Moody's Downgrades JetBlue, Cites Negative Outlook
Thursday April 13, 8:51 PM EDT
SAN FRANCISCO (Dow Jones) -- Moody's Investor Services pushed low-cost carrier JetBlue Airways Corp's (JBLU) debt deeper into speculation grade Thursday, citing the airline's unexpectedly poor operating results and persistent long-term challenges to its profitability. Moody's, in a note issued after Thursday's closing bell, said it was lowering its credit rating on $2.3 billion of JetBlue (JBLU) corporate debt to B2 from Ba3. Moody's also withdrew prospective ratings on a multiple seniority shelf registration, stating "the outlook remains negative." The move follows a net loss for JetBlue in 2005, a year in which the carrier saw its aggressive growth strategy clipped by higher fuel costs and the burden of adding a new type of jet to its fleet. if ((typeof tag336_1) == "function") { tag336_1(); } else { if (typeof(site) == "undefined" & typeof(moAdData) != "undefined") site
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','336','280','4','4',136989,87106,'0','225',246);" onclick="pr_trk('ac',136989,4);" onmouseout="if(typeof(prRoll)=='function')prBExit(event);" shape=RECT target=_new coords=285,246,333,280 href="http://c4.excite.com/adclick/CID=00017bdcc3ee6fed00000000/AREA=MONEY/SITE=Excite/AAMSZ=336x280/CM=33238/CR=18251/AD=288/CC=97244/ACB_RANDOM=2893295996?/relocate=http://www.scottrade.com/index.asp?supbid=62992";> "The rating also considers the difficult operating environment in the U.S. passenger airline industry due to fierce competition, particularly in JetBlue's core East Coast markets. High fuel costs are likely to continue to negatively affect JetBlue's operating margin, although the company does have a fuel hedging program that provides some protection against higher oil prices," Moody's wrote in a note. Moody's said JetBlue's decision to expand its operations using the Brazilian- built Embraer 190 is likely to drive up operating costs over the next few years since the
plane costs more to fly on an available per-mile basis than the bigger Airbus A320 that until now has been the backbone of its fleet. "As these aircraft are deployed in new markets, JetBlue's traditional model is to stimulate traffic with lower fares to the traveling public, which could pressure the margins even further," Moody's warned. JetBlue ended 2005 with a $20.3 million loss -- its first loss ever -- after an especially tough fourth quarter. The New York-based airline said in February it expects to report a net loss for the first quarter and full year. It is schedule to release its first-quarter report on April 25. JetBlue stock closed Thursday with a 22-cent gain at $10.40 a share. After hitting a 52-week high of $16.85 in December, JetBlue stock dropped sharply to a low of $9.95 on March 13.
Roger & Amanda La France