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Company: JetBlue Airways (JBLU)
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20 votes

  Young Fleet Skews Operating Results

As of 2008, JetBlue's fleet is one of the "youngest" fleets in the airline industry, with its aircraft averaging a mere 3.1 years. Therefore, JBLU's financial performance through 2007 has been skewed since the company's maintenance costs are significantly lower than most other airlines. As its fleet continues to age, however, JBLU's maintenance costs will continue to climb, thus reducing the company's operating margin.

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4 votes

  Lack of Fuel Hedges Poses Risk to Low-Cost Operating Model

JBLU hedges about 30% of its annual fuel needs, about the industry average. However, competitor Southwest hedges up to 70% of its annual fuel needs. As a result, JetBlue paid an average $2.09 per gallon of fuel compared to Southwest's average $1.70 per gallon. Furthermore, JBLU's fuel expenses increased by 24% in 2007 because of higher fuel prices. Lastly, as of the end of 2007, JetBlue had only secured 13% of its 2008 fuel needs in hedging contracts. Therefore, the company expects that its CASM will increase 10%-12% during 2008 because of higher fuel costs.

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