Tuesday, 23 July 2019

JetBlue announces second quarter 2019 results

The US budget carrier and hometown airline of New York, JetBlue Airways, has reported its results for the second quarter 2019 this week. 

“Thanks to the hard work of our crewmembers, JetBlue is consistently recognized as one of the best airlines in the world. We are excited with the progress we are making on our ‘building blocks’ and towards our 2020 financial goals. As we look to the second half of 2019, we expect a return to margin expansion and EPS growth,” said Robin Hayes, JetBlue’s Chief Executive Officer.

“Airbus has recently communicated additional A321neo delays that will reduce our 2020 growth plans and naturally add pressure to our CASM ex-fuel. Despite these delays, we remain confident that we can execute both our unit cost commitments and achieve our $2.50 to $3.00 earnings per share target for 2020.”

“We believe our work is positioning us for success into the next decade. Next year we anticipate the first delivery of our margin-accretive A220s, a game-changing aircraft to further help us reduce our unit costs, improve our margins and increase our EPS. We are thrilled that we recently converted 13 additional A321s in our existing order book to A321 XLRs, and we expect to begin our European service by adding London from Boston and New York starting in 2021.”


Revenue Performance and Outlook


“During the second quarter our capacity grew 5.9 percent, slightly over the mid-point of our guidance range of 4.5 to 6.5 percent. This was due to a solid completion factor in the quarter, despite runway construction in Fort Lauderdale and JFK, and smaller projects elsewhere in our network,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.

“We continue to adapt to an always changing industry environment. This quarter we saw new challenges in the Caribbean, in Punta Cana leisure markets. Leisure is an important part of our business, but the majority of our traffic to the Dominican Republic is VFR, or ‘visiting friends and relatives’ that has proven to be more resilient.

Looking into the third quarter, we expect RASM growth between 0.5 and 3.5 percent year over year. The third quarter guidance includes our expectation for continued close-in strength and a 0.75 percentage point headwind largely from Punta Cana. We expect the benefits of our network reallocation efforts will continue to ramp, and we are pleased with the ancillary changes we implemented last year.”

Cost Performance, Outlook and Balance Sheet


“Our second quarter CASM ex-fuel represents a unit cost increase below the mid-point of our guidance range. For the third quarter, we expect CASM ex-fuel growth to range between 0.5 and 2.5 percent. Our guidance includes approximately 1.5 percentage points of maintenance and marketing expenses that has shifted to the third quarter from earlier in the year. Our capacity growth is unusually low this quarter. Our lower capacity is driven both by NEO delivery delays, and our decision earlier in the year to moderate off-peak capacity to support our RASM and margins,” said Steve Priest, JetBlue’s EVP Chief Financial Officer.

“We have made significant progress in our Structural Cost Program over the past six months. We are pleased to report that we have now achieved $257 million dollars in run rate savings by 2020. We are pleased to have recently signed a long-term engine maintenance agreement covering over half of our V2500 engines, which serve our current Airbus fleet. We expect CASM ex-fuel growth of 0.5 to 1.5 percent for 2019 despite A321neo delivery delays.”

Capital Allocation and Liquidity


JetBlue ended the quarter with approximately $909 million in unrestricted cash, cash equivalents, and short term investments, or 11.4% of trailing twelve month revenue. In addition, at the end of the quarter, JetBlue maintained approximately $625 million in undrawn lines of credit. JetBlue repaid $49 million in regularly scheduled debt and capital lease obligations for the second quarter.

Fuel Expense and Hedging


The realized fuel price in the quarter was $2.16 per gallon, a 5.3% decline versus second quarter 2018 realized fuel price of $2.28.

JetBlue has not entered into forward fuel derivative contracts to hedge its fuel consumption for the third quarter of 2019. Based on the forward curve as of July 12th, JetBlue expects an average all-in price per gallon of fuel of $2.18 in the third quarter


Reported diluted earnings per share of $0.59 in the second quarter of 2019 compared to a diluted loss per share of $0.39 in the second quarter of 2018. Adjusted diluted earnings per share was $0.60(1) in the second quarter of 2019 versus $0.37(1) in the second quarter of 2018. Note A to this earnings release includes the GAAP to Non-GAAP reconciliation between reported and adjusted diluted earnings per share.

GAAP pre-tax income of $236 million in the second quarter of 2019, compared to a pre-tax loss of $162 million in the second quarter of 2018. Excluding the one-time costs, adjusted pre-tax income of $238 million(1), an increase of 52% from the second quarter of 2018.

Pre-tax margin of 11.2%, inclusive of the one-time costs, up from pre-tax margin of (8.4%) in the second quarter of 2018. Adjusted pre-tax margin of 11.3%(1), a 3.2 percentage point increase year over year.

Highlights from the Second Quarter 2019


Second quarter 2019 revenue per available seat mile (RASM) increased 3.1% year over year, driven by holiday calendar placement and strong close-in trends. This increase is above the mid-point of our original guidance range of 1.0% to 4.0%.

Operating expenses per available seat mile, excluding fuel (CASM ex-fuel) (1) increased 1.8%, better than the mid-point of our initial guidance range of 1.5% to 3.5%. This increase is mainly driven by pilot contract costs, offset by ramping benefits of the Structural Cost Program and the favourable timing of expenses.

Key Guidance for the Third Quarter and Full Year 2019:


Capacity is expected to increase between 3.0% and 5.0% year over year in the third quarter 2019. For the full year 2019, JetBlue expects capacity to increase between 5.5% and 6.5%.
RASM growth is expected to range between 0.5% and 3.5% for the third quarter 2019 compared to the same period in 2018.

