khysanth
New Member
This was given to all crewmembers:
And here is the official press-release:
Q4 and Year-End 2005 Results
Good Morning Crewmembers -
Very shortly this morning we will publicly announce our fourth quarter and full year 2005 results. A copy of the full press release and financials is attached for your review, but we also wanted to take some time to discuss the results of this quarter, the past year and our outlook for 2006.
For the quarter, we reported a negative 7.1% operating margin, resulting in a 25 cent loss per share. Results for the period include $13 million in unusual charges consisting of $6.9 million in non-cash stock-based compensation expense related to the accelerated vesting of certain employee stock options and a $6.1 million charge for development costs related to a maintenance and inventory tracking system that will not be implemented. Excluding these items, we would have reported a negative 4.1% operating margin, or a loss of 9 cents per share.
Operating revenues for the quarter rose 34% to $446 million, driven by a 22% increase in revenue passenger miles as well as a $9 increase in average fares. RASM was 7.02 cents, up 7.4% over 2004 on an average stage length that was flat.
Our fuel cost per gallon during the quarter increased more than 50% to $1.87 – by far the biggest driver of our year over year CASM increase of 19%. CASM excluding fuel increased 8% to 5.12 cents.
This is our first ever loss as a public company, and we are not pleased with this performance. We had expected to report a loss this quarter, and shared these projections with you around the time of our third quarter earnings call in October. The same challenges that we outlined at that time – high fuel prices and a challenging revenue environment, together with the impact of hurricanes, combined to affect our results in the fourth quarter.
We obviously cannot predict with any certainty what the full year 2006 will bring. For purposes of our 2006 projections, we have assumed that we will face very challenging fuel prices for the full year. When we first built our budget plan for 2006, we expected a return to profitability assuming a fuel price of $1.80 per gallon. However, the market currently predicts that fuel costs will average just under $2.00 for the year – even higher than the price we paid last quarter. While we’ve been able to add some additional hedge protection throughout the year, it’s simply not enough to offer substantial relief at this high cost of fuel.
As noted above, our RASM for 2005 increased by 7.4%. Although this is a significant increase, many other carriers saw higher RASM gains. There is a strong correlation between RASM and capacity. Unlike some other airlines, we have not seen meaningful competitive capacity reductions in our markets. Those airlines which have seen such capacity reductions have enjoyed greater year-over-year RASM increases. Also, some carriers enjoyed greater RASM growth than us in 2005 by reducing or flattening their own capacity. Of course, it’s far easier to achieve significant RASM gains when you’re reducing capacity than when you’re adding it at a rate of 28-30%, as we expect to do in 2006.
Plans for Delta’s Song capacity remain a great unknown. While Delta has announced that Song as an independent brand will no longer exist as of May 2006, we don’t yet know where they plan to utilize their 48 757 aircraft. We do know that they plan to spend the money to convert those planes to a dual-class configuration, so at a minimum we should see an approximate 8% reduction in seats in the markets where we overlap with Song. As we haven’t yet seen any confirmed schedule filings, we have not assumed any upside benefit from potential Song capacity reduction. We continue to suffer the effects of ultra-low discounted fares by distressed carriers in bankruptcy—such as Delta/Song in 70+% of our markets. In the fourth quarter of 2004, only 40% of our network had exposure to Song.
Although our fourth quarter financial results were disappointing, in the fourth quarter we attained several key milestones, thanks to the dedicated efforts of our great Crewmembers – now close to 10,000 strong. For example: JetBlue was named Best Domestic Airline for the fourth consecutive year in the Conde Nast Traveler’s 2005 Readers Choice Award; we began service from Newark Liberty International Airport; we announced major expansion in New York and Boston; we completed a $155 million stock offering, further increasing our strong cash position; and we operated our first E190 revenue flight. . In addition, after a long and arduous process, we executed a 30-year lease for the design, construction and operation of a new 26-gate terminal at JFK. Design of the project is substantially complete and construction has commenced in earnest. This important project reflects our commitment to JFK and the greater New York area – and it will greatly enhance our long-term opportunities in the world’s largest travel market.
So what can we do about this challenging situation? The good news is that we continue to offer the best product in the industry that enjoys strong customer demand thanks to your hard work and dedication. We are examining all aspects of our business to find opportunities to return to profitability and you should know that no stone will be left unturned. We continue to look for opportunities to diversify into higher-yielding market opportunities and to recognize a better average fare in the markets where we currently operate. We intend to make some changes in our revenue management group, including moving the team from Salt Lake City to Forest Hills and hiring additional leadership in the area. We will also continue to selectively reduce capacity in markets where it makes sense to do so, ensuring that we’re deploying our assets wisely in this current high-cost environment which will mean reducing some flights where it makes sense to do so. On the fuel side, we’ll continue take advantage of any opportunities to add to our hedge position and we ask all of you to continue your excellent and successful focus on reducing fuel burn per block hour. Of course, controlling our non-fuel costs will continue to be critical for all of us. We will do what is necessary to return JetBlue to profitability, but fuel continues to increase at a faster pace then we are able to recover through fare increases, which at times is difficult given the competition in our markets.
