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Analysts Criticize JetBlue Expansion Plan
By BRAD FOSS , 04.05.2006, 05:59 PM
As the U.S. airline industry unraveled over the past five years, JetBlue Airways Corp. proved that a carrier with the right mix of low overhead, cheap fares and distinguished service could succeed during a punishing downturn.
The outlook for most big airlines is still pretty grim, with Delta Air Lines Inc. and Northwest Airlines Corp. in bankruptcy, and the rest unlikely to show a profit in 2006. What has changed, though, is that investors now lump JetBlue among the lackluster.
The tarnish on JetBlue's reputation comes just as a few money-losing carriers, such as AMR Corp.'s American Airlines and Continental Airlines Inc., are gaining favor on Wall Street thanks to shrinking costs, increased demand for air travel and rising fares.
Analysts agree that JetBlue's problems stem from an aggressive expansion plan that has run into headwinds, such as high fuel prices, fierce competition and some bad decisions when choosing new markets. Several have placed a "sell" or equivalent rating on the company's stock.
"Since we're not making money, I think there is skepticism that is out there and it is legitimate skepticism," said John Owen, JetBlue's chief financial officer.
While 2006 is expected to be an unprofitable year for six-year-old JetBlue, the discount carrier aims to minimize the red ink by flying more short-haul routes (to save on fuel), serving airports with fewer rivals and raising fares.
CEO David Neeleman said another option on the table is to scale back JetBlue's rapid growth plan, which includes orders for more than 180 new planes worth approximately $7.5 billion.
http://www.forbes.com/feeds/ap/2006/04/05/ap2650558.html?partner=alerts
Here we go again.
