Airlines Profit In Decline…
Many airlines are reporting losses for business year 2008 and Jet Blue Airways is no different. In fact, the airline reported a 2008 pre-tax loss to the tune of $75 million. A special charge of $53 million occurred in 2008 and was part of the total $75 million loss. However, without the special charge the pre-tax loss of JetBlue for 2008 would have been $23 million.
Part of the reason JetBlue experienced such high losses was a result of the high fuel prices. From 2007 to 2008, fuel prices jumped $400 million for the airline. Keeping this in mind the company actually did a good job keeping losses in check.
Several actions were taken by JetBlue to reduce losses. One was to reduce all capital commitments as well as sale aircraft, end leases, or simply defer payment.
Lower utilization and aircraft gauge adjustments were used as well to achieve additional reductions in capacity. Due to this effort for the first time in JetBlue history the airline was able to operate the third and fourth quarters at negative capacity.
Increased pricing traction was a result of the capacity reductions. During the year, airfare also increased approximately 13%. Ancillary revenues increased significantly year over year and saw a growth of approximately 90%. This amounted to approximately 10% of JetBlue’s revenue in 2008 or $350 million.
Debt payments, both mandatory and voluntary, were paid during the year as a result of a few financing transactions that were significant for the company to achieve in a tumultuous financial market.
4th Quarter Earnings
During the fourth quarter JetBlue earned $4 million in pre-tax income. This does not include special items. The full year results, in addition to the fourth quarter results, were negatively impacted by the $53 million non-cash accounting charge. For the quarter, based on GAAP, the airline recorded a $49 million pre-tax loss.
Per seat mile, passenger revenue grew 15% and RASM 18% on a year-over-year basis. During the quarter the units showed growth and the airline operated on a 6% operating margin. Operating margins for 2009 are already improving significantly based on lower fuel prices. New challenges are created through a reduction in demand. JetBlue is continuing to work hard to meet the present needs of both customers and shareholders as well as prepare for the future.