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JetBlue announces third quarter 2018 results

JetBlue Airways Corporation today reported its results for the third quarter 2018:

Reported diluted earnings per share of $0.16, inclusive of $112 million in one-time costs related to the E190 fleet transition and the recently-signed pilot contract. Excluding these costs, adjusted diluted earnings per share of $0.43⁽¹⁾. This compares to JetBlue’s third quarter 2017 diluted earnings per share of $0.55.
GAAP pre-tax income of $68 million. Excluding the one-time costs, adjusted pre-tax income of $180 million⁽¹⁾, a decrease of 39.5% from the third quarter of 2017.
Pre-tax margin of 3.4%, inclusive of the one-time costs. Excluding these one-time costs, adjusted pre-tax margin of 9.0%⁽¹⁾, a 7.4 point decrease year over year.

Highlights from the Third Quarter 2018

Third quarter 2018 revenue per available seat mile (RASM) increased 1.7%, year over year, including 0.4 points of negative impact from severe weather during September.
Operating expenses per available seat mile, excluding fuel (CASM ex-fuel) growth of 3.2%, at the lower end of the updated guidance range of 3.0% to 5.0%. CASM ex-fuel for the third quarter includes a 2.0 point headwind related to recurrent costs of the pilot contract, effective as of August 1^st.

Key Guidance for the Fourth Quarter and Full Year 2018:

Capacity is expected to increase between 7.5% and 9.5% year over year in the fourth quarter 2018. The fourth quarter guidance includes a previously-announced 2.0 point ASM reduction to mitigate the impact of higher fuel prices. For the full year 2018, JetBlue expects capacity to increase between 6.5% and 7.0%.
RASM growth is expected to range between 1.0% and 4.0% for the fourth quarter 2018 compared to the same period in 2017.
CASM ex-fuel is expected to decrease between (3.5)% and (1.5)% for the fourth quarter of 2018. CASM ex-fuel for the fourth quarter includes a 3.0 point headwind related to the pilot contract. For the full year 2018, JetBlue expects year over year CASM ex-fuel to be between 0.75% and 1.75%. The headwind from the pilot contract to CASM ex-fuel for the full year 2018 is expected to be equal to 1.3 points.

For further details see the latest Investor Update and the Third Quarter 2018 Earnings Presentation available via the internet at http://investor.jetblue.com.

JetBlue will conduct a conference call to discuss its quarterly earnings today, October 23, at 10:00 a.m. Eastern Time. A live broadcast of the conference call will also be available via the internet at http://investor.jetblue.com.

(1) Note A provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.

Executing our Plan to Reach our EPS Commitments

“I’d like to thank our 22,000 Crewmembers, for all their hard work delivering the JetBlue experience to our Customers. Our financial performance was impacted by fuel prices that increased approximately 37% year over year. We are on track to hit our 2018 CASM ex-fuel guidance, despite pulling capacity in both the third and fourth quarters to adjust to higher fuel prices.

In the short term, we are focused on improving our earnings, particularly in the areas we can control, and have a plan to improve margins in 2019, and again in 2020. We are taking actions to recapture higher fuel costs through price – both with fare increases over recent months and through higher ancillary revenue initiatives. At our Investor Day in early October, we showed how our five building blocks will help us improve our margins and achieve our earnings target between $2.50 and $3.00 per share by 2020,” said Robin Hayes, JetBlue’s Chief Executive Officer.

“Since 2014 we have a track record of executing our plans – and we have a path to continue improving our relative margins, starting in 2019. We have the culture, the brand and the geography we need to be successful,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.

Revenue Performance and Outlook

Third quarter RASM increased 1.7%. Excluding the 0.4 point impact from severe weather during September, RASM was above the mid-point of our updated guidance of 1.0% to 3.0%. During the quarter we saw close-in demand trends improve across the network,” said Marty St. George, JetBlue’s EVP Commercial and Planning.

“We continued to grow our capacity on the lower end of our mid to high single digit range. For the fourth quarter, we expect capacity growth between 7.5 and 9.5 percent. Given the 2.9 points of lost capacity from hurricanes in the fourth quarter of 2017, our schedule-to-schedule capacity growth is approximately 6 percent for the fourth quarter of 2018. We expect to see some revenue benefits from the network changes and the ancillary revenue changes launched during the third quarter.”

