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JetBlue posts 1st quarterly loss, shares dive

Posted on: Wednesday, 1 February 2006, 13:05 CST

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.

Source: REUTERS

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