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JetBlue Airways Corporation (JBLU - Analyst Report), reported earnings of 21 cents per share missing the Zacks Consensus Estimates by a penny. However, earnings rose substantially from 14 cents earned in the corresponding quarter a year ago backed by cost control and increased focus on differentiated product offerings.

Total operating revenue climbed 10.2% year over year to $1,442 million and surpassed the Zacks Consensus Estimate of $1,439 million. The year-over-year growth was aided by the introduction of new services, fleet re-designing and expansion of network footprint.

Operating income came in at $152 million, up 34.5% year over year. Operating margin increased 190 basis points (bps) year over year to 10.5%.

Operating Statistics

Airline traffic, measured in revenue passenger miles, rose 5.4% year over year in the reported quarter on 5.1% growth in capacity. Load factor (percentage of seats filled with passengers) increased 20 bps year over year to 85%.

Yield per passenger mile increased 5.1% year over year in the third quarter. Passenger revenue per available seat mile grew 5.4% while operating revenue per available seat mile increased 5% year over year.


In the quarter under review, total operating expenses increased 8.1% year over year to $1,290 million, primarily due to maintenance expenses (up 28.0%), and fuel costs and related taxes (up 4.2%). JetBlue’s operating unit cost or cost per available seat mile (CASM) increased 2.8% year over year. Excluding fuel, CASM crept up 4.9% from the year-ago quarter.


JetBlue ended the quarter with unrestricted cash and short-term investments of $954.0 million. The company has a revolving credit facility of $350 million. Total debt, as of Sep 30, 2013, was $2.84 billion compared with $2.85 billion at the end of 2012.


For the fourth quarter of 2013, the company expects CASM between negative 1.0% and positive 1.0% and CASM, excluding fuel and profit sharing, is expected between negative 0.5% and positive 1.5% year over year. CASM for full-year 2013 is expected to increase 1.0%–3%. Excluding fuel and profit sharing, CASM is estimated to increase between 2.5% and 4.5% year over year.

Capacity is expected to increase 7.0–9.0% in the fourth quarter and 5.5–7.5% for 2013. JetBlue expects average fuel price per gallon, including hedges and fuel taxes, at $3.03 in the fourth quarter and has hedged approximately 39% of its projected fuel requirements.

Our Analysis

JetBlue, which operates with  other carriers like Delta Air Lines  (DAL - Analyst Report), Southwest Airlines Co. (LUV - Analyst Report) and  United Continental Holdings Inc. (UAL - Analyst Report), currently carries a Zacks Rank #2 (Buy). We believe the company displays a strong brand name and is in constant endeavors to improve its service and products offerings. Additionally, JetBlue will benefit from growing travel demand, network expansion, fleet re-designing, cost-saving moves and lucrative strategic partnerships.

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