Food for thought....

[Blastor]

U.S. airline JetBlue third-quarter profit cut by more than half


Canadian Press


October 24, 2005

NEW YORK (AP) - JetBlue Airways Corp. on Thursday said its third-quarter profit fell by more than half as the airline industry continues facing pressure from persistently high fuel costs.

The company's results topped Wall Street expectations for a loss, but JetBlue forecast deficits for both the fourth quarter and fiscal 2005. Its shares fell 94 cents, or 4.8 per cent, to $18.60 US in premarket activity. Quarterly income dropped to $2.7 million US, or two cents per share, from $8.1 million, or seven cents per share, the year before. Analysts, however, were expecting JetBlue to post a loss of one cent per share, according to a Thomson Financial survey.

Operating revenue totalled $453 million, a 40 per cent increase from $323 million and slightly ahead of analysts' consensus target of $451.6 million.

"The combination of record high jet fuel costs, which were 58 per cent above fuel costs for the same period last year, hurricanes and a competitive revenue environment has proven difficult for all airlines, and JetBlue is not immune," said David Neeleman, chairman and chief executive, in a statement.

JetBlue's quarterly traffic grew 30.7 per cent to 5.48 billion revenue passenger miles - one customer flown a mile - as capacity expanded 28.2 per cent to 6.33 billion available seat miles. Occupancy increased 1.7 percentage points to 86.6 per cent, but that lagged the company's break-even load factor of 87.4 per cent.

The company generated 7.87 cents per passenger mile, up six per cent from a year ago, although operating expenses swelled 13.8 per cent to 6.93 cents per available seat mile.

JetBlue forecast a loss for the fourth quarter and full year, based on expectations for negative operating margin between 5 per cent and 7 per cent for the quarter. The forecast assumes quarterly aircraft fuel costs of $2 per gallon after hedges, and up to $9 million of a non-cash, one-time expense from the acceleration of stock options.

[Flightlevels]

Interesting thing about oil is it's volitility in the last while that is hurting the airlines so much. For example a barrel is roughly 60 dollars right now for crude. Before the huricanes and such refining costs per barrel were about 5 dollars to turn that barrel to Jet fuel. Then the storms came and the traders in thier sensitivity drove the refining costs from about 5 bucks/brl to almost 52 dollars per barrel...yikes $60 for the crude and another $52 to refine it to JETA....tough times. well I have heard that the profit share party is on or around the 23rd of November, and with speaking with Clive we had a good quarter and expects stock price to recover somewhat then, (to be posted NOV 3rd) but no specifics were given but he is pleased. lots of good revenue initiatives coming down the pipe such as westjet vacations in Feb and the new res system that codesharing can begin.(oneworld is working hard to gain feed from Canada) incidently with this Air Canadas domestic load factor would be 12% less if it didn't have star alliance....so lots of potential with feed alone. all in all positive stuff from the management.

[Blastor]

Beddoe proclaimed his love for jet Blue in front of his fanatical followers many times in the last 2-3 years. Beddoe turned away from the successfull formula (Southwest) and embraced Jet Blue, going so far as to get leather seats and other knick-knacks...just like Jet Blue

Beddoe's idol is getting battered by competition, in an area where the pop. is at least 100 times more numerous then all WJ routes combined.
Sounds familiar?

Should've stick to the Southwest formula

[Frequent Flier_10]

Hey Blastor, Ever look at the financials to see who is more profitable before choosing which one is a better model?

Southwest is doing well because of their hedges. End of story.

JetBlue has been much more profitable than Southwest.

I saw a report that said over the last seven quarters, JetBlue has averaged an EBITDAR margin of 26%, versus Southwest at 25%. But if you exclude Southwests fuel hedge, their average goes to 16% -- much lower than JetBlue's. WestJet has averaged 18% over the same time, and it had Jetsgo to deal with.

So who would you want to replicate? Maybe those TV's and leather seats will pay off.....

Southwest is a great airline, and they have lots of time to figure out how to deal with high fuel prices, but withouth those hedges, they begin to look a lot more ordinary.

[Flightlevels]

I disagree, the formula for both are dependant on fuel alone. Southwest has an amazing fuel hedge. If you removed the hedge Southwest would lose money today, no matter what the business model. I just saw the graph on it. The landscape is changing all the time and wetjet has to change with it to be viable. A good example of this is going to be a flood of RJ's on the market. We don't intend to duplicate flt for flt but to carve some profitability from each run that we do. I have been told that the 600 can run for almost 20% cheaper than an erj 190 based on our common maint. type rated pilots etc...the key is keep the costs down and the intiatives going for the future. A good example of this is the new revenue management system, if we didn't make the decision on this 3 yrs ago we would be lagging bad today. This system can compare fares with all airlines in an amazing amount of time and then adjust our fares with our formulas. cool stuff.

[Rebel]

This is part of a quote from the Pprune unedited;

Interesting to note – the founder of JetBlue – founded a charter airline in Salt Lake which he sold, for much $$$, to Southwest. When the non compete expired – he was not the fool to joust with the master – No he headed cross country to the big Apple and set up Jet Blue. He was smart enough to realize he was not selling to Aunt Edna going to Vegas for the $7.99 all you can eat but the Jay Lo’s going clubbing in Miami. So he has created the hippest airline in the country – in the city that eats it up. (And if you know anything fool – you know every New Yorker loves a bargain – so they low price is part of the cache)
Morale of the story - know your market - stick to the knitting

[CanadaEH]

Beddoe's idol is getting battered by competition, in an area where the pop. is at least 100 times more numerous then all WJ routes combined.
Sounds familiar?

