JetBlue Hits Pause on Airbus A320 Cabin Upgrades as Neo Deliveries Slide

JetBlue Airways is postponing cabin upgrades to some of its Airbus A320 aircraft as deliveries of new A321neo jets continue to slide.

The New York-based carrier has pushed upgrades to about 10 A320s to 2020 as it works to make up for the loss of more than half of its planned new aircraft deliveries this year, JetBlue CFO Steve Priest said during the company's second-quarter earnings call Tuesday.

JetBlue began the year expecting deliveries of its first 13 A321neos but, due to production delays at the European airframer, will only receive six aircraft in 2019, he said. The issues continue into 2020 with the company forecasting just 14 A321neo arrivals, instead of the scheduled 15 aircraft.

The delivery delays alone would reduce the airline's 2019 capacity growth from an initial target of up 5-7%, year-over-year. However, the company has "managed to tweak the restyling program to manage the capacity challenges in 2019," said Priest.

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By upgrading just 50 A320 cabins instead of 60 this year, JetBlue can grow capacity by 4.5-5.5% in 2019, just a half-a-point reduction from its initial forecast.

Where JetBlue will really feel the impact of the delivery delays is in 2020. The company expects a roughly two-point impact to planned capacity growth next year as a result of the late A321neos, says Priest.

In a report today, Cowen analyst Helane Becker estimates that the carrier will grow by roughly 6% in 2020 including the two-point reduction.

While it is difficult to say where JetBlue will not grow in 2019 due to the delivery delays, the carrier is pulling back capacity in Caribbean markets with weak leisure demand, including Punta Cana (PUJ) in the Dominican Republic where several American tourists have died since the beginning of the year.

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The carrier has cut seats to Punta Cana by 5.2% in the second half of the year compared to the same period in 2018, Diio by Cirium schedule data shows.

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The A321neo delays are just the latest delivery delay for JetBlue. In 2017, the airline converted three neo deliveries scheduled for 2018 to the A321ceo due to production issues, pushing back the introduction of the aircraft to this year.

One thing the delivery delays will not impact is the airline's planned London launch in 2021, JetBlue CEO Robin Hayes said on the same call. The flights will be flown with A321LR aircraft, a variant of the A321neo that can fly up to 4,600 miles.

JetBlue's A320 retrofit program will see its entire fleet of 130 aircraft restyled with a new cabin by the end of 2020. The upgrade raises seat count by 12 to 162 seats, while at the same time adding new seatback monitors and power outlets in every row.

Joanna Geraghty, chief operating officer of JetBlue, said the airline so far has completed upgrades to 28 A320s and remains on track to complete the entire fleet by the end of 2020 – even with the decision to push some 2019 retrofits to next year.

Customer response to the restyled A320 cabins has been positive, she said.