JetBlue Announces Third Quarter Results

• Operating income of $164 million in the third quarter. This compares to operating income of $152 million in the third quarter of 2013.

• Pre-tax income of $132 million in the third quarter. This compares to pre-tax income of $119 million in the third quarter of 2013.

• Net income for the third quarter was $79 million, or $0.24 per diluted share. This compares to JetBlue's third quarter 2013 net income of $71 million, or $0.21 per diluted share.

"Today, we are pleased to report record third quarter earnings," said Dave Barger, JetBlue's Chief Executive Officer. "We saw improved profitability across our network, reflecting the success of our efforts to differentiate our product and culture and maintain competitive costs. I would like to thank our 15,500 crewmembers for their dedication to running a safe airline and delivering outstanding service to our customers."

Operational Performance

JetBlue reported record third quarter operating revenues of $1.5 billion. Revenue passenger miles for the third quarter increased 5.9% to 10.1 billion on a capacity increase of 4.5%, resulting in a third quarter load factor of 86.2%, an increase of 1.2 points year over year.

Yield per passenger mile in the third quarter was 13.96 cents, up 0.9% compared to the third quarter of 2013. Passenger revenue per available seat mile (PRASM) for the third quarter 2014 increased 2.4% year over year to 12.03 cents and operating revenue per available seat mile (RASM) increased 1.4% year over year to 13.00 cents.

Operating expenses for the quarter increased 5.7%, or $75 million, over the prior year period. Interest expense for the quarter declined 7.8%, or $3 million, due to JetBlue's focus on debt reduction. JetBlue's operating expense per available seat mile (CASM) for the third quarter increased 1.2% year over year to 11.61 cents. Excluding fuel and profit sharing, CASM(1) increased 2.6% to 7.13 cents.

"Our record results reflect the strength of our underlying business as we continued to drive margin improvement across our network," said Robin Hayes, JetBlue's President. "Our focus remains on improving results through ancillary revenue initiatives, cost control and profitable growth. We believe these efforts will drive improved returns for our shareholders."

Fuel Expense and Hedging

JetBlue continued to hedge fuel to manage price volatility. Specifically, in the third quarter JetBlue had in place hedges for approximately 23% of its fuel consumption and managed approximately 7% of its fuel consumption using fixed forward price agreements (FFPs). This resulted in a realized fuel price of $3.05 per gallon, a 2.7% decrease over third quarter 2013 realized fuel price of $3.14. JetBlue recorded $1 million in losses on fuel hedges that settled during the third quarter.

JetBlue has managed approximately 34% of its fourth quarter projected fuel requirements using a combination of FFPs, jet fuel swaps and caps. Based on the fuel curve as of October 16th, JetBlue expects an average price per gallon of fuel, including the impact of hedges, FFPs and fuel taxes, of $2.80 in the fourth quarter.

Liquidity and Cash Flow

JetBlue ended the quarter with approximately $742 million in unrestricted cash and short term investments. In addition, JetBlue maintains $550 million in lines of credit.

During the third quarter, JetBlue repaid approximately $61 million in regularly scheduled debt and capital lease obligations. JetBlue plans to repay approximately $128 million in regularly scheduled debt and capital lease obligations in the remainder of 2014.

"Solid financial performance together with our continued focus on debt reduction allowed us to continue strengthening the balance sheet," said Mark Powers, JetBlue's Chief Financial Officer. "We believe this focus will allow us to grow and improve returns, enhancing long-term shareholder value."

Fourth Quarter and Full Year Outlook

For the fourth quarter of 2014, CASM is expected to decrease between (3.0)% and (1.0)% versus the year-ago period. Excluding fuel and profit sharing, CASM in the fourth quarter is expected to increase between 1.0% and 3.0% year over year.

CASM for the full year is expected to increase between 0.5% and 2.5% over full year 2013. Excluding fuel and profit sharing, CASM in 2014 is expected to increase between 2.5% and 4.5% year over year.

Capacity is expected to increase between 5.0% and 7.0% in the fourth quarter. For the full year, capacity is expected to increase between 4.0% and 6.0%.

JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except share and per share amounts)
(unaudited)
			Three Months Ended								Nine Months Ended
			September 30,						Percent		September 30,						Percent
			2014			2013			Change		2014			2013			Change
OPERATING REVENUES
	Passenger		$	1,414		$	1,321		7.0		$	4,016		$	3,729		7.7
	Other			115			121		(5.1	)		355			347		2.4
		Total operating revenues		1,529			1,442		5.9			4,371			4,076		7.2
OPERATING EXPENSES
	Aircraft fuel and related taxes			515			501		2.9			1,476			1,433		3.0
	Salaries, wages and benefits			318			283		12.3			963			842		14.4
	Landing fees and other rents			88			81		8.9			248			231		7.5
	Depreciation and amortization			79			73		6.8			234			212		10.0
	Aircraft rent			31			32		(3.5	)		93			97		(3.8	)
	Sales and marketing			59			60		(0.7	)		182			163		11.5
	Maintenance materials and repairs			109			109		(0.5	)		305			334		(8.8	)
	Other operating expenses			166			151		9.5			524			451		16.2
		Total operating expenses		1,365			1,290		5.7			4,025			3,763		7.0
OPERATING INCOME				164			152					346			313
	Operating margin			10.7	%		10.5	%	0.2	pts.		7.9	%		7.7	%	0.2	pts.
OTHER INCOME (EXPENSE)
	Interest expense			(37	)		(40	)	(7.8	)		(113	)		(123	)	(7.8	)
	Capitalized interest			4			4		20.7			11			11		1.0
	Interest income and other			1			3		(89.2	)		(2	)		1		(232.9	)
	Gain on sale of subsidiary			-			-		-			241			-		100.0
		Total other income (expense)		(32	)		(33	)	(4.2	)		137			(111	)	(223.3	)
INCOME BEFORE INCOME TAXES				132			119					483			202
	Pre-tax margin			8.6	%		8.2	%	0.4	pts.		11.0	%		4.9	%	6.1	pts.
	Income tax expense			53			48					170			81
NET INCOME			$	79		$	71				$	313		$	121
EARNINGS PER COMMON SHARE:
	Basic		$	0.27		$	0.25				$	1.07		$	0.43
	Diluted		$	0.24		$	0.21				$	0.93		$	0.38
	Weighted average shares outstanding (thousands):
		Basic		290,547			280,935					292,946			280,443
		Diluted		341,108			343,745					343,496			342,918

JETBLUE AIRWAYS CORPORATION
COMPARATIVE OPERATING STATISTICS
(unaudited)
	Three Months Ended								Nine Months Ended
	September 30,						Percent		September 30,						Percent
	2014			2013			Change		2014			2013			Change
Revenue passengers (thousands)		8,579			8,059		6.4			24,091			23,112		4.2
Revenue passenger miles (millions)		10,127			9,561		5.9			28,421			27,182		4.6
Available seat miles (ASMs) (millions)		11,752			11,252		4.5			33,558			32,133		4.4
Load factor		86.2	%		85.0	%	1.2	pts.		84.7	%		84.6	%	0.1	pts.
Aircraft utilization (hours per day)		12.0			12.2		(1.4	)		11.9			12.1		(2.0	)
Average fare	$	164.80		$	164.02		0.5		$	166.70		$	161.37		3.3
Yield per passenger mile (cents)		13.96			13.83		0.9			14.13			13.72		3.0
Passenger revenue per ASM (cents)		12.03			11.75		2.4			11.97			11.61		3.1
Operating revenue per ASM (cents)		13.00			12.82		1.4			13.02			12.68		2.7
Operating expense per ASM (cents)		11.61			11.47		1.2			11.99			11.71		2.4
Operating expense per ASM, excluding fuel (cents)		7.22			7.02		2.8			7.59			7.25		4.7
Operating expense per ASM, excluding fuel and profit sharing (cents) (a)		7.13			6.95		2.6			7.56			7.23		4.6
Airline operating expense per ASM (cents) (b)		11.61			11.33		2.5			11.88			11.57		2.7
Departures		77,205			74,206		4.0			220,274			211,701		4.0
Average stage length (miles)		1,082			1,085		(0.2	)		1,088			1,088		-
Average number of operating aircraft during period		197.4			187.1		5.5			194.8			183.5		6.1
Average fuel cost per gallon, including fuel taxes	$	3.05		$	3.14		(2.7	)	$	3.09		$	3.16		(2.1	)
Fuel gallons consumed (millions)		169			160		5.6			477			454		5.2
Full-time equivalent employees at period end (b)										13,225			12,124		9.1

