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JetBlue Post Q3 Profit - $35mil Net  
User currently offlineLAXintl From United States of America, joined May 2000, 24870 posts, RR: 46
Posted (2 years 9 months 1 week 14 hours ago) and read 6974 times:

While a profit, still yet another quarter of somewhat anemic earnings.

$35mil net down from $59mil during same quarter in 2010, even on record company revenues.

So while revenues grew 16% year over year, cost and especially fuel outpaced earnings. They also had a few special items including fuel hedge loss settlement and Hurricane Irene related charge.

More after the conference call.
I suspect analyst will again question the companies recent inability to grow its earnings in relationship with its overall growth leading to ever narrower margins in recent years.

In pre-market trading stock is down almost 5%.

Press release:
http://www.marketwatch.com/story/jet...s-third-quarter-results-2011-10-26

[Edited 2011-10-26 04:59:58]


From the desert to the sea, to all of Southern California
31 replies: All unread, showing first 25:
 
User currently offlineDLPMMM From United States of America, joined Apr 2005, 3589 posts, RR: 10
Reply 1, posted (2 years 9 months 1 week 13 hours ago) and read 6834 times:

Quoting LAXintl (Thread starter):

Thanks for the update.

Interesting indeed....is this because the age of the fleet and corresponding maintenence, or the increasing seniority of the workforce is catching up to them?...both?....or the "back end loaded leases" I had heard about but never saw proof?

Sorry I am too lazy to look the answers up myself, but it is too difficult on the road with an iPhone.


User currently offlinewestindian425 From United States of America, joined May 2004, 1024 posts, RR: 1
Reply 2, posted (2 years 9 months 1 week 12 hours ago) and read 6702 times:

Would it be a stretch to speculate that jetBlue will pull an "Apple" and ask David Neeleman to come back? It was his vision after all.


God did not create aircraft pilots to be on the ground
User currently offlinelightsaber From United States of America, joined Jan 2005, 12903 posts, RR: 100
Reply 3, posted (2 years 9 months 1 week 11 hours ago) and read 6471 times:
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From the OP link: Pre-tax income of $56 million in the third quarter, which includes a one-time loss related to the early extinguishment of portions of JetBlue's convertible debt.

Retiring debt is not a bad reason to have lower profit...

I found this intersting: "Our focus on improving revenue performance during shoulder periods by, among other actions, better accommodating business traffic in Boston drove solid unit revenue growth during the third quarter," said Robin Hayes, JetBlue's Chief Commercial Officer.

B6 has had a tough time attracting business customers. If they are able to do so in BOS, kudos to them. IMHO, they need TATL connections to help the RASM. (A32XNEO anyone)  

It looks as if B6 is lightly hedged based on their tiny fuel hedging losses: JetBlue's fuel expense reflects $4 million in losses on fuel hedges that settled during the third quarter. In addition, JetBlue recorded $3 million in non-cash fuel hedging ineffectiveness losses during the quarter, which is included in non-operating income/expense.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineLAXintl From United States of America, joined May 2000, 24870 posts, RR: 46
Reply 4, posted (2 years 9 months 1 week 11 hours ago) and read 6447 times:

Some notes from the earnings call this morning.


As suspected analyst did indeed question JetBlue about its lagging margins compared to its peer. To managements credit this was the first call they really conceded that, yes they need better focus on producing return on capital. Maybe the recent CFO change will help such focus.
Another analyst basically suggested JetBlue should not focus on growth as much going forward, but throttle back instead and focus on earnings metrics.


