JetBlue Results

JetBlue Announces Second Quarter 2019 Results

JetBlue Airways Corporation (NASDAQ: JBLU) today reported its results for the second quarter 2019:

  • Reported diluted earnings per share of $0.59 in the second quarter of 2019 compared to a diluted loss per share of $0.39 in the second quarter of 2018. Adjusted diluted earnings per share was $0.60(1) in the second quarter of 2019 versus $0.37(1) in the second quarter of 2018. Note A to this earnings release includes the GAAP to Non-GAAP reconciliation between reported and adjusted diluted earnings per share.
  • GAAP pre-tax income of $236 million in the second quarter of 2019, compared to a pre-tax loss of $162 million in the second quarter of 2018. Excluding the one-time costs, adjusted pre-tax income of $238 million(1), an increase of 52% from the second quarter of 2018.
  • Pre-tax margin of 11.2%, inclusive of the one-time costs, up from pre-tax margin of (8.4%) in the second quarter of 2018. Adjusted pre-tax margin of 11.3%(1), a 3.2 percentage point increase year over year.

Highlights from the Second Quarter 2019

  • Second quarter 2019 revenue per available seat mile (RASM) increased 3.1% year over year, driven by holiday calendar placement and strong close-in trends. This increase is above the mid-point of our original guidance range of 1.0% to 4.0%.
  • Operating expenses per available seat mile, excluding fuel (CASM ex-fuel) (1) increased 1.8%, better than the mid-point of our initial guidance range of 1.5% to 3.5%. This increase is mainly driven by pilot contract costs, offset by ramping benefits of the Structural Cost Program and the favorable timing of expenses.

Key Guidance for the Third Quarter and Full Year 2019:

  • Capacity is expected to increase between 3.0% and 5.0% year over year in the third quarter 2019. For the full year 2019, JetBlue expects capacity to increase between 5.5% and 6.5%.
  • RASM growth is expected to range between 0.5% and 3.5% for the third quarter 2019 compared to the same period in 2018.
  • CASM ex-fuel is expected to increase between 0.5% and 2.5% for the third quarter of 2019, due to approximately 1.5 points related to the timing of expenses moving from the first half, and lower capacity during the period. For the full year 2019, JetBlue expects year over year CASM ex-fuel to grow between 0.5% and 1.5%.

“Thanks to the hard work of our crewmembers, JetBlue is consistently recognized as one of the best airlines in the world. We are excited with the progress we are making on our ‘building blocks’ and towards our 2020 financial goals. As we look to the second half of 2019, we expect a return to margin expansion and EPS growth,” said Robin Hayes, JetBlue’s Chief Executive Officer.

“Airbus has recently communicated additional A321neo delays that will reduce our 2020 growth plans and naturally add pressure to our CASM ex-fuel. Despite these delays, we remain confident that we can execute both our unit cost commitments and achieve our $2.50 to $3.00 earnings per share target for 2020.”

“We believe our work is positioning us for success into the next decade. Next year we anticipate the first delivery of our margin-accretive A220s, a game-changing aircraft to further help us reduce our unit costs, improve our margins and increase our EPS. We are thrilled that we recently converted 13 additional A321s in our existing order book to A321 XLRs, and we expect to begin our European service by adding London from Boston and New York starting in 2021.”

Revenue Performance and Outlook

“During the second quarter our capacity grew 5.9 percent, slightly over the mid-point of our guidance range of 4.5 to 6.5 percent. This was due to a solid completion factor in the quarter, despite runway construction in Fort Lauderdale and JFK, and smaller projects elsewhere in our network,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer.

“We continue to adapt to an always changing industry environment. This quarter we saw new challenges in the Caribbean, in Punta Cana leisure markets. Leisure is an important part of our business, but the majority of our traffic to the Dominican Republic is VFR, or ‘visiting friends and relatives’ that has proven to be more resilient.

