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JetBlue Balance Sheet Risks Could Grow as Hormuz Reopening Hopes Dim, Seaport Says in Downgrade

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JetBlue Balance Sheet Risks Could Grow as Hormuz Reopening Hopes Dim, Seaport Says in Downgrade

JetBlue Airways' (JBLU) balance sheet woes could worsen as the Strait of Hormuz appears unlikely to reopen anytime soon, potentially prolonging jet fuel volatility, Seaport Research Partners said Monday.

The 60-day memorandum of understanding between the US and Iran aimed at ending their conflict expired Monday, with no indications that it would be extended. Control of the Strait of Hormuz has proved to be a key sticking point in recent diplomatic efforts to reach a truce. The narrow waterway is the world's most important chokepoint for crude flows.

While jet fuel volatility amid the Hormuz uncertainty affects all airlines, it is particularly more concerning for JetBlue, which is already heavily indebted, according to Seaport senior analyst Daniel McKenzie. The company had total debt of $8.48 billion as of June 30, it reported late last month.

"To be sure, jet fuel volatility is a challenge for all, but it's a disproportionate risk to (JetBlue) given elevated debt levels that are at risk of moving higher before they move lower," McKenzie said in a note to clients Monday. "If oil spikes from increased hostilities with Iran and (JetBlue) is forced to boost debt to fund losses, its balance sheet could become too indebted and shares could ultimately become worthless."

Seaport downgraded its rating on the JetBlue stock to neutral from buy and withdrew its price target, just months after upgrading the stock on the assumption that the Strait of Hormuz would reopen.

"Greater geopolitical risk implies a lower valuation multiple, hence our view investors will likely get a lower entry point," McKenzie said Monday. "(Fourth-quarter) schedules are now firming up and at the industry level, supply appears modestly higher (versus the third quarter). Hence our concern that revenue upside for (JetBlue) -- and others -- could be limited at a time when it may need to boost ticket prices."

JetBlue shares were down 6.2% in afternoon trade. American Airlines Group (AAL) shares were 1.6% lower, while Southwest Airlines (LUV), United Airlines (UAL) and Delta Air Lines (DAL) were also in the red.

US President Donald Trump warned of an attack on Oman if it "gets in the way" of efforts in the Strait of Hormuz, news outlets reported Monday.

"The industry pricing backdrop remains solid, which leads us to conclude (JetBlue) surprises on (2026 second-half) revenue, however, the geopolitical backdrop worsens," McKenzie wrote in the note.

Price: $5.32, Change: $-0.33, Percent Change: -5.84%

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