s survival was jeopardized after regulators scrapped a $3.8 billion merger agreement with JetBlue Airways that would have created the fifth-largest carrier in the U.S. The deal could have ensured Spirit’s survival as the carrier burns through cash and struggles with debt.
As consumers watch their wallets, companies have felt pressure from investors to do the same. Executives have sought to show shareholders that they’re adjusting to consumer demand as it returns to typical patterns or even softens, as well as aggressively countering higher expenses.
Airlines, automakers, media companies and package giant UPS are all digesting new labor contracts that gave raises to tens of thousands of workers and drove costs higher.
Companies in years past could get away with passing on higher costs to customers who were willing to splurge on everything from new appliances to beach vacations. But businesses’ pricing power has waned, so executives are looking for other ways to manage the budget â or squeeze out more profits, said Gregory Daco, chief economist for EY.
“You are in an environment where cost fatigue is very much part of the equation for consumers and business leaders,” Daco said. “The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labor, even interest rates.”
There are some exceptions to the recent cost-cutting wave: Walmart, for example, said last month that it would build or convert more than 150 stores over the next five years, along with a more than $9 billion investment to modernize many of its current stores.
And some companies, such as banks, already made deep cuts. Five of the largest banks, including Wells Fargo and Goldman Sachs, together eliminated more than 20,000 jobs in 2023. Now, they’re awaiting interest rate cuts by the Federal Reserve that would free up cash for pent-up mergers and acquisitions.
But cost reductions unveiled in even just the first few weeks of the year amount to tens of thousands of jobs and billions of dollars. In January, U.S. companies announced 82,307 job cuts, more than double the number in December, while still down 20% from a year ago, according to Challenger, Gray and Christmas.
And the tightening of months prior is already showing up in financial reports.
So far this earnings season, results have indicated that companies have focused on driving profits higher without the tailwind of big price increases and sales growth.
As of mid-February, more than three-quarters of the S&P 500 had reported fourth-quarter results, with far more earnings beats than revenue beats. The quarter’s earnings, measured by a composite of S&P 500 companies, are on pace to rise nearly 10%. Revenues, however, are up a more modest 3.4%.
And the layoffs haven’t been contained to tech. UPS said it was axing 12,000 jobs, saving the company $1 billion, CEO Carol Tome said late last month, citing softer demand. Many of the largest retail, media and entertainment companies have also announced workforce reductions, in addition to other cuts.
Warner Bros. Discovery has slashed content spending and headcount as part of $4 billion in total cost savings from the merger of Discovery and WarnerMedia. Disney initially promised $5.5 billion in cost reductions in 2023, fueled by 7,000 layoffs. The company has since increased its savings promise to $7.5 billion, and executives suggested in its Feb. 7 quarterly earnings report that it may exceed that target.
JetBlue Airways, which hasn’t posted an annual profit since before the pandemic, is deferring about $2.5 billion in capital expenditures on new Airbus planes to the end of the decade, culling unprofitable routes and redeploying aircraft in addition to the worker buyouts.
Some cuts are even making their way to the front of the cabin. United Airlines, which also posted a profit in 2023, at the start of this year said it would serve first-class meals only on flights more than 900 miles, up from 800 miles previously. “On flights that are 301 to 900 miles, United First customers can expect an offering from the premium snack basket,” according to an internal post.
Several of the country’s largest automakers, such as General Motors and Ford Motor, have lowered spending by billions of dollars through reduced or delayed investments on all-electric vehicles. The U.S.-based companies as well as others, such as Netherlands-based Stellantis, have recently reduced headcount and payroll through voluntary buyouts or layoffs.
Even Chipotle, which reported more foot traffic and sales at its restaurants in the most recently reported quarter, is chasing higher productivity by testing an avocado-scooping robot called the Autocado that shortens the time it takes to make guacamole. It’s also testing another robot that can put together burrito bowls and salads. The robots, if expanded to other stores, could help cut costs by minimizing food waste or reducing the number of workers needed for those tasks.
Industry experts have chalked up some recent cuts to companies catching their breath â and taking a hard look at how they operate â after an unusual four-year stretch caused by the pandemic and its fallout.
EY’s Daco said the past few years have been marked by a mismatch in supply and demand when it comes to goods, services and even workers.
Customers went on shopping sprees, fueled by government stimulus and less experience-related spending. Airlines saw demand disappear and then skyrocket. Companies furloughed workers in the early pandemic and then struggled to fill jobs.
He said he expects companies this year to “search for an equilibrium.”
“You’re seeing a rebalancing happening in the labor markets, in the capital markets,” he said. “And that rebalancing is still going to play out and gradually lead to a more sustainable environment of lower inflation and lower interest rates, and perhaps a little bit slower growth.”
