JetBlue sees profit streak continuing into 2010

NEW YORK - JetBlue Airways Corp. on Thursday issued a bright earnings outlook for the last half of the year in stark contrast to most other U.S. airlines.

The low-cost carrier said the door is open for possible expansion, alliances — and more fee hikes.

JetBlue expects to post a profit in the next two quarters, after reporting a second-quarter profit that came mostly from cost cuts and lower fuel prices. In contrast, rival Southwest said it cannot predict a profitable third quarter.

JetBlue earned $20 million, or 7 cents per share, in the April-to-June period, compared with a loss of $9 million, or 4 cents per share, a year ago.

Revenue fell 6 percent to $807 million. That beat the forecast of analysts polled by Thomson Reuters, who predicted profit of 2 cents per share on revenue of $800.1 million.

Forest Hills, N.Y.-based JetBlue said expenses dropped 13 percent in the quarter compared with a year earlier.

Passenger traffic in the quarter fell 3.1 percent, on a 1.7 percent decrease in capacity. Airlines cut capacity either through scaling back the number of planes in their fleet, the number of flights on a given route, or by using smaller jets.

JetBlue also made less money per passenger during the quarter. Its yield per passenger mile fell 4.4 percent. The average fare was down 8 percent during the quarter, but JetBlue started to raise some fares toward the end.

The carrier's fuel prices were down about 38 percent compared with a year ago. JetBlue took $42 million in fuel hedging losses in the period related to bad bets on fuel prices from last year.

In a conference call with analysts and investors, CEO Dave Barger said JetBlue began to raise base fares in some markets at the end of the second quarter. JetBlue has been able to raise prices to the Caribbean, for example, because the carrier has added flights to locations where other major airlines have cut back, giving it the upper hand when it comes to pricing.

The carrier said it's working to strengthen its liquidity to pay down debt and prepare for the possibility of buying new slots or gates at key airports, like Ronald Reagan Washington National. Right now, JetBlue flies out of neighboring Washington Dulles International. It's also adding service to Baltimore/Washington International (BWI) this fall.

Barger said he's all ears for a possible strategic alliance that would allow JetBlue customers to easily transfer to more international markets from its home base at New York's John F. Kennedy International.

On the home front, Barger said JetBlue is profiting from added fees, noting that ancillary revenue hikes for services onboard have been "well-received" by customers. The carrier raised the fee for its seats with more legroom during the second quarter — to $40 from $30 on long-haul flights and to $25 from $20 on shorter ones. It also raised the price to check a second bag to $30 from $20.

But Barger said JetBlue won't charge customers for its live television service. Continental, which has partially rolled out its live TV offering, charges $6.

JetBlue also hasn't joined other competitors in charging for things like first checked bags. Barger said the company is very careful to not "nickel and dime" customers.

The airline made an average of $17.50 per passenger in added fees in the second quarter, compared with $16 a year earlier.

The carrier also promised it isn't planning to trim its staff to cut costs.

JetBlue Chief Financial Officer Ed Barnes said the airline's strict no-furlough policy has put pressure on its costs, but it's not budging. Unlike other carriers who've laid off thousands of workers to save money, Barnes said JetBlue's policy is vital to morale for its 12,000 employees and ultimately, for long-term shareholder value.

JetBlue sees revenue per available seat mile — or the money it makes to fly one person one mile — falling between 7 and 10 percent in the third quarter. Costs to fly one passenger one mile are also expected to fall between 12 and 14 percent, mostly due to lower fuel prices. Excluding fuel, costs per available seat mile would increase between 9 and 11 percent, JetBlue said.

The carrier expects to expand capacity slightly — by between 1 and 3 percent in the third quarter.

For the full year, revenue per available seat mile should drop between 2 and 5 percent, while capacity will remain close to flat.

The company thinks traffic will fall slightly in the third quarter and remain flat for the year.

JetBlue added four planes to its fleet during the second quarter, bringing the total to 151. It doesn't expect to add any more this year.

Shares rose 13 cents, or 2.7 percent, to $4.91 in afternoon trading.

(This version CORRECTS Reagan airport's full name.)

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.