Should've stick to the Southwest formula

JetBlue flies something like 50+ flights per day from NYC to Florida. What do you think a season of record numbers of hurricanes would do to your number one market?

[Flightlevels]

This is part of a quote from the Pprune unedited;

Interesting to note – the founder of JetBlue – founded a charter airline in Salt Lake which he sold, for much $$$, to Southwest. When the non compete expired – he was not the fool to joust with the master – No he headed cross country to the big Apple and set up Jet Blue. He was smart enough to realize he was not selling to Aunt Edna going to Vegas for the $7.99 all you can eat but the Jay Lo’s going clubbing in Miami. So he has created the hippest airline in the country – in the city that eats it up. (And if you know anything fool – you know every New Yorker loves a bargain – so they low price is part of the cache)
Morale of the story - know your market - stick to the knitting

Hi Reb, this would hold more true to AC than anyone else thus far....sticking to what you know ie: long haul....domestically the rj's are something new and have yet to be proven, the tango's and zips were new and the different fare catagories are new etc...Westjet is only 9yrs old....would you agree?

[Flightlevels]

Beddoe's idol is getting battered by competition, in an area where the pop. is at least 100 times more numerous then all WJ routes combined.
Sounds familiar?

Should've stick to the Southwest formula

JetBlue flies something like 50+ flights per day from NYC to Florida. What do you think a season of record numbers of hurricanes would do to your number one market?

good point Can Eh...never knew how much they dep on florida

[Rebel]

Hmm I don't think so, the reference as I understand it is to niche type of markets. AC has always operated across the board in all the markets some more successful then others..The current strength of AC lies in it's diversification which should enable AC to weather this storm better then those who are not diversified.

However there are a lot of wild cards out there right now with the price of fuel and the upcoming bird flu problem so it could be a rough ride..

[fokkerguy]

after years of watching big blue and big red bleed each other dry. I now get to watch the teal team take on big red.

But hey Beddoe's a pretty sharp guy. he's adding capacity, frequency and going head to head with AC . What could possibly go wrong?

At least The teal guys enjoy working for peanuts . This is beneficial for all airlines as it sets the bar lower in terms of wages.

[2low]

Hey Fokker, Fack you.

[Flightlevels]

I don't think we are exactly going head to head.....55 a/c vs 300 and change..... it is just a travellers choice/alternative. Sorry no peanuts here. what's your definition of that. add something intelligent.

[mooseway]

Yes it is peanuts, unless you live in west where cost of living is low (Excl Vancouver). Try living off it in T.O.

[Flightlevels]

cost of living isn't low in YYC, when you say peanuts do you mean the 30 something to start at jazz or the 40 ish at AC or the 40 ish here or the 40 ish at Canjet??? but then we would be hijacking the thread...start a new one on wages and cost of living if this is your rant. or better yet look in the archives.

[babybus]

Flightlevels,

40k to start at AC but 75,000$ if still EMJ FO after 2 years,

105,000$ if A320 FO 125,000$ if B767 FO 140,000$ if A340 FO etc....Just keeps going way up.

The 40k to start is misleading if you only look at your first year,but who makes a career decision based on just the first year salary?

Oops....Guess the thread is hijacked

[tonysoprano]

Babybus.
Notice Fltlevels also conveniently leaves out the starting salary at WJ. I'd say salaries are still pretty good at AC despite the flood of low cost wages that have invaded our industry. Even after the cuts. Ya, ya I know, no low cost wages at WJ. Your mortgage is paid and as long as there is a profit, you are rich.

[Ryan Coke]

What do you mean he left out the starting wage at WJ? I thought he was accurate, with the 40ish at WJ and AC, in fact I thought AC was more like 37k, no?

It just seems like we don't mind the honest debate on wages, but I don't understand why you guys want to twist truths or get bent out of shape over this stuff.

[Jaques Strappe]

Three ex Westjet guys were recently on course at AC. They were saying that at WJ, they were making $650 every two weeks. That is below poverty! How can that be true? but why would 3 different sources all say the same thing?

[tonysoprano]

Rye/Fltlevels.
"...the 40ish here.." Yikes.
Sorry guys. Seems that cold medicine has some side effects (on my brain). Anyway, starting salaries aside (they suck everywhere), the long term is what I look at. Barring any more perfect storms, I know pretty much what my salary and pension will be when I retire. Not planning on buying any yatchs and it'll take me most of my life to pay off the mortgage, but I'm staying put.

[195psi]

They were maxing on their ESP if that's what there take home pay is. The ESP is great but the taxes on what WJA put in is murder. That is wht their take homw was 650. They were putting away $400 every 2 week or $800 a month in RRSP's or stock, not including options. Did they mention that.

[A330]

Babybus,

As nice as those salaries sound your a little optimistic, about 20k high on every scale. Off formula year 3 EMB fo is looking at about 55k.

[tonysoprano]

195psi.
That's great for investments, but it's still only $650 every two weeks to live on. I couldn't feed myself on that let alone a family of four. YYC ain't cheap either. I sure hope those guys were investing in RRSPs and not the airline stock. Pretty sad what pilots have to go through these days.

[WJ200]

They could also have chosen to clear closer to $1000 every two weeks if they hadn't done the 20%. This is entirely optional and it depends on if you can afford to do it or not. The poeple I hear moaning about their take-home pay should look at how much they are putting away and if it is worth the every day sacrifices.

Ialso think that $75,000 after two years is a myth if you are still in the Pay Group according to everything that has been said here. I did the "file review" again in May and asked about pay and was told $55,000 after two years which is why I am still WJ200!!!

[Flightlevels]

thought u were gonna save us the rah rah in posting again tony...lol yawn.