Bloomberg News

JetBlue to ‘Aggressively’ Bid for LaGuardia, Reagan Slots

October 26, 2011

(Updates with fleet detail in 10th paragraph.)

Oct. 26 (Bloomberg) -- JetBlue Airways Corp. will bid for takeoff and landing slots being auctioned at New York LaGuardia and Washington Reagan airports, possibly tapping its $1.24 billion cash balance in the effort.

The U.S. Federal Aviation Administration is preparing to auction 16 pairs of slots at LaGuardia and eight at Reagan under a plan by Delta Air Lines Inc. and US Airways Group Inc. to swap assets at the airports. JetBlue wants to expand at both facilities.

“We have a plan to aggressively bid and win those slots,” Chief Executive Officer Dave Barger said today in an interview. “We’re interested in both airports.”

JetBlue is based in New York and has the most daily domestic departures from the city’s John F. Kennedy International Airport. It operates as many as 11 daily flights from LaGuardia and nine from Reagan. The airline likely would face competition for the slots from Southwest Airlines Co., the largest discount carrier, which has said it’s studying whether to bid for them.

“JetBlue is concerned about Southwest’s further incursions into what it views, in a geographical sense, as its turf,” said George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia. Even with additional slots, JetBlue would “end up with such a small market footprint that they’re not going to get much traction.”

Bidding Process

Barger declined to comment on how many slots it will seek at each airport. Because takeoffs and landings are limited at both airports, airlines must buy or trade slots in order to expand. In the pending auction, the slots are being sold in bundles instead of individually.

“With how the bidding is taking place and our balance sheet strength, we do not believe we’ll have an issue at all in terms of actively participating in the bidding process at both airports,” Barger said. The airline had $1.24 billion in cash and short-term investments at Sept. 30.

Barger commented as JetBlue reported that third-quarter net income tumbled 41 percent to $35 million as increased spending for fuel eclipsed higher fares and passenger traffic. Profit of 11 cents a share fell from 18 cents a year earlier.

Excluding the cost of retiring some debt early, the per- share profit was 12 cents, missing the 13-cent average of 15 analyst estimates compiled by Bloomberg.

Embraer Cancellations

JetBlue canceled the deliveries of 12 Embraer SA E190 aircraft that had been scheduled for delivery in 2014, 2017 and 2018 under a previously announced plan to limit its E190 fleet to no more than 75 planes, the airline said today on a conference call. JetBlue said in June it was working with Embraer to remarket 25 remaining E190s it had ordered.

The airline also deferred the delivery of seven E190s to 2018 instead of 2013 and 2014 as previously planned. JetBlue will take two E190s in 2013 and two in 2014. The changes will reduce JetBlue’s aircraft obligations by about $200 million, the company said.

JetBlue’s fuel expense climbed 55 percent to $454 million in the third quarter and was the company’s largest cost, the company said in statement. The average price JetBlue paid for each gallon of jet fuel rose 44 percent from a year earlier to $3.25.

The airline managed a sixth straight quarterly profit as it bucked the industry trend by adding capacity while other carriers trimmed seating and flights to help reduce operating costs.

Sales rose 16 percent to $1.2 billion on an 8.2 percent increase in traffic. Yield, or average fare per mile, gained 7.7 percent. JetBlue has focused its growth on Boston, where the company is trying to win more business travelers, and in the Caribbean.

JetBlue rose 1.4 percent to $4.42 at the close in New York. The shares have tumbled 33 percent this year.

--Editors: Niamh Ring, Donna Alvarado

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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