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.
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.
(We are reissuing this article to correct a mistake. The
original article, issued Friday, November 25, 2011, erroneously
stated that
WestJet
(
WJA
) was a subsidiary of 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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