JetBlue Posts $22 million Q1 Loss

[StraaightTaalk]

JetBlue loss narrows, but lower margins ahead

Padraic Cassidy, MarketWatch
Last Update: 11:05 AM ET Apr 24, 2007


NEW YORK (MarketWatch) -- JetBlue Airways Corp. on Tuesday posted a narrower loss for the first three months of the year in a quarter when severe weather was widely expected to batter the low cost-carrier's balance sheet.

11:58am 04/24/2007

(JetBlue's) loss was cut to $22 million from $32 million, or to 12 cents a share from 18 cents a share. Analysts polled by Thomson Financial forecast a loss, on average, of 19 cents a share.

The New York-based carrier's revenue climbed 24% to $608 million from $490 million. Analysts, on average, were expecting $607.7 million.

"We are disappointed with our first quarter results, which were significantly impacted by two ice storms in the Northeast area," said David Neeleman, JetBlue's chairman and chief executive. But, he added, "We learned a great deal following the events and consequently, we're better able to recover from irregular operations."

JetBlue's load factor, or the percentage of seats filled with paying passengers, fell 3.6 points to 80.6% as capacity increased 12.1%.

JetBlue's yield per passenger mile, or its pricing number, rose 13.4% year-over-year in the quarter.

The shares fell 3% in early trade as investors focused on JetBlue's forecast for lower operating margins ahead.

JetBlue forecast a pretax margin for the second quarter of 3% to 5%, with unit costs rising 6% to 8%.

For the full year, JetBlue predicted a pretax operating margin of 1% to 3%, as unit costs rise 7% to 9%. Its 2007 capacity is expected to increase between 11% and 13%.

"Fuel and demand appear to be the culprits," wrote J.P. Morgan analysts in a research note. "Needless to say, any downward revision to JetBlue's demand confidence is worrisome, in our view, following less-than-robust domestic demand commentary from American Airlines, Continental Airlines Inc. and Southwest Airlines Co."
Airline shares fell uniformly early Friday, led lower by JetBlue. See full story.

Padraic Cassidy is a reporter for MarketWatch in New York.

 

[FWAAA]

A pre-tax loss of $45 million. Ouch.

With the first quarter load factor down to 80.1%, it may be time for B6 to re-evaluate the misguided decision to never overbook. Overbooking (for those who understand it) really is beneficial for both airlines and passengers.

Operating expenses continue to spiral out of control. As an example, Revenue was up an impressive 24%, but then so were Salaries/Wages/Benefits. What?!?

A fast growing airline like B6 should be growing revenue twice as fast as wages, as the new-hires come aboard very cheaply (at the bottom of the pay scale). On top of that, higher revenues shouldn't require any additional overhead employees - for the most part, they should require only additional pilots, FAs, etc.

Another troubling item is Interest Expense - up 39%. Uggh. Must be a lot of variable rate debt. Great. Now that interest rates are trending higher.

To put the interest expense item in perspective: At jetBlue, gross interest expense was 8.6% of revenue.

At AMR, an airline widely seen as "troubled" and "debt-laden," gross interest expense was a mere 4.4% of revenue. Just slightly more than half as much interest per dollar of revenue.

Comparing net interest expense (offsetting interest income and cap int) paints a similarly gloomy picture: at B6, net interest expense was 5.3% of revenue yet at AMR, net interest expense was 3% of revenue.

Tell me again, which airline has debt trouble? B)

The first quarter was ugly and reveals some huge flaws. If B6 can put the operational failures (and especially the failure to immediately respond to its failures) behind it, and continue to increase unit revenue at an impressive pace, perhaps everything will be rosy. I'm not convinced that's how the story ends; others' mileage may vary.

 

[whlinder]

How many of the A320s have been reconfigured to 150 seats?

 

[FWAAA]

How many of the A320s have been reconfigured to 150 seats?

The press release says that all of them were completed as of late February.

 

[whlinder]

Wow, and their LF was still down to 80%? And they increased yield 13% and still lost money? Yikes.

With their operational problems, I don't think running at 80% is all that bad (don't want it too high or else they won't be able to recover from irrops), but obviously they are going to continue to have to push their yield up if they want to make money. I just wonder how all that "low-fare" marketing will affect B6 as they try to raise prices.

 

[StraaightTaalk]

Wow, and their LF was still down to 80%? And they increased yield 13% and still lost money? Yikes.

With their operational problems, I don't think running at 80% is all that bad (don't want it too high or else they won't be able to recover from irrops), but obviously they are going to continue to have to push their yield up if they want to make money. I just wonder how all that "low-fare" marketing will affect B6 as they try to raise prices.

Definitely a troublesome trend for B6.

 

[justaumechanic]

25 million of that loss is E=190 related..

Get it? JetBlue would have made money had it not been for that piece of crap flying in the system..

What were Dave and Dave thinking? Better to take the weight penelty of the A319 or the A318 vs the nightmare that is the E190..

Junk.. The old saying is true.. You get what you pay for.