UBS analysts started coverage on JetBlue Airways Corporation (NASDAQ:JBLU) with a Sell rating, assigning a price target of $5 on the stock. The analysis highlighted concerns over the airline’s continued pre-tax losses, negative free cash flow (FCF), and high leverage extending into 2025. Despite potential gains from improving domestic revenue per available seat mile (RASM) and easing cost pressures next year, JetBlue faces unique challenges.

Notably, the airline’s significant use of GTF engines is expected to ground 4-5% of its fleet in 2024, with issues lingering into 2025, potentially resulting in an EBIT loss of $120 to $170 million annually. Additionally, JetBlue’s pilot contract is due for renegotiation in the first half of 2025, likely increasing future costs.

The analysts suggest that these risks are not fully reflected in the airline’s current valuation, which seems to anticipate approximately $1,025 million in EBITDAR for 2025, compared to UBS’s estimate of about $935 million.

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