JetBlue Airways Corporation (JetBlue Airways) (New York) today announced plans to optimize its fleet, including:

• Deferral of 24 Embraer ERJ 190 aircraft from 2014-2018 to 2020-2022, reducing capital expenditures over the near term.
• Conversion of 18 Airbus A320 positions to A321s, better matching capacity with growing network demand in key markets while reducing unit costs.
• An incremental order for 15 A321ceo and 20 A321neo aircraft, providing increased fleet flexibility and offering up to 15 percent in fuel burn savings.
• Sharklet retrofit of up to 110 Airbus A320s in current fleet beginning in 2015.

“We believe these fleet changes will provide increased ability to match capacity and demand throughout our network and reduce costs, leading to improved shareholder returns over the long term,” said JetBlue President and CEO Dave Barger.

As a result of the fleet adjustments noted above, JetBlue will optimize its Embraer ERJ 190 fleet to approximately 60 aircraft in the near term.

“While the E190 is critical to our continued success in Boston and San Juan, we are now at the point where our network growth calls for larger gauge aircraft,” Mr. Barger said.  “In addition to allowing us to more cost-effectively serve certain high density markets, we believe our fleet restructuring plan will allow us to accelerate attractive growth opportunities at Fort Lauderdale/Hollywood International Airport.”

JetBlue has converted 18 A320s to A321s.  The A321 is expected to have unit costs 10 to 15 percent lower than those of the A320 aircraft it will replace, driven in part by a 10 to 15 percent improvement in fuel consumption per seat. “With significant savings from increased fuel efficiency and better utilization of our airport slot portfolio in key markets, we believe these A321 aircraft will improve our company’s profitability,” Mr. Barger said.

The fleet changes announced today will enable JetBlue to add 15 incremental A321ceo aircraft to its fleet by 2017, while deferring 24 E190 aircraft.  “With today’s announcement, we are reducing our capital commitments through the next three years, which is consistent with our free cash flow and return on invested capital goals,” said JetBlue Chief Financial Officer Mark Powers.

In addition, JetBlue has placed an order for 20 A321neo aircraft for delivery beginning in 2018.  Fuel savings associated with the new engine option A320 family is forecast to be approximately 12 to 15 percent compared to the current engine option A320 family.

JetBlue expects to retrofit up to 110 Airbus A320s in its existing fleet with sharklets beginning in 2015.  Sharklets are expected to reduce fuel consumption by up to three percent.

Estimated Aircraft Delivery Schedule (2013-2022):

*   JetBlue converted 8 A320ceo positions to A321ceo positions including 7 in 2017 and 1 in 2018
**  JetBlue converted 10 A320neo positions to A321neo positions including 5 in 2018 and 5 in 2019

On the financial side, the company issued this report:

JetBlue Airways Corporation today reported its results for the third quarter 2013:

• Operating income for the quarter was $152 million, resulting in a 10.5% operating margin.  This compares to operating income of $113 million and an 8.6% operating margin in the third quarter of 2012.
• Pre-tax income for the quarter was $119 million.  This compares to pre-tax income of $73 million in the third quarter of 2012.
• Net income for the third quarter was $71 million, or $0.21 per diluted share.  This compares to JetBlue’s third quarter 2012 net income of $45 million, or $0.14 per diluted share.

“We are pleased to report our highest ever quarterly earnings and our fourteenth consecutive quarter of profitability,” said Dave Barger, JetBlue’s CEO.  “These results reflect the success of our network strategy in high value geography and our focus on offering customers a differentiated product while maintaining competitive costs.  I would like to thank our 15,000 crewmembers for their hard work and continued dedication to serving our 30 million customers.”

Operational Performance

JetBlue reported record third quarter operating revenues of $1.4 billion.  Revenue passenger miles for the third quarter increased 5.4% to 9.56 billion on a capacity increase of 5.1%, resulting in a third quarter load factor of 85.0%, an increase of 0.2 points year over year.

Yield per passenger mile in the third quarter was 13.83 cents, up 5.1% compared to the third quarter of 2012.  Passenger revenue per available seat mile (PRASM) for the third quarter 2013 increased 5.4% year over year to 11.75 cents and operating revenue per available seat mile (RASM) increased 5.0% year over year to 12.82 cents.

“Our record revenue results demonstrate the strength of our network in our hometown of New York and throughout the rest of our core network,” said Robin Hayes, JetBlue’s Chief Commercial Officer. “We are also very pleased with the success of our focused growth strategy in Boston, Fort Lauderdale and the Caribbean & Latin America. The combination of our strong brand and unique JetBlue Experience once again allowed JetBlue to generate a revenue premium versus our competitors in many of our key markets.”

Operating expenses for the quarter increased 8.1%, or $95 million, over the prior year period.  JetBlue’s operating expense per available seat mile (CASM) for the third quarter increased 2.8% year over year to 11.47 cents.  Excluding fuel and profit sharing, CASM increased 4.9% to 6.95 cents.

Fuel Expense and Hedging

JetBlue continued to hedge fuel to manage price volatility.  During the third quarter JetBlue hedged approximately 29% of its fuel consumption and managed approximately 14% of its fuel consumption using fixed forward price agreements (FFPs), resulting in a realized fuel price of $3.14 per gallon, a 1.1% decrease over third quarter 2012 realized fuel price of $3.17.  JetBlue recorded $3 million in losses on fuel hedges that settled during the third quarter.

JetBlue has managed approximately 39% of its fourth quarter projected fuel requirements using a combination of FFPs, collars, swaps and call options.  Based on the fuel curve as of October 24th, JetBlue expects an average price per gallon of fuel, including the impact of hedges, FFPs and fuel taxes, of $3.03 in the fourth quarter.

Balance Sheet Update

JetBlue ended the third quarter with approximately $954 million in unrestricted cash and short term investments.  In addition, JetBlue maintains a $200 million line of credit and a revolving credit facility for up to $350 million.

“We remain focused on strengthening the balance sheet,” said Mark Powers, JetBlue’s Chief Financial Officer.  “We believe strong cash from operations will allow us to continue to grow sustainably as we increase our asset base and continue paying down debt, enhancing long term shareholder value.”

Fourth Quarter and Full Year Outlook

For the fourth quarter of 2013, CASM is expected to be between negative 1.0% and positive 1.0% compared to the year-ago period.  Excluding fuel and profit sharing, CASM in the fourth quarter is expected to be between negative 0.5% and positive 1.5% year over year.

CASM for the full year is expected to increase between 1.0% and 3.0% over full year 2012.  Excluding fuel and profit sharing, CASM in 2013 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 fourth quarter and to increase between 5.5% and 7.5% for the full year.

Copyright Photo: Stephen Tornblom/AirlinersGallery.com. JetBlue is now capping its Embraer ERJ 190 at around 60 aircraft. ERJ 190-100 IGW N203JB (man 19000023) in the Bubbles tail motif climbs away from the runway at the New York (JFK) hub.

JetBlue Airways: