JetBlue Delays Expansion

JetBlue is cooling its jets by delaying plans to expand its fleet. Discount airliner JetBlue announced Tuesday that it is putting the brakes on its plans to expand its fleet by delaying the purchase of 21 Airbus jetliners for five years. The company is reacting to soaring fuel costs, which are shrinking margins as well as slackening passenger demand.

Investors weren't enthused about the airline's curbed ambitions. The Forest Hills, N.Y.-based company's shares tumbled 2.0%, or 10 cents, to $4.31. JetBlue's stock has been charting a steady downward trajectory for some time now; the company has fallen 60.2% in the past 12 months.

The Airbus A320 jets, originally scheduled for delivery between 2009 through 2011, will now be delivered in 2014 and 2015. The delay will help JetBlue's cash situation by pushing back the sizable investment and by avoiding the expenses associated with maintaining the new planes.

"In the face of escalating fuel costs, we believe it is essential to take a more financially conservative approach to managing our business," said Chief Executive Dave Barger. "The aircraft deferrals we announced today will help us further moderate our growth rate in 2009 and beyond, which will enhance liquidity and defer future debt obligations." The planes should cost roughly $76.9 million, but carriers usually negotiate a discount on large orders.

JetBlue plans to take delivery of nine new A320s in 2008 and sell the same number by the end of the year, spokesman Bryan Baldwin said. Independent aviation consultant Mike Boyd saw the logic for the reined-in growth plan. "Most of those planes were meant for expansion. You don't expand at $4-a-gallon jet fuel," Boyd said. "When you have a downturn ... not taking on the debt and the problems with 21 new airplanes, that's a good move."

Airbus executives voiced concerns at the ILA Berlin Air Show Wednesday about the precariousness of the airline companies in the current environment. "One of our worries is that the financial situation of the airlines could be [negatively affected] by the oil price," said Louis Gallois, chief executive of European Aeronautic Defence and Space, the parent company of Airbus.

Gallois added, "We see also companies which are deeply hurt by the oil price increase." The chief executive said that EADS isn't currently feeling the impact but that the plane manufacturer is "monitoring closely the situation." JetBlue Delays Expansion | Business