The auto industry, for example, faced a supply issue during much of the Covid pandemic but is now facing a potential demand problem. Inventories of new vehicles are rising â surpassing 2.5 million units and 71 days’ supply toward the end of 2023, up 57% year over year, according to Cox Automotive â forcing automakers to extend more discounts in an effort to move cars and trucks off dealer lots.
Automakers have also been contending with slower-than-expected adoption of EVs.
David Silverman, a retail analyst at Fitch Ratings, said companies are “feeling a bit heavy as sales growth moderates and maybe even declines.”
Cost cuts at UPS, Hasbro and Levi all followed sales declines in the most recent fiscal quarter. Macy’s, which reports earnings later this month, has said it expects same-store sales to drop, and there’s early evidence that may come to bear: Consumers pulled back on spending in January, with retail sales falling 0.8%, more than economists expected, according to the latest federal data.
Most major retailers, including Walmart, Target and Home Depot, will report earnings in the coming weeks.
Credit ratings agency Fitch said it doesn’t expect the U.S. economy to tip into recession, but it does anticipate a continued pullback in discretionary spending.
“Part of companies’ decision to lower their expense structure is in line with their views that 2024 may not be a fantastic year from a top-line-growth standpoint,” Silverman said.
Plus, he added, companies have had to find cash to fund investments in newer technology such as infrastructure that supports e-commerce, a resilient supply chain or investments in artificial intelligence.
Companies may have another reason to cut costs now, too. As they see other companies shrinking the size of their workforces or budgets, there’s safety in numbers.
Or as Silverman noted, “layoffs beget layoffs.”
“As companies have started to announce them it becomes normalized,” he said. “There’s less of a stigma.”
Even with rolling layoffs, the labor market remains strong, which may help explain why Wall Street has by and large rewarded those companies that have found areas to save and returned profits to shareholders.
Shares of Meta, for example, almost tripled in price in 2023 in that “year of efficiency,” making the stock the second-best gainer in the S&P 500, behind only Nvidia. After laying off more than 20,000 workers in 2023, Meta on Feb. 2 announced its first-ever dividend and said it expanded its share buyback authorization by $50 billion.
UPS, fresh from job cuts, said it would raise its quarterly dividend by a penny.
Overall, dividends paid by companies in the S&P 500 rose 5.05% last year, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, and he estimated they will likely increase nearly 5.3% this year.
â CNBC’s Michael Wayland, Alex Sherman, Robert Hum, Amelia Lucas and Jonathan Vanian contributed to this story.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
A JetBlue Airways plane prepares to take off from the Fort Lauderdale-Hollywood International Airport on January 31, 2024 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images
Carl Icahn won his push for seats on JetBlue Airways’ board of directors, according to a statement from the airline Friday, days after disclosing a nearly 10% stake in the New York-based airline and that he was in talks for board representation there.
The two new directors are Jesse Lynn, general counsel of Icahn Enterprises, and Steven Miller, a portfolio manager of Icahn Capital.
Shares of JetBlue were up about 4% in after-hours trading following the announcement.
The JetBlue investment isn’t Icahn’s first investment in the airline industry. In one of his more infamous activist campaigns, the corporate raider took TWAÂ private in the late 1980s, and the airline struggled and filed for bankruptcy.
Icahn said in disclosing his JetBlue stake that he believes the shares are undervalued. JetBlue’s stock is down more than 19% over the last 12 months as of Friday’s close. The NYSE Arca Airline Index, which tracks the broader sector, is up about 7% over the same period.
JetBlue’s new CEO, Joanna Geraghty, took the helm Monday, and the carrier has appointed a pair of airline veterans to get it back on track.
“Building on our distinct brand and unique value proposition, we are focused on delivering value to our shareholders and all of our stakeholders, and we welcome the contributions of our new board members as we move forward with that common goal,” Geraghty said in a statement on Friday.
JetBlue hasn’t posted a profit since before the pandemic and has been cutting costs, trying to become more reliable after a post-Covid travel surge and a blocked merger with budget carrier Spirit Airlines. A federal judge last month ruled against a combination of the two airlines, citing reduced competition.
JetBlue had argued it needed the tie-up to help it compete against the largest American carriers. JetBlue and Spirit are appealing the judge’s ruling.
Carl Icahn at the 6th annual CNBC Institutional Investor Delivering Alpha Conference on September 13, 2016.
Heidi Gutman | CNBC
Activist investor Carl Icahn on Monday reported a nearly 10% stake in JetBlue Airways, saying the airline stock is undervalued. Shares of JetBlue spiked more than 15% in extended trading.
Icahn amassed the stake in a series of purchases in January and February, according to regulatory filings. He has had and plans to continue discussions with the company “regarding the possibility of board representation,” the records said.
JetBlue said in a statement, “We are always open to constructive dialogue with our investors as we continue to execute our plan to enhance value for all of our shareholders and stakeholders.”
Representatives for Icahn were not immediately available to comment.