FINANCE
o $35mil profit in Q3
o 16% revenue increase yoy. PRASM was up 7.7%
o But expenses were up 22%. Especially fuel
o Q3 Fuel up 42% - $162mil
o Ex fuel CASM +2.2%
o Maintenance cost up 25% - aging of fleet entering checks. Going into 2012 will see higher shop visits and contractual escalations.
o Ancillary revenues continues to grow – now $19/pax – up 7% yoy primarily driven by Even More Space product which will produce $100mil in 2011.
o Prepaid $32mil in notes in Q3 – took a $5mil prepayment penalty.
o Had $4mil loss on fuel positions
o Reemphasize low cost focus, cost control need to be foundation of success. Productivity and overhead cost management are front and center.
o Cost pressure from salaries and benefits due salary wage scale steps - some 13,500 employees now
o Fuel most significant cost – best hedge is fuel efficiency. But financial hedge is insurance – 45% of Q4 hedged. 21% for 2012 so far.
o As of now forecast $600mil in added annual fuel cost.
o Focused on margins, return on capital. Clearly have work to do in this area. Greater focus on shareholder returns
o $1.2bil unrestricted cash at end of Q3.
o Positive free cash flow in 2011.
o View strong cash balance as prudent in current environment.


TRAFFIC / NETWORK
o 8.3% capacity growth in Q3.
o Very busy summer
o LF down slightly 1.1%, but saw higher yields
o 1400 flights cancelled due hurricane Irene. Had to move 50 planes away rom NYC/BOS area - $8mil net hit.
o BOS + Caribbean biggest growth areas.
o BOS now has 42 destinations. Biz markets demand outpacing rest of network and producing higher yield.
o Mix of VFR and leisure Carrib & Latin markets complement each other nicely. Largest airline in DR. Continue to bolster SJU, more intra-Carrib. FLL-BOG in 2012
o 12 airline partners now. Expect to add 1 more in 2011.
o Focus on improving revenue performance especially in off peak travel period
o Uncertain environment, but no evidence of traffic slow down. Thanksgiving bookings look “healthy”, not much visibility into December yet.
o 8-10% ASM growth in Q4.
o 2012 Capacity plans not finalized. Growth likely “mid single growth digit rate”
o Will pursue asset opportunities that become available including competing in LGA/DCA slot auction.


FLEET
o 5.9 year average age
o Received 2 E190’s in Q3
o Plan 1 E190 & 1 A320 delivery in Q4
o End year with 169 aircraft - 120 A320 / 49 E190
o 4 190 and 7 A320 due in 2012.
o In October formalized previous announced Airbus orders (321+NEO)
o Long term plan E190 fleet shrink up to 25 tails below plan. Deferring 7 E190 2013-14 deliveries to 2018. Will cancel some 2014-2018 deliveries.


OTHER
o No urgency monetize (sell off) LiveTV - New satellite launched last week in Kazakhstan. Will have increased bandwidth capacity which is needed as WiFi demand grows. Getting Revenues from 3rd parties including upgrading 200 planes at UAL.
o Lufthansa is free to reduce its investment as it wishes, however B6 very much appreciates the LH relationship.

=

[Edited 2011-10-26 08:48:48]


From the desert to the sea, to all of Southern California
User currently offlinerichierich From United States of America, joined Nov 2000, 4242 posts, RR: 6
Reply 5, posted (2 years 9 months 1 week 10 hours ago) and read 6421 times:

Six consecutive Quarters of profit is quite a feat in this industry, so kudos to B6 for this result.

As with any analysis, there are some questions though. JetBlue takes in a heck of a lot of revenue "just" to come out with a somewhat meager $35M profit, so that is of some concern to investors for sure. And the fuel hedging can work either way, as we saw with WN, it did not make a significant impact either way. If the cost of oil rises sharply, one has to wonder how well JetBlue will fare. To be honest, this is what keeps the CEOs and CFOs of many an airline awake at night...



None shall pass!!!!
User currently offlinehatbutton From United States of America, joined Mar 2005, 1500 posts, RR: 14
Reply 6, posted (2 years 9 months 1 week 10 hours ago) and read 6379 times:

Quoting lightsaber (Reply 3):
From the OP link: Pre-tax income of $56 million in the third quarter, which includes a one-time loss related to the early extinguishment of portions of JetBlue's convertible debt.

Retiring debt is not a bad reason to have lower profit...

