UPDATE 1-Reuters Summit-JetBlue looking for cost cuts-CFO
Tue Dec 6, 2005 12:54 PM ET
(For other news from the Reuters Aerospace and Defense Summit, click on http://today.reuters.com/summit/SummitInfo.aspx?name=DefenseSummit05&pid=500) (Adds quotes on fuel hedging, Song closure, capacity)
By Christian Plumb
WASHINGTON, Dec 6 (Reuters) - JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) is looking to cut costs as it seeks to recover from its first loss-making year since going public in April 2002, the carrier's chief financial officer said on Tuesday.
At the same time, the No. 3 U.S. airline by market value is looking for new ways to boost revenue as it pushes forward with an aggressive expansion plan, CFO John Owen told the Reuters Aerospace and Defense Summit.
"The order of the day is to continue to focus on costs like we always do and to really heavily focus on trying to raise the average RASM (revenue per available seat mile) on our flights through better revenue management," he said.
On the cost side, the airline has taken steps including selective flight cutbacks on routes which are less profitable at currently high fuel prices and automating some functions.
Still, he acknowledged in an interview with the summit, held in Washington, that there is not a lot of fat to cut at the already lean airline.
"We take cost control around here very seriously," he said. "We're not in a position of the Big Six legacy carriers that are going to say, 'Gee, we're going to strip $3 billion in costs out of our system.'"
JetBlue is also hoping to generate more income from ancillary services like its co-branded credit card with American Express Co. (AXP.N: Quote, Profile, Research) as well as other moves it has not yet disclosed.
The New York-based airline has tried to take advantage of the recent dip in fuel prices from highs seen in October by buying contracts that lock in those prices, he said.
"With the curve having come down, we have done some more hedging," he said, though he declined to quantify the amount.
Owen said JetBlue has been gaining pricing power in some markets, like transcontinental flights, as rivals reduce capacity, but that other routes, such as those connecting the Northeast to Florida, remain very competitive.
The bankruptcy of Washington-based carrier Independence Air has not helped JetBlue much because it had little overlap with the airline's route system, he said.
As for bankrupt Delta Air Lines Inc. (DALRQ.PK: Quote, Profile, Research) , one of its toughest rivals, JetBlue is still trying assess how much it will be helped by the No. 3 U.S. carrier's announcement in October that it will shut down its low cost Song division.
"Their plans for Song are still a quandary for us," he said.
Still, the shuttering of Song, even if it simply means that Delta will be flying smaller planes on those competitive routes linking the Northeast to Florida, is likely to help JetBlue's pricing power, he said.
Over time, JetBlue expects more rivals to reduce capacity if fuel prices remain high. "Either capacity will shrink and average fares will go up ... or fuel prices will go down, but you won't continue to have excess capacity and high fuel prices," he said.
Tue Dec 6, 2005 12:54 PM ET
(For other news from the Reuters Aerospace and Defense Summit, click on http://today.reuters.com/summit/SummitInfo.aspx?name=DefenseSummit05&pid=500) (Adds quotes on fuel hedging, Song closure, capacity)
By Christian Plumb
WASHINGTON, Dec 6 (Reuters) - JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) is looking to cut costs as it seeks to recover from its first loss-making year since going public in April 2002, the carrier's chief financial officer said on Tuesday.
At the same time, the No. 3 U.S. airline by market value is looking for new ways to boost revenue as it pushes forward with an aggressive expansion plan, CFO John Owen told the Reuters Aerospace and Defense Summit.
"The order of the day is to continue to focus on costs like we always do and to really heavily focus on trying to raise the average RASM (revenue per available seat mile) on our flights through better revenue management," he said.
On the cost side, the airline has taken steps including selective flight cutbacks on routes which are less profitable at currently high fuel prices and automating some functions.
Still, he acknowledged in an interview with the summit, held in Washington, that there is not a lot of fat to cut at the already lean airline.
"We take cost control around here very seriously," he said. "We're not in a position of the Big Six legacy carriers that are going to say, 'Gee, we're going to strip $3 billion in costs out of our system.'"
JetBlue is also hoping to generate more income from ancillary services like its co-branded credit card with American Express Co. (AXP.N: Quote, Profile, Research) as well as other moves it has not yet disclosed.
The New York-based airline has tried to take advantage of the recent dip in fuel prices from highs seen in October by buying contracts that lock in those prices, he said.
"With the curve having come down, we have done some more hedging," he said, though he declined to quantify the amount.
Owen said JetBlue has been gaining pricing power in some markets, like transcontinental flights, as rivals reduce capacity, but that other routes, such as those connecting the Northeast to Florida, remain very competitive.
The bankruptcy of Washington-based carrier Independence Air has not helped JetBlue much because it had little overlap with the airline's route system, he said.
As for bankrupt Delta Air Lines Inc. (DALRQ.PK: Quote, Profile, Research) , one of its toughest rivals, JetBlue is still trying assess how much it will be helped by the No. 3 U.S. carrier's announcement in October that it will shut down its low cost Song division.
"Their plans for Song are still a quandary for us," he said.
Still, the shuttering of Song, even if it simply means that Delta will be flying smaller planes on those competitive routes linking the Northeast to Florida, is likely to help JetBlue's pricing power, he said.
Over time, JetBlue expects more rivals to reduce capacity if fuel prices remain high. "Either capacity will shrink and average fares will go up ... or fuel prices will go down, but you won't continue to have excess capacity and high fuel prices," he said.
