JetBlue Cuts 2007 Earnings Outlook on High Fuel Costs
JetBlue Airways, which suffered a major service disruption in February, on Wednesday lowered its 2007 earnings outlook because of high fuel costs and potentially weaker demand.
But the company kept its first-quarter outlook unchanged, despite another weather-related disruption last week, and its shares rose .
In a filing with the U.S. Securities and Exchange Commission, the discount carrier forecast a pretax profit margin of 2 to 4% for the year, down from the range of 3 to 5% it announced on February 21.
The 7-year-old airline, which reined in growth plans last year after earnings slumped, also lowered its 2007 operating profit margin target by one percentage point to between 7 and 9%.
Speaking at a JP Morgan investor conference, Chief Executive David Neeleman said the lower outlook stemmed from the cost of jet fuel, which though down slightly from a year ago is still at historic highs. He also said that concerns about weaker revenue also contributed to the company's lower forecast.
Airline executives have expressed concerns that the slowing U.S. housing market could crimp consumer spending, softening demand for air travel.
JetBlue maintained its first-quarter targets. It had previously said the February storm and resulting service meltdown cost it about $30 million.
Making Nice
In trying to placate angry customers following its service fiasco, JetBlue promised cash or travel vouchers to passengers in the event that operational glitches lead to lengthy delays or cancellations.
The company did not specify whether that policy would weigh on costs in the future.
In mid-February, ice storms near JetBlue's New York hub caused the company to cancel 1,191 flights. Another ice storm last week led to about 400 cancellations.
Neeleman said the recent service problems weren't affecting JetBlue's bookings for the coming months.
"We see no effects of the storm on our forward bookings," said Neeleman. "We feel good about our bookings going forward."
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JetBlue shares have traded at $8.93 to $17.02 in the past 52 weeks.
