Pricey JetBlue Finds It'll Take More Than Earnings

Updated from 11:21 a.m. EDT

JetBlue Airways

(JBLU) - Get Report

bucked industry trends and turned a profit in its first quarter but investors who have bid up the stock frantically since its initial offering were apparently looking for more.

At a time when the major airlines are gushing losses, JetBlue earned $13 million, or 34 cents a share, in the first quarter, compared with $6.7 million, or 21 cents a share, a year ago. Good thing, too, since given its $1.8 billion market cap, the carrier is already bigger than several of the established airlines that are awash in red ink.

By comparison,

UAL

(UAL) - Get Report

, the parent of United Airlines, has an equity market value of $803.3 million, while

Continental Airlines

(CAL) - Get Report

-- which spun off its own regional carrier,

ExpressJet

(XJT)

, in an initial public offering last week -- has a market cap of $1.7 billion.

UAL, which is the second-biggest airline in terms of revenue, lost $510 million in the first quarter, while the fifth-largest carrier, Continental Airlines, had a loss of $166 million. Both airlines have been blighted by slow traffic and excess capacity following the terrorist attacks on Sept. 11.

Peer Review

In fact, the only major carrier to post a first-quarter profit was

Southwest Airlines

(LUV) - Get Report

, a regional airliner with a $13.8 billion market cap.

Like Southwest, JetBlue offers low fares in underserved markets in metropolitan areas with high average fares. Over its two-year existence, the upstart has been touted as the next Southwest. Like its low-cost peer, JetBlue operates a single fleet of airplanes, in order to keep its equipment expenses down. JetBlue's first quarter operating expenses were $110 million, compared with $4 billion at UAL and $2.2 billion at Continental. Southwest had total costs of $1.2 billion in the first quarter.

At the same time, JetBlue said that its load factor, or the percentage of seats filled in its planes, rose to an all-time high of 80.8%, versus load factors of 72.2% at UAL and 74% at Continental.

Also benefiting JetBlue is the fact that it employs a non-union workforce. In the first quarter, employment-related costs were 31% of the startup's total revenue, compared to 48% at UAL, whose financial recovery in the first quarter was hurt by complications with negotiating open labor contracts.

Pricey

At mid-afternoon Thursday, JetBlue was trading off $1.11, or 2.43%, at $44.60. The company still trades at about 50 times projected 2002 earnings, compared to the S&P 500, which is trading at approximately 22 times this year's earnings.

On April 12, JetBlue made its debut with great fanfare, rising 67% on its first day of trading.

JetBlue's revenue grew 109% to $133.4 million in the first quarter from $63.9 million a year ago. In the first quarter, JetBlue said it improved its operating margin to 17.5% from 11.8% a year ago.

The carrier said that it expects to record a lower operating margin in the second quarter, however, as the seasonal effects of Passover and Easter boosted traffic over the first quarter.