JetBlue Airways (JBLU) Tops Q4 EPS by 1c; RASM Down 2.7%; 'Expects Strong Sequential Improvement in RASM in Both Domestic & Latin Market'

JetBlue Airways (NASDAQ: JBLU) reported Q4 EPS of $0.56, $0.01 better than the analyst estimate of $0.55. Revenue for the quarter came in at $2.03 billion versus the consensus estimate of $2.03 billion.

• Reported diluted earnings per share of $0.56 in the fourth quarter of 2019 compared to a diluted earnings per share of $0.55 in the fourth quarter of 2018. Adjusted diluted earnings per share was $0.56(1) in the fourth quarter of 2019 versus $0.50(1) in the fourth quarter of 2018. Note A to this earnings release includes the GAAP to Non-GAAP reconciliation between reported and adjusted diluted earnings per share.
• GAAP pre-tax income of $220 million in the fourth quarter of 2019, compared to a pre-tax income of $201 million in the fourth quarter of 2018. Excluding the one-time items, adjusted pre-tax income of $221 million(1), up 8% from a pre-tax income of $205 million(1) in the fourth quarter of 2018.
• Pre-tax margin of 10.8%, up 0.6 percentage points from a pre-tax margin of 10.2% in the fourth quarter of 2018. Adjusted pre-tax margin of 10.9%(1), a 0.5 percentage point increase year over year from a pre-tax margin of 10.4%(1), exclusive of the one-time costs.

Highlights from the Fourth Quarter 2019

• Fourth quarter 2019 revenue per available seat mile (RASM) declined (2.7)% year over year. This decline is largely in-line with our updated guidance range of (3.5)% to (1.5)%.
• Operating expenses per available seat mile, excluding fuel (CASM ex-fuel)(1) was flat year over year, at the midpoint of our guidance range of (1.0)% to 1.0%. This was mainly driven by the compounding benefits of the Structural Cost Program.

Key Guidance for the First Quarter and Full Year 2020:

• Earnings per share is expected to range between $0.10 and $0.20 in the first quarter 2020. For the full year, JetBlue expects earnings per share to range between $2.50 and $3.00.
• Capacity is expected to increase between 1.5% and 3.5% year over year in the first quarter 2020. For the full year 2020, JetBlue expects capacity to increase between 5.5% and 7.5%.
• RASM growth is expected to range between 0.0% and 3.0% for the first quarter 2020 compared to the same period in 2019.
• CASM ex-fuel is expected to increase between 1.5% and 3.5% for the first quarter of 2020. For the full year 2020, JetBlue expects year over year CASM ex-fuel growth to range between (2.0)% and 0.0%.

Revenue Performance and Outlook

“Our fourth quarter and full year 2019 capacity grew in the upper half of our guidance range due to improved completion factor, in addition to shifting the timing of our cabin restyling program to make up for NEO delivery delays,” said Joanna Geraghty, JetBlue’s President and Chief Operating Officer. “Our first quarter 2020 growth is unusually low, and our annual growth is over 2 points lower than our plan from our 2018 Investor Day, reflecting our current expectations of Airbus deliveries.

Our fourth quarter RASM decreased 2.7 percent year over year, in line with our December update range of (3.5) to (1.5) percent, driven by softer than expected close-in bookings for the Thanksgiving peak.

For the first quarter, we expect strong sequential improvement in RASM in both our domestic and Latin markets, resulting from our capacity actions, our revenue initiatives, easier comps and lower scheduled growth. Our first quarter guidance of 0 to 3 percent includes a headwind of approximately one half point to our system RASM, due to earthquakes in Puerto Rico.”

Cost Performance, Outlook and Balance Sheet

“CASM ex-fuel for the fourth quarter was flat, in line with the mid-point of our guidance range, and for the full year CASM ex-fuel grew 0.8%, beating the mid-point of our initial full year guidance of 0 to 2 percent,” said Steve Priest, JetBlue’s EVP Chief Financial Officer.

“For the first quarter of 2020, we expect CASM ex-fuel growth to range between 1.5 and 3.5 percent. The year over year progression in unit costs this quarter is mainly driven by unusually low scheduled capacity growth, given the timing of 2019 deliveries. In addition, we have scheduled maintenance events during the trough period that result in expenses shifting into the quarter.

Our updated 2020 CASM ex-Fuel guidance is now between minus (2) and 0 percent. We are pleased that despite the capacity constraints tied to the NEO delays, our 2020 goal is very much in line with the original CASM-ex Fuel goal we announced at our last Investor Day. Furthermore, our 2020 plan reflects our commitment to deliver on our 3-year CAGR goal of 0 to 1 percent.”

Capital Allocation and Liquidity

JetBlue ended the quarter with approximately $1.3 billion in unrestricted cash, cash equivalents, and short term investments, or 16.4% of trailing twelve month revenue. JetBlue repaid $65 million in regularly scheduled debt and capital lease obligations during the fourth quarter of 2019.

Fuel Expense and Hedging

The realized fuel price in the quarter was $2.07 per gallon, a 7.6% decline versus fourth quarter 2018 realized fuel price of $2.24.

JetBlue has entered into forward fuel derivative contracts to hedge its fuel consumption for the first and second quarters of 2020. Based on the forward curve as of January 10th, JetBlue expects an average all-in price per gallon of fuel of $2.09 in the first quarter of 2020.

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