JetBlue Reports Record Quarter and Says It Will Focus on Bigger Aircraft

NEW YORK ( TheStreet) -- JetBlue ( JBLU) reported record quarterly income and said it will focus on adding larger aircraft rather than regional aircraft to its fleet.

The carrier reported third-quarter earnings of $71 million, or 21 cents a share. Analysts had estimated 22 cents. Revenue rose 10.4% to $1.4 billion, in line with estimates. In the same quarter a year earlier, JetBlue earned $45 million, or 14 cents a share.

JetBlue also said said Tuesday it will defer delivery of 24 Embraer 190 aircraft and will place orders for 35 Airbus A321s, converting 18 A320 orders to A321 orders. The change sets the size of the E190 fleet at 60 aircraft. The A321 order includes 15 A321ceo aircraft, to be added by 2017, and 15 A321neos.

The current fleet includes just one A321 as well as 130 A320s and 59 E190s.

"While the E190 is critical to our continued success in Boston and San Juan, we are now at the point where our network growth calls for larger gauge aircraft," said CEO Dave Barger, in a prepared statement. "In addition to allowing us to more cost-effectively serve certain high density markets, we believe our fleet restructuring plan will allow us to accelerate attractive growth opportunities at Fort Lauderdale/Hollywood International Airport."

A321s have a unit cost that is 10% to 15% lower than A320 unit costs. "With significant savings from increased fuel efficiency and better utilization of our airport slot portfolio in key markets, we believe these A321 aircraft will improve our company's profitability," Barger said.

Chief Financial Officer Mark Powers said the order change will reduce "our capital commitments through the next three years, which is consistent with our free cash flow and return on invested capital goals."

Additionally, JetBlue expects to retrofit up to 110 Airbus A320s in its existing fleet with sharklets beginning in 2015. Sharklets are expected to reduce fuel consumption by up to 3%.

During the quarter, the carrier reported its best-ever earnings and 14th consecutive quarter of profitability. "These results reflect the success of our network strategy in high value geography and our focus on offering customers a differentiated product while maintaining competitive costs," Barger said. Passenger revenue per available seat mile rose 5.4% to 11.75 cents.

On the cost side, cost per available seat mile excluding fuel and special items increased 4.9% to 6.95 cents, while CASM including items rose 2.8% to 11.47 cents. In the current quarter, CASM excluding fuel and profit sharing is expected to be between negative 0.5% and positive 1.5%.

JetBlue shares closed Monday at $7.53, up 32% for the year. Shares were flat in premarket trading on Tuesday.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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