JetBlue Earnings Preview: What We’re Watching
JetBlue Airways (NYSE:JBLU) is the 6th largest passenger carrier in the U.S. based on revenue passenger miles and operates on a point-to-point routes with its fleet of 115 Airbus A320 aircraft and around 45 EMBRAER 190 aircraft – the youngest and most fuel-efficient fleet of any major U.S airline. It competes with American Airlines (NYSE:AMR), Delta Airlines (NYSE:DAL), Southwest Airlines (NYSE:LUV) and U.S. Airways (NYSE:LCC).
We have a $6.50 price estimate for JetBlue Airways, which is about 20% ahead of the current market price.
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Commercial partnerships to promote growth
JetBlue is building strategic commercial partnerships with several airlines as a part of its growth strategy to improve its market share on domestic and international routes. In March 2011, it announced two new commercial partnerships with LAN Airlines and Virgin Atlantic to allow its customers to access several new international markets like South America and Western Europe. This also enables international travelers to access to JetBlue’s key domestic and Caribbean routes. JetBlue has also recently added functionality to jetblue.com, enabling customers to book online tickets that include segments on its airline partners.
Plans to introduce in-flight broadband
JetBlue has been recognized as a “value airline” based on its award winning customer service, in-flight entertainment and yet has a low cost structure and competitive fares. It has also recently executed an agreement with ViaSat Inc. to jointly develop and introduce state of the art in-flight broadband connectivity technology on its aircraft.
Young and fuel-efficient fleet, yet fuel-volatility raising costs
With recovering economy and gradually improving demand for air travel, JetBlue has benefited from the industry-wide trend of fare increase. Yet steep hike in fuel costs, upto 60% since January 2011, have been compressing operating margins. JetBlue continues to build its fuel-hedging portfolio and expects to hedge 35% of its fuel consumption for 2011. Yet, cost per available seat mile for 2011 is expected to increase by 15% to 20% over 2010. To rein in costs, JetBlue has also slowed down its planned capacity increase for 2011.