The charge was worth only $5m. So their adjusted pre-tax was only $61m which is about a 5.1% pretax margin. Not bad though considering WN's adjusted pretax was 4.7% However....

Quoting LAXintl (Reply 4):
o Maintenance cost up 25% - aging of fleet entering checks. Going into 2012 will see higher shop visits and contractual escalations.

This is the real cause for concern I think for their non fuel unit costs. The honeymoon period on a lot of aircraft is ending. If they are only get 5% in the strongest quarter of the year, it's going to be tough the rest of the year as maintenance costs go up.


User currently offlineScottB From United States of America, joined Jul 2000, 6712 posts, RR: 32
Reply 7, posted (2 years 9 months 1 week 10 hours ago) and read 6324 times:

Quoting DLPMMM (Reply 1):
Interesting indeed....is this because the age of the fleet and corresponding maintenence, or the increasing seniority of the workforce is catching up to them?...both?....or the "back end loaded leases" I had heard about but never saw proof?

It was predominantly fuel, although maintenance costs were also up an eye-popping 35% for the quarter and 33% for the first nine months. The rest of their costs were up less on a percentage basis than their ASM's, so those components of CASM should be down a bit.

Quoting LAXintl (Thread starter):
I suspect analyst will again question the companies recent inability to grow its earnings in relationship with its overall growth leading to ever narrower margins in recent years.

They missed by a penny on earnings, too, although the market's reaction has been muted considering the rest of the sector is down. You are completely correct on the questions about future growth & earnings growth. The shares are quite fairly priced based on JBLU's earnings and lack of a dividend.

Quoting lightsaber (Reply 3):
If they are able to do so in BOS, kudos to them. IMHO, they need TATL connections to help the RASM. (A32XNEO anyone)

The A320NEO will still be challenged to make it from even the U.K. to BOS. It's no 757. Inbound TATL connections at BOS to B6 will also be less than ideal without some construction work.


User currently offlineLAXintl From United States of America, joined May 2000, 24870 posts, RR: 46
Reply 8, posted (2 years 9 months 1 week 10 hours ago) and read 6303 times:

Quoting lightsaber (Reply 3):
Retiring debt is not a bad reason to have lower profit...

The debt retirement only cost them $5mil hit.

YoY net profit was down 40% while revenue grew 16%.

Quoting richierich (Reply 5):
JetBlue takes in a heck of a lot of revenue "just" to come out with a somewhat meager $35M profit, so that is of some concern to investors for sure. And the fuel hedging can work either way, as we saw with WN, it did not make a significant impact either way. If the cost of oil rises sharply, one has to wonder how well JetBlue will fare.

Yes basically $1.2bil in revenues churning to produce the $35mil end result.

Analysts continue to express their views while the company has doubled in size the last 5-years, its earnings have not moved commensurately and instead sit at the same place essentially - a terrible return on invested working capital.

Fuel wise, another 4% shift in the average barrel price would have have wiped out the quarters profit. Not much leeway.

Quoting hatbutton (Reply 6):
This is the real cause for concern I think for their non fuel unit costs. The honeymoon period on a lot of aircraft is ending.

Indeed the honeymoon is over, however B6 has in the past cleverly sold off older frames and replacement them with newer ones. They do have a pretty full order book, so additional such activity is quite possible especially as both their fleet types have good market valuation and demand.



From the desert to the sea, to all of Southern California
User currently offlinelucky777 From United States of America, joined Oct 2008, 543 posts, RR: 0
Reply 9, posted (2 years 9 months 1 week 9 hours ago) and read 6186 times:

It seems jetBlue has basically stagnated in recent years. As has already been noted, it's taking massive amounts of revenue to produce only meager profits (profits nonetheless i suppose) Since all of the low-hanging fruit has already been picked i'm not sure how/where B6 can meaningfully increase ROI. Also, does $1.2 Billion in unrestricted cash on hand seem a little weak to anybody else?

