AIRLINEFINANCEINSIGHTS

JetBlue Airways – Why Is The Stock Flying Sky High?

JetBlue Airways

JetBlue Airways (IATA Airline Code – B6)’s stock has been flying sky high in the market. We will investigate why in this post.

Analysis

It has been a banner year for the airline industry in the US as fuel prices have continued on its downward trend and airlines are managing costs while increasing prices in certain markets.

JetBlue, in particular, has been a standout since its low of  US$9.41 recorded on October 13, 2014 over Ebola concerns. (NASDAQ: JBLU) is up ~43% to an intraday 52-week high of US$13.48 today.

Stock information is taken from Google Finance on November 19, 2014 (All Rights Reserved)
Stock information is taken from Google Finance on November 19, 2014 (All Rights Reserved)

Here is a comparison of major US airlines as a comparison since their October 13, 2014 close:

Information taken from Google Finance on November 19, 2014 (All Rights Reserved)
Information taken from Google Finance on November 19, 2014 (All Rights Reserved)

The top 3 performers are:

Delta Air Lines (NYSE: DAL) – 35.57%, JetBlue Airways (NASDAQ: JBLUE) – 32.10% and United Airlines (NYSE: UAL) – 31.96%. Note that both Nasdaq and Dow Jones Industrial indexes are up only 9.4 and 6.9% in the same period.

There are many items contributing to JetBlue’s rise during this period:

  • The new first class product Mint (TM) has been a success since its introduction in August 2014 and contributing to increased yields for the New York (JFK) to San Francisco (SFO)/ Los Angeles (LAX) routes.
  • Load factor was 86.2% in 3rd quarter 2014 (up 1.2% year over year) which helps increase revenue.
  • Introducing a retrofit program that will increase their Airbus A320 capacity 10% from 150 to 165 seats which will contribute to additional revenue.
  • Delaying new jet delivery from 2016-2018 to 2022-23 as part of cost management
  • Introducing a tiered fare program in 2015 which will supplement its low prices with checked bag fees

While some of these changes may not please passengers, JetBlue will still be the only airline with the highest pitch in economy on its A320 and free wifi.

In January 2015, we will feature a year end review of the industry across different regions.

 

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