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The discounted U.S. airline JetBlue Airways Corporation (JBLU - Analyst Report) delivered weak first quarter 2013 results on the aftereffects of the Hurricane Sandy along with high expenses associated with aircraft maintenance and salaries and wages.

The company’s earnings of 5 cents were substantially below both the prior-year quarter’s results and the Zacks Consensus Estimate of 9 cents.

Total operating revenue climbed 8.0% year over year to $1.29 billion, surpassing the Zacks Consensus Estimate of $1.28 billion. Expansion of network along with the offering of superior and advance products and services aided the outperformance.

Operating income came in at $59 million, down by 33.4% year over year. Operating margin decreased 290 bps year over year to 4.5%.

Operating Statistics

Airline traffic, measured in revenue passenger miles, jumped 7.6% year over year in the reported quarter on 6.3% growth in capacity. Load factor (percentage of seats filled with passengers) increased 100 basis points (bps) year over year to 83.9%.

Yield per passenger mile inched up 0.7% year over year in the first quarter. Passenger revenue per available seat mile inched up 1.8% while operating revenue per available seat mile improved 1.5%.

Expenses

In the quarter under review, total operating expenses increased 11.3% year over year to $1.24 billion, primarily due to maintenance expenses (up 29.8%), other operating expenses (up 20.7%) plus fuel costs and related taxes (up 8.0%). JetBlue’s operating unit cost or cost per available seat mile (CASM) was up 4.6% year over year. Excluding fuel, CASM increased 6.6% from the year-ago quarter.

Financials

JetBlue ended the quarter with unrestricted cash and short-term investments of $849.0 million. The company has a revolving credit facility of $350 million. Total debt, as of Mar 31, 2013, was $2.82 billion as compared with $2.85 billion at the end of 2012.

Guidance

For the second quarter of 2013, the company expects CASM between negative 1.5% and positive 0.5% and CASM, excluding fuel, between 3.0% and 5.0%. CASM for full year 2013 is expected to increase 1.5–3.5%. Excluding fuel, CASM is expected to increase 2–4%.

Capacity is expected to increase 6.5–8.5% in the second quarter and 6.0-8.0% for 2013. JetBlue expects average fuel price per gallon, including hedges and fuel taxes, at $3.03 in the second quarter of 2013 and has hedged approximately 37% of its projected fuel requirements.

Other Airline Stocks

Delta Air Lines (DAL - Analyst Report) reported first quarter 2013 results with adjusted earnings of 10 cents per share, surpassing the Zacks Consensus Estimate of 7 cents. The results also improved considerably from the year-ago adjusted loss of 5 cents per share.

Southwest Airlines Co. (LUV - Analyst Report) reported first quarter 2013 adjusted earnings of 7 cents per share, which beat the Zacks Consensus Estimate of 3 cents. The results improved considerably from the prior-year quarter loss of 2 cents per share.

United Continental Holdings Inc. (UAL - Analyst Report) posted loss of 98 cents per share, narrower than the Zacks Consensus forecasted loss of $1.09. Comparing year over year, the result was worse than a loss of 87 cents per share.

Our Analysis

JetBlue currently carries a Zacks Rank #2 (Buy). We believe JetBlue’s favorable business model, cost-saving steps, expansion initiatives and beneficial partnerships will enable it to generate earnings growth in the coming months. Additionally, growing travel demand, network and fleet restructuring, premium on-board services along with attractive entertainment options and foray into new locations are expected to boost the company’s performance.
 

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