JetBlue sees loyalty program as potential source of collateral

JetBlue Airways Corp.’s loyalty program could be a source of collateral if the airline were to pursue financing in the debt capital markets, its chief financial officer said on Tuesday, adding that it is looking to address convertible maturities “as quickly as possible.” JetBlue has about $11b of unencumbered assets — those not already pledged as collateral — that could be used for fresh financing, CFO Ursula Hurley said on an earnings call. The company’s loyalty program represents about half of that, she said. Long Island City, New York-based JetBlue has $750m in a convertible note that carries a 0.5% coupon coming due in 2026. Management wants to address it quickly, Hurley said. Debt that matures within 12 months, including some due in 2025, becomes current on the company’s balance sheet. JetBlue had $5.3b of long-term debt as of the end of June, including finance lease obligations, according to regulatory filings. “We’re currently assessing all markets to see the most effective and the most constructive in terms of all-in cost of funding,” Hurley said on the call with analysts. Using a loyalty program as collateral has become a popular tactic for airlines, which are capital intensive but have valuable assets like their mileage programs. When the pandemic sent airlines into a cash crunch, Delta Air Lines Inc. and United Airlines Holdings Inc. were among borrowers that pledged their loyalty programs as collateral.<br/>