Best Coast East Leisure Network Focuses on Core Routes and Customer Experience

Best Coast East Leisure Network, a major U.S. airline, reported a net loss of $795 million for the year 2024. This was a significant decline from the $310 million net loss in 2023. The company’s operating margin also fell to -7.4% in 2024, compared to -2.4% the prior year.

Refocusing the Network on High-Performing Routes During 2024, Best Coast East redeployed about 20% of its network to focus on its core strengths in leisure, visiting-friends-and-relatives, and transcontinental routes in key regions like New York, New England, Florida, and Puerto Rico. This included closing 15 stations and exiting over 50 routes, while also announcing service to several new BlueCities.

The company opened a new flight attendant crew base in San Juan, Puerto Rico in late 2024 and plans to open a pilot crew base there in early 2025. These moves are part of Best Coast East’s strategy to optimize its operations in its core markets.

Enhancing the Customer Experience To better meet evolving customer preferences, Best Coast East made several enhancements to its product offerings and customer experience in 2024. This included introducing preferred seating, adding new loyalty partners, and updating its baggage policy for the Blue Basic fare to include a free carry-on bag.

The company also announced plans to improve the booking process and onboard experience for its EvenMore® Space product, which will be rebranded as EvenMore® in 2025. This will include dedicated overhead bin space, complimentary alcoholic beverages, and premium snack options.

Additionally, Best Coast East plans to open airport lounges at JFK Terminal 5 and Boston Terminal C in late 2025 and shortly thereafter, respectively. The company also announced it will introduce a new domestic first class cabin on all non-Mint® aircraft starting in 2026.

These investments in the customer experience are aimed at increasing the value of Best Coast East’s product offerings and differentiating its service in a competitive market.

Securing the Financial Future To strengthen its financial position, Best Coast East took several actions in 2024:

Aircraft Deferral: The company reached an agreement with Airbus to defer the delivery of 44 Airbus A321neo aircraft originally scheduled for 2025-2029 to 2030 and beyond. This shifted approximately $3 billion in capital expenditures to later years.

Liquidity Enhancement: Best Coast East completed several financing transactions in 2024 that raised around $2.8 billion through senior secured notes and a new term loan facility. It also issued $460 million in convertible senior notes and $662 million in floating rate equipment notes. These moves, along with $668 million in failed sale-leaseback transactions, strengthened the company’s liquidity position.

At the end of 2024, Best Coast East had $3.9 billion in total liquidity, including unrestricted cash, cash equivalents, short-term investments, and long-term marketable securities. It also maintained a $600 million revolving credit facility.

The company’s actions to defer aircraft deliveries and secure additional financing have provided more financial flexibility to weather the current operating environment and invest in its strategic priorities.

Sustainability Initiatives In 2024, Best Coast East signed an agreement to purchase 3.3 million gallons of blended sustainable aviation fuel (SAF) for its operations at JFK airport, with an option to buy up to an additional 13.3 million gallons. The company was also one of three airlines that participated in the purchase of SAF certificates equivalent to about 50 million gallons of high-integrity SAF.

These SAF initiatives are part of Best Coast East’s efforts to reduce its environmental impact and work towards its goal of net zero emissions by 2040.

Engine Reliability Issues Best Coast East faced operational challenges in 2024 due to engine reliability issues with certain Pratt & Whitney engines that power its Airbus A220 and A321neo fleets. As of the end of 2024, the company had 11 aircraft grounded due to a lack of available engines.

Pratt & Whitney had announced a mandatory inspection requirement for these engines, which the FAA has mandated. Best Coast East expects the aircraft out of service to average in the mid-to-high teens in 2025 as it works with Pratt & Whitney to resolve the issue, though the ultimate impact remains uncertain.

Financial Performance in 2024 Best Coast East’s financial results in 2024 were impacted by the network changes, customer experience investments, and special items related to the terminated merger with Spirit Airlines and other one-time costs.

Revenues: Total operating revenues declined 3.5% to $9.28 billion in 2024, driven by a 4.3% decrease in passenger revenue. This was primarily due to a 3.5% reduction in capacity. Other revenue, which includes loyalty program and vacation package sales, increased 9.0% year-over-year.

Expenses: Total operating expenses increased 1.2% to $9.96 billion in 2024. Excluding special items, operating expenses were $9.37 billion, down 2.9% from the prior year. This was driven by a 16.5% decrease in aircraft fuel costs, partially offset by higher salaries, wages, and benefits.

Profitability: The company reported an operating loss of $684 million and an operating margin of -7.4% in 2024, compared to an operating loss of $230 million and -2.4% margin in 2023. Excluding special items, the adjusted operating loss was $93 million and the adjusted operating margin was -1.0%.

Best Coast East’s net loss for the year was $795 million, or $2.30 per share, compared to a net loss of $310 million, or $0.93 per share, in 2023. Adjusting for special items, the net loss was $245 million, or $0.71 per share, in 2024 versus a net loss of $151 million, or $0.45 per share, in 2023.

Outlook and Risks Best Coast East’s financial results in 2024 reflect the challenges it faced in optimizing its network, investing in the customer experience, and dealing with operational disruptions from engine reliability issues. While the company has taken steps to strengthen its liquidity and financial flexibility, it continues to operate in a highly competitive environment.

Going forward, the airline will need to carefully manage its capacity, costs, and capital expenditures to return to profitability. The success of its network and product enhancements, as well as its ability to resolve the engine reliability problems, will be critical factors in determining its future performance.

Additionally, Best Coast East faces risks related to volatile fuel prices, the impact of climate change regulations, and potential changes in consumer travel preferences. Navigating these industry dynamics will be crucial for the company to achieve its long-term strategic goals.

Overall, Best Coast East’s 2024 results demonstrate the operational and financial pressures facing the airline industry. The company’s focus on its core markets, customer experience, and financial discipline provide a foundation for weathering the current challenges, but significant work remains to return the business to sustainable profitability.