JetBlue Airlines 2012 Annual Report Download - page 30

JETBLUE AIRWAYS CORPORATION-2012 10K26
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Overview
In 2012, we executed on our plans for sustainable, profi table growth while continuing to strengthen our balance sheet and improve our operating
margin. Every day, we commit to delivering a safe and reliable JetBlue Experience to our customers while maintaining a competitive cost advantage
and improving returns for our shareholders.
2012 Highlights and Accomplishments
•
We reported our fourth consecutive year of net income and our highest
earnings per diluted share, $0.40, since 2003, and generated record
revenues of nearly $5 billion.
• We improved our return on invested capital, or ROIC, by approximately
one percentage point even as we grew our operations, increasing
capacity by 8%.
• We generated $698 million in cash from operations while strengthening
our balance sheet with increased lines of credit and reductions to our
overall debt balance.
• We expanded our portfolio of commercial airline partnerships, adding
eight new airline partnerships during the year, bringing our total to 22
airline partnerships as of December 31, 2012.
• We further solidifi ed our position as New York’s hometown airline with
the opening of our new headquarters in Long Island City and as we
commenced construction of an international arrivals facility at John F.
Kennedy International Airport, or JFK.
• We were recognized by J.D. Power and Associates for the eighth
consecutive year as the “Highest in Airline Customer Satisfaction among
Low-Cost Carriers.”
• We preserved the direct relationship with our Crewmembers, an important
driver of our culture and brand.
We continue to deliver a unique JetBlue Experience to our customers with
the superior service they have come to expect from us. In addition, our
commitment to deliver increased returns for our shareholders remains at
the core of our overall business strategy. We believe our continued focus
on fi nancial discipline, product innovation and network enhancements,
combined with our service excellence, will drive our future success. Some
of our major initiatives are described below.
Strengthening of our Balance Sheet
Throughout 2012, we were focused on strengthening our balance sheet.
We believe we made signifi cant progress in doing so, and we remain
committed to further improving our balance sheet. We ended the year
with unrestricted cash, cash equivalents and short-term investments at
approximately 15% of trailing twelve months revenue. During 2012, we
prudently used cash to invest in our business while maintaining a solid
liquidity profi le. Throughout the year, we reduced our overall debt balance
by $285 million while increasing our total property and equipment by nearly
10%. Our investments also included capital spending for slot acquisitions,
our international arrival facility at JFK and aircraft prepayments. We believe
spending wisely now will generate future returns, through balance sheet
improvements and, ultimately, by helping us maintain the fl exibility to be
able to take advantage of future growth opportunities. Additionally, in
September 2012, our Board of Directors approved a share repurchase
program for up to 25 million shares over a fi ve year period. During the
fourth quarter of 2012, we repurchased approximately 4.1 million shares
of our common stock for $23 million.
Airport Infrastructure Investments
During 2012, we made signifi cant airport infrastructure enhancements in
several of our focus cities. In San Juan, we moved into a larger space in
the all-new Terminal A at Luis Muñoz Marin International Airport. In Boston,
we opened a newly renovated hangar to support our growing operations.
In New York, we commenced construction of a new international arrival
extension to our existing Terminal 5 at JFK. The creation of a new dedicated
site to handle U.S. Customs and Border Protection checks at Terminal 5
will eliminate the need for our international customers to arrive at an often
slow Terminal 4. In Long Beach, we moved into our own concourse in the
newly modernized terminal facility.
Network Initiatives
We continue to make network adjustments in furtherance of our overall
network growth plans. Our network focus over the past several years has
primarily been on Boston and the Caribbean and Latin America. We feel
there remains opportunity to grow our revenue in these regions due to our
differentiated product offerings. In Boston, for example, with our product
and network enhancements, we have been able to better accommodate
business customers which has helped us to build revenue momentum
from corporate share gains.
Throughout 2012, we continued to improve our relevance to business
customers in Boston. We offer non-stop service to more destinations
from Boston’s Logan International Airport than any other carrier at Boston.
East Coast short-haul markets in Boston were the best performing region
in our network during 2012, as measured by year over year unit revenue
growth, even while we added signifi cant capacity.
Our growth in the Caribbean and Latin America also continued in 2012; we
now have approximately 27% of our capacity in this important region. We
remain focused on growing our network and further reducing seasonality
by targeting new customers, including leisure travelers, business travelers,
visiting friends and relatives, or VFR, traffi c and international airline partners.
New Service
As part of our ongoing network initiatives and route optimization efforts, we
continued to make schedule and frequency adjustments throughout 2012. In
Boston, particularly, we did so to better accommodate business customers
and increase our relevance. During 2012, we commenced service to fi ve
new destinations: Dallas/Fort Worth, Texas, Cartagena, Colombia, Samana,
Dominican Republic, Grand Cayman, Cayman Islands and Providence,
Rhode Island. Additionally, we have announced plans to begin service to
the following destinations in 2013: Charleston, South Carolina, Albuquerque,
New Mexico, Philadelphia, Pennsylvania and Medellin, Colombia. Our growth
includes adding new routes between existing cities. Our commitment to
profi table growth also resulted in the discontinuation of certain routes and
reduced service in our network throughout 2012.