JetBlue Airways (New York) has been informed that its bid for 12 slot pairs at Ronald Reagan Washington National Airport (DCA) has been provisionally accepted. These assets became available as a result of divestitures mandated by the U.S. Department of Justice (DOJ) in the American Airlines-US Airways merger.

Once approved by DOJ, JetBlue expects to add 12 new roundtrip flights at Washington’s popular, close-in airport. The airline plans to introduce nonstop service to cities it does not currently serve from DCA, expanding the benefits of its award-winning service to more communities, as well as add more flights on some existing routes.

JetBlue first entered the Reagan National market in 2010 and today offers 18 daily roundtrip flights to Boston, Fort Lauderdale/Hollywood, Orlando, Tampa, as well as the airport’s only nonstop service to San Juan, Puerto Rico. With its new slots, JetBlue will operate up to 30 roundtrips per day at DCA.

On the financial side, JetBlue Airway Corporation issued its financial report for the fourth quarter and the entire year of 2013:

JetBlue Airways Corporation reported its results for the fourth quarter and full year 2013:

• Operating income of $115 million in the fourth quarter. This compares to operating income of $44 million in the fourth quarter of 2012. For the full year 2013, JetBlue reported operating income of $428 million. This compares to operating income of $376 million for the full year 2012.

• Pre-tax income of $77 million in the fourth quarter. This compares to pre-tax income of $1 million in the fourth quarter of 2012. For the full year 2013, JetBlue reported pre-tax income of $279 million. This compares to a pre-tax income of $209 million for the full year 2012.

• Net income for the fourth quarter was $47 million, or $0.14 per diluted share. This compares to JetBlue’s fourth quarter 2012 net income of $1 million, or $0.00 per diluted share. For the full year 2013, JetBlue reported net income of $168 million, or $0.52per diluted share. This compares to net income of $128 million, or $0.40 per diluted share for the full year 2012.

Operational Performance

JetBlue reported record fourth quarter operating revenues of $1.4 billion. Revenue passenger miles for the fourth quarter increased 7.1% to 8.7 billion on a capacity increase of 8.3%, resulting in a fourth quarter load factor of 80.9%, a decrease of 1.0 point year over year.

Yield per passenger mile in the fourth quarter was 14.35 cents, up 6.5% compared to the fourth quarter of 2012. Passenger revenue per available seat mile (PRASM) for the fourth quarter 2013 increased 5.3% year over year to 11.62 cents and operating revenue per available seat mile (RASM) increased 5.6% year over year to 12.77 cents.

Operating expenses for the quarter increased 8.7%, or $100 million, over the prior year period. Interest expense for the quarter declined 8.4%, or $5 million as a result of JetBlue’s debt reduction strategy. JetBlue’s operating expense per available seat mile (CASM) for the fourth quarter increased 0.4% year over year to 11.70 cents. Excluding fuel and profit sharing, CASM increased 0.6% to 7.30 cents.

Over the course of 2013, JetBlue improved its return on invested capital (ROIC) to 5.3%. “We remain committed to improving ROIC by one percentage point per year on average,” said Mark Powers, JetBlue’s Chief Financial Officer. “We recognize that while we have more work to do to improve returns, we believe we have a plan in place to achieve these goals in 2014.”

Fuel Expense and Hedging

JetBlue continued to hedge fuel to manage price volatility. Specifically, during the fourth quarterJetBlue hedged approximately 28% of its fuel consumption and managed approximately 12% of its fuel consumption using fixed forward price agreements (FFPs). This resulted in a realized fuel price of $3.10 per gallon, a 3.1% decrease over fourth quarter 2012 realized fuel price of $3.20. JetBluerecorded $3 million in losses on fuel hedges that settled during the fourth quarter.

JetBlue has managed approximately 24% of its first quarter projected fuel requirements using a combination of FFPs, jet fuel swaps and caps. Based on the fuel curve as of January 23rd, JetBlueexpects an average price per gallon of fuel, including the impact of hedges, FFPs and fuel taxes, of$3.13 in the first quarter.

Liquidity and Cash Flow

JetBlue ended the year with approximately $627 million in unrestricted cash and short term investments. In addition, JetBlue maintains $550 million in undrawn lines of credit. For the full year 2013, JetBlue generated $758 million of operating cash flow and had capital expenditures of $637 million, including $453 million of aircraft investments. As a result, JetBlue generated $121 million in free cash flow in 2013.

During 2013, JetBlue repaid $510 million in debt and capital lease obligations, including approximately $248 million in the fourth quarter. In addition, JetBlue prepaid approximately $94 million of aircraft related debt in December. JetBlue recorded a $3 million loss in non-operating income during the quarter in connection with this prepayment. JetBlue expects this transaction will generate $25 million in interest expense savings over the next six years. JetBlue plans to repay approximately $470 million in debt and capital lease obligations in 2014, including approximately$235 million in the first quarter.

JetBlue has increased its pool of unencumbered aircraft from one to 23 and decreased its total debt balance by approximately $550 million since 2011, thereby decreasing the financial risk in the business. “We remain focused on continuing to strengthen our balance sheet as we expect to continue to generate free cash flow and purchase aircraft with cash in 2014,” said Mr. Powers.

First Quarter and Full Year Outlook

JetBlue expects first quarter results to be adversely impacted by severe weather in the Northeast during the beginning of January, which resulted in the cancellation of approximately 1,800 flights. The severe weather reduced JetBlue’s total revenue by an estimated $45 million and reduced operating income for the first quarter by approximately $30 million.

For the first quarter of 2014, CASM is expected to be increase between 0.0% and 2.0% versus the year-ago period. Excluding fuel and profit sharing, CASM in the first quarter is expected to increase between 3.0% and 5.0% year over year.

CASM for the full year is expected to increase between 1.0% and 3.0% over full year 2013. Excluding fuel and profit sharing, CASM in 2014 is expected to increase between 3.0% and 5.0% year over year.

Capacity is expected to increase between 2.5% and 4.5% in the first quarter. For the full year, capacity is expected to increase between 5.0% and 7.0%.

Copyright Photo: Brian McDonough/AirlinersGallery.com. Embraer ERJ 190-100 IGW N316JB (msn 19000291) completes the River Approach into Reagan National Airport on the Virginia side of the Potomac River.

JetBlue Airways: