JetBlue..The story of expanding too fast?...

Profile picture for user rdc1000

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19 years 9 months

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JetBlue has posted a full year net loss of $20m for 2005. I THINK this is the first time the carrier has made a loss, as I believe it actually turned a profit even in the first year. It makes you wonder if they haven't been the victims of expanding too fast...especially given that they now have 2 aircraft types in the fleet. I wonder if the rapid expansion has prevented them from keeping control of costs as well as capacity available. I'm not expecting them to go out of business, but I it'll be interesting to see if they turn it round nex year. Perhaps those new start ups around the world that have ordered massive fleets should watch and learn!!!
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Profile picture for user cloud_9

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14 years

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JetBlue has posted a full year net loss of $20m for 2005. I THINK this is the first time the carrier has made a loss, as I believe it actually turned a profit even in the first year. It makes you wonder if they haven't been the victims of expanding too fast...especially given that they now have 2 aircraft types in the fleet. I wonder if the rapid expansion has prevented them from keeping control of costs as well as capacity available. I'm not expecting them to go out of business, but I it'll be interesting to see if they turn it round nex year. Perhaps those new start ups around the world that have ordered massive fleets should watch and learn!!!
What you say could be true to a certain extent, especially about the two types of aircraft, however, all low-cost airlines need to expand their route networks rapidly in order to gain a better share of the market. You might also want to consider that airlines in the US have been suffering from high fuel costs since Hurricanes Katrina and Rita slammed into US oil refineries in the Gulf of Mexico region. The only exception to this would be Southwest, who says that by hedging the cost of fuel has helped to boost its quarterly profit from $119m to $227m. During the the fourth quarter of 2005, its fuel supplies were hedged at 85%, and so paid an average of $26 a barrel.
Profile picture for user rdc1000

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What you say could be true to a certain extent, especially about the two types of aircraft, however, all low-cost airlines need to expand their route networks rapidly in order to gain a better share of the market.
Not necessarily the case, especially in my view as these airlines are operating within the realms of contestability. Remember, the majority of these airlines operate without FFP's and so they do not require a major network to satisfy customers, they are price and load factor driven. Within the realms of contestability the airlines would not expand fast at the expense of profit, each route should logically be profitable in its own right. If you also count in the stimulation effect of the LCCs, and the fact that many operate on wholly new routes then they are not expanding rapidly to gain market share. IF anything, they expand rapidly to reduce fixed costs, ie, the impact of having to pay rent on an office is less if you have 5 routes, than if you have 2, because the cost of the office is spread between more routes/passengers, thus helping to keep the fares down, and this comes down the the fact that they are driven by load factor (because they often offer more capacity than demand, and so use very low fares to stimulate demand or modal shift).

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What's the operating profit/loss?
Profile picture for user rdc1000

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19 years 9 months

Posts: 1,342

What's the operating profit/loss?
For the full year it was an operating profit of $47.6m for the year, but an operating loss for the final quarter of $31.5m. They announced yesterday that they anticipate a loss for the first quarter of this year, and also for 2006 overall. They blame fuel prices, which is fair enough, suggesting that their business model is suited to $40-45 per barrel, but currently they're paying $70 per barrel. However they also stated that last year they had a 7% increase in Revenue per Avaliable Seat Miles, whilst capacity increased 25%!!!