This is not Icahn’s first investment involving the airline industry. In one of his more infamous activist campaigns, the corporate raider took TWA private in late 1980s, only to see the airline struggle and file for bankruptcy.
JetBlue has been cutting costs and working to improve operations in an effort to return to profitability after a post-Covid travel surge and a blocked merger with budget carrier Spirit Airlines. A federal judge last month ruled against a combination of the two airlines, citing reduced competition.
JetBlue had argued it needed the tie-up to help it compete against the largest American carriers. JetBlue and Spirit are appealing the judge’s ruling.
JetBlue’s new CEO, Joanna Geraghty, took the helm Monday, and the carrier has appointed a pair of airline veterans to get it back on track.
— CNBC’s John Melloy and Leslie Josephs contributed to this report.
This is breaking news. Please check back for updates.
JetBlue Airways Corp. and Spirit Airlines Inc. said late Friday that they have appealed a court ruling that earlier this week blocked their planned merger.
JetBlue JBLU, -1.19%
and Spirit SAVE, +17.19%
announced the appeal in a terse press release that provided no more details, adding only that the process is “consistent with the requirements of the merger agreement.”
Wall Street was split on whether the airlines would be legally obliged to appeal the Tuesday ruling, which sided with the Justice Department in saying that a merger between low-cost JetBlue and ultra-low-cost Spirit would hurt competition.
Shares of Spirit rallied 12% after hours Friday, while JetBlue shares fell nearly 2%. Analysts at JP Morgan said this week that the ruling freed JetBlue from a “costly merger.”
The likelihood of Spirit attracting a new merger or takeover bid is considered low without a debt restructuring. Frontier Group Holdings Inc. ULCC, -2.13%
and JetBlue competed for Spirit in 2022, with Frontier ultimately bowing out in July of that year.
Raymond James analyst Savanthi Syth said in a note earlier Friday that it was “clear to us that Spirit is pressing JetBlue to appeal the antitrust ruling, but we continue to believe the chances of success are low.”
Syth has estimated that an appeal would take some four to five months.
Shares of Spirit have lost 67% in the past 12 months, while shares of JetBlue are down 41%. The U.S. Global Jets ETF JETS
has lost 9% in the same period. Those losses contrast with gains of 24% for the S&P 500 index SPX.
LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.
Leslie Josephs | CNBC
A federal judge Tuesday blocked JetBlue Airways‘ purchase of Spirit Airlines after the Justice Department sued to stop the merger, saying the deal would drive up fares for price-sensitive consumers by taking the discount carrier out of the market.
JetBlue’s proposed $3.8 billion purchase of discounter Spirit would have produced the country’s fifth-largest airline, a deal the carriers had said would help them better grow and compete against larger rivals like Delta and United.
“JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” U.S. District Court Judge William Young wrote in his decision. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”
The decision, handed down Tuesday, marks a victory for a Justice Department that has aggressively sought to block deals it views as anti-competitive.
“Today’s ruling is a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward,” Attorney General Merrick Garland said in a statement. “The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers.”
The DOJ alleged in its lawsuit, filed in March, that JetBlue’s acquisition of the budget airline would force many passengers to pay higher fares by eliminating Spirit and “about half of all ultra-low-cost airline seats in the industry.”
Spirit has grown rapidly in recent years by offering cheap fares and fees for everything else from seat assignments to carry-on luggage, a no-frills model that has become a favorite punchline for late-night comedians.
“Spirit is a small airline. But there are those who love it,” Young, who was appointed by former President Ronald Reagan, wrote in his ruling. “To those dedicated customers of Spirit, this one’s for you.”
Spirit shares plunged after the ruling and ended the day down 47%, while JetBlue’s stock gained about 5%.
Spirit’s market capitalization as of Friday’s close was $1.66 billion, less than half of JetBlue’s proposed purchase price. The Miramar, Florida-based airline has been struggling with grounded airplanes due to an engine manufacturing issue and softer-than-expected travel demand.
Spirit Airlines and JetBlue Airways stock after a federal judge blocked the carrier’s proposed merger.
JetBlue and Spirit said in a joint statement that they disagreed with the ruling and were evaluating next steps.
“We continue to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers,” the carriers said.
JetBlue and Spirit said Tuesday that “JetBlue’s termination of the Northeast Alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised.”
JetBlue fought hard for Spirit. It launched a hostile takeover bid weeks after Frontier Airlines and Spirit agreed to merge in a cash-and-stock deal. Frontier’s business model is more similar to Spirit’s, and both airlines have similar fleet configurations, unlike JetBlue’s more full-service model which stands in contrast to Spirit’s discount strategy.
After Spirit’s board rejected JetBlue’s initial takeover offer, Spirit CEO Ted Christie said in May 2022 that he didn’t think a JetBlue deal would be approved by regulators, citing the American Airlines partnership and JetBlue’s plan to take seats out of the market.