While disappointed with our results, we are very well positioned for the future with one of the lowest CASMs in the industry and what we believe is the best product delivered by the best Crewmembers in the industry. As always, the most significant impact that each of us can have on our effort to return to profitability is to continue to deliver excellent Customer Service which will promote Customer loyalty. We must remain focused on doing all we can to keep our Customers happy so that they will actively choose to fly JetBlue even if our fare is slightly higher than a competitor’s, and so that they will tell their friends and family about their great JetBlue Experience.
Please join us on a webcast of our conference call to discuss this quarter’s results and our business outlook with the financial and media communities later today at 10:00 a.m. ET. You can access the webcast at investor.jetblue.com. A transcript of the call will be posted on the intranet within 24 hours and an audio replay of the live event will be archived at the address above by clicking ‘Audio Archive’.
In closing, we’d like to offer a sincere thank you for your efforts toward building our great airline as we work through the challenges of the year ahead and prepare for success in the years to come.
With warm regards -
David and Dave
And here is the official press-release:
New York (February 1, 2006) -- JetBlue Airways Corp. (Nasdaq: JBLU) today reported its results for the fourth quarter and full year 2005:
“We are very disappointed in our performance this quarter as we continued to feel the effects of record-high fuel prices and a tough revenue environment, compounded by the impact of Hurricane Wilma and the residual effects of Hurricanes Katrina and Rita,” said David Neeleman, JetBlue’s Chairman and CEO. “Although we saw a 7.4% increase in revenue per available seat mile (RASM) in the face of 25% capacity growth, it was not nearly enough to offset the impact of high fuel costs.”
- Net loss for the quarter was $42.4 million, representing a loss per share of $0.25. These results include $13.0 million in unusual charges consisting of $6.9 million in non-cash stock-based compensation expense related to the accelerated vesting of certain employee stock options and a $6.1 million charge for development costs related to a maintenance and inventory tracking system that will not be implemented. Excluding these two unusual items, the reported net loss would have been $32.0 million, or a loss per diluted share of $0.19 in the fourth quarter. This compares with fourth quarter 2004 net income of $1.5 million, or $0.01 per diluted share. For the full year 2005, net loss totaled $20.3 million, or a $0.13 loss per share. Excluding these two unusual items, the reported net loss would have been $9.8 million, or a loss per diluted share of $0.06 for the full year ended December 31, 2005, compared with net income of $46.2 million, or $0.28 per diluted share, for the full year 2004.
- Operating loss for the quarter was $31.5 million, resulting in a negative 7.1% operating margin. Excluding the impact of the unusual items, the reported operating margin would have been negative 4.1%. This compares to operating income of $10.8 million and a 3.2% operating margin in the fourth quarter of 2004. For the full year 2005, operating income was $47.6 million, resulting in an operating margin of 2.8%. Excluding the impact of the unusual items, operating margin for the full year 2005 would have been 3.6%. This compares with operating income of $110.9 million and an 8.8% operating margin for the full year 2004.
- Operating revenues for the quarter totaled $446.0 million, representing growth of 34.0% over operating revenues of $332.8 million in the fourth quarter of 2004. For the full year, operating revenues totaled $1.70 billion, representing growth of 34.5% over operating revenues of $1.26 billion for the full year 2004.
During the fourth quarter of 2005, JetBlue achieved a completion factor of 98.9% of scheduled flights, compared to 99.9% in 2004. On-time performance, defined by the US Department of Transportation as arrivals within 14 minutes of schedule, was 70.9% in the fourth quarter of 2005 compared to 80.1% for the same period in 2004. For the full year 2005, JetBlue achieved a completion factor of 99.4%, identical to the full year 2004. On-time performance for the full year 2005 was 71.6%, compared to 81.6% for the full year 2004. The Company attained a load factor in the fourth quarter of 2005 of 81.1%, a decrease of 1.8 points on a capacity increase of 24.7% over the fourth quarter of 2004. Load factor for the full year 2005 was 85.2%, an increase of 2.0 points on a capacity increase of 25.3%.
