Fuel hedging helps JetBlue to another successful quarter

Victoria
By Victoria April 27, 2012 22:57

Fuel hedging helps JetBlue to another successful quarter


JetBlue Airways has posted net income for the first quarter of this year of $30 million for the first quarter – a rise of $27million on the same quarter last year.

Operating expenses, including a 22.7% year-over-year increase in fuel, rose significantly however by 15.2% to $1.1 billion, while operating income grew by a phenomenal 97.4% to $89 million.

Operating margin increased 3 points to 7.4% as the 19% increase in total revenues covered $80 million and higher fuel cost.

 

“While high fuel prices continue to pressure the industry, JetBlue was able to fully offset the increase in fuel expense with record revenues,” said Dave Barger, JetBlue’s President and Chief Executive Office. “A strong pricing environment and the ability to execute on our network strategy in key markets, such as Boston and the Caribbean, allowed us to achieve these strong results. JetBlue ended the quarter with approximately $1.2 billion in unrestricted cash and short-term investment or 26% of trailing 12 months revenue. We continue to believe a strong liquidity position is paramount particularly in light of today’s volatile fuel prices.”

 

Passenger unit revenues increased 8% year-over-year even with 12% more capacity.

 

Mark D. Powers commented that the quarterly operating expenses increased by 15% year-over-year driven higher fuel expense of $80 million, which comprises nearly 40% of airline’s total costs.

 

“While the price of jet fuel increased by approximately 10% compared to last year, we believe we’re well positioned with a fuel-efficient fleet, having an average age of only 6.2 years, as well as employing prudent fuel conservation operating practices. We hedge fuel as a form of insurance against sudden and severe price spikes. In the first quarter, we hedged approximately 42% of our fuel consumption. This helped offset some price pressure. We recorded $9 million in hedge gains during the quarter. For the second quarter, we have hedged approximately 26% of our anticipated jet fuel requirements. For the remainder of 2012, approximately 21% of our projected fuel consumption is hedged.”

 

Including the impact of fuel hedging and taxes, JetBlue’s fuel price in the first quarter was $3.25 per gallon. “Brent crude, based on the forward curve as of April 20, is averaging about $118 per barrel for the full year 2012. And the crew to heat crack spread is averaging about $15 per barrel. Based on this and including the impact of hedges in Texas, we are estimating a second quarter fuel price of $3.33 per gallon and a full year per gallon price of $3.30.”

Victoria
By Victoria April 27, 2012 22:57
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