JBLU » Topics » Outlook

This excerpt taken from the JBLU 10-Q filed Jul 25, 2008.
Outlook
 
The U.S. domestic airline industry continues to be severely impacted by soaring fuel prices. Our average price per gallon of fuel in the second quarter of 2008 increased by nearly 60% over the same period in 2007. Domestic airlines have responded to the unprecedented rise in fuel prices by reducing their planned domestic capacity in 2008 and beyond, raising fees and/or furloughing employees. Although the fares charged by domestic airlines have increased on a year over year basis, these increases have not been sufficient to offset the record increases in fuel costs and, as a result, the industry as a whole is facing record losses in 2008. Several U.S. airlines have either filed for bankruptcy protection thus far in 2008 or have ceased operations all together. In April 2008, Delta Air Lines and Northwest Airlines entered into a definitive agreement to merge, subject to approvals. In July 2008, Southwest Airlines and Westjet Airlines announced plans for a code-share partnership, a significant development for domestic low cost carriers. There continue to be reports of potential further consolidation, alliances and liquidation in the industry. We are unable to predict what the effect would be of further industry bankruptcies, liquidations or consolidation on JetBlue or the domestic airline industry as a whole.
 
During the second quarter of 2008, we continued to moderate our growth plans and focus on liquidity preservation. In May, we deferred the delivery of 21 Airbus A320 aircraft that had been scheduled for delivery between 2009 and 2011 to between 2014 and 2015. In July, we deferred the delivery of 10 EMBRAER 190 aircraft that had been scheduled for delivery between 2009 and 2011 to 2016. These deferrals have reduced our near term capital funding requirements and reduced our near term debt burden. We also successfully accessed the capital markets by completing a new $201 million convertible debt financing in June, the net proceeds of which were used to repay substantially all of our $175 million principal amount of 3.5% convertible debt issued in 2003. In July, we executed a $110 million line of credit, secured by a portion of our auction rate securities, which provides us with additional liquidity, if needed. We also completed four previously announced A320 aircraft sales, which generated $133 million in proceeds, or $47 million after repayment of the related debt. We have commitments for the sale of five additional A320 aircraft throughout the remainder of 2008 and one in 2009. We may further slow our growth through additional aircraft sales, leasing aircraft, grounding aircraft, returns of leased aircraft and/or deferral of aircraft deliveries.
 
We have also continued our focus on new and innovative ways to increase our revenues which serve to enhance the JetBlue Experience and not compromise it. During the second quarter of 2008, customers were able to experience our new Even More Legroom offering, which consists of 38 inches of seat pitch in selected rows, for a modest fee on selected flights. The customer feedback from this product offering has been very positive. In addition, similar to others in the industry, we began charging a fee for customer’s second checked bag and have also increased our reservation change fees. During the quarter, we also launched a Spanish website, which we believe is very helpful to many of our customers, and have improved the pay per view movie offerings available onboard all of our aircraft.
 
Our focus on cost control and cash preservation has helped us to take advantage of market opportunities. For example, we have increased our presence in the Caribbean by redeploying aircraft into Puerto Rico and the Dominican Republic, which we expect will further strengthen our financial position as these markets have historically tended to generate higher revenue than mainland flights of a comparable distance. We also have one of the youngest and most fuel efficient fleets in the industry, with an average age per aircraft of three years, which we believe gives us a competitive advantage, especially in the current fuel environment.
 
We expect our full-year operating capacity to increase approximately 0% to 2% over 2007 with the net addition of three Airbus A320 aircraft and seven EMBRAER 190 aircraft to our operating fleet. We expect that the EMBRAER 190 aircraft will represent approximately 13% of our total 2008 operating capacity. Assuming fuel prices of $3.27 per gallon, net of effective hedges, our cost per available seat mile for 2008 is expected to increase 25% to 27% over 2007. We expect our full year operating margin to be between negative 1% and 1% and our pre-tax margin to be between negative 5% and negative 3%.


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Table of Contents

This excerpt taken from the JBLU 10-Q filed Apr 25, 2005.

Outlook

 

We expect our full-year operating capacity for 2005 to increase by approximately 26% to 28% over 2004.  While the industry revenue environment remains extremely competitive, our passenger revenue per available seat mile is expected to be slightly higher in 2005 than it was in 2004. Fuel costs have risen sharply in 2005 and may increase further. Assuming fuel cost per gallon of $1.42, net of hedging, our cost per available seat mile is expected to increase by 8% to 10% over 2004 and our operating margin is expected to be between 5% and 7% for 2005.  Our 2005 forecast excludes the effects of any additional stock compensation expense that we would incur from the implementation of SFAS No. 123(R), Share-Based Payment, which has been delayed until January 1, 2006.  We continue to assess our implementation options and evaluate the impact this pronouncement will have on us.

 

EXCERPTS ON THIS PAGE:

10-Q
Jul 25, 2008
10-Q
Apr 25, 2005
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