JetBlue’s confidence seems to be deflating after months of claiming it had plans in place to deal with some of the issues, such as rising oil prices, which were negatively impacting its competitors, driving some of them to close.
Recently the New York-based airline, which offers flights to and from The Bahamas, reported fourth quarter losses in the amount of $42.4 million – a figure that has caused raised eyebrows among analysts. They were not expecting such a huge quarterly loss compared with the net profit of $1.5 million the airline earned for the same period in 2004.
Further, the company anticipates first quarter losses for 2006 which, according to a Reuters report, has led analysts to downgrade JetBlue’s stock to “sell” and “reduce” from its previous “neutral” position.
This revelation has already seen the airline’s stock drop by 13 per cent. The fourth quarter losses for 2005 represented a 25 cents drop in share price. The company’s huge losses for the fourth quarter in 2005 are a first for JetBlue since it went public in 2002.
JetBlue reported that its operating revenue was $446 million, which was a 34 per cent increase. Airline officials attributed the increase to costs associated with the addition of new routes.
Unfortunately, the airline’s revenue was not enough to offset losses. Despite its claims last year that it would not increase ticket prices like its competitors were doing, turbulent times for the airline are forcing its hand to consider it as an option.
According to the Reuters report, a JetBlue executive said ticket prices might have to increase by as much as $10 to offset high fuel costs.
Also according to Reuters, “The carrier said its aircraft fuel expense increased 89.5 percent to about $152 million, as average fuel costs surged 50.3 percent to $1.87 per gallon in the quarter.”
The airline executive was also quoted as saying that JetBlue could not turn the situation around by depending on its hedge program to recover profits. “It would be nice to have hedges like Southwest … but frankly we don’t,” said Chief Executive David Neeleman in the Reuters report.
The Nassau Guardian
