JetBlue Airlines 2012 Annual Report Download - page 3

Dear Fellow Shareholders,
2012 was one of the best years in our airline’s 13-year history. We delivered strong fi nancial results, including a 50% increase of net income to $128 million
on record revenues of nearly $5 billion. We executed on our plans for sustainable, profi table growth as we opened fi ve new cities and expanded into
19 new markets. We improved our return on invested capital, or ROIC, by approximately one percentage point while simultaneously growing our
operations. We reported our fourth consecutive year of profi tability and improved operating margin by 40 basis points to 7.5%. Even with Hurricane
Sandy, which signifi cantly impacted operations in our hometown of New York and reduced operating income by $30 million, we reported our highest
diluted earnings per share since 2003 of $0.40.
We generated a record $698 million in cash from operations while strengthening our balance sheet with a $285 million reduction in our overall debt
balance. We repurchased approximately $23 million of common stock through our share buyback program, largely offsetting the number of shares
issued during the year in connection with equity-based crewmember compensation. We ended the year with approximately $731 million in unrestricted
cash and short term investments – or 15% of trailing twelve months revenue – while increasing our available lines of credit to $325 million. Our strong
operating trends and improved credit metrics resulted in an improved ratings and outlook from Standard & Poor’s and Fitch Ratings.
Differentiated Product
We continue to generate a price premium versus our competitors in many of our key markets; we attribute much of this success to our strong brand and
the unique JetBlue Experience our Crewmembers deliver to our 29 million customers. We believe we offer customers the best main cabin experience
in North America with a strong core product, including free infl ight entertainment and the most legroom in coach of any U.S. airline (based on average
fl eet-wide seat pitch) and reasonably priced optional upgrades designed to enhance this core experience. As a testament to the exceptional customer
service provided by our Crewmembers, we earned our eighth consecutive J.D. Power award for service excellence in 2012.
We have continued to focus on ways to further differentiate the JetBlue Experience, including enhancements to our Even More™ offering. To that end, we
reconfi gured our EMBRAER 190 aircraft to include an additional eight Even More™ Space seats and began to offer Even More Speed™, our expedited
security option, for sale on a standalone basis in most of our U.S. domestic locations. We also introduced a new tier within our TrueBlue frequent fl yer
program – called TrueBlue Mosaic – to better recognize and reward JetBlue’s most loyal and highest-value customers.
We believe our focus on providing customers with the best value for their investment reinforces our position as the carrier of choice for leisure and
business customers who have been underserved by low cost airlines and traditional network airlines.
Our strong brand helps drive word-of-mouth marketing, and we successfully use social media as a powerful way to gain positive exposure and connect with
our customers. At year end, we had over two millions followers on Twitter, maintaining our social media leadership as the most-followed airline on Twitter.
High-Value Geography
2013 marks only the 14th year since our fi rst fl ight; and we believe signifi cant, profi table, growth opportunities abound. While our total network currently
represents only approximately fi ve percent of the U.S. domestic market, we continue to grow profi tably in very lucrative markets. The cities we serve
include some of the largest high-value travel markets and most densely populated areas in the country, including New York, Boston and Florida.
In Boston, we have continued to create and capitalize on opportunities in the changing competitive landscape by adding routes and frequencies and
increasing our relevance to business travelers. At year end, our domestic operations accounted for more than 20% of all domestic fl ights at Boston’s
Logan Airport.
We also continue to see signifi cant potential for profi table growth in the Caribbean and Latin America. We now have approximately 30% of our capacity
in this important region. Our signifi cant presence and continued investment in this region continues to benefi t the customer experience. In San Juan,
Puerto Rico, for example, we moved into new facilities in 2012 to support future growth.
While our network growth over the past several years has primarily been focused in Boston, the Caribbean and Latin America, the pace of growth in
the rest of our network has slowed, resulting in improved returns. At year end, approximately fi ve percent of our capacity was in markets less than one
year old compared to 17% in new markets at the end of 2007.
We also continued to expand the scope of our network through airline partnerships with eight new airline partners in 2012. Hawaiian Airlines became
the fi rst of our airline partners to arrive and depart from our home at JFK International Airport’s Terminal 5, and Aer Lingus plans to move their operations
to our terminal in 2013. With 23 partners as of March 2013, we now offer our customers the opportunity to book travel to hundreds of destinations in
six continents. Given our valuable slot portfolio and state-of-the art terminal at JFK, we believe we are well positioned to serve global carriers and fl ow
incremental passengers and revenue through our network.