UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 24, 2014
JETBLUE AIRWAYS CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware | | 000-49728 | | 87-0617894 |
(State of Other Jurisdiction of Incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
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27-01 Queens Plaza North, Long Island City, New York 11101
(Address of principal executive offices) (Zip Code)
(718) 286-7900
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
On July 24, 2014, we provided an update for investors presenting information relating to our financial outlook for the third quarter ending September 30, 2014 and full year 2014, and other information regarding our business. The update is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
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Exhibit Number | | Description |
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99.1 |
| | Investor Update dated July 24, 2014 of JetBlue Airways Corporation. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | JETBLUE AIRWAYS CORPORATION | |
| | | | (Registrant) | | |
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Date: | July 24, 2014 | | | By: | | /s/ MARK D. POWERS | |
| | | | | | Executive Vice President and Chief Financial Officer (on behalf of the Registrant and in his capacity as Principal Financial and Accounting Officer) |
EXHIBIT INDEX
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Exhibit Number | | Exhibit |
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99.1 | | Investor Update dated July 24, 2014 of JetBlue Airways Corporation. |
Investor Update Investor Update: July 24, 2014*
This investor update provides JetBlue’s investor guidance for the third quarter ending September 30, 2014 and full year 2014.
*This investor guidance reflects the sale of LiveTV completed in June 2014
Recent Announcements
JetBlue has recently announced service between the following new city pairs:
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City Pair | Frequency | Start Date |
Fort Lauderdale, FL - Cartagena, Colombia** | 1x Daily | October 29, 2014 |
Fort Lauderdale, FL - Jacksonville, FL | 2x Daily | October 29, 2014 |
Fort Lauderdale, FL - Las Vegas, NV | 1x Daily | October 29, 2014 |
Boston, MA - Liberia, Costa Rica** | 1x Weekly (seasonal) | November 1, 2014 |
Boston, MA - Puerto Plata, Dominican Republic** | 1x Weekly (seasonal) | November 1, 2014 |
Boston, MA - Vieux Fort, Saint Lucia** | 1x Weekly (seasonal) | November 1, 2014 |
Orlando, FL - Salt Lake City, UT | 1x Daily | November 12, 2014 |
Washington, DC (DCA) - Fort Myers, FL | 1x Daily (seasonal) | December 18, 2014 |
Washington, DC (DCA) - West Palm Beach, FL | 1x Daily (seasonal) | December 18, 2014 |
**Subject to receipt of government approval
Capacity
Third quarter 2014 available seat miles (ASMs) are estimated to increase 3.0% to 5.0% year-over-year. Full year 2014 ASMs are estimated to increase 4.0% to 6.0% year-over-year.
JetBlue estimates the following distribution as a percentage of total ASMs by aircraft type:
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Third Quarter 2014 | | Full Year 2014 |
A320 | A321 | E190 | | A320 | A321 | E190 |
79% | 6% | 15% | | 80% | 5% | 15% |
Average stage length is projected to be approximately 1,083 miles during the third quarter of 2014 versus 1,085 miles during the same prior year period and approximately 1,089 miles for the full year 2014 versus 1,090 miles for the full year 2013.
Operational Outlook
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| Third Quarter | | Full Year |
| 2014 | | 2014 |
Operating Expense Year-Over-Year Percentage Change | | | |
Unit Operating Expense (CASM) | 0.5% - 2.5% | | 1.0% - 3.0% |
Unit Operating Expense Excluding Fuel and Profit Sharing (CASM Ex-Fuel and Profit Sharing) | 1.0% - 3.0% | | 2.5% - 4.5% |
1
JetBlue Airways Investor Relations • (718) 709-2202 • ir@jetblue.com
Investor Update |
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| Third Quarter | | Full Year | |
| 2014 | | 2014 | |
Fuel Expense | | | | |
Estimated Consumption (gallons) | 167 million | | 635 million | |
Estimated Fuel Price per Gallon, Net of Hedges * | $3.08 | | $3.09 ** | |
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* Includes fuel taxes and fixed forward price (FFP) agreements. ** JetBlue utilizes the forward Brent crude curve and the forward Brent crude to heating oil crack spread to calculate the unhedged portion of its prompt quarter. As of July 17, 2014, the forward Brent crude per barrel price was $110 and the crack spread averaged $11 per barrel for the third quarter of 2014. JetBlue utilizes the median of Bloomberg consensus for Brent crude and the heating oil crack spread to calculate the unhedged portion for the remainder of the year. As of July 17, 2014, the median Bloomberg consensus for Brent crude per barrel was $107 and the heating oil crack spread was $15 for fourth quarter.
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Fuel Hedges
As of July 17, 2014 JetBlue’s advanced fuel derivative contracts for the next twelve months are as follows:
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| | Gallons | | Estimated Percentage of Consumption | | Price |
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3Q14 | | 39 million | | 23% | | 17% in USGC jet fuel swaps at an average of $2.82/gal 6% in USGC jet caps at an average strike price of $3.07/gal.*** |
4Q14 | | 42 million | | 27% | | 17% in USGC jet fuel swaps at an average of $2.80/gal 10% in USGC jet caps at an average strike price of $3.06/gal. *** |
1Q15 | | 17 million | | 10% | | 10% in USGC jet fuel swaps at an average of $2.80/gal |
2Q15 | | 17 million | | 10% | | 10% in USGC jet fuel swaps at an average of $2.76/gal |
***JetBlue has entered into offsetting USGC jet put contracts at an average strike price of $2.80/gal for 4% of expected 3Q14, and an average strike price of $2.80/gal for 10% of expected 4Q14 consumption.
In addition to its advanced fuel derivative contracts, JetBlue has entered into fixed forward price agreements for 7% of expected 3Q14 consumption at an average price of $2.86 and 7% of expected 4Q14 consumption at an average price of $2.86. Note that all FFP prices are based on USGC indexed average jet fuel prices.
Other Income (Expense)
JetBlue estimates total Other Income (Expense) excluding special items to be between ($31) and ($36) million in the third quarter and between ($130) and ($140) million for the full year. In addition, JetBlue realized a one-time gain of $242 million in the second quarter in connection with the sale of LiveTV.
2
JetBlue Airways Investor Relations • (718) 709-2202 • ir@jetblue.com
Investor Update Tax Rate
JetBlue expects an annual effective tax rate excluding the gain associated with the sale of LiveTV of approximately 40%. The capital gain generated from the sale of LiveTV allowed JetBlue to utilize a capital loss carry forward which resulted in the release of a valuation allowance related to the capital loss deferred tax asset of $19 million. As a result, JetBlue expects an effective tax rate of approximately 31% on the book gain associated with the sale of LiveTV. Including the gain on sale, JetBlue expects an annual effective tax rate of approximately 37%. However, the actual tax rate in the third quarter and full year 2014 could differ due to a change to state apportionment and/or the non-deductibility of certain items for tax purposes.
Capital Expenditures
(In millions)
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Third Quarter 2014 | | Full Year 2014 |
Aircraft | Non-aircraft (JetBlue) | Non-aircraft (LiveTV) | | Aircraft | Non-aircraft (JetBlue) | Non-aircraft (LiveTV) |
$135 | $65 | $0 | | $625* | $325 | $20 |
* Approximately $80 million of full year capital expenditures expected to receive capital lease treatment.
Aircraft Delivery Schedule
As of June 30, 2014 JetBlue’s fleet was comprised of 130 Airbus A320 aircraft, 7 Airbus A321 aircraft, and 60 EMBRAER 190 aircraft. 109 aircraft were on order from Airbus and 24 aircraft were on order from Embraer.
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| Airbus A320 | | Airbus A321 | | EMBRAER 190 |
| Aircraft | Mortgage | Lease | | Aircraft | Mortgage | Lease | | Aircraft | Mortgage | Lease |
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2Q14 | — | — | — | | 2 | 2 | — | | — | — | — |
3Q14 | — | — | — | | 2 | 1 | — | | — | — | — |
4Q14 | — | — | — | | 4 | — | — | | — | — | — |
Total at Year End | 130 | 66 | 30 | | 13 | 8 | — | | 60 | 30 | 30 |
3
JetBlue Airways Investor Relations • (718) 709-2202 • ir@jetblue.com
Investor Update Share Count
Share count estimates for calculating basic and diluted earnings per share are as follows:
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| | Third Quarter 2014 |
| | Basic Share Count | | Diluted Share Count | | Interest Add-back |
Net Income Range | | (in millions) | | (in millions) | | (in millions)* |
Zero - $12 million | | 294.4 | | 296.7 | | $— |
$12 million - $16 million | | 294.4 | | 311.9 | | $1 |
$16 million or greater | | 294.4 | | 345.1 | | $2 |
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| | Full Year 2014 |
| | Basic Share Count | | Diluted Share Count | | Interest Add-back |
Net Income Range | | (in millions) | | (in millions) | | (in millions)* |
Zero - $47 million | | 300.9 | | 309.4 | | $— |
$47 million - $64 million | | 300.9 | | 324.6 | | $2 |
$64 million or greater | | 300.9 | | 354.5 | | $8 |
* Net of taxes
These share count estimates assume 20% annual stock price appreciation and that all of the holders of the 6.75% convertible debentures due 2039 (Series A) will be converted to shares during the fourth quarter 2014. These share count estimates do not include any share repurchases that may occur throughout 2014 under JetBlue’s share buyback program. The number of shares used in JetBlue’s actual earnings per share will likely be different than those stated above.
4
JetBlue Airways Investor Relations • (718) 709-2202 • ir@jetblue.com
Investor Update LiveTV Transaction Summary: July 24, 2014
This summary provides investor information on the effect of LiveTV on JetBlue’s financial statements prior to its divestiture.
JetBlue Consolidated Income Statement
Revenue
JetBlue previously reported third party LiveTV revenues in its 2013 Annual Report on Form 10-K on page 68 and its first quarter 2014 Quarterly Report on Form 10-Q on page 20 filed with the SEC and available on http://investor.jetblue.com.
Operating Expenses
JetBlue previously reported consolidated and airline only unit operating expenses in its quarterly earnings releases filed on Form 8-K with the SEC and available on http://investor.jetblue.com.
JetBlue’s full year 2014 CASM Ex-Fuel and Profit Sharing decreased by approximately 1 point relative to prior guidance to 2.5% - 4.5% primarily due to the divestiture of LiveTV.
Breakdown of LiveTV Consolidated Operating Expenses
Full Year 2013
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| Percent of Total LiveTV Consolidated Operating Expenses |
Salaries, wages and benefits | ~45% |
Depreciation and amortization | ~15% |
Other operating expenses | ~35% |
All other* | ~5% |
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LiveTV Consolidated Operating Expenses | ~$65 million |
* De minimis impact on Landing Fees & Other Rents, Sales and Marketing and Maintenance, Materials & Repairs
Capital Expenditures
JetBlue expects approximately $20 million in capital expenditures related to LiveTV in 2014, a reduction of $40 million relative to prior full year guidance. JetBlue expects no future additional capital expenditures related to LiveTV.
Balance Sheet
JetBlue reported in its first quarter 2014 Quarterly Report on Form 10-Q on page 18 major classes of LiveTV assets and liabilities. JetBlue expects these balances will revert to zero with the completion of the LiveTV divestiture.
5
JetBlue Airways Investor Relations • (718) 709-2202 • ir@jetblue.com
Investor Update This investor update contains statements of a forward-looking nature which represent our management's beliefs and assumptions concerning future events. When used in this document and in documents incorporated herein by reference, the words “expects,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” “seeks,” “targets” and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions, and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, including, without limitation, our extremely competitive industry; volatility in financial and credit markets which could affect our ability to obtain debt and/or lease financing or to raise funds through debt or equity issuances; increases and volatility in fuel prices, maintenance costs and interest rates; our ability to implement our growth strategy; our significant fixed obligations and substantial indebtedness; our ability to attract and retain qualified personnel and maintain our culture as we grow; our reliance on high daily aircraft utilization; our dependence on the New York metropolitan market and the effect of increased congestion in this market; our reliance on automated systems and technology; our being subject to potential unionization, work stoppages, slowdowns or increased labor costs; our reliance on a limited number of suppliers; our presence in some international emerging markets that may experience political or economic instability or may subject us to legal risk; reputational and business risk from information security breaches; changes in or additional government regulation; changes in our industry due to other airlines' financial condition; a continuance of the economic recessionary conditions in the U.S. or a further economic downturn leading to a continuing or accelerated decrease in demand for domestic and business air travel; and external geopolitical events and conditions. Further information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to, the Company's 2013 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this investor update.
6
JetBlue Airways Investor Relations • (718) 709-2202 • ir@jetblue.com
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