JetBlue resets cost structure to enable low airfares for next decade

[January 23, 2020]    By Tracy Rucinski

CHICAGO (Reuters) - JetBlue Airways Corp <JBLU.O> said on Thursday it had shaved $314 million off its cost base over the past three years, delivering on a cost-cutting drive designed to enable budget-friendly airfares over the next decade. Curbing costs is a priority for many companies, but particularly for airlines like JetBlue, where costs have been rising faster than for many peers and whose business model depends on fares that can compete with legacy airlines.

A JetBlue passenger jet lands with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren

A JetBlue spokesman confirmed the $314 million in savings, which he said would be announced on the company's earnings call later in the day.

Still, JetBlue expects costs to rise 1.5% to 3.5% in the first quarter, partly due to scheduled aircraft maintenance, before coming under control in 2020 with an estimated decline of up to 2%.

JetBlue shares were up 3% at $20.40 in light premarket trading.

New York-based JetBlue said operating expenses per available seat mile, excluding fuel -- a key performance metric -- were flat in the fourth quarter thanks to the savings program.

The airline, which plans to launch service to London in 2021, is seeking to grow its capacity by between 5.5% and 7.5% this year.

Larger competitors like Southwest Airlines Co <LUV.N> are having to scale back capacity growth due to the prolonged grounding of the Boeing 737 MAX.

JetBlue does not operate the 737 MAX, which was grounded worldwide in March after two fatal crashes within five months, and is in the process of transitioning away from its Embraer <EMBR3.SA> jets to an all-Airbus <AIR.PA> fleet.

Earnings per share rose to $0.56 in the quarter ended Dec. 31 from $0.55 a year earlier, just above a Wall Street consensus forecast for $0.55, on a 3.2% rise in total operating revenues to $2 billion.

Earnings are expected to range between $0.10 and $0.20 per share in the first quarter and between $2.50 and $3.00 in the full-year, while revenues per mile flown are seen flat to 3% higher in the first quarter.

(Reporting by Tracy Rucinski; Editing by Bernadette Baum)

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