Jetblue reports wider than expected loss

MiAAmi

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JetBlue posts first quarterly loss since IPO
Wed Feb 1, 2006 9:16 AM ET


By Paritosh Bansal


JetBlue posts first quarterly loss since IPO

NEW YORK, Feb 1 (Reuters) - JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) on Wednesday posted its first quarterly loss since its 2002 initial public offering and forecast losses for the coming year, sending its shares down nearly 8 percent in premarket trading.

JetBlue's loss exceeded Wall Street expectations, but analysts said they were more concerned about its forecast for losses in the first quarter and for the full year.

Helane Becker, an analyst at the Benchmark Company, said she expected the airline's shares to be under pressure this year. "It is the guidance for continued loss, which is obviously very bearish for the stock."

The No. 2 U.S. low-cost carrier reported a fourth-quarter net loss of $42.4 million, or 25 cents a share, compared with a net profit of $1.5 million, or 1 cent a share, a year earlier.

Excluding exceptional items, the airline lost 19 cents a share, compared with Wall Street expectations of a loss of 16 cents a share, according to Reuters Estimates.

U.S. airlines have been under pressure as high fuel costs and increasing competition -- including from other low-cost carriers -- squeeze profits all around, even pushing some companies into bankruptcy.

But Becker said JetBlue's loss outlook was specific to the carrier and did not reflect a trend for the low-cost carrier industry overall.

"They have some issues that are specific to them," she said, adding that JetBlue was not hedged enough on fuel and was expected to buy more aircraft this year, adding to its costs.

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

But the discount carrier said its average fuel costs surged 50.3 percent to $1.87 per gallon in the quarter.

Ray Neidl, an analyst at Calyon Securities, said JetBlue's earnings not only fell short of his expectations, but he had also been expecting the carrier to post a profit for 2006. Neidl rates the stock "neutral."

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

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

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

The stock was down 77 cents, or 5.9 percent, at $12.27 on the Inet electronic brokerage system after closing on Tuesday at $13.04 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 15 percent, compared with a 5.5 percent drop in the sectoral Amex Airlines index.
 
The reason many are concerned is the plan to continue to expand in the face of an environment with already too many seats. This also when some of your competitors are finally getting healthier and will be ready to meet B6 with fierce competition.

When your load factor is dropping and you plan to expand by 28-30% over 2005 I think you'll find the stock plunging further.

Cheers,
Z
 
stick to one type of a/c for starters. and stop growing so much. take it easy.
 
JetBlue's diversion from the LCC script is finally starting to cost it, and cost it big.

Ex-fuel CASM was up a whopping 8% for the fourth quarter of 2005, compared to 4Q2004. Very few airlines can sustain that kind of expense explosion.

Not to worry - Soros has plenty of money - probably enough to throw good money after bad.
 
JetBlue's diversion from the LCC script is finally starting to cost it, and cost it big.

Ex-fuel CASM was up a whopping 8% for the fourth quarter of 2005, compared to 4Q2004. Very few airlines can sustain that kind of expense explosion.

Not to worry - Soros has plenty of money - probably enough to throw good money after bad.

You mean the media darling of the industry actually lost money? Welcome to the real world folks. It only gets worse.
 
Didn't People Express post their first loss after their fifth year of continuous profitability and growth? ;)
 
IIRC, PE's red ink started in '85, after only four years of profits.
But I agree that the similarities between PE and jB continue...

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Plus "the NEW plane smell" has gone, with regard to A/C maintainence.

AH, some on this board will remind us, that this $$ "setback", is secondary to B6 "running AA out of Long Beach"

Bet Neeleman starts taking medication VERY SOON !!

NH/BB's
 
In today's Newsday (a Long Island newspaper), there's a big article about JetBlue and Neeleman is quoted as saying that B6 will be raising fares more and that people will be willing to pay more to fly B6. Well, maybe a little more. JetBlue made it's reputation as an airline offering premium service at low prices. If they are seen as a premium airline charging premium prices, then they're in trouble.

What are their options? Lower CASM by flying longer routes? B6 already flies a lot of long routes and with the E190s coming on line, they'll be flying more short routes than before. Reduce wages? B6 already has low wage costs. Increase load factor? It's already way up. Increase aircraft utilization? It's also already very high. There's not much they can do to lower the cost side of the equation so the only thing they can do is raise the revenue side.
 
In today's Newsday (a Long Island newspaper), there's a big article about JetBlue and Neeleman is quoted as saying that B6 will be raising fares more and that people will be willing to pay more to fly B6. Well, maybe a little more. JetBlue made it's reputation as an airline offering premium service at low prices. If they are seen as a premium airline charging premium prices, then they're in trouble.

What are their options? Lower CASM by flying longer routes? B6 already flies a lot of long routes and with the E190s coming on line, they'll be flying more short routes than before. Reduce wages? B6 already has low wage costs. Increase load factor? It's already way up. Increase aircraft utilization? It's also already very high. There's not much they can do to lower the cost side of the equation so the only thing they can do is raise the revenue side.

One thing is that JetBlue can hold off giving anyone their increases in pay rather than reduce wages. They have no choice but to raise fares to offset fuel costs. The problem is that by raising fares, they are more in line with everyone else. This coupled with the bankrupt legacy carriers exiting Chapter 11 with billions less in costs doesn't separate them from the rest of the pack.

Keep in mind that Southwest has been around and continually profitablt for well over 30 years because they maintained a slow growth, one fleet plan. Jetblue wants to take over the industry in just a few years.
 
What are their options? Lower CASM by flying longer routes? B6 already flies a lot of long routes and with the E190s coming on line, they'll be flying more short routes than before. Reduce wages? B6 already has low wage costs. Increase load factor? It's already way up. Increase aircraft utilization? It's also already very high. There's not much they can do to lower the cost side of the equation so the only thing they can do is raise the revenue side.

This is exactly what I've been predicting for 3 years now. Eventually costs will catch up with B6, and with very little room to trim, the only option will be to raise prices. This will bode well for the rest of the industry as they match B6's fares and finally off set the high cost of doing business.

Unfortunately for B6, it levels the playing field a bit and means they no longer have the one thing that set them apart from everyone else... low fares.
 
Unfortunately for B6, it levels the playing field a bit and means they no longer have the one thing that set them apart from everyone else... low fares.


I have to disagree with you here. Compare a coach seat on B6 with a coach seat on any of the majors and you'll still see quite a bit of difference, particularly if you're an occasional (not VFF) traveler.

B6 - all full-sized aircraft, newer planes, leather seats, extra legroom, choice of snacks, and those cute little TVs.

Majors - more and more RJ flights, some planes new - some are older than I am (think NWA), minimal snack offerings (in some cases buy-on-board or pay for soda), no leather, no cute little TVs.

When fares are the same or very close, B6 will win this battle time and time again. Don't be so quick to dismiss them just because they're encountering their first losses. They're still a very formidable competitor with a predictable, quality product that the public can understand.
 
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