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    JetBlue Foresees Slower Growth, Cost Cutting

    (Oct. 24, 2006) -- JetBlue Airways, LB Airport's largest commercial passenger carrier, indicated today (Oct. 24) in a webcast conference call and accompanying release that it plans slower growth, continued cost cutting and some forthcoming capacity reductions (number of aircraft) in announcing a 3rd quarter net loss of $0.5 million compared to third quarter 2005 net income of $2.7 million.

    "Results this quarter demonstrate our crewmembers' success in their ongoing focus on cost control, as we work to maximize productivity and institutionalize low-cost carrier spending habits throughout our airline. Unfortunately, the revenue environment during the quarter remained challenging as we continued our new market expansion and saw lower than expected overall demand due in part to security related concerns," said Mr. Neeleman in an accompanying release.

    Mr. Neeleman added in the release, "The company has made the prudent decision to reduce our rate of growth over the next three years through a reduction in both our Airbus 320 fleet and our EMBRAER 190 fleet. We believe this will enable us to be more strategic about our aircraft deployment, generate a higher level of earnings, strengthen our balance sheet and improve our cash position. With revised capacity next year expected to increase between 14 and 17 percent, we remain committed to profitable growth and to bringing our high quality product to new and existing customers."

    JetBlue President/COO Dave Barger indicated during the webcast that the company's cost reductions affect every department...and are expected to produce a leaner structure, better able to compete regardless of revenue environment.

    The story made national business news: Reuters: JetBlue Posts Narrow Loss, Reduces Expansion

    Today's report by JetBlue comes as the City Council faces decisions on how to pay for expansion of LB Airport's permanent terminal area facilities. At the same time, discussions continue between city staff and appellants over aspects of the Airport terminal area EIR proceeding.

    JetBlue reported a load factor [filled seats] in the third quarter of 2006 of 80.4%...a decrease of 6.2 points on a capacity increase of 19.0% over the third quarter of 2005. (The 3rd quarter of 2006 included UK arrests in a plot involving liquids on aircraft, which raised the threat level here and triggered passenger restrictions.)

    The company's operating revenue for the quarter totaled $628 million, representing growth of 38.7% over operating revenues of $453 million in the third quarter of 2005; operating income for the quarter was $41 million, resulting in a 6.6% operating margin, compared to operating income of $14 million and a 3.1% operating margin in the third quarter of 2005. Pre-tax income for the quarter was $1.3 million, compared with a loss of $3.7 million in the year ago period, the company said.

    The firm said that in the third quarter of 2006, JetBlue had a completion factor of 99.6 % of scheduled flights versus 99.4% in the third quarter of 2005; on-time performance, defined by the US Department of Transportation as arrivals within 14 minutes of schedule, was 74.6% in the third quarter of 2006 compared to 72.2% for the same period in 2005.

    The company said in its release:

    Looking ahead, for the fourth quarter of 2006, JetBlue expects to report an operating margin between six and eight percent assuming an all-in aircraft fuel cost per gallon of $1.94. Pre-tax margin for the quarter is expected to be between one and three percent. Cost per available seat mile (CASM) is expected to increase between six and eight percent over the year-ago period, at the assumed $1.94 aircraft fuel cost per gallon. Excluding fuel, CASM in the fourth quarter is expected to increase between five and seven percent year over year. Capacity is expected to increase between 13 and 15 percent in the fourth quarter and stage length is expected to decrease roughly 18% over the same period last year.

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