“It will not happen in our opinion and for that reason our board has rejected it and to imply otherwise again, we think is insulting,” he said on CNBC’s “Squawk Box” at the time.
Spirit shareholders ended up rejecting the Frontier deal and months later approving a sweetened JetBlue proposal in October 2022.
Young’s decision leaves New York-based JetBlue grappling with next steps, tasking incoming CEO Joanna Geraghty with steering the airline on a new path. Geraghty was announced as successor to CEO Robin Hayes after he said earlier this month that he would retire.
JetBlue argued access to Spirit’s similar fleet of Airbus planes would allow it to grow quickly when planes and pilots are in short supply, growth it said it needs to compete against bigger airlines. The carrier operates in highly congested airspace in New York and other cities, and had planned to use Spirit as a way to gain access to more routes and travelers.
Years of previous consolidation left United, Delta, American and Southwest in control of about three-quarters of the domestic market.
JetBlue planned to remodel Spirit’s yellow planes by removing the branding and seats from the tightly packed jets to provide more of a full-service model.
“Although Spirit’s yellow aircraft livery would not immediately be repainted as JetBlue planes, at the moment the merger is consummated, Spirit and JetBlue would no longer be competitors,” Young wrote in his decision.
JetBlue Airways Corp.’s stock fell 7% in premarket trades on Tuesday after the carrier warned it would post a wider-than-expected fourth-quarter loss, while it missed analyst estimates for its third-quarter loss and revenue.
“While we have been able to offset some of the costs associated with the challenging operational backdrop, the sheer magnitude of the air traffic control and weather-related delays has been staggering,” the carrier said.
JetBlue JBLU, +1.69%
said it lost $153 million, or 46 cents a share in the third quarter. In the year-ago quarter, JetBlue reported net income of $57 million, or 18 cents a share.
Adjusted loss in the latest quarter was 39 cents a share, wider than the FactSet consensus estimate for a loss of 25 cents a share.
JetBlue’s revenue fell 8% to $2.35 billion, below the analyst estimate of $2.38 billion.
For the fourth quarter, JetBlue expects to report an adjusted loss of 55 cents to 35 cents a share against an analyst estimate of a loss of 15 cents a share.
Delta Air Lines Boeing 717-200 airplane as seen on the final approach landing at New York JFK John F. Kennedy International Airport, NYC, USA.
NurPhoto / Contributor
Delta Air Lines CEO Ed Bastian said the airline will make “modifications” in the next few weeks to its loyalty program after a recently announced overhaul that would make it more expensive for many travelers to earn elite status and get into airport lounges was met with a backlash from customers.
“No question we probably went too far,” Bastian said at the Rotary Club of Atlanta on Monday.
The program changes, which Delta unveiled earlier this month, would reward customers with elite status based on how much they spent, a model similar to that of American Airlines, and reduce access to Delta popular airport Sky Club lounges for many American Express cardholders.
JetBlue Airways tried to capitalize on some customers’ anger over Delta’s changes by offering frequent flyer status matching, saying, “we’ve made it easy for you to cozy up to a new loyalty program and see where it goes.”
Delta has been grappling with a surge in elite travelers, bolstered by Covid pandemic and post-pandemic spending, and swarms of travelers trying to get into its lounges, leading to long lines for many customers. The airline and rivals including American and United have been racing to build bigger airport lounges to cater to swelling numbers of big spenders.
Bastian said the airline will announce the updated program changes in the coming weeks. A Delta spokesman declined to comment further on the changes.
“It’s gotten to the point, honestly, where we have so much demand for our premium product and services that are far in excess of our ability to serve it effectively in terms of our assets,” Bastian said.
He said that over Covid, the airline has doubled the number of Diamond Medallion status members.
David Neeleman, CEO of Breeze Airways and founder of JetBlue, told CNBC on Wednesday that he has Delta Medallion status and that he tries to use Delta’s airport lounges but that sometimes “there’s a big line and it’s not worth it.”
Delta last year announced several changes to crack down on overcrowding at the clubs, such as barring employees from using them when flying standby with company travel privileges, even if they had qualifying credit cards. The Atlanta-based carrier also raised prices for club memberships for regular customers.
Ticketmaster parent Live Nation Entertainment Inc. LYV, -7.84%
is expected to become the focus of an antitrust suit from the U.S. Department of Justice by the end of the year, according to a report late Friday. Citing three unidentified sources close to the matter, Politico reported Friday that the DoJ intends to claim Live Nation is abusing its power in the live music industry. A request for comment from the DoJ was not returned as of publication time. A new case would add to the embattled company’s many policy and legal battles, which, if successful, could lead to a breakup of the company, Politico had reported previously. Earlier in the month, JetBlue Airways Corp. JBLU, +1.95%
said it was unwinding a joint venture with American Airlines Group Inc. AAL, +1.33%
after a court ruling in May siding with the DoJ.