Looking into the third quarter, we expect RASM growth between 0.5 and 3.5 percent year over year. The third quarter guidance includes our expectation for continued close-in strength and a 0.75 percentage point headwind largely from Punta Cana. We expect the benefits of our network reallocation efforts will continue to ramp, and we are pleased with the ancillary changes we implemented last year.”

Cost Performance, Outlook and Balance Sheet

“Our second quarter CASM ex-fuel represents a unit cost increase below the mid-point of our guidance range. For the third quarter, we expect CASM ex-fuel growth to range between 0.5 and 2.5 percent. Our guidance includes approximately 1.5 percentage points of maintenance and marketing expenses that has shifted to the third quarter from earlier in the year. Our capacity growth is unusually low this quarter. Our lower capacity is driven both by NEO delivery delays, and our decision earlier in the year to moderate off-peak capacity to support our RASM and margins,” said Steve Priest, JetBlue’s EVP Chief Financial Officer.

“We have made significant progress in our Structural Cost Program over the past six months. We are pleased to report that we have now achieved $257 million dollars in run rate savings by 2020. We are pleased to have recently signed a long-term engine maintenance agreement covering over half of our V2500 engines, which serve our current Airbus fleet. We expect CASM ex-fuel growth of 0.5 to 1.5 percent for 2019 despite A321neo delivery delays.”

Capital Allocation and Liquidity

JetBlue ended the quarter with approximately $909 million in unrestricted cash, cash equivalents, and short term investments, or 11.4% of trailing twelve month revenue. In addition, at the end of the quarter, JetBlue maintained approximately $625 million in undrawn lines of credit. JetBlue repaid $49 million in regularly scheduled debt and capital lease obligations for the second quarter.

Fuel Expense and Hedging

The realized fuel price in the quarter was $2.16 per gallon, a 5.3% decline versus second quarter 2018 realized fuel price of $2.28.

JetBlue has not entered into forward fuel derivative contracts to hedge its fuel consumption for the third quarter of 2019. Based on the forward curve as of July 12th, JetBlue expects an average all-in price per gallon of fuel of $2.18 in the third quarter of 2019.

                         
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
                         
 

Three Months Ended

 

 

 

Six Months Ended

 

 

 
 

June 30,

 

Percent

 

June 30,

 

Percent

 
 

2019

 

2018(1)

 

Change

 

2019

 

2018(1)

 

Change

 
OPERATING REVENUES                        
Passenger

$

2,031

 

$

1,858

 

9.3

 

$

3,833

 

$

3,549

 

8.0

 
Other

 

74

 

 

70

 

5.3

 

 

144

 

 

133

 

8.3

 
Total operating revenues

 

2,105

 

 

1,928

 

9.2

 

 

3,977

 

 

3,682

 

8.0

 
                         
OPERATING EXPENSES                        
Aircraft fuel and related taxes

 

484

 

 

491

 

(1.4)

 

 

921

 

 

908

 

1.5

 
Salaries, wages and benefits

 

576

 

 

486

 

18.5

 

 

1,151

 

 

985

 

16.8

 
Landing fees and other rents

 

121

 

 

122

 

(0.6)

 

 

237

 

 

230

 

2.6

 
Depreciation and amortization

 

127

 

 

114

 

11.3

 

 

251

 

 

226

 

11.4

 
Aircraft rent

 

25

 

 

24

 

4.8

 

 

50

 

 

48

 

3.1

 
Sales and marketing

 

75

 

 

75

 

(0.4)

 

 

141

 

 

142

 

(1.0)

 
Maintenance, materials and repairs

 

168

 

 

188

 

(10.1)

 

 

324

 

 

329

 

(1.8)

 
Other operating expenses

 

277

 

 

261

 

6.1

 

 

563

 

 

522

 

8.1

 
Special items

 

2

 

 

319

 

(99.3)

 

 

14

 

 

319

 

(95.6)

 
Total operating expenses

 

1,855

 

 

2,080

 

(10.8)

 

 

3,652

 

 

3,709

 

(1.6)

 
                         
OPERATING INCOME (LOSS)

 

250

 

 

(152)

 

264.3

 

 

325

 

 

(27)

 

1,283.4

 
                         
Operating margin

 

11.9%

 

 

-7.9%

 

19.8

pts.

