Ace757
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JetBlue Posts 12.5% Lower Profit But Double-Digit MarginAviation Daily04/23/2004, page 02
JetBlue's first-quarter profit slipped 12.5% to $15.2 million due to high fuel prices and an intense battle on transcontinental routes, but the carrier still managed to report an 11.3% operating margin for its weakest period of the year.
In a conference call with analysts, CEO David Neeleman expressed mixed emotions about the quarter's performance. On the one hand, the airline's double-digit margin was at the high end of management's guidance and costs excluding fuel were lower than expected. On the other, Neeleman expressed concern that transcon routes weighed down profits.
Revenues jumped 33.1% to $289.0 million, keeping the airline on track to easily top $1 billion in revenues for the year, the Dept. of Transportation's benchmark for major airline status. Yields however, fell 6.2% to 8.29 cents on a 7.8% increase in average length of haul. Load factor sank 1.5 percentage points to 79.9% as did unit revenue, which fell 7.9% year-over-year to 6.85 cents. Overall, CFO John Owen said the airline's revenues were almost exactly at the level forecast by management.
Fuel aside, there were some pleasant surprises on the cost side of the income statement. Unit costs fell 2.9% to a rock-bottom 6.08 cents, which Owen attributed to "continuing economies of scale." He said the airline had a longer average stage length and lower-than-expected fuel burn per block hour. The airline also spent less on sales and marketing than expected.
During the quarter, the airline paid $0.92 per gallon, a 6.1% decrease from last year, but the cost was higher than the amount budgeted. The carrier has 44% of its fuel requirements hedged for the second quarter and about 40% hedged for the second half of the year. JetBlue ended the first quarter with $585 million in cash and short-term investments.
Neeleman reported that about 53% of JetBlue's capacity in the quarter was deployed on transcon routes. He described the "meltdown" of the transcon markets, when American and other network carriers launched aggressive pricing and promotions to compete. Each month during the quarter brought improvements, but those routes are expected to remain under pressure.
Neeleman added, however, that he believes JetBlue is more insulated in the transcon battle because it operates to Long Beach, Calif., while much of the capacity is being added to Los Angeles International Airport. Executives said the north-south routes between New York and Florida did extremely well over the winter with high demand. The airline peaked at 53 daily flights between New York Kennedy and Florida, and Neeleman predicted it might offer 65 flights next winter.
Looking ahead, bookings and loads in April are looking "very good," and the carrier is seeing more strength in the West, "improving greatly from the first quarter." May bookings are at or above last year's level. -SL
LOOKS LIKE JETBLUE CAN'T EVEN MAKE MONEY ON TRANS CON FLIGHTS. HMMMM....I WONDER WHY THAT IS.
JetBlue's first-quarter profit slipped 12.5% to $15.2 million due to high fuel prices and an intense battle on transcontinental routes, but the carrier still managed to report an 11.3% operating margin for its weakest period of the year.
In a conference call with analysts, CEO David Neeleman expressed mixed emotions about the quarter's performance. On the one hand, the airline's double-digit margin was at the high end of management's guidance and costs excluding fuel were lower than expected. On the other, Neeleman expressed concern that transcon routes weighed down profits.
Revenues jumped 33.1% to $289.0 million, keeping the airline on track to easily top $1 billion in revenues for the year, the Dept. of Transportation's benchmark for major airline status. Yields however, fell 6.2% to 8.29 cents on a 7.8% increase in average length of haul. Load factor sank 1.5 percentage points to 79.9% as did unit revenue, which fell 7.9% year-over-year to 6.85 cents. Overall, CFO John Owen said the airline's revenues were almost exactly at the level forecast by management.
Fuel aside, there were some pleasant surprises on the cost side of the income statement. Unit costs fell 2.9% to a rock-bottom 6.08 cents, which Owen attributed to "continuing economies of scale." He said the airline had a longer average stage length and lower-than-expected fuel burn per block hour. The airline also spent less on sales and marketing than expected.
During the quarter, the airline paid $0.92 per gallon, a 6.1% decrease from last year, but the cost was higher than the amount budgeted. The carrier has 44% of its fuel requirements hedged for the second quarter and about 40% hedged for the second half of the year. JetBlue ended the first quarter with $585 million in cash and short-term investments.
Neeleman reported that about 53% of JetBlue's capacity in the quarter was deployed on transcon routes. He described the "meltdown" of the transcon markets, when American and other network carriers launched aggressive pricing and promotions to compete. Each month during the quarter brought improvements, but those routes are expected to remain under pressure.
Neeleman added, however, that he believes JetBlue is more insulated in the transcon battle because it operates to Long Beach, Calif., while much of the capacity is being added to Los Angeles International Airport. Executives said the north-south routes between New York and Florida did extremely well over the winter with high demand. The airline peaked at 53 daily flights between New York Kennedy and Florida, and Neeleman predicted it might offer 65 flights next winter.
Looking ahead, bookings and loads in April are looking "very good," and the carrier is seeing more strength in the West, "improving greatly from the first quarter." May bookings are at or above last year's level. -SL
LOOKS LIKE JETBLUE CAN'T EVEN MAKE MONEY ON TRANS CON FLIGHTS. HMMMM....I WONDER WHY THAT IS.
