July 26, 2012
JetBlue Airways, facing rising maintenance costs driven by an aging fleet of Airbus A320 aircraft delivered in the mid-2000s, says it sold six spare engines in the second quarter and replaced them with new engines acquired in 2012 and late 2011.
“We may continue to opportunistically bend the engine maintenance cost curve by selling other older engines in the future,” CFO Mark Powers said during the New York-based airline’s second-quarter earnings conference call. Power said the airline recorded an $8 million gain in connection with the engine sales. He did not mention who the buyers were.
While JetBlue is dealing with maintenance costs, Powers also briefly mentioned another potential fleet issue: delayed delivery of Airbus A320 aircraft. “Airbus has indicated possible manufacturing delays, which could impact our four remaining 2012 deliveries,” Powers said. He did not elaborate; Airbus did not have any immediate comment.
Powers also noted other cost-saving and cost-smoothing measures implemented by the airline, including the recent signing of a 15-year flight-hour maintenance agreement with General Electric for its fleet of Embraer 190 engines, the first such agreement for the aircraft’s CF34 powerplant. Powers also says JetBlue is making faster progress than expected in negotiating agreements to replace the flight-hour maintenance agreements it had with Aveos Fleet Performance, which abruptly ceased its Canadian operations in March because of financial problems.
The Aveos agreement covered about 20% of the components on JetBlue’s Airbus aircraft, and JetBlue has been using uncontracted providers at greater cost as an interim measure. During the airline’s first-quarter earnings call in April, Powers said he expected the transition to impact expenses this year in double-digit millions of dollars, but now he is reducing that estimate to single-digit millions.