Jetblue Posts 1st Quarterly Loss

February 1, 2006

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JetBlue Airways on Wednesday posted a wider-than-expected quarterly loss as high fuel costs and competition squeezed earnings, and said it would also lose money in 2006.

JetBlue reported a fourth-quarter net loss of USD$42.4 million compared with a net profit of USD$1.5 million a year earlier. The loss was JetBlue's first since going public in 2002.

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

Helane Becker, an analyst at the Benchmark Company, said JetBlue's outlook was specific to the carrier and did not reflect a trend for other low-cost carriers, including Southwest Airlines.

"I don't think it's a (low-cost carrier) problem," Becker said. "At Southwest, we are expecting their earnings growth to actually accelerate this year."

New York-based JetBlue said operating revenue rose 34 percent to USD$446 million as the airline added new routes to Boston and other destinations.

But JetBlue officials said that revenue still did not increase enough to offset the rise in fuel prices, and added that the company would have to look at other avenues, including increasing ticket prices.

The carrier said its aircraft fuel expense increased 89.5 percent to about USD$152 million, as average fuel costs surged 50.3 percent to USD$1.87 per gallon in the quarter.

"It would be nice to have hedges like Southwest... but frankly we don't," Chief Executive David Neeleman said. "We need to get another USD$10 or so per ticket" to return to profits.

The airline expects to report a negative operating margin of between 3 percent and 5 percent in the first quarter, assuming fuel costs USD$1.92 per gallon.

For 2006, it forecast an operating margin of between 2 percent and 4 percent, based on an assumed aircraft fuel cost of USD$1.98 per gallon, net of hedges.

It expects to increase capacity by 27 percent to 29 percent in the first quarter, compared with last year.

In the most recent quarter, JetBlue took charges totaling USD$13 million. They include a USD$6.1 million charge for the development of a maintenance and inventory tracking system and a USD$6.9 million charge related to stock-based compensation.