A decline in second quarter yields has prompted JetBlue Airways to reverse capacity guidance growth issued in May, but still expects to increase available seat miles (ASMs) 5.5-7.5% this year, compared to 2012.
Almost all of this growth (which is down half a percentage point from prior guidance) will be focused on the airline’s operations at Boston Logan International Airport and Fort Lauderdale–Hollywood International Airport in Florida, with the rest of the network essential “flat or near to flat,” Chief Commercial Officer Robin Hayes said yesterday during the company’s second quarter earnings call.
These two markets offer JetBlue many opportunities for expansion, President and CEO David Barger noted during the call, adding that the internal goal for Boston is to reach 150 daily flights, about a third more than current levels. Barger said the company is “very happy with Fort Lauderdale,” as it offers access to “many Latin American markets that are underserved by other U.S. carriers.”
Barger also is “satisfied” with JetBlue’s hub operation at Luis Munoz Marin International Airport in San Juan, P.R., despite increased competition for Caribbean traffic.
Despite this optimism, JetBlue still has to address rising costs, and while capacity guidance has reverted to that issued in February, non-fuel unit costs for the year now are expected to rise 2.4-4.5% instead of the 1.5-2.5% forecast at the beginning of the year.
This increase, as with cost increases in recent quarters, primarily is due to maintenance costs on the General Electric (GE) CF34 engines powering the airline’s fleet of Embraer E-Jets, although JetBlue expects a new support contract with GE will allow the carrier to better manage its Embraer MRO costs. Second quarter maintenance expense rose 30.6% year-over-year to $111 million.
The yield decline that prompted the change in JetBlue’s supply forecast totaled 2.8% in the second quarter, and passenger unit revenue fell 3.3% year-over-year, although a 7.8% rise in ASMs and a relatively flat load factor allowed the airline to produce a 4.5% increase in operating revenues to $1.3 billion.
Operating expenses, however, grew 7.5%, due to the MRO costs and increases associated with the capacity growth. Net income, as a result, declined 30.8% to $36 million and the operating margin fell 2.6 points to 7.6%.