JetBlue Airways Corporation CEO Discusses Q3 2010 Earnings - Call Transcript

JetBlue Airways Corporation CEO Discusses Q3 2010 Earnings - Call Transcript
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JetBlue Airways Corporation (

JBLU

)

Q3 2010 Earnings Call

October 21, 2010 09:30 am ET

Executives

Dave Barger - CEO

Ed Barnes - CFO

Analysts

Michael Linenberg - Deutsche Bank

Bill Green - Morgan Stanley

Jamie Baker - JPMorgan

Duane Pfennigwerth - Raymond James

Will Randow - Citigroup

Glenn Engel - Bank of America-Merrill Lynch

Hunter Keay - Stifel Nicolaus

Gary Chase - Barclays Capital

Kevin Crissey - UBS

Helane Becker - Dahlman Rose & Co.

Dan Mckenzie - Hudson Securities

Steve O'Hara - Sidoti & Company

Presentation

Operator

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» JetBlue Q3 2009 Earnings Call Transcript

Good morning ladies and gentlemen and welcome to the JetBlue Airways third quarter 2010 earnings conference call. Today's call is being recorded. We have on call today Dave Barger, JetBlue's Chief Executive Officer and Ed Barnes, JetBlue's CFO.

As a reminder, this call includes forward-looking statements about future events. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore, investors should not place undue reliance on these statements. For additional information concerning factors that could cause results to differ from the forward-looking statements, please refer to the company's annual and periodic reports filed with the Securities and Exchange Commission.

At this time I would now like to turn the call over to Dave Barger. Please go ahead sir.

Dave

Barger

Thank you Sandra and good morning everyone and thank you for joining us. This morning we announced record net income of $59 million for the third quarter or $0.18 per diluted share, an improvement of $44 million year-over-year. We reported operating income of $140 million resulting in an operating margin of 13.6%, the best margin we posted since 2004. We believe we are on track to report one of our most profitable years ever, reflecting the progress we have made to strengthen our network, maximize revenues and control costs.

I'd like to take this opportunity to thank our crew members for the remarkable job they are doing when in a safe, reliable and productive, high quality operation. Our crew members should be extremely proud of their performance, and we are pleased to reward them for their contribution to our financial success.

Based on our year-to-date profit, we accrued $12 million in profit sharing during the third quarter, and $26 million year-to-date. We also continue to focus on maintaining a strong liquidity position, one of the best in the industry. We ended the quarter with roughly $1 billion of unrestricted cash and short investments, or 25% of trailing 12 months revenue. Given the volatility and the price of fuel, and the airline industry's vulnerability to unpredictable events, we believe maintaining a strong liquidity position remains of paramount importance.

Out third quarter results were driven by a strong revenue environment in the ongoing development of our network strategy and revenue initiatives. Quarterly revenues exceeded $1 billion for the first time in our company's history, up 20.5% versus last year. Unit revenues for the quarter were up 11.1% on an 8.5% increase of capacity. Typically an increase in capacity comes at the expense of yield but our third quarter yield increased 11.4% year-over-year even as average stage length increased 2%. We had an average one-way fare of $142 and 11.6% improvement over last year, this reflects the improving demand environment as well as our ability to attract and retain higher yielding customers.

We are particularly pleased with our September year-over-year passenger unit revenue performance which increased 10% on 10% more capacity. Our domestic PRASM for September outperform the industry reflecting our focus on improving revenue performance during shoulder periods.

A key part of this focus has been the expansion of our network in Boston. As we expand the Boston with new destinations and increased frequencies we have become increasingly relevant to its business travelers. In 2010 we will open six new destinations from Boston and increase capacity by 30% versus last year.

During the third quarter we saw a significant improvement in both yield and load factor on our east coast short-haul market such as Boston to Chicago reflecting schedule adjustments we made to better accommodate business traffic on those routes as well as better access to our inventory through the GDS channel. These actions coupled with our low cost structure and strong brand have enabled us to increase market share in Boston. We expect competitive capacity in our Boston markets to be down about 2.5% year-over-year in the fourth quarter of 2010.

We continue to see tremendous additional potential in Boston, we currently offer over 75 daily flights to 34 destinations and we plan to grow to over 100 flights per day in Boston by next summer. As part of this effort we plan to begin service from Boston to Washington National next month and to New York in May of next year for solidifying our position as Boston's leading carrier.

Our Caribbean and Latin America markets also continue to perform well in fact unit revenue growth in the Caribbean has outpaced our system average. During September the Caribbean and Latin America was the best performing regions in our network in terms of year-over-year revenue growth even as we added significant capacity. By the end of next year we expect roughly 23% of our capacity will be in the Caribbean and Latin America.

Our balance mix up leisure driven markets such as Punta Cana and visiting friends and relatives or the VFR market such Santa Domingo has helped us better manage the seasonality of our business and approve overall revenue performance.

We continue to be opportunistic as competitors reduce capacity in this key region. To that end we recently announced this service from San Juan to Tampa and Jacksonville and we plan to begin service to Turks & Caicos island from New York and Boston in February.

Another key element of our focus on improving revenue performance during off peak periods has been to enhance our product offering for business travelers. Last month for example we began offering pre-boarding for even more legroom customers. We also continue to benefit from real time connectivity in the GDS channel as result of our transition to Sabre earlier this year which has help increased corporate travel penetration.

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