JetBlue posts 1st quarterly loss, shares dive

By Paritosh Bansal

NEW YORK (Reuters) – JetBlue Airways Corp. on Wednesday
posted a wider-than-expected quarterly loss as high fuel costs
and competition squeezed earnings, and said it would also lose
money in 2006, sending its shares down more than 13 percent.

The loss was JetBlue’s first since going public in 2002.
Analysts said they were more concerned that the carrier had
forecast losses for the first quarter and the full year.

Helane Becker, an analyst at the Benchmark Company, said
she expected shares of the airline, once a Wall Street
favorite, to be under pressure this year.

“It is the guidance for continued loss, which is obviously
very bearish for the stock,” she said.

JetBlue, 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 items, the airline lost 19 cents a share,
compared with Wall Street expectations for 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 low-cost carriers
– affect profits, even pushing some companies, such as Delta
Air Lines Inc. and Northwest Airlines Corp., into bankruptcy.

But Becker said JetBlue’s outlook was specific to the
carrier and did not reflect a trend for other low-cost
carriers, including Southwest Airlines.

“I don’t think it’s a (low-cost carrier) problem,” Becker
said. “At Southwest, we are expecting their earnings growth to
actually accelerate this year.”

She said that JetBlue was not hedged well enough on fuel
and expected to buy more planes this year, which would add to
its cost burden.

NOT ENOUGH REVENUE

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 JetBlue officials said in a conference call that
revenue still did not increase enough to offset the rise in
fuel prices, and added that the company would have to look at
other avenues, including increasing ticket prices.

The carrier said its aircraft fuel expense increased 89.5
percent to about $152 million, as average fuel costs surged
50.3 percent to $1.87 per gallon in the quarter.

“It would be nice to have hedges like Southwest … but
frankly we don’t,” Chief Executive David Neeleman said on the
call. “We need to get another $10 or so per ticket” to return
to profits.

FULL-YEAR DISAPPOINTMENT

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 costs $1.92 per gallon.

For 2006, it forecast an operating margin of 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 by 27 percent to 29 percent
in the first quarter, compared with last year.

JetBlue stock was down $1.80, or 13.8 percent, to $11.24 in
midday trading on Nasdaq, making it the worst performer in the
sector and taking the shares to their lowest level since March
2003.

A one-time outperformer among U.S. airlines, JetBlue stock
has come back down to earth. So far this year, its shares are
down 26.8 percent, compared with a 7 percent drop in the
sectoral Amex Airlines index.

In the most recent quarter, JetBlue took charges totaling
$13 million. They include a $6.1 million charge for the
development of a maintenance and inventory tracking system and
a $6.9 million charge related to stock-based compensation.