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The discounted U.S. airline JetBlue Airways Corporation (JBLU - Analyst Report) delivered a break even fourth quarter 2012 adjusted earnings, missing the Zacks Consensus Estimate of 2 cents as well as the year-ago earnings of 8 cents per share.

Earnings for the full year of 2012 increased to 40 cents from 28 cents in the year-ago period but missed the Zacks Consensus Estimate by a penny.

Although Hurricane Sandy negatively impacted the fourth quarter results, the company registered a strong performance in 2012. The low-cost airline positioned itself as New York’s favorite airline company and its expansion in Caribbean and Latin American markets is yielding record revenue growth for the company.

Total Revenue

Total operating revenue climbed 4.2% year over year to $1.19 billion, missing the Zacks Consensus Estimate of $1.22 billion. For 2012, total operating revenue increased 10.6% year over year to $4.98 billion.

Airline traffic, measured in revenue passenger miles, increased 4.3% year over year in the reported quarter on 4.8% growth in capacity. Load factor (percentage of seats filled with passengers) decreased 30 basis points (bps) year over year to 81.9%.

For 2012, airline traffic increased 9.3% year over year on a 7.6% upside in capacity. Load factor (percentage of seats filled with passengers) enhanced 140 bps year over year to 83.8%.

Yield per passenger mile inched up 0.2% year over year in the fourth quarter. Passenger revenue per available seat mile inched down 0.2% while operating revenue per available seat mile decreased 0.5% in the reported quarter.

For the full year of 2012, Yield per passenger mile edged up 2% year over year. Passenger revenue per available seat mile and operating revenue per available seat mile registered 3.6% and 2.8% year-over-year growth, respectively.

Highlights of the release

In the quarter under review, total operating expenses rose 8.3% year over year to $1.15 billion, primarily due to maintenance expenses (up 27.3%), other operating expenses (up 11.8%) and landing fees (up 9.9%). JetBlue’s operating unit cost or cost per available seat mile (CASM) grew 3.3% year over year. Excluding fuel, CASM increased 4.8% from the year-ago quarter.

In 2012, total operating expenses were $4.61 billion, up 10.1% year over year.  Maintenance and Landing fees increased 48.4% and 12.8%, respectively. JetBlue’s CASM climbed 2.3% year over year. However, excluding fuel, CASM inched up 3.3% year over year.

Operating income came in at $44 million, down by a significant 47.5% year over year. Operating margin decreased 360 bps year over year to 3.7%.

For the full year of 2012, operating income increased 16.6% year over year to $376 million.  Operating margin inched up 40 bps year over year to 7.5%.  
Balance Sheet

JetBlue ended the year with unrestricted cash and short-term investments of $731.0 million. Total debt at the end of 2012 was $2,851 million as compared to $3,136 million at the end of 2011.  


For the first quarter of 2013, the company expects CASM to increase 1–3% and CASM, excluding fuel, to range between negative 2.0% to positive 4.0%.

CASM for full year 2013 is expected to increase 1.5–3.5%. Excluding fuel, CASM is expected to increase in the range of 1–3%, mostly due to increase in maintenance costs.

Capacity is expected to increase in the range of 5.5–7.5% in the first quarter and for 2013.  

JetBlue expects average fuel price per gallon, including hedges and fuel taxes, to be $3.23 in the first quarter of 2013. The company has hedged approximately 18% of its projected fuel requirements for the first quarter of 2013.

Other Airline Releases

Other stocks to consider in the aviation service industry are Delta Air Lines (DAL - Analyst Report), United Continental Holdings Inc. (UAL - Analyst Report) and Southwest Airlines Co. (LUV - Analyst Report). Southwest’s Net earnings of 9 cents managed to beat the Zacks Consensus Estimate of 7 cents in the most recent quarter, while Delta’s earnings of 28 cents were in line with the Zacks Consensus Estimate. Meanwhile, United Continental posted dismal fourth-quarter 2012 results, with a loss of 58 cents wider than the Zacks Consensus Estimate of a loss of 54 cents.

Our Analysis

We believe JetBlue will continue to benefit from network expansion, significant cost control measures, deployment of fuel efficient fleet and managed capital expenditures. Additionally, ancillary revenue initiatives enhanced by its Getaway Vacations Division and even more space offering along with airline partnerships will likely boost its top-line growth.

JetBlue currently carries a Zacks Rank #3 (Hold).

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