Moody's cuts JetBlue on weak earnings, outlook
Thu Apr 13, 2006 5:22 PM ET
NEW YORK, April 13 (Reuters) - Moody's Investors Service on Thursday cut its ratings on JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) deeper into junk territory, citing poorer-than-expected operating results and challenges in executing its growth strategy.
"The rating also considers the difficult operating environment in the US passenger airline industry due to fierce competition, particularly in JetBlue's core East Coast markets," Moody's said in a statement.
The airline in February posted a wider-than-expected loss for the fourth quarter as high fuel costs and competition squeezed earnings, and said it would also lose money in 2006. [ID:nN01220449]
"High fuel costs are likely to continue to negatively affect JetBlue's operating margin, although the company does have a fuel hedging program that provides some protection against higher oil prices," Moody's said.
JetBlue's expansion strategy is also likely to measurably increase its operating costs over the next several years, Moody's said.
Moody's cut JetBlue's corporate family rating two notches to "B2," five levels below investment grade, from "Ba3." The outlook is negative, meaning it is likely to be cut again over the next 12-to-18 months.
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