Majestic Research

Reuters

JetBlue Posts Q1 Loss on High Fuel Costs

Published: April 25, 2006

NEW YORK (Reuters) — JetBlue Airways on Tuesday reported a lower-than-expected quarterly loss and said it would defer deliveries of 12 aircraft and sell possibly up to five in a plan to return to profitability.

The company said that in the face of high fuel costs, it had developed a plan, including capacity adjustments, revenue growth and cost reductions.

The plan includes deferral of 12 aircraft deliveries and selling of at least two, and potentially up to five, existing Airbus A320 aircraft from its current fleet.

Analysts applauded the airline’s move to cut capacity.

“The feeling on the Street was that there was maybe too much capacity coming online over the years,” said Matt Jacob, an analyst at Majestic Research.  “I am encouraged by the management’s plan to slow down capacity growth.”

Helane Becker, an analyst at Benchmark Company, added, “The fact they are cutting capacity is a huge positive for the industry as well as for them.”

JetBlue, the No. 2 U.S. low-cost carrier, reported a loss in the first quarter of $32 million, or 18 cents per share, compared with a net profit of $6 million, or 4 cents a share, in the year-ago period.

Analysts, on average, were expecting the airline to post a loss of 20 cents per share, excluding special items, according to Reuters Estimates.

Fuel costs

U.S. airlines have been under pressure as high fuel costs and increasing competition — including from low-cost carriers—affect profits, even pushing some companies, such as Delta Air Lines and Northwest Airlines, into bankruptcy.

Carriers have been able to raise ticket prices as demand continues to be strong and airlines cut back on capacity.  Nonetheless revenue increases have not been able to counter the effect of high fuel prices.

“We are disappointed to report our second consecutive quarterly loss,” Chief Executive David Neeleman said in a statement.  In the last quarter, the company reported its first loss since its initial public offering in 2002.

First-quarter operating revenue increased 31.4% to $490 million.

The carrier said realized fuel price during the quarter surged 42.5% to $1.86 per gallon in the quarter.

Looking ahead, the company said it expects to report an operating margin between 4% and 6% for the second quarter, assuming fuel cost per gallon of $2.10.

It expects to report net income in the second quarter and a net loss for the full year 2006.

JetBlue’s shares were up 37 cents to $9.77 during premarket trading on Inet after closing at $9.40 on Nasdaq.

A one-time outperformer among U.S. airlines, JetBlue stock has come back down to earth.  So far this year, its shares are down more than 38%, compared with a roughly 7% drop in the sectoral Amex Airlines index.