User currently offlineMaverickM11 From United States of America, joined Apr 2000, 17352 posts, RR: 46
Reply 10, posted (2 years 9 months 1 week 9 hours ago) and read 6145 times:

Quoting LAXintl (Reply 4):
As suspected analyst did indeed question JetBlue about its lagging margins compared to its peer.

Compared to whom? Their operating margin seems to be on par with some of the stronger carriers, and nearly double WN.

Quoting LAXintl (Reply 4):
o No urgency monetize (sell off) LiveTV

Any idea how LiveTV does?



E pur si muove -Galileo
User currently offlinehatbutton From United States of America, joined Mar 2005, 1500 posts, RR: 14
Reply 11, posted (2 years 9 months 1 week 9 hours ago) and read 6126 times:

Quoting lucky777 (Reply 9):
It seems jetBlue has basically stagnated in recent years. As has already been noted, it's taking massive amounts of revenue to produce only meager profits (profits nonetheless i suppose) Since all of the low-hanging fruit has already been picked i'm not sure how/where B6 can meaningfully increase ROI. Also, does $1.2 Billion in unrestricted cash on hand seem a little weak to anybody else?

No for their size that's about normal. AS is roughly the same size and has $1.3b cash.


User currently offlinelightsaber From United States of America, joined Jan 2005, 12903 posts, RR: 100
Reply 12, posted (2 years 9 months 1 week 9 hours ago) and read 6115 times:
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Quoting hatbutton (Reply 6):
If they are only get 5% in the strongest quarter of the year, it's going to be tough the rest of the year as maintenance costs go up.

Agreed. Hence the work on revenue.

Quoting ScottB (Reply 7):
The A320NEO will still be challenged to make it from even the U.K. to BOS. It's no 757.

There is work being done to make the A321NEO TATL capable. Personally, I should have written that type. Mostly as there is the cargo hold volume for fuel tanks.   

There will be A32X doing TATL. Just a question of when and which model.   

Quoting hatbutton (Reply 6):
The charge was worth only $5m.

Fair enough. I missed that. B6 should have better profits.

Quoting LAXintl (Reply 8):
Indeed the honeymoon is over, however B6 has in the past cleverly sold off older frames and replacement them with newer ones. They do have a pretty full order book, so additional such activity is quite possible especially as both their fleet types have good market valuation and demand.

Only for the right purchase price/depreciation schedule.  

Last I looked, B6 is also taking *back* some of the airframes they previous released. Hopefully the lease payments are low enough to cover the increased maintenance expenses.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinepanamair From United States of America, joined Oct 2001, 4876 posts, RR: 25
Reply 13, posted (2 years 9 months 1 week 8 hours ago) and read 6037 times:
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Quoting richierich (Reply 5):
JetBlue takes in a heck of a lot of revenue "just" to come out with a somewhat meager $35M profit,

Actually, operating profit (Operating Revenues - Operating Expenses) wise, they are not too shabby, coming in at 9.0% operating margin this quarter (though it's down from 13% same period last year, it is nevertheless quite respectable). However, it gave more than 40% of its operating profit back through Interest Expenses of $45m.
JBLU's interest expense is almost 4% of its operating revenues, compared to around 2.3% at Delta, or 1.2% at Southwest. Even AMR's interest expense is lower at 3.3% of operating revenues


User currently onlinestlgph From United States of America, joined Oct 2004, 9303 posts, RR: 25
Reply 14, posted (2 years 9 months 1 week 6 hours ago) and read 5812 times:

analysts predicting 3 cents a share revenue for the 4th quarter, same as last year.
for the year, 19 cents a share, down from 33 cents last year.

they're predicting another profit for the 4th quarter, but a smaller one as fuel prices rise and they grow, rather than cut capacity. revenues are expected to be up.

as mentioned above, analysts believe latin america/caribbean/boston will be growth points through most of 2012 - growth up to 10%



Eternal darkness we all should dread. It's hard to party when you're dead.
User currently onlinedeltaflyertoo From United States of America, joined Nov 2000, 1643 posts, RR: 1
Reply 15, posted (2 years 9 months 1 week 5 hours ago) and read 5464 times:

B6 offers an exceptional product......nobody denies that. They should look to how WN expanded all these years and strategically enter NEW markets and link them back to the existing ones. I would think cities like MCI, CLE,IND, MAYBE DFW, CVG, etc would be good starters. Remember Delta Express back in the 90s that had low fare service from Orlando to the midwest and east? Maybe add MCO to those markets as well.

