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JetBlue Reports 21% Surge in Profit

The carrier's improved results come despite an 82% rise in costs, most of them expansion-related.

November 08, 2002|James F. Peltz | Times Staff Writer

JetBlue Airways Corp. said Thursday that its third-quarter profit jumped 21% from a year earlier even as the low-fare carrier spent heavily to expand service in California and elsewhere.

But the airline also incurred some unusual costs in the quarter, including a sharp rise in credit card fraud, and JetBlue's stock tumbled $3.70 to close at $37.10 on Nasdaq after the earnings were released.

JetBlue is one of the few airlines making money, mainly because its general operating costs are among the lowest in the business. The New York-based airline, which launched service in early 2000, also said it enjoyed its best quarterly load factor yet in the quarter, with 84.8% of its seats filled.

JetBlue's net income rose to $12.2 million, or 27 cents a share, in the three months ended Sept. 30, from $10.1 million, or 30 cents, a year earlier. Its per-share earnings fell because JetBlue, which had its initial public stock offering in April, now has more common shares outstanding than a year ago. Revenue doubled, to $165.3 million.

JetBlue's improved results were contrasted with the third quarter a year ago, when the industry suffered from the aftermath of the Sept. 11 attacks. But the higher profit also came despite an 82% surge in third-quarter costs, which largely reflected JetBlue's expansion of flights from Long Beach -- its West Coast hub -- and other cities.

One of its major expansions came in early September, when JetBlue began service between Long Beach and Oakland. It has since added flights from Long Beach to Las Vegas and Salt Lake City. The new flights were rolled out earlier than JetBlue had planned because AMR Corp.'s American Airlines and other carriers are pressing to take over JetBlue's unused slots at Long Beach Airport.

"We spent a lot of money going from six flights a day ... to 18 flights" today, David Neeleman, JetBlue's chief executive, said in a conference call with analysts. "It was the preservation of an asset, and we had to do it."

But Neeleman also said JetBlue suffered "a big spike up" in credit card charge-backs that the airline attributed mostly to Internet fraud. In an interview, Neeleman said the charge-backs, in which a cardholder is reimbursed after disputing a transaction, nearly tripled from the second quarter, to about $1.2 million, but that the company is employing new technology and employee training to curb the problem.

JetBlue sells most of its tickets online. Its average one-way fare in the quarter was $106.69, up from $101.41 a year earlier.

JetBlue also said it moved up plans for service between Las Vegas and New York to capture business from National Airlines, which grounded operations Wednesday.

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