JetBlue
(
JBLU
) has made its way through the flight auction at New York's
LaGuardia and Washington's Reagan airports, edging out one of the
largest discounted airlines --
Southwest
(
LUV
). Through this auction, JetBlue received eight pairs of
roundtrip slots at each of these airports.
Further, JetBlue's subsidiary,
WestJet Airlines Ltd.
(
WJA
) also received eight other flight slots auctioned at LaGuardia
airport.
Despite the financial turmoil including higher fuel prices, weak
demand and challenging weather conditions, JetBlue managed to post
record revenues in the recently concluded quarter, encouraging
flight additions. Recently, JetBlue also announced its expansion
plans in the Caribbean islands. The company will begin non-stop
twice-daily flights from Fort Lauderdale, Florida to Kingston,
Jamaica from April 30, 2012. Additionally, JetBlue will introduce
two daily flights connecting San Juan, Puerto Rico, and Ft.
Lauderdale in May 2012.
Fare hikes and rising demand from the emerging markets have
attracted many other players in the airline industry to add
flights. Companies like
Delta
(
DAL
), Southwest and
United Continental
(
UAL
) are also seeking network expansion at new international
routes.
In March 2012, Delta will add services from New York-JFK to
various destinations in Latin America and non-stop new flights
between New York-LaGuardia and Nassau, Bahamas. Delta will also
connect seven U.S. cities like Austin, Jacksonville, Kansas City,
New Orleans, Milwaukee, San Francisco and Los Angeles with JFK
airport in June 2012. Further, the carrier will also introduce 12
daily flights to 11 domestic and Caribbean markets during the first
half of 2012 to capitalize on the surge in air travel on these
routes.
Continental commenced daily flights between Houston's Bush
Intercontinental Airport and Lagos, Nigeria, on November 16. United
will begin its non-stop daily flights between New York/Newark
Liberty and Buenos Aires, Argentina, in April 2012 and Continental
will fly between New York/Newark Liberty to Frankfurt Airport from
January 2, 2012.
With respect to domestic airlines, Southwest Airline was the
first to announce new international flights connecting Houston
Hobby to San Juan, Puerto Rico, and to three other cities in
Mexico. The carrier will begin these services by May 2012.
Additionally, AirTran, the subsidiary of Southwest is also
slated to fly between Ft. Lauderdale, Hollywood and San Juan,
Puerto Rico and Denver. Trailing a little behind, JetBlue will also
add two daily flights connecting San Juan, Puerto Rico, and Ft.
Lauderdale in May next year.
The host of services introduced on new and existing networks
reflects a positive momentum in the airline industry for the
upcoming year. Apart from their dwindling cost structures, these
carriers remained challenged by inclement weather conditions and
the fluctuating economy in the past quarters. Nevertheless, the
carriers are expected to hit the growth trajectory based on
improving passenger traffic and cargo volumes, particularly in
international routes, as well as aggressive fare hikes.
The International Air Transport Association projects demand
growth of 5.9% in the current year and 4.6% in the following year.
Further, the Association expects revenues to increase up to $632
billion on aggressive fare hikes. However, the profit margin is
expected to be only 1.2% for 2011 and 0.8% for 2012 given the
negative impacts of fuel prices.
As a result, we remain cautious on these stocks and continue to
maintain our long-term Neutral rating on Delta Air Lines, United
Continental, Southwest Airlines and JetBlue.
DELTA AIR LINES (
DAL
): Free Stock Analysis Report
JETBLUE AIRWAYS (
JBLU
): Free Stock Analysis Report
SOUTHWEST AIR (
LUV
): Free Stock Analysis Report
UNITED CONT HLD (
UAL
): Free Stock Analysis Report
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