JetBlue Announces Second Quarter 2012 Results

NEW YORK, July 25, 2012 /PRNewswire/ — JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the second quarter 2012:

Operating income for the quarter was $130 million, resulting in a 10.2% operating margin, compared to operating income of $86 million and a 7.5% operating margin in the second quarter of 2011.
Pre-tax income of $86 million in the second quarter. This compares to pre-tax income of $43 million in the second quarter of 2011.
Net income for the second quarter was $52 million, or $0.16 per diluted share. This compares to JetBlue’s second quarter 2011 net income of $25 million, or $0.08 per diluted share.
“Thanks to the hard work of our outstanding crewmembers, we reported our ninth consecutive quarter of profitability and our highest ever second quarter profit,” said Dave Barger, JetBlue’s President and Chief Executive Officer. “Our focused growth strategy in Boston and the Caribbean & Latin America is clearly paying off as we generated record revenues and improved operating margins.”

Operational Performance

JetBlue reported record second quarter operating revenues of $1.3 billion, an increase of 11.0% versus last year. Revenue passenger miles for the second quarter increased 10.5% to 8.50 billion on a capacity increase of 5.5%, resulting in a second quarter load factor of 85.3%, an increase of 3.8 points year over year.

Yield per passenger mile in the second quarter was 13.78 cents, up 1.3% compared to the second quarter of 2011. Passenger revenue per available seat mile (PRASM) for the second quarter 2012 increased 6.1% year over year to 11.76 cents and operating revenue per available seat mile (RASM) increased 5.2% year over year to 12.82 cents.

“Our strong second quarter unit revenue results reflect our continued success in attracting both leisure and higher yielding business traffic while growing our network,” said Robin Hayes, JetBlue’s Chief Commercial Officer. “These results would not have been possible without our focus on delivering excellent customer service to our customers every day.”

Operating expenses for the quarter increased 7.7%, or $82 million, over the prior year period. JetBlue’s operating expense per available seat mile (CASM) for the second quarter increased 2.1% year-over-year to 11.51 cents.

Excluding fuel, CASM increased 5.6% to 6.99 cents, driven primarily by higher maintenance expense due to the aging of JetBlue’s fleet. JetBlue has taken several actions designed to better manage maintenance expense, including the sale and replacement of six older spare engines during the second quarter, which favorably impacts ongoing repair rates. JetBlue also sold two EMBRAER 190 aircraft that it had previously leased to a third party. JetBlue recorded approximately $10 million in gains in other operating expenses during the quarter related to the sales of these assets.

Fuel Expense and Hedging

JetBlue continued to hedge fuel to manage price volatility. Specifically, JetBlue hedged approximately 27% of its fuel consumption during the second quarter, resulting in a realized fuel price of $3.22 per gallon, a 3% decrease over second quarter 2011 realized fuel price of $3.31. JetBlue’s fuel expense reflects $1 million in losses on fuel hedges that settled during the second quarter. In addition, JetBlue recorded $4 million in mark-to-market fuel hedge accounting losses during the quarter, which is included in non-operating income/expenses.

JetBlue has hedged approximately 27% of its third quarter projected fuel requirements and 27% of its fourth quarter projected fuel requirements using a combination of collars, crude call options, and jet fuel swaps. Based on the fuel curve as of July 20th, JetBlue expects an average price per gallon of fuel, including the impact of hedges and fuel taxes, of $3.13 in the third quarter and $3.18 for the full year 2012.

Balance Sheet Update

JetBlue ended the second quarter with approximately $1.2 billion in unrestricted cash and short term investments. In addition, JetBlue announced it has obtained a new line of credit for up to $100 million with Morgan Stanley, which is secured by a portion of its short-term investments.

During the quarter, JetBlue made approximately $220 million in debt payments, including approximately $170 million of prepayments. JetBlue recorded a $2 million gain in non-operating income during the quarter in connection with these prepayments.

“We maintained a strong cash position and further strengthened our balance sheet by prepaying higher priced debt and reducing our overall debt balance,” said Mark Powers, JetBlue’s Chief Financial Officer. “We believe these actions, among others we are taking this year, will be accretive to earnings and improve our return on invested capital.”

Third Quarter and Full Year Outlook

For the third quarter of 2012, CASM is expected to increase between 1.0% and 3.0% over the year-ago period. Excluding fuel, CASM in the third quarter is expected to increase between 4.5% and 6.5% year over year. JetBlue expects most of this year over year increase to be driven by maintenance expense and profit sharing expense.

CASM for the full year is expected to increase between 1.0% and 3.0% over full year 2011. Excluding fuel, CASM in 2012 is expected to increase between 2.5% and 4.5% year over year.

Capacity is expected to increase between 7.0% and 9.0% in the third quarter and to increase between 6.5% and 8.5% for the full year.

JetBlue will conduct a conference call to discuss its quarterly earnings today, July 25, at 9:00 a.m. Eastern Time. A live broadcast of the conference call will be available via the internet at http://investor.jetblue.com.
Pending regulatory approval*, flights are scheduled to begin December 13, 2012, and continue through April 21, 2013. Details of WestJet’s seasonal non-stop service include:

Just as in the previous year, WestJet flight attendants will be on board the Boeing 757-200s to ensure the same great WestJet guest experience. Thomas Cook Airlines will provide the aircraft and pilots. The agreement complements the announcement in April that WestJet’s Boeing 737 aircraft will provide more seat capacity for Thomas Cook in the 2012-2013 winter season. As an expansion to its successful, two-year, Canada-wide, partnership, WestJet is the only airline providing capacity for Thomas Cook’s tour operator arm in the Canadian market.

“With this agreement, we can deliver our award-winning guest experience to more Albertans using a larger aircraft with greater range,” said Bob Cummings, WestJet Executive Vice-President, Sales, Marketing and Guest Experience. “The decision to lease a second aircraft is a direct response to demand for service, and the additional flying will allow us to offer three additional daytime flights this winter at low fares. With this additional aircraft, we’re pleased to offer each route one additional round-trip flight per week over last year.”

WestJet Vacations is pleased to offer a wide range of flexible and affordable vacation packages with a strong selection of hotels and condominiums. Choose from 37 locations in Oahu (Honolulu) and 36 in Maui, ranging from studio to one, two and three bedrooms, many of which are located close to or on the beach. For families looking for something truly magical this winter, WestJet Vacations offers packages to Disney’s newest property, Aulani, a Disney Resort & Spa, featuring the only teen spa in Hawaii, a kids club with an array of activities, an 8,200 square foot pool and the only private snorkel reef on the island.

Guests who book a vacation package can be sure to receive the best price with the WestJet Vacation Price Guarantee. Under its terms, should an identical WestJet Vacations package decrease in price at any time prior to 21 days before departure, guests and travel agents can call WestJet Vacations and the difference in cost will be refunded to the original form of payment. The guarantee can also be used multiple times should the price continue to drop.

The WestJet Vacations price guarantee is offered to guests who book a minimum three-night WestJet Vacations package before October 31, 2012, for travel between September 4, 2012 and June 27, 2013. For full details and restrictions, please visit westjetvacations.com.

“We look forward to bringing Albertans to the islands of Hawaii again this year,” concluded Bob Cummings. “Albertans can count on their preferred airline to offer the same friendly and caring service they’ve come to know as they embark on their Hawaiian vacation this year.”