JetBlue Trims Growth Plans on Revenue Woes and Rising Fuel Costs

  • Airline sees unit revenue falling more than earlier expected
  • Jet-fuel prices increase 48 percent from low this quarter

JetBlue Airways Corp. cut its planned growth for this year, grappling with disappointing results for a key measure of revenue just as fuel prices threaten to crimp profit.

The airline said it will increase flight and seat capacity between 8 percent and 9.5 percent this year, down from previous plans of as much as 10.5 percent growth. Second-quarter revenue from each seat flown a mile will decline 7.5 percent to 8.5 percent from a year earlier, JetBlue said in a statement Friday, compared with earlier guidance for a drop of 7 percent.

Fare discounting and capacity increases across the U.S airline industry that have outpaced economic growth have battered unit revenue for more than a year. Meanwhile, low jet-fuel prices that had helped carriers report record profits are climbing, rising 48 percent in New York through Thursday from this quarter’s low on April 5. Holding the line on capacity helps boost per-seat revenue, a key metric for some investors, as higher fuel prices render some marginal flights unprofitable.

“This should not be a surprise, as the decline in forecast unit revenue is consistent with recent comments from several other airlines,” Helane Becker, a Cowen & Co. analyst, said in a note to investors. “Earlier this week, JetBlue successfully led a fare increase. The airlines have recently been more active with attempts at fare increases in an effort to offset rising jet-fuel costs.”

Big Expense

Fuel has fallen to the second-largest expense for most carriers, behind labor. It accounted for 17 percent of JetBlue’s operating expenses in the first quarter, after historically representing about one-third of airlines’ overall costs.

Unit revenue fell 7 percent last month, following a 12.5 percent decline in April, the New York-based carrier said.

JetBlue dropped 1.5 percent to $18.16 at 10:19 a.m. in New York. The shares earlier dropped as much as 3.9 percent, the most intraday since May 12.

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