Dave Barger, President and COO, commented, “Our crewmembers performed admirably throughout the difficult environment of 2005. Together, we successfully met the challenges of opening four new cities, connecting many others destinations across our system, adding sixteen new A320s, integrating the E190 aircraft into our fleet as well as commencing construction of our new terminal at JFK and completing construction of two new hangars in addition to our new training facility in Orlando. Looking ahead, we remain focused on improving the company’s financial and operating performance.”
For the fourth quarter 2005, operating revenues increased by 34.0% over 2004 to $446.0 million. Revenue passenger miles increased 22.0% from the fourth quarter of 2004 to 5.2 billion. Yield per passenger mile was 8.16 cents, up 8.1% compared to 2004. Operating revenue per available seat mile (RASM) increased 7.4% year-over-year to 7.02 cents. Available seat miles grew 24.7% to 6.4 billion. Operating expenses for the fourth quarter were $477.5 million, up 48.3% from the fourth quarter of 2004. Operating expense per ASM (CASM) for the fourth quarter 2005 increased 18.9% year-over-year to 7.51 cents. This figure includes the impact of the two unusual items discussed above. During the quarter, realized fuel price was $1.87 per gallon, a 50.3% increase over fourth quarter 2004 realized fuel price of $1.24. Excluding fuel, CASM increased 7.9% year over year. As a result of its fuel hedging program, JetBlue realized an $11.8 million benefit in the fuel expense line in the fourth quarter and a $43.1 million benefit for the full year 2005. JetBlue ended the year with $483.8 million in cash and investment securities.
Looking ahead, for the first quarter of 2006, JetBlue expects to report a negative operating margin between 3% and 5% assuming an all in aircraft fuel cost per gallon of $1.92. For the first quarter, CASM is expected to increase between 17% and 19% over the year-ago period, at the assumed $1.92 aircraft fuel cost per gallon. Excluding fuel, CASM in the first quarter is expected to increase between 6% and 8% year over year. Capacity is expected to increase between 27% and 29% over the same period last year. For the full year 2006, JetBlue expects to report an operating margin between 2% and 4% based on an assumed aircraft fuel cost per gallon of $1.98, net of hedges. CASM for the full year is expected to increase between 10% and 12% over full year 2005, at the assumed $1.98 aircraft fuel cost per gallon. Excluding fuel, CASM in 2006 is expected to increase between 4% and 6% year over year. Capacity for the full year 2006 is expected to increase between 28% and 30% over 2005. Based on these assumptions, the company expects to report a net loss for both the first quarter and the full year 2006.
JetBlue will conduct a conference call to discuss its quarterly earnings today, February 1, at 10:00 a.m. Eastern Time. A live broadcast of the conference call will be available via the World Wide Web at http://investor.jetblue.com.
About JetBlue:
JetBlue Airways is a low-fare airline based in New York City that operates 370 flights daily to 34 destinations. JetBlue offers customers roomy leather seats with 36 channels of free DIRECTV® * programming, the most live television offered by any airline. On flights longer than two hours, the airline also features a selection of first-run movies and bonus features from FOX InFlight™. Customers enjoy brand name snacks and beverages, including freshly brewed Dunkin' Donuts coffee and fine wines selected by JetBlue’s “Low Fare Sommelier,” Joshua Wesson, founder of Best Cellars. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way and an overnight stay is never required. For information or reservations call 1-800-JETBLUE (1-800-538-2583) or visit www.jetblue.com.
* DIRECTV® service is not available on flights between JFK or Newark and Puerto Rico or the Dominican Republic; however, FOX InFlight™ is offered complimentary on these routes. FOX InFlight is a trademark of Twentieth Century Fox Film Corporation. JetBlue's in-flight entertainment is powered by LiveTV, a wholly owned subsidiary of JetBlue.
###This press release contains statements of a forward-looking nature which represent our management's beliefs and assumptions concerning future events. Forward-looking statements involve risks, uncertainties and assumptions and are based on information currently available to us. Actual results may differ materially from those expressed in the forward looking statements due to many factors, including without limitation, our extremely competitive industry, our ability to implement our growth strategy including the integration of the EMBRAER 190 aircraft into our operations, our significant fixed obligations, our ability to maintain our culture, our reliance on high daily aircraft utilization, increases in maintenance costs, fuel prices, insurance costs and interest rates, our dependence on the New York market, our reliance on automated systems and technology, our reliance on sole suppliers, additional government regulation and future acts of terrorism or the threat of such acts or escalation of U.S. military involvement overseas. Information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to, the Company's 2004 Annual Report on Form 10-K/A and Quarterly Reports on Form 10-Q and 10Q/A. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release.
So now they can jack up the prices and their "loyal" customers will think..."oh, it's worth it!" And now they will turn a huge profit!