(a)		Refer to Note A, Consolidated operating cost per available seat mile, excluding fuel & profit sharing, at the end of our Earnings Release for more information on this non-GAAP measure.
(b)		Excludes operating expenses and employees of LiveTV, LLC, which are unrelated to our airline operations and no longer part of JetBlue from June 10, 2014.

SELECTED CONSOLIDATED BALANCE SHEET DATA
(in millions)
	September 30,		December 31,
	2014		2013
	(unaudited)
Cash and cash equivalents	$	449	$	225
Total investment securities		415		516
Total assets		7,741		7,350
Total debt		2,362		2,585
Stockholders' equity		2,386		2,134

Net Income and Pre-Tax Income, excluding special items. JetBlue excludes special items from net income and pre-tax income because management believes the exclusion of these items is helpful to investors to evaluate the company's recurring core operational performance in the periods shown. Therefore, we adjust for these amounts. Special items excluded in the tables below showing reconciliation of net income and pre-tax income include the gain on the sale of JetBlue's wholly-owned subsidiary LiveTV, LLC due to the non-recurring nature of this item.

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF NET INCOME, INCOME BEFORE INCOME TAXES AND EPS EXCLUDING SPECIAL ITEMS
(in millions, except per share amounts)
(unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
	$		$		$		$
Income before income taxes	$	132	$	119	$	483	$	202
Less: Gain on sale of subsidiary		-		-		241		-
Income before income taxes excluding special items		132		119		242		202
Less: Income tax expense		53		48		170		81
Add back: Income tax relating to gain on sale of subsidiary (c)		-		-		73		-
Net Income excluding special items	$	79	$	71	$	145	$	121
Earnings per common share excluding special items:
Basic	$	0.27	$	0.25	$	0.50	$	0.43
Diluted	$	0.24	$	0.21	$	0.44	$	0.38

The capital gain generated from the sale of LiveTV allowed JetBlue to utilize a capital loss carryforward which resulted in the release of a valuation allowance related to the capital loss deferred tax asset of $19 million

Consolidated operating cost per available seat mile, excluding fuel and profit sharing ("CASM Ex-Fuel and Profit Sharing"). CASM is a common metric used in the airline industry. We exclude aircraft fuel and related taxes and profit sharing from operating cost per available seat mile to determine CASM Ex-Fuel and Profit Sharing. We believe that CASM Ex-Fuel and Profit Sharing provides investors the ability to measure financial performance excluding items beyond our control, such as (i) fuel costs, which are subject to many economic and political factors beyond our control, and (ii) profit sharing, which is sensitive to volatility in earnings. We believe this measure is more indicative of our ability to manage costs and is more comparable to measures reported by other major airlines.

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL AND PROFIT SHARING
(dollars in millions, per ASM data in cents)
(unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
	$		per ASM	$		per ASM	$		per ASM	$		per ASM
Total operating expenses	$	1,365	11.61	$	1,290	11.47	$	4,025	11.99	$	3,763	11.71
Less: Aircraft fuel and related taxes		515	4.39		501	4.45		1,476	4.40		1,433	4.46
Operating expenses, excluding fuel		850	7.22		789	7.02		2,549	7.59		2,330	7.25
Less: Profit sharing		11	0.09		7	0.07		11	0.03		7	0.02
Operating expense, excluding fuel and profit sharing	$	839	7.13	$	782	6.95	$	2,538	7.56	$	2,323	7.23

Refer to full documentation in attachments box, located at the top left, below the headline.