JetBlue's loss exceeded Wall Street expectations, but analysts said they were more concerned about its forecast for losses in the first quarter and for the full year.
Helane Becker, an analyst at the Benchmark Company, said she expected the airline's shares to be under pressure this year. "It is the guidance for continued loss, which is obviously very bearish for the stock."
The No. 2 U.S. low-cost carrier reported a fourth-quarter net loss of $42.4 million, or 25 cents a share, compared with a net profit of $1.5 million, or 1 cent a share, a year earlier. U.S. airlines have been under pressure as high fuel costs and increasing competition — including from other low-cost carriers — squeeze profits all around, even pushing some companies into bankruptcy.
Becker said JetBlue's loss outlook was specific to the carrier and did not reflect a trend for the low-cost carrier industry overall.
"They have some issues that are specific to them," she said, adding that JetBlue was not hedged enough on fuel and was expected to buy more aircraft this year, adding to its costs.
New York-based JetBlue said operating revenue rose 34% to $446 million as the airline added new routes to Boston and other destinations. But the discount carrier said its average fuel costs surged 50.3% to $1.87 per gallon in the quarter.
Ray Neidl, an analyst at Calyon Securities, said JetBlue's earnings not only fell short of his expectations, but he had also been expecting the carrier to post a profit for 2006. Neidl rates the stock "neutral."
The airline expects to report a negative operating margin of between 3% and 5% in the first quarter, assuming fuel would cost $1.92 per gallon. For 2006, it expects to report an operating margin between 2% and 4%, based on an assumed aircraft fuel cost of $1.98 per gallon, net of hedges.
It expects to increase capacity between 27% and 29% in the first quarter, compared with last year.
A one-time outperformer among U.S. airlines, JetBlue stock has come back down to earth. So far this year, its shares are down 15%, compared with a 5.5% drop in the sectoral Amex Airlines index.
JetBlue has faced some difficulties with the Embraer transitioning into their fleet. Doubling spare parts, pilot training, and maintainance facilities could weigh down JetBlue's profits this year. It could also be an issue that slows their growth this year.
Get more information on China Eastern Airlines, KLM Airlines and Pacific Blue Airline.
» JetBlue Faces a New Challenge from LeaderNotes
For JetBlue and Neeleman, 2006 will be a watershed year that will test his leaderhsip. Will the airline make adjustments to strategy, adapt to the changing and volatile environment or fall in line with most of the industry that regularly suffers losses... [Read More]
Tracked on: March 7, 2006 1:11 PM | Permalink to Trackback