Well I've finally had a chance to read the 10Q and review the balance sheet on Edgar.com. I would agree that $2.4 million in available working capital is not much, and is a drop from $11 million at the end of the 1st quarter.
However, I did some additional research to try and learn how JBLU's numbers compare to the industry at large. First of all, I went ahead used a common financial analyst method for measuring liquidity (aka working capital). The measurement is known as a "current ratio" (or quick ratio). It is calculated by taking current assets and dividing it over current liabilities. In the case of JBLU, it's current ratio (CR) for the Q2 reporting period is 1.01. I also went ahead and calculated the CR's for a respresentative cross-section of the industry, based on their latest SEC filings. The details are highlighted as follows:
1. JBLU: 1.01
2. ATAH: 1.09
3. AAI: 1.11
4. LUV: 1.55
5. CAL: .88
6. AMR: .59
7. DAL: .55
Based on these ratios, and using an arbitrary selection of the industry's biggest, smallest, best, and worse performing airlines, I came up with an industry average CR of .96. The average CR for the LCC's listed above came out to 1.19, and which I believe is a better indicator to measure JBLU's performance in this area. I also did a look-back over the last four quarters, and calculated an average CR of 1.03 for JBLU. AAI, in comparison, had an average CR of .95 for same time period. Based on the data here, it is easy to say that JBLU is a lagging performer among the LCC's listed here, but this doesn't tell the whole story.
For example, ATAH (which has a slightly higher CR than JBLU) just announced that it will be unable to meet its current liability obligations in 2004, and is now attempting to renegotiate with its creditors to keep operating outside of bankruptcy protection. DAL has also declared the same problem by attempting to solicit its creditors with alternative repayment options, all in an effort to extend the repayment schedule due dates.
Meanwhile, JBLU came out earlier this month to tender a convertible debt issue, and a secondary stock offering to generate more cash. As noted here, the money increased JBLU's cash on hand to almost $600 million, and will be earmarked for future debt obligations and working captital needs. While all three airlines have minimal working capital reserves, only JBLU had the werewithal to exercise its financing cash flow instruments to bring in more cash. However, both ATAH & DAL were unable to do the same, and are now forced to approach their creditors with hat in hand asking for special consideration.
The difference between JBLU and ATAH/DAL is that JBLU has a much better credit rating, growing tangible assets, and a strong position in the equity markets. Add to that the very low cost of capital and JBLU is able to deftly manage its short-term financing obligations, while still continuing its planned growth strategy. DAL & ATAH are now both at risk of bankruptcy, and the inability to respond to competitive challenges in like-kind over the longer term. For example ATAH, with an aging fleet of L1011's, wants to replace them with newer B767's, but now the airline must put such fleet replacement plans on hold until their debt managment crisis is solved...a decidedly competitive disadvantage.
IMO, JBLU's working capital reserves could be much better, but they could much worse too. It appears that for now it's a very managable concern for their management team. My guess is that their working capital reserves will be increased at the end of this quarter.