Planes are seen on the tarmac as people wait for their flight reschedule inside of the Newark International Airport on June 27, 2023 in Newark, New Jersey.
Kena Betancur | Getty Images News | Getty Images
United Airlines‘ CEO Scott Kirby said that without more gates the airline will have to reduce or change schedules to handle frequent gridlock at its Newark, New Jersey, hub, a message that came after mass flight delays marred July Fourth holiday weekend travel. The carrier gave 30,000 frequent flyer miles to customers who were most affected by the chaos.
“This has been one of the most operationally challenging weeks I’ve experienced in my entire career,” Kirby said in a note to staff on Saturday.
He said that the airline needs more gates at Newark Liberty International Airport because of frequent aircraft backups there. “We are going to have to further change/reduce our schedule to give ourselves even more spare gates and buffer — especially during thunderstorm season,” he added. United didn’t provide more detail on the schedule reductions.
A day earlier, Kirby apologized for taking a private jet out of New Jersey’s Teterboro Airport while thousands of passengers were stranded, CNBC first reported Friday.
Problems began with a series of thunderstorms in some of the country’s most congested airspace along the East Coast last weekend, cutting off routes for aircraft. While most airlines recovered, United’s problems continued during the week, angering both customers and crews. United and JetBlue Airways executives said air traffic control problems worsened the disruptions.
Kirby laid out the weeklong troubles and said long-term changes were needed. He said that extensively delayed departures, which piled up at its hub at Newark since last weekend, hurt its operation. Takeoffs were delayed by as much as 75% for longer than 8 hours in some cases from Sunday through Tuesday.
“Airlines, including United, simply aren’t designed to have their largest hub have its capacity severely limited for four straight days and still operate successfully,” he wrote.
Aircraft and crews were then left out of position, something that happens often during severe weather and can spark a cascade of disruptions for customers.
Unions complained about hours-long waits for crew members to get assignments and get hotels, forcing them to stay at airports longer.
Kirby said the carrier must improve the platforms so crews can get assignments and accommodation more easily on its app, saying what happened over the past week isn’t acceptable.
Kirby called for more investment in the FAA and air traffic control to avoid delays and staffing shortages, some of which occurred after hiring and training paused early in the pandemic.
United sent the 30,000 miles to customers who were delayed overnight or didn’t get to their destination at all, a spokeswoman said. She declined to say how many customers received the email.
More than 42,000 U.S. flights arrived late from last Saturday through Friday and more than 7,900 were canceled — or more than 5% of airlines’ schedules — a rate that was more than triple the average so far this year, according to flight-tracker FlightAware. United fared worse than competitors with about half of its mainline schedule arriving late and almost a fifth canceled over that period, FlightAware data show.
United’s operation improved on Saturday but disruptions lingered. About a third of its mainline schedule, or close to 864 flights were delayed and 60 flights, or 2% were canceled, down from 1,327 delays and 252 cancellations on Friday.
Passengers wait at the Newark Liberty International Airport as more than 2000 flights were canceled due to the nationwide storm in New Jersey, United States on June 27, 2023.
Fatih Aktas | Anadolu Agency | Getty Images
Flight disruptions mounted Tuesday as severe storms and staffing issues kicked off a rocky start to summer.
Roughly 3,000 U.S. flights were delayed as of midday Tuesday and another 1,100 were canceled as thunderstorms that derailed thousands of trips over the weekend lingered. That’s on top of more than 8,800 U.S. delays and 2,246 cancellations on Monday.
The disruptions come ahead of the busy Fourth of July travel period, when millions are expected to fly. The Transportation Security Administration said it could screen more travelers than in 2019, before the pandemic, raising competition for spare seats.
The Biden administration has pressured airlines to improve their operations after widespread flight disruptions last spring and summer, which prompted carriers to trim their overambitious schedules. But the industry struggled to recover this past weekend from a series of thunderstorms that didn’t let up for days.
Thunderstorms are difficult for airlines because they can form with less warning than other major weather obstacles like winter storms or hurricanes. Rolling delays could force crews to reach federally mandated workday limits and further worsen disruptions.
Some airline executives have also blamed some of the disruptions on shortages of air traffic controllers.
United Airlines CEO Scott Kirby told staff on Monday that “the FAA frankly failed us this weekend.” He said that during Saturday’s storms the FAA reduced arrival rates by 40% and departures by 75% at Newark Liberty International Airport, one of the airline’s biggest hubs.
“It led to massive delays, cancellations, diversions, as well as crews and aircraft out of position,” Kirby wrote in a staff note, which was seen by CNBC. “And that put everyone behind the eight ball when weather actually did hit on Sunday and was further compounded by FAA staffing shortages Sunday evening.”
