JetBlue TrueBlue - JB posts 2007 profit

http://biz.yahoo.com/pz/080129/135203.html

Kudos to jetBlue on great 2007 numbers!

Some highlights from the first few minutes of the call (all I was able to hear thus far):


Talks have already begun with LH for possible interlining/code shares
3 new cities to be announced in 2008 (probably with more Caribbean focus)
Slowing growth to 5-8%, down from project 6-9%
Sell 6 A320s (incl. 2 announced in last call)

Kudos to jetBlue on great 2007 numbers!

Some highlights from the first few minutes of the call (all I was able to hear thus far):


Talks have already begun with LH for possible interlining/code shares
3 new cities to be announced in 2008 (probably with more Caribbean focus)
Slowing growth to 5-8%, down from project 6-9%
Sell 6 A320s (incl. 2 announced in last call)

What if the LH partnership fosters into something like a regional *A member??

What if the LH partnership fosters into something like a regional *A member??

More likely if UA leaves *A as part of a merger. That would leave *A with only US and B6 in the US, which is pretty poor coverage. At the same time, however, I would guess UA and US would both oppose B6 joining the alliance.

Not completely out of the realm of reason, but I wouldn't bet on it until other merger/alliance shifts happen.

While cash on hand is/was tight before LH, it's interesting to see the endless columns devoted to B6's imminent demise when B6 remains the U.S. carrier with the longest period of profitability since 9/11 and the shortest period of losses since 9/11...

While cash on hand is/was tight before LH, it's interesting to see the endless columns devoted to B6's imminent demise when B6 remains the U.S. carrier with the longest period of profitability since 9/11 and the shortest period of losses since 9/11...

Net loss for the quarter was $4 million, representing a net loss of $0.02 per diluted share, compared with fourth quarter 2006 net income of $17 million, or earnings of $0.10 per diluted share. For the full year 2007, net income totaled $18 million, or $0.10 per diluted share, compared with a net loss of $1 million, or $0.00 per diluted share, for the full year 2006.
We are delighted to report a profit for 2007 -- our first full-year profit since 2004 -- especially in light of the operational challenges and record high fuel prices we faced during the year.

Emphasis mine.

Do they have the most profit? Or just the most consecutive quarters? I'd take +100/-5/-5/-5 over +5/+5/+5/+5 any year. I have no idea what the numbers are, but I do know that statistics can be used to support whatever purpose you want them to :)

B6 has $834MM plus $300MM from LH on hand. That's not a ton of money, but they can get by on that with a pretty decent run rate. Of course, I have no idea how the new airplanes coming online and the old ones leaving is going to impact the cash flow, nor do I know what, if any, major debt obligations there may be coming due in the near future.

CASM isn't up too much, but if the domestic market goes at all soft there is going to be trouble; B6 is not diversified enough to withstand a major down-turn in domestic travel.

Why would UA oppose B6? The only place they compete is IAD but that is not the bulk of B6's ops. B6 would be a very nice partner to UA (not merged) if UA placed their code on B6 and then would allow people to connect to *A's ex-JFK transatlatnic ops.

Emphasis mine.

Do they have the most profit? Or just the most consecutive quarters? I'd take +100/-5/-5/-5 over +5/+5/+5/+5 any year. I have no idea what the numbers are, but I do know that statistics can be used to support whatever purpose you want them to :)

B6 has $834MM plus $300MM from LH on hand. That's not a ton of money, but they can get by on that with a pretty decent run rate. Of course, I have no idea how the new airplanes coming online and the old ones leaving is going to impact the cash flow, nor do I know what, if any, major debt obligations there may be coming due in the near future.

CASM isn't up too much, but if the domestic market goes at all soft there is going to be trouble; B6 is not diversified enough to withstand a major down-turn in domestic travel.I never wrote the most profit, but, however, it is true that B6's cumulative losses since 9/11 are minuscule compared to all the legacies.

The difference, which is very significant of course, is that they are very cash poor compared to the legacies.

And as far as posting a loss in 4th qtr, B6 is hardly alone in this category.

But the lack of cash is a big problem, of course, which has been bolstered by LH...even then the total cash reserves are still low obliging B6 to keep posting profits, hence the slew of upcoming initiatives to increase revenue (refundable fares, premium section in front of a/c, etc.)

I never wrote the most profit, but, however, it is true that B6's cumulative losses since 9/11 are minuscule compared to all the legacies.

