Airlines have not had a good time of things in 2020. The novel coronavirus pandemic has been a disaster for the industry. Billions of dollars in government bailouts have been needed to keep airlines afloat despite near-empty planes. In some ways, JetBlue Airways (NASDAQ:JBLU) is in a better position than other airlines, with its focus on domestic flights and the Americas. After taking a thrashing through the early spring, JBLU stock has been on a slow and rocky upward trend.
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Since closing below $7 in March, JBLU has now rallied to $13. In fact, shares have posted gains of 90% since March 23 — but still remain well short of the $21.56 they hit in February. Even then, that was on the low side for JetBlue shares over the past five years.
With shares trending upward since August, domestic passenger travel picking up after the lockdown, jet fuel prices still depressed, and significant upside to reach even February levels, is now the time to take a chance on JBLU stock?
Pandemic Remains Steep Challenge, Lower Fuel Prices a Silver Lining
JetBlue flies between American cities, as well as to destinations in South America and the Caribbean. While that has helped to insulate the airline from the sort of damage competitors that run flights to Europe (which largely banned U.S. visitors) suffered, JetBlue has still seen a dramatic drop in passengers.
The industry has been in recovery since the lockdowns ended, but “recovery” still doesn’t paint a rosy picture. For JetBlue, that meant it flew only 25% to 30% of its regular schedule in June, about 50% in July, and slightly more in August. Earlier this month, the company announced it would add 24 new routes in markets showing “strengthened demand potential.”
Measures needed to address public health concerns about flying are cutting into profitability. This includes extensive cleaning of planes between flights and keeping middle seats empty to promote distancing. JetBlue recently extended its open-middle-seat policy to October 15.
The silver lining in the mess that has been 2020? An ill-timed price war between Russia and Saudi Arabia resulted in oil prices collapsing to record lows. Along with that oil price collapse came a dramatic fall in jet fuel prices. Even now after creeping back up, the price of jet fuel in North America is nearly 46% lower than it was last year.
That reduction in fuel cost has had a material impact on JetBlue’s operating expenses. While the airline’s jets are flying far less as a result of the pandemic, reduced fuel costs for flights have helped to offset the related costs such as keeping a middle seat free and enhanced cleaning.
But before getting too excited about what the fuel savings mean, consider the bigger issue: that catastrophic drop in passengers. In the second quarter, the amount of fuel burned by JetBlue flights dropped by 86.7%.
Bottom Line on JBLU Stock
At this point, it’s time to circle back to the big question: is now the time to buy JBLU stock? As InvestorPlace contributor Tezcan Gecgil pointed out back in June, it’s crucial that JetBlue get to the point where its flights are once again profitable.
Cheap fuel and a few added flights aside, I don’t see any signs of a scenario where that happens any time soon.
The pandemic has far from run its course, so air travel seems unlikely to stage a comeback in the near future. Even if it does, there are doubts about the economic conditions we’ll be facing. Airline investors discovered in the aftermath of the 2008 Great Recession just how long it can take airline stocks to recover when consumers are hurting and holding back on shelling out for discretionary expenses like flying.
JBLU earns a ‘D’ rating in Portfolio Grader. It’s not hopeless, but there are few positives that would recommend it as a buy at this point.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.