An FAA spokesman said in a statement: “We will always collaborate with anyone seriously willing to join us to solve a problem.”
The staffing challenges aren’t new. The Covid-19 pandemic derailed hiring and training of new air traffic controllers, and the agency is now trying to catch up.
The Department of Transportation’s Office of the Inspector General said in a report last week that air traffic control staffing shortfalls puts air traffic operations at risk. In March, the FAA and some airlines agreed to reduce flights to help ease congestion at busy New York airports because of the staffing issues.
But the problems persist at a time when airlines are readying crews and schedules for a busy summer season, fueled by sustained travel demand.
And the disruptions frustrated flight crews who were left waiting on hold for reassignments.
The Association of Flight Attendants-CWA, which represents flight attendants at United and others said in a memo to members on Monday that hold times for crew scheduling were longer than three hours.
“There is an absolute recognition by Union leadership and Inflight management that something must be done in order to permanently address these adverse situations resulting from irregular operations,” the union said.
New York-based JetBlue Airways also faced high levels of flight delays over the past few days and acknowledged it can improve how it handles disruptions in a note to crew members Monday, which was reviewed by CNBC.
Don Uselmann, vice president of inflight experience at JetBlue, said the airline could have updated crew reporting times more efficiently so staff wouldn’t be waiting for flights and reducing wait times for hotel assignments.
“Summer peak is officially underway, and extreme weather events, ATC staffing constraints, and the resulting delays will put all airlines to the test,” he said in his note. “This weekend’s [irregular operation] won’t be our last, but the combination of events put acute pressure on the operation and made it more challenging than most.”
An American Airlines plane takes off near a parked JetBlue plane at the Fort Lauderdale-Hollywood International Airport on July 16, 2020 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images
A federal judge Friday ordered American Airlines and JetBlue Airways to end their partnership in the Northeast, a win for the Justice Department after it sued to undo the alliance arguing it was anti-competitive.
The lawsuit, filed in September 2021, alleged that the airlines’ alliance was effectively a merger that would hurt consumers by driving up fares. The trial began a year later in Boston and wrapped up in December.
Both airlines expressed disappointment with the decision and said they were considering next steps.
“It makes the two airlines partners, each having a substantial interest in the success of their joint and individual efforts, instead of vigorous, arms-length rivals regularly challenging each other in the marketplace of competition,” U.S. District Judge Leo Sorokin said in his ruling.
Fort Worth, Texas-based American Airlines and New York-based JetBlue Airways argued they needed the so-called Northeast Alliance to better compete with other large carriers Delta Air Lines and United Airlines in congested airports in the region.
“Whatever the benefits to American and JetBlue of becoming more powerful — in the northeast generally or in their shared rivalry with Delta — such benefits arise from a naked agreement not to compete with one another,” Sorokin wrote. “Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent.”
He ordered the airlines to end the partnership 30 days after the ruling. The carriers are likely to challenge the decision. A JetBlue spokeswoman said the carrier is studying the decision and evaluating next steps.
“We are disappointed in the decision,” the spokesperson said. “We made it clear at trial that the Northeast Alliance has been a huge win for customers. Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline’s low fares and great service to more routes than would have been possible otherwise.”
“The Court’s legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance,” an American Airlines spokesman said in a statement. “There was no evidence in the record of any consumer harm from the partnership, and there is no legal basis for inferring harm simply from the fact of collaboration.”
Undoing the partnership would be difficult, especially during the peak summer travel season, which airlines have already sold tickets for.
JetBlue and American are not allowed to coordinate fares under the partnership, which was approved in the final days of the Trump administration in 2021 and has since expanded.
JetBlue had previously warned in a securities filing a ruling against the NEA “could have an adverse impact on our business, financial condition, and results of operations.
“Additionally, we are incurring costs associated with implementing operational and marketing elements of the NEA, which would not be recoverable if we were required to unwind all or a portion of the NEA,” the company said.
The Justice Department didn’t immediately respond to a request for comment.
The department separately in March filed an antitrust lawsuit to block JetBlue’s proposed acquisition of budget carrier Spirit Airlines, arguing the deal would drive up fares, “harming cost-conscious fliers most acutely.”
That combination faces a high hurdle for approval by the Biden administration, which has vowed to take a hard line against what it views as anti-competitive deals.
Traders wearing masks arrive before the opening bell at the New York Stock Exchange (NYSE) in Wall Street in New York City.
Johannes Eisele | AFP | Getty Images
Check out the companies making headlines before the bell on Tuesday.
First Republic Bank — The San Francisco-based regional bank plunged after it said Monday that deposits fell by 40% to $104.5 billion during the first quarter, which came out worse than Wall Street’s expectations. First Republic said that its deposit flows have since stabilized. The stock was down nearly 22% in early morning trading and has declined by 86.6% so far this year. On Tuesday, Janney downgraded First Republic to sell from neutral and lowered its price target on the stock to $8 from $10, implying a 50% downside from Monday’s closing price.
related investing news
UPS — UPS shares fell 1.6%after the shipping giant reported quarterly results that missed analyst expectations. The company earned an adjusted $2.20 per share on revenue of $22.93 billion. Analysts expected earnings of $2.21 per share on revenue of $23.01 billion, according to Refinitiv.
