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JETBLUE AIRWAYS CORPORATION-2014Annual Report26
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Year 2014 compared to Year 2013
Overview
We reported net income of $401 million, an operating income of $515million
and an operating margin of 8.9% for the year ended December 31, 2014.
This compares to net income of $168 million, an operating income of $428
million and an operating margin of 7.9% for the year ended December 31,
2013. Diluted earnings per share were $1.19 for 2014 compared to $0.52
for the same period in 2013. Net income for the year ended December
31, 2014 includes the after tax gain on the sale of LiveTV of approximately
$169 million, or $0.49 per diluted share.
Approximately 80% of our operations are centered in and around the heavily
populated northeast corridor of the U.S., which includes the New York
and Boston metropolitan areas. During the first three months of 2014, this
area experienced one of the coldest winters in 20 years, with New York
and Boston each experiencing over 57 inches of snow. These weather
conditions led to the cancellation of approximately 4,100 flights, nearly
double the amount we canceled in the whole of 2013. These cancellations
resulted in a negative impact on our first quarter 2014 seat revenue as
well as ancillary revenue such as change fees due to our policy of waiving
these fees during severe weather events.
Operating Revenues
(Revenue in millions)
2014 2013
Year-over-Year Change
$%
Passenger Revenue $ 5,343 $ 4,971 $ 372 7.5
Other Revenue 474 470 4 0.7
Operating Revenues $ 5,817 $ 5,441 $ 376 6.9
Average Fare $ 166.57 $ 163.19 $ 3.38 2.1
Yield per passenger mile
(cents)
14.13 13.87 0.26 1.9
Passenger revenue per ASM
(cents)
11.88 11.61 0.27 2.3
Operating revenue per ASM
(cents)
12.93 12.71 0.22 1.7
Average stage length
(miles)
1,088 1,090 (2) (0.2)
Revenue passengers
(thousands)
32,078 30,463 1,615 5.3
Revenue passenger miles
(millions)
37,813 35,836 1,977 5.5
Available Seat Miles
(ASMs) (millions)
44,994 42,824 2,170 5.1
Load Factor 84.0% 83.7% 0.3 pts
Passenger revenue is our primary source of revenue and accounted for
over 92% of our total operating revenues for the year ended December
31, 2014. As well as seat revenue, passenger revenue includes revenue
from our ancillary product offerings such as EvenMore™ Space. Revenues
generated from international routes, including Puerto Rico, accounted for
30% of our passenger revenues in 2014. Revenue is recognized either
when transportation is provided or after the ticket or customer credit
expires. We measure capacity in terms of available seat miles, which
represents the number of seats available for passengers multiplied by
the number of miles the seats are flown. Yield, or the average amount
one passenger pays to fly one mile, is calculated by dividing passenger
revenue by revenue passenger miles. We attempt to increase passenger
revenue primarily by increasing our yield per flight which produces higher
revenue per available seat mile, or RASM. Our objective is to optimize our
fare mix to increase our overall average fare while continuing to provide
our customers with competitive fares.
In 2014, the increase in passenger revenues was mainly attributable to a
5% increase in capacity and a 2% increase in yield. Our largest ancillary
product remains the EvenMore™ Space seats, generating approximately
$200 million in revenue, an increase of over 16% compared to 2013.
The primary component of Other Revenue is the fees from reservation
changes and excess baggage charged to customers in accordance with our
published policies. We also include the marketing component of TrueBlue
point sales, on-board product sales, transportation of cargo, Charters,
ground handling fees of other airlines and rental income. Our subsidiary,
LiveTV was sold in June 2014 and any third party revenues earned for the
sale of in-flight entertainment systems and on-going services provided for
these systems before this date are included in Other Revenue.
In 2014, Other Revenue increased by $4 million compared to 2013. While
there was a $42 million increase in revenues mainly from fees, Getaways™
sales, the marketing component of TrueBlue point sales and on-board
product sales, this was offset by a $38 million reduction in third party
LiveTV revenue as a result of the sale of LiveTV in June 2014.