JetBlue Shares Fall on Lower Outlook

The six-year-old airline has hit some bumps after a period of rapid growth and it embarked on a turnaround effort earlier this year."The company, in our view, faces significant revenue challenges given its rapid growth plans despite a slowing economy," Merrill Lynch analyst Michael Linenberg said.

In a filing late on Thursday, the New York-based airline said it expected a 2006 pretax profit margin of negative 2 percent to break-even. That's one percentage point lower than a forecast range from July 25.

The discount carrier, which features onboard satellite TV, kept its third-quarter guidance for pretax profit margin steady at between negative 1 percent and positive 1 percent. The stable third-quarter forecast coupled with the lower full-year guidance implies a more pessimistic outlook for the fourth quarter.

In the filing, the company said the outlook assumes a third-quarter gain of about $6 million and an "immaterial loss" in the fourth quarter from the planned sale of five planes.JetBlue also lowered its third-quarter forecast for growth in passenger revenue per available seat mile a measure of demand by five percentage points to 13 percent to 15 percent.

This was countered by a decline in estimated third-quarter average fuel cost to $2.10 a gallon from $2.20 a gallon. This equates to savings of about $10 million based on its expected fuel consumption of 101 million gallons.

JetBlue increased its fourth-quarter fuel hedge in recent weeks. It said it had hedged 51 percent of its estimated fourth-quarter jet fuel consumption compared with 31 percent as of July 25.It is protected against a rise in prices, starting at $2.15 a gallon in jet fuel and $67 a barrel in oil.

The airline didn't say what its exposure to falling prices is. Some airlines that have hedged near peak summer prices may end up paying above-market prices for fuel.JetBlue shares on Nasdaq were down 5 cents at $9.81, after trading as high as $10.10. It was underperforming the Amex airline index, which was up slightly.