3M — The industrial stock added 1.3% before the opening bell. 3M reported $1.97 in earnings per share, higher than analysts expectations of $1.58 from FactSet. The Minnesota-based company announced it would cut about 6,000 positions globally in efforts to focus on high-growth markets such as automotive electrification and home improvement, while prioritizing emerging growth areas such as climate technology and semiconductors.
McDonald’s — Shares advanced less than 1% after the company beat Wall Street expectations for the first quarter. The company reported $2.63 in adjusted earnings per share on $5.9 billion in revenue. Analysts polled by Refinitiv expected $2.33 in per-share earnings and $5.59 billion in revenue. The stock was recently up 9.8%.
General Motors — Shares gained 2.1% after General Motors raised its key guidance for 2023 and reported first-quarter earnings that beat Wall Street’s top- and bottom-line forecasts. The company reported $39.99 billion in revenue, higher than $38.96 billion according to Refinitiv data. Adjusted earnings came in at $2.21 per share, above the consensus estimate of $1.73. General Motors and Samsung SDI are also expected to announce as early as Tuesday that they plan to build a joint battery manufacturing plant in the U.S.
JetBlue — The stock popped more than 2.3% in the premarket after the airline forecasted a “solidly profitable” second quarter due to strong travel demand. For the first quarter, JetBlue posted a 34 cents loss, less than the 39 cents expected, per Refinitiv.
Packaging Corp of America — Shares fell 6.8% after the company reported an adjusted profit per share of $2.20, which came in below a StreetAccount forecast of $2.27 per share. The company’s second-quarter guidance also missed expectations.
Novartis — Shares of the pharmaceutical company added more than 3% after it raised its full-year earnings outlook, saying it expects sales to grow by mid-single digits. Novartis reported earnings per share of $1.71 on $12.95 billion in revenue, topping analysts’ expectations of $1.54 per share on $12.52 billion in revenue.
PepsiCo — Shares of the beverage and snacks giant climbed nearly 1.6% in premarket trading after it posted earnings and revenue that topped Wall Street’s expectations. PepsiCo also raised its outlook on the full year. The company said first-quarter revenue totaled $17.85 billion, surpassing the $17.22 billion consensus estimate of analysts polled by Refinitiv. PepsiCo reported earnings per share of $1.50, topping analysts’ expectations of $1.39.
— CNBC’s un Li, YAlex Harring, Michelle Fox Theobald and Tanaya Macheel contributed reporting.
Airlines stocks fell across the board in premarket trade Wednesday, after the Federal Aviation Administration said a computer outage had led to all U.S. fights being grounded. The agency said on its website that its “Notice to Air Missions” system has been activated “to address the equipment outage issues for the U.S. NOTAM system.” A NOTAM is a notice for workers engaged in flight operations. There was no indication of when service might be restored. Southwest Airlines Co. LUV, +1.68%
led the decliners, falling 2.5%. American Airlines Group Inc. AAL, +3.97%
was down 1.6%, United Airlines Holdings Inc. UAL, +5.54%
was down 0.8%, JetBlue Airways Corp. JBLU, +4.92%
was down 0.7% and Delta Air Lines Inc. DAL, +3.59%
was down 0.7%. The U.S. Global Jets ETF JETS, +2.40%
was down 0.7% and has fallen 14% in the last 12 months, while the S&P 500 SPX, +0.70%
has fallen 17%.
Aircraft are deiced at General Mitchell International Airport in Milwaukee
Reuters
Flight cancellations eased further on Monday but disruptions from severe winter weather across the U.S. lingered, particularly for Southwest Airlines, at the tail end of Christmas weekend.
Airlines have canceled more than 17,000 U.S. flights since Wednesday, according to FlightAware, as storms brought snow, ice, high winds and bitter cold around the country, derailing air travel from coast to coast. Those conditions slowed down ground crews as they faced severe conditions at airports.
Carriers are likely to detail the costs of the disruptions when they report results next month, if not earlier.
Southwest Airlines was hit particularly hard by winter weather over the holiday travel period, along with other issues including unexpected fog in San Diego and staffing shortages at a fuel vendor in Denver, the carrier’s chief operating officer told staff.
Southwest had been canceling many flights proactively in an effort to stabilize its operation, COO Andrew Watterson said. From Wednesday through Saturday, about a quarter of Southwest’s flights were canceled, and two-thirds were delayed, according to FlightAware data.