User currently offlineLAXintl From United States of America, joined May 2000, 24870 posts, RR: 46
Reply 16, posted (2 years 9 months 1 week 2 hours ago) and read 4945 times:

Quoting MaverickM11 (Reply 10):
Compared to whom? Their operating margin seems to be on par with some of the stronger carriers, and nearly double WN.

Return on invested capital. JetBlue has sunk millions into the operation, doubled in size, however has essentially gotten negative returns from its money. Even with almost zero interest rates, not doing anything with the money would have been more profitable for shareholders some quarters. In otherwords, each $1 risked, has not brought much much more than $1 back. Lots of money churning, for no return.

For example the last 5-years the carrier only produces a 0.3% return on assets and 0.5% on return on invested capital. Comparison Southwest averaged north of 4% annually. The biggest laggard was AMR with -7% over 5-years, but we know the huge issues it has.

Hence analyst have been getting more vocal in recent quarters and now even suggesting the carrier trim growth (which cost money) and instead focus on developing better returns.

Quoting MaverickM11 (Reply 10):
Any idea how LiveTV does?

Not sure. They are always coy about it, and its results are buried.

Certainly doing things like buying into new satellites is not cheap. Personally I suspect if it was a good money spinner, it would have been monetized a long time ago.



From the desert to the sea, to all of Southern California
User currently onlineBOStonsox From United States of America, joined Dec 2007, 1989 posts, RR: 0
Reply 17, posted (2 years 9 months 6 days 20 hours ago) and read 4224 times:

Sounds like it's a bit of same old, same old for B6. BOS and Caribbean will be the focuses, and I can't wait to hear what the 44th destination from BOS will be, I imagine it will be announced sooner or later.


2013 World Series Champions!
User currently offlinebonusonus From United States of America, joined Nov 2009, 403 posts, RR: 0
Reply 18, posted (2 years 9 months 6 days 11 hours ago) and read 3831 times:

Quoting ScottB (Reply 7):
The A320NEO will still be challenged to make it from even the U.K. to BOS. It's no 757. Inbound TATL connections at BOS to B6 will also be less than ideal without some construction work.

Would an airline like B6 ever consider doing 1-stop TATL with a customs pre-clear somewhere in Ireland?


User currently offlineKarlB737 From United States of America, joined Mar 2004, 3096 posts, RR: 10
Reply 19, posted (2 years 9 months 6 days 10 hours ago) and read 3782 times:

Quoting LAXintl (Reply 4):
o Long term plan E190 fleet shrink up to 25 tails below plan. Deferring 7 E190 2013-14 deliveries to 2018. Will cancel some 2014-2018 deliveries.

Courtesy: Bloomberg News
Embraer Falls Most in Three Weeks After JetBlue Cancels Order

"Embraer SA (EMBR3), the world’s fourth- largest aircraft manufacturer, fell the most in three weeks after JetBlue Airways Corp. (JBLU) said it was canceling orders for 12 E190 jets."

http://www.bloomberg.com/news/2011-1...blue-cancels-order.html?cmpid=yhoo

Quoting lucky777 (Reply 9):
It seems jetBlue has basically stagnated in recent years.

One need only look at all the holes all over the country they have avoided:
JetBlue | Where We Jet: Flight Destinations
http://www.jetblue.com/wherewejet/

Quoting deltaflyertoo (Reply 15):
B6 offers an exceptional product......nobody denies that.

Except in Michigan, Ohio, West Virginia, Kentucky, Tennessee, South Carolina, Georgia, Alabama, Mississippi, Arkansas, Missouri, Iowa, Indiana, Wisconsin, Minnesota, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, New Mexico, Colorado, Montana, and Idaho.


