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JetBlue in the red
Discount carrier posts loss, says it won’t make money this year as fuel costs, ‘old’ airlines cut profits
BY TOM INCANTALUPO, Newsday
STAFF WRITER
February 1, 2006, 10:51 PM EST

Reality has set in for JetBlue Airways.

The Forest Hills-based carrier yesterday posted a wider than expected loss for last year's fourth quarter and said it doesn't expect to make a profit this year, either.

The bad news from what has been an industry success story may soon affect the airline's passengers: The company said it is considering raising fares as it deals with spiraling fuel costs and increased competition.

"We are very disappointed in our performance this quarter as we continued to feel the effects of record-high fuel prices and a tough revenue environment, compounded by the impact of Hurricane Wilma and the residual effects of Hurricanes Katrina and Rita," David Neeleman, JetBlue's chairman, chief executive and founder said in a statement.

Neeleman said in a telephone conference with analysts that he planned to raise fares this year. "Our customers will pay us more to fly on JetBlue," he said. "We need to ask for it."

The $42.4 million loss for last year's final quarter was the first since the low-cost, low-fare carrier began offering shares to the public in 2002. Fuel costs were up 90 percent in the quarter over a year earlier.

The loss also illustrates, analysts said, that JetBlue's low-cost advantage over its larger competitors has diminished, as older, "legacy" carriers such as United, American and Delta extract wage and work rule concessions from their own workers and, in the case of United and Delta, use Chapter 11 bankruptcies to further reduce costs and become more competitive.

"We see a situation now where the window of opportunity has, to a large degree, closed," said Robert Mann, a private airline consultant based in Port Washington. "They [legacy carriers] have gotten their costs down to where they are at least within striking distance of the low-cost carriers."

United officially came out of bankruptcy yesterday and Mann said it's likely to aggressively attempt to win back customers it has lost to JetBlue and other discounters.

Mann and other analysts also cited phase-in costs to JetBlue of a new type of aircraft -- the Embraer 190 short- to medium-range jet -- as affecting the carrier's bottom line. "Expenses were crushingly higher than expected," Mann said.

The company's shares, traded on the NASDAQ, dropped 14 percent or $1.86 yesterday to close at $11.18, a new 52-week low.

Consultant Stuart Klaskin said that despite setbacks, the outlook for the carrier is good. "They're going to be around for a very long time," said Klaskin, who is based in Florida. "They have an extremely astute management team and anyone who tells you the sky is falling for them doesn't have a clue what they're talking about."