CASM ex-fuel is expected to increase between 0.5% and 2.5% for the third quarter of 2019, due to approximately 1.5 points related to the timing of expenses moving from the first half, and lower capacity during the period. For the full year 2019, JetBlue expects year over year CASM ex-fuel to grow between 0.5% and 1.5%.



JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
 
Three Months Ended



Six Months Ended


June 30,

Percent

June 30,

Percent
2019

2018(1)

Change

2019

2018(1)

Change
OPERATING REVENUES
Passenger
$
2,031
$
1,858
9.3
$
3,833
$
3,549
8.0
Other

74

70
5.3

144

133
8.3
Total operating revenues

2,105

1,928
9.2

3,977

3,682
8.0
 
OPERATING EXPENSES
Aircraft fuel and related taxes

484

491
(1.4)

921

908
1.5
Salaries, wages and benefits

576

486
18.5

1,151

985
16.8
Landing fees and other rents

121

122
(0.6)

237

230
2.6
Depreciation and amortization

127

114
11.3

251

226
11.4
Aircraft rent

25

24
4.8

50

48
3.1
Sales and marketing

75

75
(0.4)

141

142
(1.0)
Maintenance, materials and repairs

168

188
(10.1)

324

329
(1.8)
Other operating expenses

277

261
6.1

563

522
8.1
Special items

2

319
(99.3)

14

319
(95.6)
Total operating expenses

1,855

2,080
(10.8)

3,652

3,709
(1.6)
 
OPERATING INCOME (LOSS)

250

(152)
264.3

325

(27)
1,283.4
 
Operating margin

11.9%

-7.9%
19.8
pts.

8.2%

-0.7%
8.9
pts.
 
OTHER INCOME (EXPENSE)
Interest expense

(19)

(16)
17.3

(38)

(32)
21.3
Capitalized interest

3

3
40.3

6

5
32.4
Interest income and other

2

3
(29.3)

1

5
(73.7)
Total other income (expense)

(14)

(10)
(25.5)

(31)

(22)
(39.6)
 
INCOME (LOSS) BEFORE INCOME TAXES

236

(162)
245.5

294

(49)
690.5
 
Pre-tax margin

11.2%

-8.4%
19.6
pts.

7.4%

-1.4%
8.8
pts.
 
Income tax expense (benefit)

57

(41)
238.7

73

(18)
499.8
 
 
NET INCOME (LOSS)
$
179
$
(121)
247.8
$
221
$
(31)
801.2
 
EARNINGS PER COMMON SHARE:
Basic
$
0.60
$
(0.39)
$
0.73
$
(0.10)
Diluted
$
0.59
$
(0.39)
$
0.73
$
(0.10)
 
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic

300.3

315.0

303.1

318.0
Diluted

301.8

315.0

304.6

318.0
 
 
(1) Prior period results have been recast to reflect the adoption of ASC 842 Leases.
 
JETBLUE AIRWAYS CORPORATION
COMPARATIVE OPERATING STATISTICS
(unaudited)
 
 
Three Months Ended




Six Months Ended


June 30,

Percent


June 30,

Percent
2019

2018

Change


2019

2018

Change
Revenue passengers (thousands)

11,026

10,923
0.9

21,191

20,804
1.9
Revenue passenger miles (millions)

13,782

13,043
5.7

26,516

24,909
6.5
Available seat miles (ASMs) (millions)

16,029

15,138
5.9

31,466

29,162
7.9
Load factor

86.0%

86.2%
(0.2)
pts.

84.3%

85.4%
(1.1)
pts.
Aircraft utilization (hours per day)

12.1

12.1
-

11.9

11.7
1.7
 
Average fare
$
184.24
$
170.08
8.3
$
180.89
$
170.61
6.0
Yield per passenger mile (cents)

14.74

14.24
3.5

14.46

14.25
1.5
Passenger revenue per ASM (cents)

12.68

12.27
3.3

12.18

12.17
0.1
Revenue per ASM (cents)

13.14

12.74
3.1

12.64

12.63
0.1
Operating expense per ASM (cents)(2)

11.58

13.74
(15.7)

11.60

12.72
(8.8)
Operating expense per ASM, excluding fuel (cents)(1)(2)

8.46

8.32
1.8

8.56

8.44
1.4
 
Departures

93,040

93,688
(0.7)

182,276

179,734
1.4
Average stage length (miles)

1,147

1,088
5.4

1,150

1,093
5.2
Average number of operating aircraft during period

253.0

245.5
3.1

253.0

244.7
3.4
Average fuel cost per gallon, including fuel taxes
$
2.16
$
2.28
(5.5)
$
2.10
$
2.19
(3.9)
Fuel gallons consumed (millions)

224

215
4.3

438

414
5.6
Average number of full-time equivalent crewmembers

18,454

17,677
(1) Refer to Note A, Consolidated operating cost per available seat mile, excluding fuel (CASM Ex-Fuel) at the end of our Earnings Release for more information on this non-GAAP measure. CASM Ex-Fuel excludes fuel and related taxes, special items, and operating expenses related to other non-airline businesses.
 
(2) Recast to reflect the adoption of ASC 842 Leases.
 
JETBLUE AIRWAYS CORPORATION
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in millions)
 
 
June 30,

December 31,
2019

2018
(unaudited)
Cash and cash equivalents
$
461
$
474
Total investment securities

452

416
Total assets(1)

11,236

10,959
Total debt

1,492

1,670
Stockholders' equity(1)

4,697

4,685
 
 
(1) Prior period results have been recast to reflect the adoption of ASC 842 Leases.
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