JetBlue defers aircraft delivery to reduce capital expenditures



Capacity expansion plans

As of September 2014, JetBlue Airways Corporation (JBLU) had a fleet of 199 aircraft consisting of 130 Airbus A320s, 9 Airbus A321 aircraft, and 60 Embraer 190 aircraft. The majority of these aircraft are owned by JetBlue, only 60 were under operating lease, and six were under capital lease.

JetBlue’s capacity measured by available seat miles (or ASMs) was 11,752 million, representing year-over-year growth of 4.5%. In 3Q14, JetBlue’s capacity growth was higher than Southwest Airlines Co. ’s (LUV) 1.1%, Delta Air Lines, Inc.’s (DAL) 3.2%, and United Continental Holdings Inc.’s (UAL) 0.5%. Meanwhile, JetBlue’s capacity was lower than Alaska Air Group, Inc.’s (ALK) 8.1%.

Part10_3Q14_Aircraft delivery schedule deferral

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Changes to fleet delivery schedule

As of September 30, 2014, JetBlue had orders for 3 Airbus A320 aircraft, 44 Airbus A321 aircraft, 30 Airbus A320 new engine option (A320 neo) aircraft, 30 Airbus A321 neo aircraft, 24 Embraer 190 aircraft, and 10 spare engines scheduled to be delivered by 2022.

Management expects to spend a total of $6,575 million in capital expenditures to purchase the aircraft. Of this amount, $200 million will be incurred in 4Q14 and $660 million in fiscal year 2015. JetBlue, however, has changed its schedule and deferred the delivery of 18 Airbus aircraft, as the graph above shows. The deferral is expected to reduce capital expenditures by $900 million through 2018.

Aircraft use during the quarter declined by 1.4%, from 12.2 hours per day to 12 hours per day, despite a 4% increase in the number of departures. This could be the result of a lower average stage-length, which fell to 1,082 in 3Q14 from 1,085 in 3Q13.

Growing demand for air travel is positive for airline companies. It’s also good news for the SPDR S&P Transportation ETF (XTN) and the iShares Transportation Average ETF (IYT) that have stock in airline companies.


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