 

8.2%

 

 

-0.7%

 

8.9

pts.
                         
OTHER INCOME (EXPENSE)                        
Interest expense

 

(19)

 

 

(16)

 

17.3

 

 

(38)

 

 

(32)

 

21.3

 
Capitalized interest

 

3

 

 

3

 

40.3

 

 

6

 

 

5

 

32.4

 
Interest income and other

 

2

 

 

3

 

(29.3)

 

 

1

 

 

5

 

(73.7)

 
Total other income (expense)

 

(14)

 

 

(10)

 

(25.5)

 

 

(31)

 

 

(22)

 

(39.6)

 
                         
INCOME (LOSS) BEFORE INCOME TAXES

 

236

 

 

(162)

 

245.5

 

 

294

 

 

(49)

 

690.5

 
                         
Pre-tax margin

 

11.2%

 

 

-8.4%

 

19.6

pts.

 

7.4%

 

 

-1.4%

 

8.8

pts.
                         
Income tax expense (benefit)

 

57

 

 

(41)

 

238.7

 

 

73

 

 

(18)

 

499.8

 
                         
                         
NET INCOME (LOSS)

$

179

 

$

(121)

 

247.8

 

$

221

 

$

(31)

 

801.2

 
                         
EARNINGS PER COMMON SHARE:                        
Basic

$

0.60

 

$

(0.39)

     

$

0.73

 

$

(0.10)

     
Diluted

$

0.59

 

$

(0.39)

     

$

0.73

 

$

(0.10)

     
                         
WEIGHTED AVERAGE SHARES OUTSTANDING:                        
Basic

 

300.3

 

 

315.0

     

 

303.1

 

 

318.0

     
Diluted

 

301.8

 

 

315.0

     

 

304.6

 

 

318.0

     
                         
                         
(1) Prior period results have been recast to reflect the adoption of ASC 842 Leases.
                         

 

JETBLUE AIRWAYS CORPORATION
COMPARATIVE OPERATING STATISTICS
(unaudited)
                           
                           
 

Three Months Ended

 

 

 

 

Six Months Ended

 

 

 
 

June 30,

 

Percent

 

 

June 30,

 

Percent

 
 

2019

 

2018

 

Change

 

 

2019

 

2018

 

Change

 
Revenue passengers (thousands)

 

11,026

 

 

10,923

 

0.9

   

 

21,191

 

 

20,804

 

1.9

 
Revenue passenger miles (millions)

 

13,782

 

 

13,043

 

5.7

   

 

26,516

 

 

24,909

 

6.5

 
Available seat miles (ASMs) (millions)

 

16,029

 

 

15,138

 

5.9

   

 

31,466

 

 

29,162

 

7.9

 
Load factor

 

86.0%

 

 

86.2%

 

(0.2)

pts.  

 

84.3%

 

 

85.4%

 

(1.1)

pts.
Aircraft utilization (hours per day)

 

12.1

 

 

12.1

 

-

   

 

11.9

 

 

11.7

 

1.7

 
                           
Average fare

$

184.24

 

$

170.08

 

8.3

   

$

180.89

 

$

170.61

 

6.0

 
Yield per passenger mile (cents)

 

14.74

 

 

14.24

 

3.5

   

 

14.46

 

 

14.25

 

1.5

 
Passenger revenue per ASM (cents)

 

12.68

 

 

12.27

 

3.3

   

 

12.18

 

 

12.17

 

0.1

 
Revenue per ASM (cents)

 

13.14

 

 

12.74

 

3.1

   

 

12.64

 

