The Airline Bottom Line

jetBlue, one of the few airlines that Wall Street actually seems to like, posted a rare (but small) loss of a half-million bucks last quarter.

So how did this very popular and successful airline manage to lose kwan last quarter?

Among the many reasons, three stand out. First of all, jetBlue has been growing faster than my waistline. They've been opening new cities and taking delivery of many, many new airplanes very quickly. Although this may be counter-intuitive, in almost any industry, ultra-fast growth can be a bad thing because the costs related to the growth outpace the cash flow.

Second, the current thinking in the industry is that domestic carriers (like jetBlue), who tend to fly shorter routes than international carriers, probably suffered the most from the London terrorist plot to bomb airplanes over the Atlantic. Because of the annoyance of not being able to carry on liquids, and the fact that the traveling public may (incorrectly) believe that this new limitation adds to travel time, perhaps some people may choose to drive rather than fly.

Finally, jetBlue broke with the tried-and-true practice of virtually every successful Low Cost Carrier (LCC) during the last year by introducing a second airline type into its fleet--the 100-seat Embraer 190. Nearly every successful LCC has stuck with one airplane type; Southwest Airlines, Ireland's Ryanair, Australia/New Zealand's Virgin Blue, Canada's WestJet, and India's SpiceJet all operate only Boeing 737 airplanes; and Frontier Airlines operates only Airbus A320-family airplanes. LCCs usually operate only one airplane type because it is far less expensive, for a variety of reasons.

jetBlue is doing something about this, however. The company has slowed their growth, and has begun a campaign to reduce costs system-wide. We'll see what happens!

# posted by Cletis Walkman @ 5:52 PM