JetBlue raises seat revenue outlook but flags higher costs

Sept. 10 (Reuters) - JetBlue Airways raised its third-quarter seat-revenue outlook on Thursday despite higher-than-expected costs as demand has remained steady through fare hikes, sending its shares up 1.5% in midday trading.

The Iran war has pushed up fuel prices, raising costs for airlines worldwide and prompting them to increase ticket prices and scale back capacity. However, consumers have remained largely unfazed by the higher prices.

The New York-based airline expects quarterly revenue per available seat mile to increase between 17% and 20%, compared with its prior forecast of a 12.5% to 16.5% rise, as high fares have not hurt demand, the airline said.

However, costs are rising faster than expected, due in part to weather and air-traffic-control-related disruptions in July and August, the company said, which drove an increase in cancellations and nudged operating costs higher.

The company said severe airport weather days across the U.S. rose 40% versus the prior three-summer average while air-traffic-control-related cancellations in the Northeast nearly doubled.

JetBlue raised its forecast for third-quarter nonfuel unit costs to a 6% to 8% increase from 2.5% to 4.5% previously. The carrier said it also expects to pay $3.96 per gallon for fuel in the quarter, up from its prior forecast of $3.49, as fuel prices have remained elevated.

TD Cowen equity analyst Tom Fitzgerald said higher costs are expected to offset much of the expected increase in seat revenue. "We expect concerns regarding the company's leverage to grow, especially moving into the shoulder season," he said in an analyst note.

In April, CEO Joanna Geraghty told employees the carrier was not considering bankruptcy this year, despite a hit from higher fuel prices.

The company also cut its capacity growth outlook and now expects third-quarter capacity to rise between 1.5% and 3.5%, down from its prior range of 3% to 6%.