More turbulence for JetBlue

Oct. 10, 2007
Feds levy $30,000 penalty and analyst downgrades stock

JetBlue Airways Corp., the Forest Hills-based discount airline, flew into turbulence yesterday, receiving a federal fine for failing to provide reliable on-time flight information, and seeing an influential analyst at Goldman Sachs downgrade its stock.

The events come as JetBlue is still trying to restore its image after embarrassing delays at Kennedy Airport in February that led to broad changes in the airline's management, including the departure of founding chief executive David Neeleman. He is now JetBlue's non-executive chairman.

Goldman Sachs analyst Robert Barry said in a note to clients that he has stripped JetBlue of its "buy" rating and replaced it with a "neutral" rating. Goldman removed JetBlue from its "America's Buy List."

"We see limited upside in the shares in the next six months," Barry wrote. He said JetBlue faces "growing pressure" on highly competitive cross-country routes. Some of that pressure will come from Virgin America Inc., the start-up airline partly owned by British billionaire Richard Branson. Virgin American started flying between San Francisco and New York on Aug. 8.

Bryan Baldwin, a JetBlue spokesman, said the airline would have no comment on the analyst's report.

The U.S. Transportation Department, meanwhile, confirmed that it levied a $30,000 fine against JetBlue "for failing to properly or adequately disclose the on-time performance of specific flights when requested." Airlines that submit performance data are required to disclose any such information to any customer who asks for it.

The transportation department said its agents "uncovered the lack of compliance in a recent telephone survey" the agency conducted, and that JetBlue's failure came "on numerous occasions."

Jenny Dervin, a spokeswoman for JetBlue, said, "We make every effort to provide on-time performance statistics to our customers and can assure you that our oversight in this instance was purely unintentional. We have corrected the situation and now are able to consistently provide this important information to our customers when asked."

Bill Mosley, a transportation department spokesman, said the survey was the first of its kind the agency had conducted, and it plans to do more.

In trading yesterday, shares of JetBlue were down 13 cents, to $9.26. They are down more than 35 percent this year.

In July, JetBlue reported profits rose in the second quarter, compared with the same period last year. But the airline said it plans, at least for the time being, to slow its growth rate. JetBlue said it plans to defer 16 of the new Embraer E-190 airplanes originally scheduled for delivery from this year through 2012, to 2013 through 2015. The company also said it plans to sell three Airbus aircraft.