You wrote "the U.S. carrier with the longest period of profitability since 9/11 and the shortest period of losses since 9/11." I'm curious how you define that. And I'm pretty sure there's a group of folks down at DAL that might challenge the notion.


And as far as posting a loss in 4th qtr, B6 is hardly alone in this category.

WN and CO posted profits. DL's loss decreased, though that's still not great. UA, US, F9 and AA all posted losses. I stopped looking at this point, but there are some carriers that aren't losing money out there. I'm glad that B6 is profitable for the year, but claiming that they have the longest period of profitability doesn't really work unless you can define that.

I'd take +100/-5/-5/-5 over +5/+5/+5/+5 any year.

With all due respect, stupid strategy. It's just like gambling in a casino. You're up $500, and slowly lose $20 on many rounds/hands to follow. Before you know it, those small losses add up and you're at BEP/negative side. Essentially, consistent profits is much more important than chasing those small losses.

Kudos to jetBlue on great 2007 numbers!

Some highlights from the first few minutes of the call (all I was able to hear thus far):


Talks have already begun with LH for possible interlining/code shares
3 new cities to be announced in 2008 (probably with more Caribbean focus)
Slowing growth to 5-8%, down from project 6-9%
Sell 6 A320s (incl. 2 announced in last call)


I have heard B6 will accepted deliveries 12x A320 & 6x E190 will be there in 2008. What about others specific information from B6 has defer deliveries until 2010 or 2012? By year-end B6 will have 110x A320 & 36x E190, am I correct? I'm sure if B6 is continuation more demand growth. I know which specific 3 announced new cities is coming in 2008. My guessing B6 will gets more new cities is: MSP, STL, MKE. Just keep hold my breath if B6 will gets more new routes from SEA anytime soon.

With all due respect, stupid strategy. It's just like gambling in a casino. You're up $500, and slowly lose $20 on many rounds/hands to follow. Before you know it, those small losses add up and you're at BEP/negative side. Essentially, consistent profits is much more important than chasing those small losses.

I planned on repeating my 100/-5/-5/-5, not losing forever :D

I'm also still waiting to hear what "the U.S. carrier with the longest period of profitability since 9/11 and the shortest period of losses since 9/11," actually means. I still think that SouthWest (the folks down in DAL that I referenced previously) might challenge that notion, though I admit I don't have hard numbers to back it up.

You wrote "the U.S. carrier with the longest period of profitability since 9/11 and the shortest period of losses since 9/11." I'm curious how you define that. And I'm pretty sure there's a group of folks down at DAL that might challenge the notion.


WN and CO posted profits. DL's loss decreased, though that's still not great. UA, US, F9 and AA all posted losses. I stopped looking at this point, but there are some carriers that aren't losing money out there. I'm glad that B6 is profitable for the year, but claiming that they have the longest period of profitability doesn't really work unless you can define that.Even adjusting for the difference in size of the carrier, B6 has cumulatively lost less money than any of the legacies since 9/11, including AA, CO, DL, UA, US, NW.

What I meant by "longest period of profitability is that B6 had a profit in 2001, 2002, 2003, and 2004, a period during which all the legacies each lost billions of dollars. And no, B6 has not been more profitable than WN in the period since 9/11.

The big difference is the lack of cash on hand; that's clearly a huge issue because no business can survive without cash.

Still, the situation needs to be put in perspective.

you counted UA twice and left out WN conveniently - if that is the your perspective.

To be fair, if you adjust for the length of existence for the carrier, and the special charges that the legacies took for Bankruptcies, JBLU will be right in the middle of the pack.

What happened is that JBLU narrowly avoided a near-death, as evidenced by the rebound of stock price. And what did it have to do to avoid that near death?

1. Dilution of the current stock base by selling to, surprisingly, a foreign flagship legacy
2. Tighten up the fees for change and re-pricing
3. Raise the ticket price - evidenced by the posts in the forum about lack of deals and the rollout of Y refundables
4. Attempt to build more code-shares
5. Attempt to tier reward structure
6. Cut down freebies and start charging fees

All that sounds familiar? Yes, JBLU is becoming a legacy, or part of. We judge by the action not the words. GONE are the days where you get superior service for below the cost. Unfortunately, those "deals" were built on the subsidy of investors and un-jaded employees. Now JBLU starts behaving like a legacy, or rather business, those people who love the company for the wrong reasons will have to eat crow, if not now, will be soon.

