Smarting from a 2005 net loss of $20.3 million and now predicting losses in the first quarter, US low-cost carrier JetBlue Airways now estimates it requires up to an extra $10 per ticket to help offset high fuel prices.
Fuel costs alone rose 89.5% in the fourth quarter to nearly $152 million, and accounted for the carrier’s largest expense and as a result, JetBlue's revenue per available seat kilometre (ASK) is not rising fast enough to cover the dramatic increase in fuel cost, it says.
According to research carried out for Flight International sister publication Airline Business, the airline isforecasting costs per ASK of at least 4.9¢ (8.21¢ per available seat mile), a 17% increase on the same period last year, when cost per ASK was 4.2¢. This guidance is based on an assumed aviation fuel cost of 51¢/litre ($1.92/USGal). The carrier's full-year projection presumes a 10% to 12% rise in cost per ASK from last year's 4.3¢ and fuel at just under 53¢/litre says chief executive David Neeleman.
“We are transitioning from an airline that is used to lower fuel prices, to one that has to get used to higher fuel prices. Maybe we’re a $40 to $45 [per barrel] airline and now have to do business in a $70/bbl environment,” he says.
Excluding fuel, JetBlue’s costs are forecast to rise 4%-6% this year. Despite this the carrier was projecting profits, “based on fuel prices from a few weeks ago”. In order for JetBlue’s fortunes to change in 2006, he says, “either fuel has to come down” or the carrier has to get a better return on its fares.
“We need to get another $10 or so per ticket,” Neeleman says, adding: “I feel our customers will pay us more to fly on JetBlue, because we deserve it, but we need to ask for it. No one is going to donate money to our cause.”
MARY KIRBY / PHILADELPHIA
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Source: Airline Business