The airline apologized to employees for the chaos, which left many struggling to get a hold of crew scheduling services, making it harder to get reassignments or make other changes, or get hotel rooms. Southwest also offered flight attendants working over the holiday extra pay.
“Part of what we’re suffering is a lack of tools,” Southwest CEO Bob Jordan said in a message to staff on Sunday. “We’ve talked an awful lot about modernizing the operation, and the need to do that. And Crew Scheduling is one of the places that we need to invest in. We need to be able to produce solutions faster.”
Some pilots were forced to sleep at airports because they were unable to find hotel rooms, said Casey Murray, president of Southwest Airlines Pilots Association, the pilots’ union.
Southwest’s problems continued on Monday while other carriers stabilized. The carrier had canceled more than 2,300 flights, 58% of its schedule, and 820 more were delayed. Delta had canceled 8% of its mainline flights on Monday, United 5% and American less than 1% with 12 flights scrubbed.
More than 3,200 U.S. flights were canceled on Monday, and close to 5,000 were delayed.
Airlines often cancel flights proactively during bad weather to avoid having planes, crews and customers out of place, problems that can make recovery from a storm more difficult.
Carriers also planned smaller schedules for Christmas Eve and Christmas Day compared with the days leading up to the holidays, making it harder for them to rebook travelers on other flights, and bookings had spiked.
Passengers check in at the Delta counter at Detroit Metro Airport in Romulus, Michigan, on December 22, 2022.
Jeff Kowalsky | AFP | Getty Images
An American Airlines spokeswoman said the “vast majority of our customers affected by cancellations were able to be reaccommodated.”
Delta is “seeing steady recovery in our operations, and expect the improvements to continue over the next several hours,” a spokesman said Monday.
Passengers also faced delayed luggage, however.
Bill Weaver, 41, said he, his wife and five children drove from Wichita, Kansas to Dallas Fort Worth International Airport for a Friday flight to Cancun after their connecting flight into the American Airlines hub was canceled. The American Airlines flight to Cancun arrived on time but their luggage didn’t get to in Cancun until Monday, and hadn’t made it to their hotel by mid-morning, so they had to spend hundreds of dollars to buy clothing and other essentials at their hotel.
Weaver, who works in software sales, said he used to travel frequently.
“I’m used to missing bags and things happen but this is by far the worst I’ve ever seen,” he said.
Extreme cold and high winds slowed ground operations at dozens of airports. More than half of U.S.-based airlines’ flights arrived late from Thursday through Saturday, with delays averaging 81 minutes, according to FlightAware.
“Temperatures have fallen so low that our equipment and infrastructure have been impacted, from frozen lav systems and fuel hoses to broken tow bars,” said United Airlines message to pilots on Saturday. “Pilots have encountered frozen locks when trying to re-enter the jet bridge after conducting walk arounds.”
The FAA said it had to evacuate its tower at United hub Newark Liberty International Airport in New Jersey because of a leak on Saturday.
JetBlue, meantime, offered flight attendants triple pay to pick up trips on Christmas Eve due to staffing shortages.
Delta Air Lines’ stock rose 4.7% before market open on Wednesday after the company raised its earnings guidance.
The carrier DAL, -4.00%
said it is executing on its three-year recovery plan, with year-one results ahead of expectations. Delta also highlighted robust demand for air travel as the industry recovers from the widespread disruption caused by the COVID-19 pandemic.
The carrier raised its 2022 adjusted EPS guidance to $3.07 to $3.12. Analysts surveyed by FactSet were looking for earnings of $2.88 a share. For 2023, Delta Air Lines Inc. forecast a near doubling of adjusted earnings to $5 to $6 a share.
Delta also forecast 2023 revenue growth at 15% to 20% compared with 2022 and said it is on track to meet its 2024 earnings target of more than $7 a share.“Demand for air travel remains robust as we exit the year and Delta’s momentum is building,” said Delta CEO Ed Bastian, in a statement.
Delta said it expects to deliver strong topline growth in 2023 and significant operating leverage, boosted by a full restoration of its network and continued improvements in premium and loyalty revenue.
Non-fuel unit costs are expected to decline 5% to 7%, driving Delta’s margin expansion and adjusted earnings growth, the company said. Delta expects to generate more than $2 billion of free cash flow, which it said will enable further debt reduction.
“2022 is proving to be a pivotal year as we rebuild the world’s best-performing airline,” said Bastian, in the statement.
The company’s robust guidance boosted other airline stocks before market open, with United Airlines Holdings Inc. UAL, -6.94%
rising 1.4%, American Airlines Group Inc. AAL, -5.21%
gaining 1.3%, and JetBlue Airways Corp. JBLU, -7.67%
rising 1.3%.
Delta shares have fallen 14.6% this year, compared with the S&P 500 index’s SPX, +0.73%
decline of 15.7% and the U.S Global Jets ETF’s JETS, -2.85%
slump of 14.3%.
