Saturday, April 25, 2009

JetBlue says it plans to stay in Long Beach

JetBlue Airways Corp. on Thursday said it plans to remain at Long Beach Airport -- two days after the airport's director met with JetBlue officials in New York and following weeks of speculation about whether the airline would stay.

In a conference call with analysts, JetBlue Chief Executive officer Dave Barger responded to reports earlier this month that JetBlue might pull out of Long Beach Airport because of the lack of progress on long-awaited improvements there. Barger said he is "disappointed" with the current facilities, but he is encouraged by recent talks with airport officials.

Barger also said that the the company will "aggressively defend" itself against growing competition on routes and pricing from rivals after posting a first-quarter profit that topped Wall Street expectations.

He said JetBlue plans to remain at the airport, where it is the largest airline, even when it begins service to nearby Los Angeles International in June. JetBlue also serves Los Angeles-area customers at Burbank Airport.

"Burbank and Long Beach and LAX can all work well together - That's how we are currently looking at it," Barger said.

High-level meeting

Long Beach Airport's new director, Mario Rodriguez, flew to New York this week and met with Barger and his top executives Tuesday, Rodriguez said Thursday.

Rodriguez told the Press-Telegram that the group discussed improvements to passenger waiting areas, security checkpoints, restrooms and concession areas. The key discussion was how to fund the projects, he said.

"The gist of the meeting was to come up with a business solution that benefits both parties," said Rodriguez.

City officials have estimated that between $50 million and $65 million in bonds would be needed to expand the terminal from the current 56,320 square feet to 89,995 square feet. Another $65 million in bonds are needed to build a new parking garage.

Rodriguez has cautioned against increasing enplaned passenger fees at the airport to finance bonds, particularly during a recession.

He said Thursday that a general airport revenue bond could be financed through increased revenue that he expects from concessions and parking. Fees at parking lots have already been increased to finance the new parking structure construction.

Rodriguez said repairs to common areas of the terminal also can be funded with existing passenger facility charges.

To improve exclusive-use facilities for JetBlue, the airport's other four passenger airlines or freight carrier UPS, each company would finance the necessary bonds through a lease agreement, Rodriguez said.

"For anything that they need for exclusive use, they will sign a long-term lease for that space to back a bond," he said.

These methods should avoid significant increases to enplaned passenger costs, he said.

"We believe that with the PFC (passenger facility charges), concessions and enhanced revenues, we will be covering all debt service," Rodriguez said. "There may be a slight increase in the enplaned passenger cost."

The improvements also will be done in phases, not all at once, Rodriguez said.

"We're trying to run the airport like a business," Rodriguez said. "We're trying to make sure that the improvements that we do will be financially feasible, and most importantly that the airport stays as a viable business entity into the future."

Rodriguez said he plans to present options and a timeline for the airport projects to the City Council in May.

Furthermore, Rodriguez said he plans to negotiate long-term leases with all of the airlines, which are now on month-to-month leases. That process will take about a year, he said.

On Monday, an appeal of a lawsuit by the Long Beach Parent-Teacher Association against the city over the airport's environmental and noise impacts will go to court. The lawsuit has blocked progress on the airport improvements, but if a second ruling comes down in the city's favor, the airport improvements shouldn't face any more legal obstacles.

New JetBlue flights

Aiming directly at the growing presence of Southwest at major eastern airports, JetBlue also said Thursday it will launch four daily nonstop flights from Boston's Logan Airport to Baltimore/Washington International Thurgood Marshall Airport (BWI) on Sept. 9.

Dallas-based Southwest last week announced plans to start flying that route and expects to begin service on Oct. 1.

Forest Hills, N.Y.-based JetBlue will offer fares starting at $39 - $10 cheaper than Southwest's lowest fare.

JetBlue has launched aggressive sales on various routes - especially transcontinental trips - as competition from Southwest and Virgin America heats up.

JetBlue also plans to start service from New York to Barbados, adding to a large number of flights from its home base at New York's John F. Kennedy International Airport to the Caribbean. Pending government approval, the Barbados flights will begin on Oct. 1.

The Forest Hills, N.Y.-based company said earlier Thursday it earned $12 million, or 5 cents per share, compared with a loss of $10 million, or 5 cents per share a year earlier.

JetBlue and low-cost carrier AirTran, which also posted a quarterly profit, were bright spots in the sector as other U.S. carriers posted losses.

It was the first time JetBlue made a profit in the first three months of the year since 2005, mostly due to lower fuel costs. The first-quarter is typically a seasonally weak period for airlines.

Adjusted to exclude a one-time charge, JetBlue's net income for the quarter would have been $20 million, or 8 cents per share.

Revenue fell 3 percent to $793 million, from $816 million in the first three months of 2008.

JetBlue ended the first quarter with about $634 million in cash and cash equivalents.

Shares rose 6 cents to $5.64 in midday trading.

(Press Telegram)

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