 

12.63

 

0.1

 
Operating expense per ASM (cents)(2)

 

11.58

 

 

13.74

 

(15.7)

   

 

11.60

 

 

12.72

 

(8.8)

 
Operating expense per ASM, excluding fuel (cents)(1)(2)

 

8.46

 

 

8.32

 

1.8

   

 

8.56

 

 

8.44

 

1.4

 
                           
Departures

 

93,040

 

 

93,688

 

(0.7)

   

 

182,276

 

 

179,734

 

1.4

 
Average stage length (miles)

 

1,147

 

 

1,088

 

5.4

   

 

1,150

 

 

1,093

 

5.2

 
Average number of operating aircraft during period

 

253.0

 

 

245.5

 

3.1

   

 

253.0

 

 

244.7

 

3.4

 
Average fuel cost per gallon, including fuel taxes

$

2.16

 

$

2.28

 

(5.5)

   

$

2.10

 

$

2.19

 

(3.9)

 
Fuel gallons consumed (millions)

 

224

 

 

215

 

4.3

   

 

438

 

 

414

 

5.6

 
Average number of full-time equivalent crewmembers              

 

18,454

 

 

17,677

     

 

(1) Refer to Note A, Consolidated operating cost per available seat mile, excluding fuel (CASM Ex-Fuel) at the end of our Earnings Release for more information on this non-GAAP measure. CASM Ex-Fuel excludes fuel and related taxes, special items, and operating expenses related to other non-airline businesses.
 
(2) Recast to reflect the adoption of ASC 842 Leases.
                         

 

JETBLUE AIRWAYS CORPORATION
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in millions)
       
       
 

June 30,

 

December 31,

 

2019

 

2018

  (unaudited)    
Cash and cash equivalents

$

461

 

$

474

Total investment securities

 

452

 

 

416

Total assets(1)

 

11,236

 

 

10,959

Total debt

 

1,492

 

 

1,670

Stockholders' equity(1)

 

4,697

 

 

4,685

       
       
(1) Prior period results have been recast to reflect the adoption of ASC 842 Leases.

 

Note A – Non-GAAP Financial Measures

 

JetBlue sometimes uses non-GAAP measures that are derived from the consolidated financial statements, but that are not presented in accordance with generally accepted accounting principles in the U.S., or GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures.

 

Consolidated operating cost per available seat mile, excluding fuel and related taxes, and certain non-airline operating expenses, and special items (“CASM Ex-Fuel”)

 

Operating expenses per available seat mile, or CASM, is a common metric used in the airline industry. We exclude aircraft fuel and related taxes, operating expenses related to other non-airline businesses, such as JetBlue Technology Ventures and JetBlue Travel Products, and special items from operating expenses to determine CASM ex-fuel. During the periods presented below, special items include one-time transition costs related to the Embraer E190 fleet exit as well as one-time costs related to the implementation of our pilots' collective bargaining agreement. We believe that CASM ex-fuel provides investors the ability to measure financial performance excluding items beyond our control, such as fuel costs which are subject to many economic and political factors beyond our control, or not related to the generation of an available seat mile, such as operating expense related to other non-airline businesses. We believe this non-GAAP measure is more indicative of our ability to manage airline costs and is more comparable to measures reported by other major airlines.

 

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL
($ in millions, per ASM data in cents)
(unaudited)
                                 
 

Three Months Ended

 

Six Months Ended

 
 

June 30,

 

June 30,

 
 

2019

 

2018

 

2019

 

2018

 
 

$

 

per ASM

 

$

 

per ASM

 

$

 

per ASM

 

$

 

per ASM

 
                                 
Total operating expenses(1)

$

1,855

 

$

11.58

 

$

2,080

 

$

13.74

 

$

3,652

 

$

11.60

 

$

3,709

 

$

12.72

 
Less:                                
Aircraft fuel and related taxes

 

484

 

 

3.02

 

 

