JetBlue reports net income of $52 million in the second quarter

JetBlue Airways Corporation (JetBlue Airways) (New York) 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.

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.

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.

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.

Copyright Photo: Ken Petersen. Airbus A320-232 N587JB 9msn 2177) prepares to takeoff at the New York (JFK) hub. N587JB also sports the special “Building Blocks” motif.

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