Order 00-2-7

New Air Corporation / JetBlue

JetBlue states that it still intends to begin certificated operations on or about February I I from New York/JFK to Buffalo with an A-320 aircraft, adding a second A-320 in the following week for service to Ft. Lauderdale. A third aircraft and market are expected to be added in March, with two more aircraft and markets to be added in June. By January 2001, JetBlue expects to be providing service to nine markets with ten A-320s.

The company filed revised statements of pre-operating expenses covering the year 1999 and the first month of 2000, and pro-forma traffic and income data for the first year of proposed actual operations (February 2000-January 2001). These documents indicate that JetBlue expects to have expended approximately $76.3 million as of the end of January 2000 for expensed and capitalized pre-operating needs. This figure is about $9.3 million higher than predicted in its original application. JetBlue's newly revised first-year operating cost projection of $115.6 million represents an increase of $17.5 million over its original projection. The new cost projection includes higher estimates for a number of items, including fuel, aircraft leases, landing fees, airport premises, and salaries.

We have examined JetBlue's revised data and find them to be reasonable. As a result of the preoperating and projected operating cost increases, however, the amount of resources to which JetBlue will need access in order to continue to meet our financial fitness criteria has correspondingly increased. Dividing the company's revised total first-year operating cost estimate of $115.6 million by four yields a three-month working capital reserve requirement of $28.6 million. With the preponderance of pre-operating expenses already paid, we have calculated that JetBlue's total start-up funds requirement is $28.6 million. The company provided an update of the stockholder investment payments it has received. At the time of its application, JetBlue anticipated investments totaling $128.2 million. Its most recent accounting showed total investment received as $129.2 million. The company's banks verified that as of January 3, JetBlue had deposited funds available to it totaling $52.3. Thus, the company, at that time, had access to approximately $23.7 million more than is required to meet our financial fitness criteria.

By:  Randall Bennett

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