JetBlue Reels in Growth Plans

Fast-growing JetBlue, which has become one of the USA's top discount airlines in just six years of existence, won't be growing quite as fast in 2007.

CEO David Neeleman said Tuesday that the New York City-based discounter's flying capacity will grow 14% to 17% next year -- aggressive for most carriers, but the slowest growth rate yet for JetBlue.

Neeleman expects it to be a profitable change.

"We feel very strongly that the slower growth will be a ... benefit for our investors" and employees, he said.

JetBlue began backing off its growth plans earlier this year after losing $32 million in the January-March quarter.

Neeleman said then that the carrier would sell five Airbus A320 jets already in its fleet, defer delivery of six A320s in each of the next two years, and slow down the delivery of its new Embraer E-190s.

With comments Tuesday, Neeleman throttled back a bit more on planned growth.

He commented in connection with JetBlue's report of a slim, $500,000 loss for the quarter ended Sept. 30, a period when U.S. airlines as a group appear to be on track for a second-straight profit. That hasn't happened since the second and third quarters of 2000.

The JetBlue loss was a modest surprise to Wall Street analysts, who'd been expecting a break-even quarter.

But Neeleman said that rising fares, lower fuel prices, cost-cutting and slower growth now give the carrier a shot at reporting a pretax profit for the full year. Earlier this year he'd all but written off any chance of that happening.

JetBlue CFO John Harvey said that slowing its growth rate should help JetBlue begin growing its profits while simultaneously building cash reserves and repairing a debt-heavy balance sheet. And the carrier will do all that without issuing new stock, he said during a conference call.

Investors recently had been worrying that JetBlue would issue more stock to fund its aggressive growth plans. Adding more stock would have diluted the value of current shares, which have lagged behind most other stocks in the sector over the last 24 months.

But they seemed more pleased with Tuesday's announcement. JetBlue shares rose 4.8% to close at $11.67.

Neeleman and Harvey declined to discuss the mechanics of how JetBlue will achieve a slower growth rate despite scheduled deliveries of new planes from both Airbus and Embraer.

Among the possibilities: deferring deliveries of the new planes or selling or leasing JetBlue planes to other carriers.

Neeleman said JetBlue wouldn't be hurt financially by decisions to defer deliveries or to sell planes already in its fleet. Neeleman said the airline's fleet and aircraft orders are financial assets. Demand for both aircraft types is strong, and he expects to get full value for them in any deals with other carriers.

JetBlue operates 470 flights daily to 47 locations and considers its key airports to be New York John F. Kennedy, Boston Logan, Washington Dulles, Fort Lauderdale, Oakland and Long Beach, Calif.

Also on Tuesday, Alaska Airlines reported a $17.4 million third-quarter loss, or 44 cents a share.

Excluding one-time charges and gains in the quarter, the USA's No.9 airline earned $77.9 million, or $1.93 share. But that still fell short of the consensus analyst forecast of $2.10 a share, according to Thomson Financial.



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