Last but least, the development of relationship between CO and LiveTV is a very interesting one. It is effectively a cash infusion by CO - JBLU has to pledge something down the road. My guess is it is either the ease of price war over Florida market, or a signal for the upcoming merger mania for the industry.


Even adjusting for the difference in size of the carrier, B6 has cumulatively lost less money than any of the legacies since 9/11, including AA, CO, DL, UA, US, NW, UA.

What I meant by "longest period of profitability is that B6 had a profit in 2001, 2002, 2003, and 2004, a period during which all the legacies each lost billions of dollars. And no, B6 has not been more profitable than WN in the period since 9/11.

The big difference is the lack of cash on hand; that's clearly a huge issue because no business can survive without cash.

Still, the situation needs to be put in perspective.

GONE are the days where you get superior service for below the cost. Unfortunately, those "deals" were built on the subsidy of investors and un-jaded employees.

And, in WN's case, extensive fuel price hedges. Yes, we are all going to have to get used to substantially higher prices at the ticket counter just as we have at the gas pump.

You hint at another factor: decreased growth rate goes hand in hand with stagnant stock price, and that means higher cost to attract and retain employees. Also lower employee morale. The fuel cost increase has started an avalanche of problems.

1. Dilution of the current stock base by selling to, surprisingly, a state-owned legacy


If you're talking about Lufthansa you might want to check your facts - it was privatized in two stages in the 1990's and has minimal state ownership today.

you are right, I will edit the post.

What I meant is more flagship country carrier, and legacy. If you're talking about Lufthansa you might want to check your facts - it was privatized in two stages in the 1990's and has minimal state ownership today.

4. Attempt to build more code-shares
5. Attempt to tier reward structure


I haven't really seen either of these; am I missing something? There was supposed "partnership" with EI a year ago that has taken until now to have a press conference (scheduled for tomorrow) and the "deal" with LH that, until now, includes nothing. And the rewards all still cost the same and are available equally across the TrueBlue program.

So did they make an attempt and fail, or not attempt at all :confused:

you counted UA twice and left out WN conveniently - if that is the your perspective.

To be fair, if you adjust for the length of existence for the carrier, and the special charges that the legacies took for Bankruptcies, JBLU will be right in the middle of the pack.

What happened is that JBLU narrowly avoided a near-death, as evidenced by the rebound of stock price. And what did it have to do to avoid that near death?

1. Dilution of the current stock base by selling to, surprisingly, a foreign flagship legacy
2. Tighten up the fees for change and re-pricing
3. Raise the ticket price - evidenced by the posts in the forum about lack of deals and the rollout of Y refundables
4. Attempt to build more code-shares
5. Attempt to tier reward structure
6. Cut down freebies and start charging fees

All that sounds familiar? Yes, JBLU is becoming a legacy, or part of. We judge by the action not the words. GONE are the days where you get superior service for below the cost. Unfortunately, those "deals" were built on the subsidy of investors and un-jaded employees. Now JBLU starts behaving like a legacy, or rather business, those people who love the company for the wrong reasons will have to eat crow, if not now, will be soon.

Last but least, the development of relationship between CO and LiveTV is a very interesting one. It is effectively a cash infusion by CO - JBLU has to pledge something down the road. My guess is it is either the ease of price war over Florida market, or a signal for the upcoming merger mania for the industry.My double mention of UA has been noted and corrected.

I did, however, mention WN, here is the excerpt: "And no, B6 has not been more profitable than WN in the period since 9/11."

First, it is indeed hard to make an apples-to-apples comparison between JBLU and the legacies because B6 was a fast-growing start-up while the legacies were dealing with decades of accumulated debts, many of which were structural (of course, many dealt with it by filing chptr 11).

No question that JBLU is maturing and becoming more like a legacy. Perhaps that is an inevitable feature of flying so much long-haul Remember WN's real ace is that it flies so much higher RASM short haul.

As far as the deal between LiveTV and CO, B6 is essentially bearing the full burden of the risk since they are installing and maintaining the systems at no cost to CO. If people buy, it will be a good deal for JBLU, but if they don't, the only cost CAL has to shoulder is the slightly higher cost of fuel due to heavier payload.

Not much of a partnership if you ask me.

No question that JBLU is maturing and becoming more like a legacy. Perhaps that is an inevitable feature of flying so much long-haul Remember WN's real ace is that it flies so much higher RASM short haul.


EXACTLY!

You recognize it, I recognize it (and every airline analyist realizes it) - too bad Neeleman lost sight of that. The guy sells a small airline to WN for a fortune, stays on the payroll (via his noncompete) and then tries to start WN v2.0.

Problem is, he didn't learn anything from WN. Instead of slow, responsible growth, he charts the opposite course.

Instead of a single fleet type, he violates the cardinal KISS rule of WN and buys the problematic 190s. Numerous posts can be found in the FT archives predicting the recent near-death experience and attributing it to the failed decision to order the second fleet type.

Instead of strategically grabbing only those high yields on short-haul routes, he turns B6 into a transcon and Florida-vacationer airline.

Maybe Barger can fix it. If I were in charge? When the stock price hit $4.30 the other day, I'd have filed a Ch 11 petition to correct the 190 mistake.

EXACTLY!

You recognize it, I recognize it (and every airline analyist realizes it) - too bad Neeleman lost sight of that. The guy sells a small airline to WN for a fortune, stays on the payroll (via his noncompete) and then tries to start WN v2.0.

Problem is, he didn't learn anything from WN. Instead of slow, responsible growth, he charts the opposite course.

Instead of a single fleet type, he violates the cardinal KISS rule of WN and buys the problematic 190s. Numerous posts can be found in the FT archives predicting the recent near-death experience and attributing it to the failed decision to order the second fleet type.

Instead of strategically grabbing only those high yields on short-haul routes, he turns B6 into a transcon and Florida-vacationer airline.

Maybe Barger can fix it. If I were in charge? When the stock price hit $4.30 the other day, I'd have filed a Ch 11 petition to correct the 190 mistake.Agreed with all, especially w. fuel @ $100/barrel (or even @ $90/barrel).

The B6 transcon strategy only worked when fuel was $25/barrel...

I would disagree - in my view, this deal is huge.

1. CAL fully understands that its adoption might drive a cascading effect of other airlines adopting the product for the competitive reason - more money to JBLU

2. The once highly touted amenities, unique to JBLU, are being sold by JBLU to its competitor, with the risk of sunk cost and unpredictable cash flow

Basically, it is the diminution of product differentiation. CO decided not to do whatever to kill JBLU, while JBLU ate the pride of the only "humanity" carrier in air travel. It is the shift of paradigm at JBLU, and a new approach to competing at CO.

The immediate effect, I believe, is the higher fares in JBLU's markets that overlap with CO's, especially FL. Down the road, I do not know yet. Time will tell, but it will not be a long wait.

Not co-inccident is that Barger is an ex-CO guy and has a great understanding of how a legacy with a NY hub makes money.





As far as the deal between LiveTV and CO, B6 is essentially bearing the full burden of the risk since they are installing and maintaining the systems at no cost to CO. If people buy, it will be a good deal for JBLU, but if they don't, the only cost CAL has to shoulder is the slightly higher cost of fuel due to heavier payload.

Not much of a partnership if you ask me.

2. The once highly touted amenities, unique to JBLU, are being sold by JBLU to its competitor, with the risk of sunk cost and unpredictable cash flow

<snip>
The immediate effect, I believe, is the higher fares in JBLU's markets that overlap with CO's, especially FL. Down the road, I do not know yet. Time will tell, but it will not be a long wait.


I think that you are underestimating the impact of number 2; I agree more with TWA Fan 1 that this is a huge risk to JBLU because of the sunk cost and unknow upside for revenue, especially since JetBlue always gave it away for free, and they're planning on charging for it on CO.

As to the fares, they aren't low because CO wants to keep them there. It is a cross between a glut of capacity and the need for JetBlue to appear as a low-fare carrier to get a significant chunk of their revenue, just like WN does.

As to the fares, they aren't low because CO wants to keep them there. It is a cross between a glut of capacity and the need for JetBlue to appear as a low-fare carrier to get a significant chunk of their revenue, just like WN does.

Good point. WN's fares are typically very similar to other carriers' fares for advance purchase. Walk-up fares on WN are still a relative bargain. That's where WN shines, and that's where they make their money. However if the other airlines all copied WN's strategy of setting full fare at roughly 3x the minimum fare, everyone would lose money, including WN (due to reduction in its current full fare market share).

It looks to me as if B6 is taking a more direct route than WN towards legacy carrier strategies. Staying with the herd is safer if you want to avoid premature death, but you won't have any new pastures to yourself that way either. Just ruminating...

Just ruminating...

Excellent extension of the metaphor :D ^ :D

I am not under-estimating anything, both are huge. My point was that both CO and JBLU changed way of doing business, and JBLU bears more risk since it is not an equal exchange.

In addition, you misunderstood what I meant by fares in overlapping market. JBLU has been pricing its product aggressively (discounted) trying to take market share, and it will do less of that now. The result will be higher fare. My bet is that JBLU will change its pricing behavior and adjust capacity, and CO will follow to reciprocate.

I think that you are underestimating the impact of number 2; I agree more with TWA Fan 1 that this is a huge risk to JBLU because of the sunk cost and unknow upside for revenue, especially since JetBlue always gave it away for free, and they're planning on charging for it on CO.

As to the fares, they aren't low because CO wants to keep them there. It is a cross between a glut of capacity and the need for JetBlue to appear as a low-fare carrier to get a significant chunk of their revenue, just like WN does.

I am not under-estimating anything, both are huge. My point was that both CO and JBLU changed way of doing business, and JBLU bears more risk since it is not an equal exchange.

In addition, you misunderstood what I meant by fares in overlapping market. JBLU has been pricing its product aggressively (discounted) trying to take market share, and it will do less of that now. The result will be higher fare. My bet is that JBLU will change its pricing behavior and adjust capacity, and CO will follow to reciprocate.

You are correct that I misunderstood, as I agree that B6 is assuming more risk for the LiveTV deal. I wouldn't mind too much if the fares came up a bit, though it will hurt my personal travel budget, as I think that the current levels are unsustainable for any of the airlines

S.

I would disagree - in my view, this deal is huge.

1. CAL fully understands that its adoption might drive a cascading effect of other airlines adopting the product for the competitive reason - more money to JBLU

2. The once highly touted amenities, unique to JBLU, are being sold by JBLU to its competitor, with the risk of sunk cost and unpredictable cash flow

Basically, it is the diminution of product differentiation. CO decided not to do whatever to kill JBLU, while JBLU ate the pride of the only "humanity" carrier in air travel. It is the shift of paradigm at JBLU, and a new approach to competing at CO.

The immediate effect, I believe, is the higher fares in JBLU's markets that overlap with CO's, especially FL. Down the road, I do not know yet. Time will tell, but it will not be a long wait.

Not co-inccident is that Barger is an ex-CO guy and has a great understanding of how a legacy with a NY hub makes money.
That's a compelling theory, except for the fact that LiveTV has been actively marketing and leasing systems to other carriers for some time.

Current clients include F9, WS, FL, DJ, XE, AP and Blue Wings of Germany.

Clearly, though, CO is the biggest client to date.

exactly my point - CO is the first legacy to adopt.

That's a compelling theory, except for the fact that LiveTV has been actively marketing and leasing systems to other carriers for some time.

Current clients include F9, WS, FL, DJ, XE, AP and Blue Wings of Germany.

Clearly, though, CO is the biggest client to date.

exactly my point - CO is the first legacy to adopt.Understood. Given the structure of the deal, it's a gamble for B6, but if CO customers buy, then it will be good source of revenue.

If other legacies decide to adopt then B6 might have found a cash cow in this sideline, likely never a huge source of revenue, but enough to help with the cash flow.

As far as product differentiation, agreed, but only up to a point since the fact that LiveTV is a free service on B6 is a clear plus for JBLU.

Understood. Given the structure of the deal, it's a gamble for B6, but if CO customers buy, then it will be good source of revenue.

If other legacies decide to adopt then B6 might have found a cash cow in this sideline, likely never a huge source of revenue, but enough to help with the cash flow.

As far as product differentiation, agreed, but only up to a point since the fact that LiveTV is a free service on B6 is a clear plus for JBLU.

You'll see a lot of leasure passengers buying it on long haul routes.
0ther than that, the sales will be average at best.

You'll see a lot of leasure passengers buying it on long haul routes.
0ther than that, the sales will be average at best.

But how much does it take to turn a profit? I vaguely remember reading on here at one point that it costs B6 roughly a dollar per seat per flight to have the system on board. Assuming that some of that cost is for additional fuel and some is the system and licensing, B6 basically only needs 25-30 people to buy it per CO flight to make money. I think that the numbers are in their favor, especially since the planes it is being put on fly mostly transcons, midcons and the like (IAH-both coasts). The shorter segments (EWR-BOS/DCA/CHI) are handled by 733/735s which are not getting the TVs - but are getting the "internet" so the business folks will still get their fix.