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JetBlue expects full-year loss in 2006

JetBlue, the fast-growing US low-fare carrier, on Wednesday said it expected a full-year loss in 2006 amid investor concerns about the problematic launch of new services with smaller regional aircraft.
/ Source: Financial Times

JetBlue, the fast-growing US low-fare carrier, on Wednesday said it expected a full-year loss in 2006 amid investor concerns about the problematic launch of new services with smaller regional aircraft.

The New York-based carrier has captured market share from established rivals with a mix of low costs and high service levels, but has deviated from the industry's standard business model by introducing 90-seat Embraer 190s alongside its fleet of larger Airbus A320s.

Jeff Neeleman, chief executive officer, last week admitted there had been teething troubles with the launch of the new aircraft caused by delivery delays and technical and training issues.

His comments exacerbated investor concerns after the airline warned of a substantial loss for the fourth quarter, despite the improving revenue environment, notably in the US east Coast markets where JetBlue's expansion has been focused.

The airline on Wednesday reported a net loss of $43.4m for the three months to December 31 after recording a profit of $1.5m for the same period in 2004.

The loss included $13m in special charges, including a $6.1m write-off for a new maintenance system that the airline has now cancelled. The performance was far worse than analysts' expected, with improving revenues overshadowed by a 7.4 per cent rise in average costs, excluding the higher fuel prices.

JetBlue is introducing the new aircraft to develop smaller new markets, but there is concern that the mixed fleet could drive up expenses.

US airlines reported a collective net loss of close to $40bn for the final quarter of 2005 as improving revenues failed to counter higher fuel prices, though there is some optimism among analysts that the industry can approach breakeven in 2006 as capacity cuts help carriers to increase fares.

While legacy carriers such as American Airlines and US Airways are cutting capacity, low-fare rivals such as AirTran and Southwest – which both reported full-year profits – plan to add dozens of aircraft this year.

JetBlue's capacity rose 25 per cent last year and is forecast to climb another 28-30 per cent in 2006, and the company said that high fuel prices would lead it to report a net loss for both the first quarter and the full year.