JetBlue Airways Corp. on Tuesday posted its second consecutive quarterly loss and outlined a plan that includes deferring delivery of some aircraft, selling others and trimming costs.
Although investors applauded the plan, sending JetBlue shares up more than 13 percent, some analysts questioned whether the proposed changes would be enough.
In a note to clients, Merrill Lynch analyst Michael Linenberg said deferring aircraft is “the right move” and called the plan “a step in the right direction.” He maintained a sell rating on the stock.
JetBlue said high fuel costs drove it to a first-quarter loss of $32 million, or 18 cents per share, versus a year-ago profit of $6 million, or 4 cents per share. Revenue rose 31 percent to $490 million from $373 million a year ago.
The results topped Wall Street forecast for a wider loss of 20 cents per share on stronger revenue of $497.9 million, according to Thomson Financial.
Shares of JetBlue soared $1.24 to close at $10.64 on the Nasdaq Stock Market. The stock reached a 52-week peak of $16.85 in December, touched a low of $8.93 last week and is down 32 percent since the start of the year.
The company said it paid an average of $1.86 per gallon for fuel during the quarter, up 43 percent from a year ago. The fuel costs were the major factor in a near doubling of operating expenses during the period.
Chairman and Chief Executive David Neeleman said in a conference call that the restructuring plan is, in a way, JetBlue getting back to its roots.
“We had a plan where we had 44 cities we were going to fly to JFK, and we had so much success on the transcontinental business — as you should when you have sub-dollar fuel — that we found that an effective way to grow,” he said. “Certainly fuel has changed the way we look at the world, and it has on the revenue side and on the cost side.”
The plan includes focusing on medium- and short-haul flights, revamping fare structures and slowing capacity growth. The company said its initiatives should boost revenue by about $35 million and yield cost savings of another $35 million this year.
JetBlue said it plans to defer orders for 12 A320 Airbus planes, which were previously scheduled for delivery from 2007 through 2012, and sell two to five of its Airbus A320 jets. JetBlue uses the A320 exclusively for long-haul flights. The deferral and sales should curb capacity growth this year to between 20 percent and 22 percent versus an earlier estimate for an increase of up to 30 percent over 2005, the company said.
The carrier said it wants to maintain the low fares it is known for but generate “a better mix” of selling prices.
“If we are trying to get an average fare to Florida that’s something north of $100, then it’s just maybe selling a lot less $69 fares and selling fares more in the $89 and $79 area,” said Neeleman.
The average fare in the first quarter was $105.
“If we had an average fare of $110 or $115, we would have been reporting much different results here for this first quarter,” Neeleman said.
Calyon Securities analyst Ray Neidl said he’s keeping “a wait-and-see attitude,” and reaffirmed a neutral rating on the stock.
“With the exception of Southwest — which still has fuel hedges — the low-cost carriers need price increases,” he said.
JetBlue’s plan calls for “labor efficiencies” — which Neeleman defined as “growing at a slower rate as we add airplanes and becoming more efficient.” The company has no plans to lay off workers, he said. However, those hired this year are considered “unbudgeted,” and new positions will be reviewed going forward.
For the first quarter, revenue passenger miles increased 24.8 percent from the first quarter of 2005 to 5.54 billion. A revenue passenger mile is equal to one paying passenger flown one mile.
Capacity increased 27.2 percent to 6.58 billion available seat miles. Occupancy, or the number of seats filled, fell 1.6 percentage points to 84.2 percent.
Looking ahead, the Forest Hills, N.Y.-based company said it expects to post a profit in the second quarter but sees a loss for the full year. Analysts expect a 2006 loss of 21 cents on $2.38 billion in revenue and forecast second-quarter profit of 4 cents per share.