JetBlue Airlines 2010 Annual Report Download - page 36

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We are an award winning airline with a differentiated product and a commitment to customer service that
offers competitive fares primarily on point-to-point routes. Our value proposition includes operating a young,
fuel efficient fleet with more legroom than any other domestic airline’s coach product, free in-flight
entertainment, pre-assigned seating, unlimited snacks, and the airline industry’s only Customer Bill of Rights.
At December 31, 2010, we served 63 destinations in 21 states, Puerto Rico, and eleven countries in the
Caribbean and Latin America and operated over 650 flights a day with a fleet of 115 Airbus A320 aircraft and
45 EMBRAER 190 aircraft.
In 2010, we reported net income of $97 million and an operating margin of 8.8%, as compared to net
income of $61 million and an operating margin of 8.6% in 2009. The year-over-year improvement in our
financial performance was primarily a result of an 8% increase in our average fares and 7% increase in
capacity, offset by a 10% increase in our realized fuel price.
Our goal is to become “the Americas’ Favorite Airline” — for our employees (whom we refer to as
crewmembers), customers and shareholders. Our achieving this goal is dependent upon continuing to provide
superior customer service and delivering the JetBlue Experience. Our financial strategy currently includes a
commitment to attaining positive free cash flow and long-term sustainable growth while also maintaining an
adequate liquidity position. Our commitment to these goals drives a focus on controlling costs, maximizing
unit revenues, managing capital expenditures, and disciplined growth.
Our disciplined growth begins with managing the growth, size and age of our fleet. In 2010, we
continued to carefully manage the size of our fleet in order to support a sustainable growth rate. As a result,
aircraft capital expenditures were significantly reduced from previous years. We modified our Airbus A320
purchase agreement in February and October 2010 resulting in the deferral of 16 aircraft previously scheduled
for delivery in 2011 through 2013 to 2015 and 2016. We also modified our EMBRAER 190 purchase
agreement in August 2010, canceling two EMBRAER 190 aircraft previously scheduled for delivery in 2012.
With new opportunities, including the coveted slots at Washington’s Reagan National we acquired via a slot
swap during 2010 and further growth opportunities particularly in Boston and the Caribbean, we leased six
used Airbus A320 aircraft under individual six year operating leases, which were in addition to our purchase
commitments with Airbus. During the year, in addition to the six leased A320s, we also increased the size of
our EMBRAER 190 operating fleet by four aircraft. We may further modify our fleet growth through
additional aircraft sales, leasing of aircraft, returns of leased aircraft and/or deferral of aircraft deliveries.
Our disciplined growth also includes the optimization of our route network by focusing on key regions,
including Boston, New York, the Caribbean and Latin America, continuing our focus on attracting business
customers while also building upon our leisure markets, strong visiting friends and relatives, or VFR, travel,
and continued expansion of our portfolio of strategic commercial partnerships. We added three new
destinations in 2010, compared to eight new destinations that were added in 2009 and two that were added in
2008. We commenced service to Punta Cana, Dominican Republic in May 2010, Ronald Reagan National
Airport in Washington, DC and Hartford, CT in November 2010. We began service to Providenciales, Turks
and Caicos Islands in February 2011 and have announced plans to commence service to Anchorage, Alaska
and Martha’s Vineyard, MA in May 2011. During 2010, we strengthened our position as the largest carrier in
Boston by adding six new destinations from Boston and we announced plans to increase our presence in
San Juan, Puerto Rico by adding new service and increased frequencies. We also continue to build upon our
presence in the Caribbean and Latin America where we have approximately 23% of our capacity, and we
expect this number to continue to grow in 2011. We believe that optimizing our schedule across our network
has both increased our relevance to the business traveler, particularly in Boston, as well as to the leisure and
VFR travelers in the Caribbean and Latin America. We expect that we will continue to diversify our network
in order to further grow and strengthen our network. In 2011, we plan to continue our focus on Boston and
Caribbean expansion.
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