Revenue Jumps at JetBlue

JetBlue's(JBLU Quote - Cramer on JBLU - Stock Picks) shares surged Tuesday as the carrier bested fourth-quarter expectations and spoke optimistically about improved unit revenue and deals with Lufthansa and Continental(CAL Quote - Cramer on CAL - Stock Picks).

The airline lost $4 million, or 2 cents a share, in the quarter, while analysts surveyed by Thomson Financial had estimated a loss of 5 cents. Revenue rose 16.6% to $739 million. Analysts had estimated $731 million. A year earlier, JetBlue had net income of $17 million.

CEO Dave Barger, who promised to slow growth when he took over as chief executive in May, said just 10% of the carrier's seats were in new markets, down from 25% a year ago. "We have transformed from an aggressive startup to a company that can sustain profitable growth," he said on a conference call with analysts.

Barger said results improved sharply in December, when JetBlue saw a 5% increase in passenger revenue per available seat mile. The momentum is continuing into the first quarter. "We have not seen any significant signs of an economic slowdown," he said.

Meanwhile, Continental said it reached an agreement with LiveTV, a wholly owned JetBlue subsidiary that provides live in-flight television and connectivity systems. LiveTV, which already serves eight airlines, will equip new Continental aircraft that begin to arrive in January 2009. Barger said it will pursue additional opportunities.

Barger also reiterated that JetBlue has begun discussions with Lufthansa regarding a "commercial agreement," as well as supply chain improvements. He said the agreement -- he did not specify that it would be a code share -- could extend beyond New York's Kennedy Airport to cities such as Orlando, where JetBlue has 17 nonstop destinations. Lufthansa recently became JetBlue's largest shareholder.

During the quarter, passenger revenue per available seat mile rose 2.5%. Capacity climbed 11.5%, largely due to 1,200 weather-related cancellations in the year-earlier quarter. Load factor fell 3.1 points to 76.6%, partially negating the impact of a 6.7% increase in yield.

Cost per available seat mile rose 11.7%. CASM excluding fuel was 5.48 cents, up 4.5%, reflecting the removal of a row of seats from the A320 fleet. Barger said expenses would have been $50 million lower had fuel prices remained at their year-ago level.

Looking ahead, first quarter passenger RASM is expected to increase 10% to 12%, while CASM excluding fuel is expected to be flat or decrease as much as 2%. Capacity will likely be up 13% to 15% for the quarter and 5% to 8% for the year.

For the full year 2007, net income totaled $18 million, representing the first full-year profit since 2004.

Shares in the carrier were trading Tuesday at $5.88, up 19%.