Does JetBlue have too much cash??

The US aviation industry is facing an interesting set of circumstances: For the first time probably ever it is realizing massive profits over consecutive quarters. And arguably it is having trouble coming up with ways to spend that cash. JetBlue is the latest carrier to report record numbers ($1.7bn revenue, $198mm net income in Q3 ’15) and during the earnings call today it announced a number of moves, all of which seem focused on getting that cash back out of the building.

For starters, the company bought out the lease on six A320 jets. The expectation is that this will lower the TCO on the planes, both from an interest and maintenance perspective. And they were coming up for renewal soon anyways. The 6 new aircraft delivered in the second half of 2015 will also be bought in cash rather than financed (2 already done, the other 4 “expected”). And the next 10 deliveries in 2016 are also expected to be paid in cash rather than financed. There are some thoughts on that front related to ROIC and meeting investor/analyst target numbers but the overall gist of things is that the company has the cash and doesn’t appear to have a better way to invest it.

.@JetBlue took 2 new A321 in Q3, 4 more in Q4. Expectation is that all will be paid in cash. Also likely all 10 2016 deliveries paid cash.

— Seth Miller (@WandrMe) October 27, 2015

The company is also paying out $50mm in profit sharing for 2015 in the month of November rather than waiting until 2016 to pay them out. This is based, per the earnings call, on knowing that the bonus is going to be big enough that the company is willing to give out part of it now rather than waiting until it calculates the final numbers to pay it all out.

Is the @JetBlue early profit sharing payment just a tax play? #IdleThoughts

— Seth Miller (@WandrMe) October 27, 2015

But it also moves $50mm off the books which the cynic in me wonders about as a money saving move, just as much as it is nice to pay the employees more sooner. It appears that profit sharing for calendar year 2014 was $25mm so this $50mm payout is double that with more to come in February 2016; the employees are likely to be happy about that, even if it does mean paying more in taxes because the bonus is bigger.

JetBlue is not alone in this challenge. Delta has had record profits for several quarters now (Delta’s Big Profits and Shopping Plans) and is also discussing ways to spend some of that cash on new planes and other product changes. But even with billions of dollars across the industry in share buy-backs and other “investor-friendly” spending it is unclear that the airlines have figured out what to do with all the cash. They’re not bringing back freebies for passengers, though.