JetBlue credit rating cut to junk status

JetBlue Airways Corp.'s credit rating was cut further into junk status by Moody's Investors Service, after the low-cost carrier posted losses for all of 2006 and this year's first quarter.

The corporate rating was lowered one step to B3, six levels below investment grade. The change affects about $1.5billion of debt, Manhattan-based Moody's said yesterday in a statement.

The reduction was because of "the continued high level of financial leverage following several years of rapid, largely debt-financed growth of its aircraft fleet, and continued weak financial results at JetBlue during a relatively good operating environment for the airlines," Moody's said.

JetBlue reported a $22-million first-quarter loss last month on storm-related flight disruptions and passenger compensation, following annual losses of $1 million last year and $20 million in 2005. Forest Hills-based JetBlue, founded in 1998 and now the eighth-largest U.S. carrier by traffic, also has cut its 2007 forecast twice, citing weakening U.S. travel demand.

Moody's retained a negative outlook for the airline because of "uncertainty regarding whether JetBlue has taken sufficient actions soon enough to generate sustained profits and preserve liquidity."

JetBlue made a series of personnel changes in the past two months after winter operating problems cost the carrier $41 million. The airline removed founder David Neeleman as chief executive, making him nonexecutive chairman and replacing him with president David Barger.

The company also appointed a new chief operating officer, a new head of the Kennedy Airport hub and a new vice president of flight operations.

Standard & Poor's Ratings Services put most of its ratings on JetBlue's debt on CreditWatch with negative implications on May 10, saying Neeleman's departure may hurt the airline.

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