JetBlue Airlines 2014 Annual Report Download - page 31

JETBLUE AIRWAYS CORPORATION-2014Annual Report 25
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 2014, we experienced the continuation of uncertain economic conditions, ongoing fuel price volatility, and the persistent competitiveness of the airline
industry. Even with these external factors, 2014 was one of the most profitable years in our history. We generated operating revenue growth of almost
7% year over year and reported our highest ever net income, including the gain on the sale of our subsidiary, LiveTV. We are committed to delivering
a safe and reliable JetBlue Experience for our customers as well as increasing returns for our shareholders. We believe our continued focus on cost
discipline, product innovation and network enhancements, combined with our service excellence, will drive our future success.
2014 Financial Highlights
• We reported our highest ever net income of $401 million, an increase
of $233 million compared to 2013. This included the after tax gain
on sale of our subsidiary, LiveTV, of $169 million for the year ended
December 31, 2014.
• Net income excluding the after tax gain on sale of LiveTV totaled
$232million, an increase of $64 million compared to the net income in 2013.
• We generated over $5.8 billion in operating revenue. Our ancillary revenue
continues to be a source of significant revenue growth, primarily driven
by customer demand for our Even More™ products as well as changes
to our fee structure.
•
Operating margin increased by 1 point to 8.9% and we improved our
return on invested capital, or ROIC, by 1 point to 6.3%.
• Our earnings per diluted share were $1.19 and includes $0.49 of impact
from the after tax gain on the sale of LiveTV. Excluding the sale, our
earnings per diluted share reached $0.70.
•We generated $912 million in cash from operations.
•
Operating expenses per available seat mile increased 0.6% to 11.78cents.
Excluding fuel and profit sharing, our cost per available seat mile increased
3.2% in 2014.
Company Initiatives
Strengthening of our Balance Sheet
Throughout 2014, we continued to focus on strengthening our balance
sheet. We ended the year with unrestricted cash, cash equivalents and
short-term investments of $708 million and undrawn lines of credit of
$600 million. Our unrestricted cash, cash equivalents and short-term
investments is at approximately 12% of trailing twelve months revenue. We
reduced our overall debt balance by $352 million, including a prepayment
for approximately $299 million of outstanding principal that had been
secured by 14 Airbus A320 aircraft. This prepayment used some of
the proceeds from the sale of LiveTV in 2014. We have increased the
number of unencumbered aircraft and spare engines in 2014 bringing total
unencumbered aircraft to 39 and spare engines to 33 as of December 31,
2014. In 2014, the holders of our 6.75% Convertible Debentures due
2039 (Series A) converted their securities into approximately 15.5 million
shares of our common stock. During 2014, we repurchased approximately
7.1million shares of our common stock for approximately $73 million
under our share repurchase program.
Aircraft
During 2014, we took delivery of nine Airbus A321 aircraft. In November
2014, we amended our purchase agreement with Airbus by deferring
13 Airbus A321 aircraft orders and eight Airbus A320 aircraft orders from
2016-2020 to 2020-2023. Of these deferrals, ten Airbus A321 aircraft
orders were converted to Airbus A321 new engine option (A321neo)
orders and five Airbus A320neo aircraft orders were converted to Airbus
A321neo aircraft orders. We additionally converted three Airbus A320
aircraft orders in 2016 to Airbus A321 aircraft orders.
Airport Infrastructure Investments
During 2014, we completed our construction of T5i, the new international
arrival extension to T5 at JFK. The creation of a new dedicated site to
handle U.S. Customs and Border Protection checks at T5 will eliminate
the need for our international customers to arrive at JFK’s T4. We expect
this will result in a more efficient process and a better JetBlue Experience
for both our customers and Crewmembers. T5i opened to our customers
in November 2014.
Network
As part of our ongoing network initiatives and route optimization efforts
we continued to make schedule and frequency adjustments throughout
2014. We added five new BlueCities to our network: Savannah, GA,
Port of Spain, Trinidad and Tobago, Detroit, MI, Hyannis, MA (seasonal)
and Willemstad, Curaçao. We also added new routes between existing
BlueCities. In March 2014, we completed the purchase of 24 Slots at
Reagan National for $75 million. We started using these Slots in the second
half of 2014 and continue to announce new route pairings.
Outlook for 2015
We believe we will continue to improve our year over year margins and
increase returns for our shareholders in 2015. We further plan to add
new destinations and route pairings based upon market demand, having
previously announced three new BlueCities for the first half of 2015. We are
continuously looking to expand our other ancillary revenue opportunities,
improve our TrueBlue loyalty program and deepen our portfolio of commercial
partnerships. We also remain committed to investing in infrastructure and
product enhancements which will enable us to reap future benefits. We
intend to continue to opportunistically pre-purchase outstanding debt
when market conditions and terms are favorable.
For the full year 2015, we estimate our operating capacity will increase by
approximately 7.0% to 9.0% over 2014 with the addition of 12 Airbus A321
aircraft to our operating fleet. We are expecting our cost per available seat
mile, excluding fuel and profit sharing, for 2015 to increase approximately
0.0% to 2.0% over 2014.