JetBlue posted its first quarterly loss since going public, putting it in the red for 2005. The carrier also said that it expects to lose money in 2006 as well. This is a stunning turnaround for an airline that for several years could do no wrong. Unlike virtually every other airline that has announced a loss, JetBlue’s CEO placed the blame squarely on them (rather than on finding a million reasons why it wasn’t management’s fault), saying, "a lot of this is our own doing." High fuel prices without fuel hedges and the difficulties of taking on additional aircraft and routes certainly contributed to the loss. In addition, competitors have gotten smarter about competing with JetBlue.
Average fares were about $109, but the airline says it needs to be up near $115-$120, a significant jump considering how difficiult it has been to increase fares in JetBlue’s highly competitive northeast-to-Florida markets.
I’m not saying I saw this coming (because I didn’t), but looking back it certainly should have caused some alarm that JetBlue was starting to expand pretty quickly during a time when costs were increasingly rapidly. Countless upstart airlines have hit a death spiral when expanding too fast while facing heavy competition and growing costs. We’ve seen this many times before, and it generally doesn’t end well. There’s a reason Southwest only serves about 60 cities after 35 years in business. JetBlue’s strong product will only take them so far if they cannot manage the massive growth they have planned for the next 5 years. This last quarter shows that they may have figured out the brand for a growing airline, but they have not figured out how to avoid the growth trap faced by every new airline.