491

 

 

3.24

 

$

921

 

 

2.93

 

 

908

 

 

3.11

 
Other non-airline expenses(1)

 

12

 

 

0.09

 

 

11

 

 

0.07

 

 

23

 

 

0.07

 

 

20

 

 

0.07

 
Special items

 

2

 

 

0.01

 

 

319

 

 

2.11

 

 

14

 

 

0.04

 

 

319

 

 

1.10

 
Operating expenses, excluding fuel(1)

$

1,357

 

$

8.46

 

$

1,259

 

$

8.32

 

$

2,694

 

$

8.56

 

$

2,462

 

$

8.44

 
                                 
                                 
(1) Recast to reflect the adoption of ASC 842 Leases.  

 

Operating Expense, Income before Taxes, Net Income and Earnings per Share, excluding Special Items and Impact of Tax Reform

 

Our GAAP results in the applicable periods include the impacts of the 2017 tax reform and charges that are deemed special items which we believe make our results difficult to compare to prior periods as well as future periods and guidance. During the periods presented below, special items include one-time transition costs related to the Embraer E190 fleet exit as well as one-time costs related to the implementation of our pilots' collective bargaining agreement. We believe the impacts of the 2017 tax reform and special items distort our overall trends and that our metrics and results are enhanced with the presentation of our results excluding the impact of these items. The table below provides a reconciliation of our GAAP reported amounts to the non-GAAP amounts excluding the impacts of the 2017 tax reform and special items.

 

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE, INCOME BEFORE TAXES, NET INCOME AND EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS AND IMPACT OF TAX REFORM

(in millions, except per share amounts)

(unaudited)
               
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018(1)

 

2019

 

2018(1)

               
Total operating expenses

$

1,855

 

$

2,080

 

$

3,652

 

$

3,709

Less: Special items

 

2

 

 

319

 

 

14

 

 

319

Total operating expenses excluding special items

$

1,853

 

$

1,761

 

$

3,638

 

$

3,390

               
Operating income (loss)

$

250

 

$

(152)

 

$

325

 

$

(27)

Add back: Special items

 

2

 

 

319

 

 

14

 

 

319

Operating income excluding special items

$

252

 

$

167

 

$

339

 

$

292

               
Income (loss) before income taxes

$

236

 

$

(162)

 

$

294

 

$

(49)

Add back: Special items

 

2

 

 

319

 

 

14

 

 

319

Income before income taxes excluding special items

$

238

 

$

157

 

$

308

 

$

270

               
Income before income taxes excluding special items

$

238

 

$

157

 

$

308

 

$

270

Less: Income tax expense (benefit)

 

57

 

 

(41)

 

 

73

 

 

(18)

Less: Income tax related to special items

 

1

 

 

79

 

 

3

 

 

79

Less: Tax reform impact

 

-

 

 

-

 

 

-

 

 

7

Net Income excluding special items and tax reform impact

$

180

 

$

119

 

$

232

 

$

202

               
Earnings Per Common Share:              
Basic

$

0.60

 

$

(0.39)

 

$

0.73

 

$

(0.10)

Add back: Special items, net of tax

 

-

 

 

0.77

 

 

0.03

 

 

0.75

Less: Tax reform impact

 

-

 

 

-

 

 

-

 

 

0.02

Basic excluding special items and tax reform impact

$

0.60

 

$

0.38

 

$

0.76

 

$

0.63

               
Diluted

$

0.59

 

$

(0.39)

 

$

0.73

 

$

(0.10)

Add back: Special items, net of tax

 

0.01

 

 

0.76

 

 

0.03

 

 

0.75

Less: Tax reform impact

 

-

 

 

-

 

 

-

 

 

0.02

Diluted excluding special items and tax reform impact

$

0.60

 

$

0.37

 

$

0.76

 

$

0.63

               
(1) Prior period results have been recast to reflect the adoption of ASC 842 Leases.

 



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