JetBlue no longer looking to sell aircraft

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JetBlue has stopped actively looking to sell aircraft after a deal to sell two Embraer E-190s fizzled when the customer failed to secure financing.

CFO Ed Barnes told analysts today JetBlue had a commitment to sell two E-190s in February but "the counterparty was unable to get financing, which isn't surprising. We did release them from those obligations and plan to take those aircraft internally."

JetBlue, however, was able to offload two other E-190s earlier this month to the same buyer. Barnes says there was no gain on this transaction as it was "essentially" a deferral. "It was something that was coordinated through Embraer," he says. "In lieu of deferral we sold the aircraft at essentially no gain."

JetBlue did not identify which parties were involved in both the fizzled and completed deals. But last week lessor Jetscape announced it had leased two ex-JetBlue E-190s to Brazilian low-cost start-up Azul, completing only half of a transaction which was originally going to involve four aircraft. Azul, which was established last year by JetBlue founder and former CEO David Neeleman, has been receiving most if not all of the E-190s being offloaded by JetBlue in recent months.

Barnes says JetBlue, after generating $23 million from the sale of about a dozen aircraft in 2008, is not currently looking to sell any more aircraft, including the two E-190s it will now take delivery of in February. "We're not out in the market right now actively trying to sell aircraft," he says.

Barnes adds by growing its fleet this year while shrinking capacity JetBlue is "positioning ourselves for 2010 and 2011. We're building some excess capacity within the airline. We do want to be able to grow when the skies clear."

JetBlue CEO Dave Barger says after concluding deals with Airbus and Embraer last year to defer 37 A320s and 10 E-190s, JetBlue is "comfortable" with the new delivery schedule for 2009 through 2011.

JetBlue is now slated to take delivery of two A320s and six E-190s this year, which Barger points out is "significantly fewer aircraft than prior years". As a result JetBlue only needs to set aside $315 million in capital expenditure for aircraft this year, compared to $625 million in 2008.

In 2010 JetBlue is now slated to take only six aircraft, three E-190s and three A320s.

With eight aircraft coming into the fleet this year and capacity actually falling, Barger says JetBlue will further reduce its average aircraft utilisation. He sees this as beneficial as it gives JetBlue the flexibility to operate more flights during holiday periods.

JetBlue's no furlough policy also means it has more crews than required, allowing it to easily add capacity during holidays. Barger says with extra aircraft and employees available, JetBlue is also in a position to quickly respond to opportunities in the market. "We're nicely positioned for growth," he says.

While capacity will be down for the short-term, Barger expects over the long term JetBlue will grow by 5% to 10% annually. Barger points out JetBlue still holds options with Airbus and Embraer which gives the carrier flexibility to resume rapid growth when market conditions warrant.