JetBlue CEO Defends Growth Plans

NEW YORK (TheStreet) -- The airline industry, proud of itself for managing capacity better than it ever has, looks askance at JetBlue(JBLU).

In an industry with flat-to-down capacity growth, JetBlue plans to boost its available seat miles by 6% in the current quarter and by 8% for the full year.

"We have earned the right to grow," said a defiant CEO Dave Barger, in an interview with TheStreet. Growth is justified, he said, because JetBlue makes money in a recession, has cash flow that turned positive in 2009 for the first time in its history and plans growth only in select destinations -- Boston, Latin America and Washington.

David " Dave" Barger, president and CEO of JetBlue Airways

Washington's Reagan National Airport is a particularly profitable place for airlines because of its convenient location and stringent slot controls. There, JetBlue will begin service Nov. 1 with nine flights a day -- seven to Boston and one each to Orlando and Fort Lauderdale.

"We'll grow Washington Reagan National one trip at a time," Barger said. "We will claw for every brick ... I'll be disappointed if we do not have 30 flights a day [by 2012]."

JetBlue, Barger said, is "contrarian," not only in its growth plans but also in its opposition to "the traditional model, which is 'if you can gouge, do it.'" Among his regrets, he said, is not starting service from Reagan National sooner. Passengers pay a price: It costs nearly 54% more to fly from Reagan National than it does to fly from Baltimore, and much of the service provided by US Airways(LCC) is on small airplanes carrying 50 passengers or less.

By contrast, JetBlue will fly 100-seat regional jets and 150-seat Airbus A320 jets, all with ample legroom. "There's no question in my mind that we will have great traction in that market," Barger said.

Of course, limited slot availability makes Reagan National a tough place to grow, but it's not as if JetBlue hasn't overcome worse odds. In its first 10 years, the iconoclastic carrier became the biggest domestic carrier at both New York's Kennedy Airport and Boston's Logan Airport. That history alone should make its Reagan National intentions clear. On Tuesday, JetBlue announced plans for Boston-Newark service.

This year, JetBlue shares are up about 2%, while the overall industry is up about 13%, with some of the gains fueled by merger-related increases and by US Airways' 86% leap. Analyst ratings for JetBlue are all over the map: Mike Derchin of CRT Capital Group has a buy and a $9 target price. Helane Becker of Dahlman Rose has a hold and a $5.50 target price. William Greene of Morgan Stanley ranks JetBlue "equal weight," neither over nor under.