On May 30, 2014, we issued an updated research report on
JetBlue Airways Corporation
). The carrier reported weak first-quarter 2014 results with both
the top and the bottom lines missing the Zacks Consensus Estimate.
However, network expansion, cost control and increased focus on
differentiated product offerings is expected to drive the company's
performance, going forward. JetBlue currently carries a Zacks Rank
JetBlue remains focused on generating a 7% return on invested
capital (ROIC) based on cost control, maximization of revenues and
a stronger balance sheet. To achieve the ROIC goal, the company is
concentrating on delivering safe and excellent service to its
customers along with the expansion and implementation of valuable
JetBlue is also banking heavily on the new services offered from
Fort Lauderdale to different locations in North America, the
Caribbean and Latin America. To support this growth momentum, the
carrier expects to introduce new flights to Cartagena, Las Vegas,
Pittsburgh and Jacksonville from the end of Oct 2014. Further,
continuous growth in JetBlue's TrueBlue and Even More product is
expected to push up the carrier's ancillary revenues by 10-15% in
Notably, JetBlue has won 40 new take-off and landing slots at
Reagan National Airport (DCA) in Washington DC, including the 16
that it leased from American Airlines. The company also plans to
add 24 daily round trip departures from DCA to eight cities in
2014. To support this goal, the company has decided to eliminate
trans-continental flying from Washington Dulles and has closed
several other non-profitable routes.
However, increase in pilot compensation is expected to affect the
company's cost going forward. The new stringent pilot duty and rest
rules under FAR117 has increased JetBlue's expenses as the company
has had to hire more pilots to comply with the aforementioned
Although JetBlue has won slots at DCA, its rival
Southwest Airlines Co.
) has grabbed an even bigger chunk of slots at the same airport.
Southwest Airlines has decided to extend daily departures from DCA
to 44 from the current 17, thus providing stiff price competition
to JBLU in the airport.
Apart from DCA, Southwest Airlines has also acquired 12 pairs of
slots at New York's LaGuardia International Airport (LGA), in a bid
to vie for the lucrative New York market, which incidentally is a
strong base for JetBlue. We thus remain cautious on the stock at
Key Picks from the Sector
Better-placed stocks worth considering within this sector include
American Airlines Group Inc.
Delta Airlines Inc.
). Both stocks currently carry a Zacks Rank #1 (Strong Buy).
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JETBLUE AIRWAYS (JBLU): Free Stock Analysis
AMER AIRLINES (AAL): Free Stock Analysis Report
SOUTHWEST AIR (LUV): Free Stock Analysis Report
DELTA AIR LINES (DAL): Free Stock Analysis
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