JetBlue reported its second straight
quarterly loss April 25 and is looking to higher average fares,
slower growth, a shift to more medium- and short-haul flights and a
return to its New York roots to help return the airline to
profitability this year.
We feel extremely
optimistic about our return to profitability, JetBlue CEO David
Neeleman said in a conference call with financial analysts and
reporters. The airline is expecting a profit in its second through
fourth quarters, based on a projected jet fuel price of $2.10 a
gallon, although it still is expecting a net loss for the full
year.
JetBlue previously
posted a profit every quarter since it began service in February
2000 but has posted losses for the previous two quarters: In
fourth-quarter 2005 it lost $42.5 
million, and the airline
now has reported a $32 million loss for the first quarter of 2006
in spite of a 31.4% increase in operating revenue.
Neeleman said
JetBlues optimistic outlook is based in part on its newfound
reliance on yield management to sell more fares in the middle
range. Neeleman called it part of a new mindset for the airline, in
which it is more focused on increasing its average fare than
filling as many seats as possible.
JetBlue reported an
average fare of $105 for the first quarter of 2006, which is about
the same as 2005 and 2004.
JetBlue raised its
fare cap on transcontinental flights from $349 to $399 April 24,
and joined an industry-wide $5 one-way fare increase the previous
week. But Neeleman said he expects the airlines average fare
improvement to come primarily from changing its fare mix with the
help of its new vice president for yield management, Richard
Zeni.
We need to trade
some load factor for higher average fares, Neeleman said. The
airline filled 84.2% of its seats in the first quarter, and more
than 90% on some routes.
Neeleman said the
change is already showing in recent results. JetBlue is forecasting
percentage improvements in revenue per available seat mile to be in
the low teens for April, May and June, and somewhat higher than
that for the remainder of the year.
Shifting capacity
Capacity cuts by
JetBlue and other airlines in many of its markets also are helping
increase pricing power, Neeleman said. That includes double-digit
reductions, by percentage, for capacity in some Northeast-Florida
markets.
JetBlue is slowing
its own capacity growth to 20% to 22% this year, down from its
previous plan for 28% to 30% growth.
JetBlue said it will
reduce capacity in certain transcontinental markets, increase
transcontinental flying in higher performing markets and shift
flying to more medium- and short-haul markets, which burn less
fuel.
The ratio of
long-haul to non-long-haul flying in summer 2005, as measured by
number of flights, was 1.5 to 1. That will shift to 1.2 to 1 in
summer 2006, JetBlue said.
The capacity cuts
will include more reductions in transcontinental flights than usual
in the fall.
JetBlue also will
defer the delivery of 12 A320 aircraft it had previously scheduled
for 2007 to 2009, and will sell two to five of the A320s it
currently flies. It still will take delivery, however, on 13 new
A320 aircraft for the remainder of this year.
JetBlue will
maintain its delivery schedule for its new 100-seat Embraer 190
aircraft, which it said is outperforming the A320s on growth in
revenue per available seat mile.
JetBlue will end the
year with 29 190s and about 99 A320s.
The airline also is
going back to its roots, in a manner of speaking, by looking to add
more markets from its New York base. JetBlues original plan called
for operating to 44 cities out of Kennedy Airport, but the airline
diverted from that when transcontinental opportunities became too
tempting to pass up.
Neeleman said the
smaller 190s make it feasible to return to something like that
44-city plan.
To contact
reporter Andrew Compart, send e-mail to [email protected].