Cost Performance, Outlook and Balance Sheet

Third quarter CASM ex-fuel was 3.2%, at the low end of the updated guidance of 3.0% to 5.0%, driven by improvements in unit maintenance costs. “We are on track to hit our 2018 plan despite the added pressure from reducing our capacity in the second half. We will continue to find opportunities to mitigate these pressures, in addition to the savings from the Structural Cost Program that build each quarter,” said Steve Priest, JetBlue’s EVP Chief Financial Officer.

“We continue to see sequential improvement in our underlying non fuel costs, and reached an inflection point during the second half this year, as we execute our Structural Cost Program. We are confident we can deliver on our 2019 commitments made at Investor Day, and are on track to achieve our 0-1 CASM CAGR through 2020.”

Capital Allocation and Liquidity

JetBlue ended the quarter with approximately $937 million in unrestricted cash and short term investments, or about 12.6% of trailing twelve month revenue. In addition, JetBlue maintains approximately $625 million in undrawn lines of credit.

In its commitment to maintaining a balanced approach to capital allocation, JetBlue executed an additional $125 million in share repurchases during the quarter.

During the third quarter, JetBlue repaid $54 million in regularly scheduled debt and capital lease obligations, and raised $261 million in net proceeds in secured aircraft debt. JetBlue anticipates paying approximately $45 million in regularly scheduled debt and capital lease obligations in the fourth quarter and approximately $223 million for the full year 2018. JetBlue anticipates maintaining a 30-40% adjusted debt to cap range and liquidity between 10% and 12%.

Fuel Expense and Hedging

The realized fuel price in the quarter was $2.32 per gallon, a 36.6% increase versus third quarter 2017 realized fuel price of $1.69.

JetBlue entered into forward fuel derivative contracts to hedge approximately 7.7% of its fuel consumption during the fourth quarter of 2018. Based on the fuel curve as of October 15^th, JetBlue expects an average price per gallon of fuel of $2.48 in the fourth quarter of 2018.

Notes

(1) Consolidated operating cost per available seat mile, excluding fuel and related taxes, and operating expenses related to other non-airline businesses (CASM Ex-Fuel) is a non-GAAP financial measure that we use to measure our core performance. Note A provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.

Top Copyright Photo (all others by JetBlue): JetBlue Airways Airbus A320-232 N779JB (msn 3811) (Bluericua) LGB (Michael B. Ing). Image: 994011.

JetBlue aircraft slide show:

JetBlue celebrates Puerto Rico and supports tourism to the island with its newest livery: Bluericua

JetBlue Airways has today officially announced its new “Bluericua” logo jet in support of Puerto Rico although the aircraft has been flying in this livery since September 15, 2018. Here is the formal announcement:

JetBlue Airways, Puerto Rico’s largest airline, has unveiled its latest special livery, which is dedicated to “La Isla del Encanto.”

The Airbus A320 aircraft – registered as N779JB – is named “Bluericua,” blending JetBlue’s brand with the affectionate name for people of Puerto Rican descent. This custom-designed livery is inspired by JetBlue’s admiration for Puerto Rico’s dynamic culture, stunning beauty and the passionate spirit of its community.

Bluericua is a very public display reaffirming JetBlue’s commitment to Puerto Rico and takes the airline’s celebration of Puerto Rican culture to new heights. This special livery reminds those who see it of the reasons they should choose Puerto Rico for their next vacation and will inspire Puerto Ricans outside of the island to take a trip home to visit family and friends.

Bluericua was designed with help from a group of JetBlue crewmembers based in San Juan, Aguadilla and Ponce, Puerto Rico. Together, they identified the quintessential cultural symbols that will promote Puerto Rico as Bluericua travels throughout the JetBlue system.

Bluericua’s starting point is its vibrant shade of blue – the brightest JetBlue has used in its fleet, in keeping with the vibrancy of the island. Emerging from this vibrant backdrop is the iconic Puerto Rican skyline near El Morro, where seven kites are being flown, representing seven symbols of the island’s culture that include:

A Single Star, as inspired by the Puerto Rican flag
A Hexagon Kite, in the traditional “chiringa” style for Puerto Rico
Dominoes, the ever-present game at gatherings, with the double 6 being the highest tile
A Coqui, the singing tree frog and the unofficial symbol of Puerto Rico
A Hibiscus, the national flower of Puerto Rico
An Iguaca, the parrot found exclusively in El Yunque National Forest
and a Tambourine, to celebrate the importance and popularity of music in Puerto Rican culture

Flying kites is a beloved pastime for the Puerto Rican community, and Bluericua celebrates this tradition that brings together family and friends. Bluericua’s kites start out at the Puerto Rican skyline and fly in unison toward the aircraft’s tail fin, evoking feelings of being carefree and happy – all emotions that a trip to Puerto Rico can deliver.

“Bluericua is our way of celebrating Puerto Rico’s resiliency and its culture. There is so much that Puerto Ricans can be proud of, and our crewmembers did a great job of identifying those prominent symbols that represent the island’s rich culture, heritage and natural beauty,” said Marty St. George, JetBlue’s executive vice president of commercial and planning. “We remain committed to promoting tourism to Puerto Rico, as the island is open and ready to welcome visitors, family and friends.”

“The Government of Puerto Rico acknowledges and thanks JetBlue for its firm commitment to the development of local economy and tourism of the Island, creating new jobs, expanding its routes and frequency of flights to Puerto Rico, through its JetBlue 100×35 initiative, and now celebrating and giving wide visibility to the Puerto Rican culture with the newly designed Bluericua livery,” said the chief executive.

Rosselló also added that “very few destinations have a dedicated aircraft, much less as a gift from JetBlue. We are honored to receive this detail from this important partner for us, which demonstrates the strong collaboration between JetBlue and the Puerto Rico Tourism Company”.

“JetBlue has been a great partner and ally of the Puerto Rican community for over 16 years. The airline’s commitment to the Island, has been showcased during the past year, with the implementation of a series of programs to support every step of our recovery. The partnership between the Government of Puerto Rico and JetBlue is stronger today than it has ever been. Today, we thank JetBlue for this new livery, which celebrates Puerto Rican culture. ‘Bluericua’ will generate great attention for our destination in all markets that JetBlue serves and will serve as a reminder of the diversity and authenticity of our offering,” said Carla Campos, executive director of the Puerto Rico Tourism Company.

Bluericua made a special visit to San Juan with a lively airport celebration hosted by JetBlue and the Puerto Rico Tourism Company, with the governor of Puerto Rico, Ricardo Rosselló, on hand to welcome the aircraft to its cultural home for the first time. Bluericua later operated its first commercial flight for customers from San Juan traveling to Boston, continuing the celebration in the air.

Celebrating the Puerto Rican Community and Its Recovery

JetBlue recently launched a campaign that pays homage to the beloved practice of spontaneous applause once a flight lands in Puerto Rico, along with some of the island’s iconic music. JetBlue teamed up with Puerto Rican musicians Ángel “Cucco” Peña and Víctor Manuelle to create a surprise and delight experience for customers traveling on a recent New York JFK-San Juan flight to celebrate the tradition. Victor Manuelle led an improvised rhythmic chant, incorporating the famous applause with live music, all while inviting JetBlue customers to join the fun during an aircraft-wide celebration.

Earlier this spring, JetBlue returned to pre-hurricane capacity, offering up to 48 daily flights between Puerto Rico and 13 cities in the mainland US, the US Virgin Islands and the Dominican Republic. JetBlue also welcomed 50 new ground and airport operations crewmembers. Puerto Rico is home to nearly 500 JetBlue crew members who support the airline’s operations in its focus city of San Juan, as well as in Aguadilla and Ponce.

Top Copyright Photo (all others by JetBlue): JetBlue Airways Airbus A320-232 N779JB (msn 3811) (Bluericua) SJU (Raul Sepulveda). Image: 943618.

JetBlue aircraft slide show: