JetBlue’s first quarter earnings top estimates amidst rising fuel costs

JetBlue Airways (JBLU) reported its first-quarter results on Tuesday before the bell. The low-cost carrier reported earnings of $0.27 per share, beating Wall Street estimates. Revenue rose 9.6% to $1.75 billion compared to $1.6 billion in the prior-year quarter, primarily due to growth in leisure travel from its Latin and Caribbean region.

Unit revenues, a key metric tracked by the street, rose an impressive 6.1% over the prior year due to strong air travel demand and improved pricing. It also benefited from the shift in holiday calendar. Cost per available seat mile excluding fuel costs (CASM) rose 3.1% in the quarter in spite of a lower completion factor, but aided by a shift in timing of maintenance expenses. Lower completion factor was mainly driven by increased flight cancellations due to adverse weather.

On the margins front, operating margins contracted 1.6 percentage points to 7.3% and pre-tax margins came in at 6.3%, down 1.3 percentage points. Margins were impacted primarily impacted by increased fuel costs and other operating expenses.

Fuel-related expenses shot up 29% due to rising fuel prices. It’s worth noting that aviation fuel prices rose 8% in the first quarter of this year. Labor costs rose 7% touching $499 million. Load factor for the airline rose modestly to 84.6%, compared to 83.9% reported last year.

For the second quarter, unit revenues are expected to be in the negative 3% to 0% range due to a shift in the holiday calendar and lower completion factor. Capacity expansion is forecast between 5% and 7% while CASM, excluding fuel costs, are expected in the range of 2% to 4%. Fuel cost per gallon is projected to come in at $2.23.

For the full year 2018, capacity growth is projected to grow in the range of 6.5% to 8.5%. Non-fuel costs are expected to be in the negative 1% to 1% range.