S&P downgrades JetBlue deeper into junk as high fuel costs dent recovery

June 8 (Reuters) - Global ratings agency S&P said on Monday it had downgraded JetBlue Airways (JBLU) to "CCC+" from "B-," pushing the carrier further into junk territory as high jet fuel costs hamper its recovery.

The low-cost carrier has been trying to restore profitability through cost cuts, network changes and efforts to improve operational reliability, but higher fuel prices have complicated its turnaround plans.

Budget and low-cost carriers have been particularly exposed to the fuel-price spike linked to the Iran war, with limited ability to pass on higher costs to consumers without risking demand in a price-sensitive travel market.

"Given the ongoing Middle East conflict and material rise in oil and jet fuel prices, we expect JetBlue's (JBLU) operating performance to be significantly pressured over at least the next 12 months," S&P said.

"A strong demand environment continues to support higher air fares, but we no longer expect positive free cash flow generation until 2028 and project leverage to be about 10x by the end of 2027."

A deeper junk rating could raise JetBlue's (JBLU) borrowing costs and limit its access to capital markets at a time when it may need additional liquidity to finance its operations.

In April, ratings agency Fitch also downgraded the New York-based carrier to "CCC+" from "B-" citing continued operating losses and negative free cash flow.

S&P kept its outlook on JetBlue (JBLU) stable, expecting the airline to maintain enough liquidity to cover projected free cash flow deficits through 2027, with no significant near-term maturities and no default or restructuring anticipated over the next 12 months.

Earlier this year, JetBlue (JBLU) secured a $500 million debt financing commitment backed by up to 22 aircraft, with an option to raise an additional $250 million.

(Reporting by Shivansh Tiwary in Bengaluru; Editing by Leroy Leo)