JetBlue reports net income of $45 million in the third quarter

JetBlue Airways Corporation (JetBlue Airways) (New York) reported its results for the third quarter 2012:

  • Operating income for the quarter was $113 million, resulting in an 8.6% operating margin, compared to operating income of $108 million and a 9.0% operating margin in the third quarter of 2011.
  • Pre-tax income of $73 million in the third quarter.  This compares to pre-tax income of $56 million in the third quarter of 2011.
  • Net income for the third quarter was $45 million, or $0.14 per diluted share.  This compares to JetBlue’s third quarter 2011 net income of $35 million, or $0.11 per diluted share.

Operational Performance

JetBlue reported record operating revenues in the third quarter of $1.3 billion, an increase of 9.4% versus the same period last year. Revenue passenger miles for the third quarter increased 8.9% to 9.07 billion on a capacity increase of 8.6%, resulting in a third quarter load factor of 84.8%, an increase of 0.3 points year over year.

Yield per passenger mile in the third quarter was 13.15 cents, up 0.8% compared to the third quarter of 2011.  Passenger revenue per available seat mile (PRASM) for the third quarter 2012 increased 1.1% year over year to 11.15 cents and operating revenue per available seat mile (RASM) increased 0.7% year over year to 12.21 cents.

Operating expenses for the quarter increased 9.8%, or $108 million, over the prior year period.  JetBlue’s operating expense per available seat mile (CASM) for the third quarter increased 1.1% year-over-year to 11.16 cents.

Excluding fuel, CASM increased 3.7% to 6.67 cents, driven primarily by higher maintenance expense due to the aging of JetBlue’s fleet.

Fuel Expense and Hedging

JetBlue continued to hedge fuel to manage price volatility. Specifically, during the third quarter JetBlue hedged approximately 27% of its fuel consumption and additionally managed approximately 18% of its fuel consumption using fixed forward price agreements (FFPs), resulting in a realized fuel price of $3.17 per gallon, a 2% decrease over third quarter 2011 realized fuel price of $3.25.  JetBlue’s fuel expense reflects approximately $2 million in gains on fuel hedges settling during the third quarter.

JetBlue has hedged approximately 27% of its fourth quarter projected fuel requirements using a combination of collars, crude call options, and jet fuel swaps.  In addition, JetBlue has managed approximately 19% of its fourth quarter projected fuel consumption using FFPs. Based on the fuel curve as of October 19th, JetBlue expects an average price per gallon of fuel, including the impact of hedges, FFPs and fuel taxes, of $3.25 in the fourth quarter and $3.22 for the full year 2012.

Balance Sheet Update

JetBlue ended the third quarter with approximately $1.1 billion in unrestricted cash and short term investments.  Since December 31, 2011, JetBlue has increased the number of unencumbered A320 aircraft to seven and decreased the total debt balance by approximately $213 million.

Fourth Quarter and Full Year Outlook

For the fourth quarter of 2012, CASM is expected to increase between 2.0% and 4.0% over the year-ago period.  JetBlue expects roughly half of this year over year increase to be driven by maintenance expense.  Excluding fuel, CASM in the fourth quarter is expected to increase between 2.0% and 4.0% year over year.

CASM for the full year is expected to increase between 1.5% and 3.5% over full year 2011.  Excluding fuel, CASM in 2012 is expected to increase between 2.0% and 4.0% year over year.

Capacity is expected to increase between 5.0% and 7.0% in the fourth quarter and to increase between 7.0% and 9.0% for the full year.

On the aircraft side, Jetblue is scheduled to take delivery of four Airbus A320s and  one Embraer ERJ 190 before the end of the year. All four A320s will be paid in cash as it is believed this is best for the ROIC (Return On Investment Commitment).

Copyright Photo: Stephen Tornblom. Airbus A320-232 N598JB (msn 2314) at the New York (JFK) hub presents a nice ramp portrait in the Barcode tail design.

JetBlue Airways: