JetBlue Airways Corporation (NASDAQ:JBLU) today reported its results for the first quarter 2018:
Diluted earnings per share of $0.27. This compares to JetBlue’s first quarter 2017 diluted earnings per share of $0.24 cents.
Pre-tax income of $110 million, a decrease of 9.2% from the first quarter of 2017.
Pre-tax margin of 6.3%, a 1.3 point decrease year over year.
Highlights from the First Quarter 2018
First quarter 2018 revenue per available seat mile (RASM) growth of 6.1%, year over year, including the net benefit from Holiday calendar placement.
Operating expenses per available seat mile, excluding fuel (CASM ex-fuel) of 3.1%, within the initial guidance range, despite a lower completion factor and offset by timing of maintenance expenses.
JetBlue signed a multi-year agreement with Pratt & Whitney for the purchase and maintenance of GTF engines, as work on the Structural Cost Program continues.
Key Guidance for the Second Quarter and Full Year 2018:
Capacity is expected to increase between 5.0% and 7.0% year over year in the second quarter 2018. For the full year 2018, JetBlue expects capacity to increase between 6.5% and 8.5%.
RASM growth is expected to range between (3.0)% and 0% for the second quarter 2018 compared to the same period in 2017.
CASM Ex-Fuel is expected to grow between 2.0% and 4.0% for the second quarter of 2018. For the full year 2018, JetBlue expects year over year CASM Ex-Fuel to be between (1.0)% and 1.0%.
For further details see the latest Investor Update and the First Quarter 2018 Earnings Presentation available via the internet at http://investor.jetblue.com.
JetBlue will conduct a conference call to discuss its quarterly earnings today, April 24, at 10:00 a.m. Eastern Time. A live broadcast of the conference call will also be available via the internet at http://investor.jetblue.com.
Progress Continues Towards Margin Commitments
“I’d like to thank our nearly 22,000 Crewmembers, who again did an exceptional job safely managing through the many snow storms that hit the Northeast during the first quarter, and into early April. Our strong RASM performance was driven by our revenue management initiatives, ongoing ancillary growth, and strong demand across our network. In addition, CASM ex-fuel growth was within our quarterly guidance, despite pressures from lower completion factor” said Robin Hayes, JetBlue’s President and CEO.
This quarter JetBlue achieved an important milestone in its Structural Cost Program, with a new engine purchase and maintenance agreement with Pratt & Whitney. In addition, JetBlue continued to make capital-light investments to support a broad digital transformation strategy, and further grow its ancillary revenues. These are part of JetBlue’s commercial and cost initiatives as it makes progress toward its goal of achieving superior margins.
Revenue Performance and Outlook
First quarter RASM growth exceeded expectations at 6.1%, above JetBlue’s guidance range from early March of 3.5% to 5.5%. Lower completion factor resulted in capacity growth below the low-end of the guidance range from January.
JetBlue’s Latin and Caribbean region was the brightest spot in its network during the first quarter, with leisure travel exceeding expectations. Growth remains targeted to Boston and Fort Lauderdale and skewed towards adding frequencies on existing routes. JetBlue continues to build relevance for its leisure and business customers, underpinning solid RASM growth and supporting its margin commitments.
“Since the end of 2017 demand has strengthened across our network, and we saw further close-in strength to end the quarter,” said Marty St. George, JetBlue’s EVP Commercial and Planning.
Cost Performance, Outlook and Balance sheet
JetBlue’s solid revenue performance and cost management efforts were partially offset by increasing fuel prices. The company’s focus on costs and the timing of certain expenses resulted in CASM ex-fuel within the guidance from January. JetBlue continues to expect its CASM ex-fuel growth to inflect during the second half of the year, driven by progress in its Structural Cost Program.
“We are delighted with having closed a 15-year deal for the purchase and maintenance of NEO engines. A minor portion of the expected savings from this agreement is included in our 3-year program, and most of the run rate savings will extend well beyond 2020. Our continued focus on costs and our recent accomplishment give us confidence that we will achieve our CASM ex-fuel commitments from 2018 to 2020,” said Steve Priest, JetBlue’s EVP Chief Financial Officer.
JetBlue also continued to maintain a balanced approach to capital allocation, which included debt repayment, one aircraft lease buy-out and $125 million in share repurchases in the quarter.
Capital Allocation and Liquidity
JetBlue ended the quarter with approximately $779 million in unrestricted cash and short term investments, or about 11% of trailing twelve month revenue. In addition, JetBlue maintains approximately $625 million in undrawn lines of credit.
During the first quarter, JetBlue repaid $58 million in regularly scheduled debt and capital lease obligations. JetBlue anticipates paying approximately $65 million in regularly scheduled debt and capital lease obligations in the second quarter and approximately $197 million for the full year 2018.
Fuel Expense and Hedging
The realized fuel price in the quarter was $2.09 per gallon, a 23.8% increase versus first quarter 2017 realized fuel price of $1.69.
JetBlue does not presently have any forward fuel derivative contracts to hedge its fuel consumption. Based on the fuel curve as of April 13th, JetBlue expects an average price per gallon of fuel of $2.23 in the second quarter of 2018.