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JetBlue Sees Cooler Demand

The company narrows its first-quarter loss.
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Updated from 9:34 a.m. EDT


(JBLU) - Get JetBlue Airways Corporation Report

recovered quickly from its mid-February weather and operational problems, but the low-fare carrier says it's facing weaker second-quarter demand.

"May and June bookings are showing signs of softening," said CEO David Neeleman on a conference call Tuesday. The trend could be cyclical, he suggested. "Sometimes you have a really good quarter, then people take a quarter off and pay off their credit cards, and they come back to you the next quarter," he said.

In the first quarter, JetBlue's passenger revenue per available seat mile grew 8.6%. March passenger RASM rose 17%, the carrier said, as Easter and Passover traffic shifted into the first quarter. As a result, April "will be kind of flat," Neeleman said. Second-quarter passenger RASM growth will be 6% to 8%.

A Valentine's Day storm resulted in about 1,200 canceled flights and cost JetBlue roughly $41 million, including $24 million for passenger vouchers and $17 million in lost revenue. But the carrier learned lessons that enabled it to avoid any meaningful financial impact from a storm the following month that resulted in about 480 cancellations.

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In that case, JetBlue called off more first-day flights and flew 93% of its second-day flights. "As painful as the St. Valentines Day event was, we've learned a lot from it," Neeleman said. "We are a better airline and we're more capable of responding to similar situations."

Despite its weather problems, JetBlue narrowed its first-quarter loss and beat expectations. It lost $22 million in the quarter, or 12 cents a share. Revenue was $608 million, up 24%. Analysts surveyed by Thomson Financial had expected a loss of 19 cents a share.

JetBlue surpassed its performance in the first quarter of 2006, when it lost $32 million, or 18 cents a share, That loss, attributed largely to rising fuel prices, led the carrier to back away from long-haul markets and limit its Airbus A320 fleet expansion.

During the most recent quarter, cost per available seat mile rose 8.2% and capacity grew 12.1%.

In the second quarter, JetBlue expects to report an operating margin between 8% and 10%, compared with a negative 2.2% margin in the first quarter. Capacity is expected to increase 12% to 14%. But Neeleman said the number is flexible because JetBlue could sell some of its used A320 jets and alter the delivery schedule for new ones.

"We like getting new airplanes and kind of shuffling off the bottom of the deck," he said. "We're entertaining lots of very attractive offers for two or three of our existing planes

and we can moderate the growth by selling airplanes if we need to."

Shares of JetBlue were losing 2.4% to $10.73.