User currently offlineflyby519 From United States of America, joined Jul 2007, 1128 posts, RR: 0
Reply 20, posted (2 years 9 months 6 days 8 hours ago) and read 3697 times:

Quoting KarlB737 (Reply 19):
Except in Michigan, Ohio, West Virginia, Kentucky, Tennessee, South Carolina, Georgia, Alabama, Mississippi, Arkansas, Missouri, Iowa, Indiana, Wisconsin, Minnesota, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, New Mexico, Colorado, Montana, and Idaho.

Population density...relatively few people live there, and/or want to travel there.



These postings or comments are not a company-sponsored source of communication.
User currently onlinejfklganyc From United States of America, joined Jan 2004, 3385 posts, RR: 5
Reply 21, posted (2 years 9 months 6 days 8 hours ago) and read 3671 times:

"One need only look at all the holes all over the country they have avoided:
JetBlue | Where We Jet: Flight Destinations
http://www.jetblue.com/wherewejet/"


Except they have exploded in Boston and in the Caribbean.

In the years that you claim they have stagnated (last 5) they have built another major hub. And in another few years they will have 2 major hubs with 150 departures a day in the most populous and wealthy stretch of land in the United States.

So while Kentucky maybe on the map one day, they are trying to sure themselves up with 2 fortified hubs in the mega cities of the north east while taking advantage of a great opportunity to own cash cow SJU courtesy of AA shrinkage.

If they don't do it, someone else will.


User currently onlinestlgph From United States of America, joined Oct 2004, 9303 posts, RR: 25
Reply 22, posted (2 years 9 months 6 days 7 hours ago) and read 3658 times:

Quoting flyby519 (Reply 20):
Population density...relatively few people live there, and/or want to travel there.

dumb comment.

jetBlue's biggest obstacle in those areas is lack of brand recognition.



Eternal darkness we all should dread. It's hard to party when you're dead.
User currently offlineflyby519 From United States of America, joined Jul 2007, 1128 posts, RR: 0
Reply 23, posted (2 years 9 months 6 days 7 hours ago) and read 3624 times:

Quoting stlgph (Reply 22):
dumb comment.

jetBlue's biggest obstacle in those areas is lack of brand recognition.

Look, youre obviously from the STL area and feel miffed because B6 isnt flying to your ghost town airport. I am sorry, but it is economics of supply/demand. Be a big boy and accept the facts

http://www.mapofusa.net/us-population-map.gif

[Edited 2011-10-27 12:14:40]


These postings or comments are not a company-sponsored source of communication.
User currently offlineKarlB737 From United States of America, joined Mar 2004, 3096 posts, RR: 10
Reply 24, posted (2 years 9 months 6 days 5 hours ago) and read 3550 times:

Quoting flyby519 (Reply 23):
feel miffed because B6 isnt flying to your ghost town airport. I am sorry, but it is economics of supply/demand. Be a big boy and accept the facts

I suppose DTW, DEN, GRR, MSP, IND, ATL are also "ghost town airports".


25 MaverickM11 : I think the bigger problem is B6' network; plenty of people know and want to try B6 in these places, but B6' network and fleet means they'd have to f
26 stlgph : Except I live in Manhattan. Nice try, though. There is plenty of supply and demand in the aforementioned areas, and plenty of income. Many of those "
27 luckyone : That's interesting, and rather amusing. Using the density map you provided, Michigan, Ohio, Kentucky, Tennessee, South Carolina, Georgia, Alabama, In
28 rwy04lga : Kansas?
29 KarlB737 : How in hell can you have brand recognition "in those areas" if you're not even flying there because the airline has overtly avoided "those areas" at
30 stlgph : ...and this is why publicists are paid hundreds of dollars by the hour.
31 flyby519 : Forgive me for my previous post. Ahem. "jetblue does not meet the needs of those who reside in populus areas like DSM, GRR, STL, IND, MCI and OMA. The
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