Capacity Growth Fuels JetBlue’s Q2’16 Revenues, Slightly Offset By Declining PRASM

JetBlue (NYSE:JBLU) released its June 2016 financial results on 26th July 2016 ^[1], missing the consensus estimate for revenue slightly. However, its stock price was seen trading approximately 7% above the pre-earnings levels, owing to the growth in its revenues and earnings. This rise in revenues can be attributable to JetBlue’s continued focus on capacity growth, which has remained the highest in the industry even in Q2. However, this was slightly offset by the effect of steeply declining unit revenues (PRASM), particularly in regions where the airline does not offer its premium Mint service.

In terms of bottom-line, although most expenses saw a rise on an annual basis, large fuel cost savings helped restrict operating expenses to previous year levels. This, in turn, fueled earnings, resulting in 20% y-o-y growth in EPS.

Going Forward

In Q3’16, the carrier expects its fuel expense to go up sequentially, due to the rising oil prices. However, on an annual basis, JetBlue will continue to save on fuel expenses. Further, its capacity growth guidance is lower than the previous quarters, likely to manage the effect of softening PRASMs, especially in Latin America. Earlier in Q2, JetBlue announced its intentions to expand its premium seat offering program, “Mint,” to seven additional transcontinental routes from four existing cities: Fort Lauderdale, Las Vegas, Seattle, and San Diego, while adding more Mint service to the Caribbean over winter weekends.

The company remains confident about its immensely successful Mint program and sees it as a game changer in the luxury travel industry. As a result, it has amended its deal with Airbus, under which it plans to add 30 new A321 airplanes over the next 7 years. The delivery of these planes is expected starting in 2017, and will complement the expansion of the airline’s Mint services in new markets such as East Coast-Europe. Since JetBlue will be amongst the first few airlines to receive the delivery of these A321 aircraft, it could disrupt the high-cost premium travel market by providing quality service at affordable costs.

See Our Complete Analysis For JetBlue here

Have more questions about JetBlue Corporation (NYSE:JBLU)? See the links below:

• What Impact Will Crude Oil Prices Have On JetBlue’s Enterprise Value?
• How Are US Air Fares Correlated To Crude Oil Prices?
• Rapid Capacity Growth And Lower Fuel Costs Drive JetBlue’s 1Q’16 Results
• How Has JetBlue Utilized Its Cash Flows Over The Last Three Years?
• How Has JetBlue’s Revenue And EBITDA Grown Over The Last Five Years?
• What Will Drive JetBlue’s Revenue And EBITDA In The Next Five Years?
• How Would JetBlue’s Equity Value Be Impacted If Crude Oil Prices Reach $100 Per Barrel By 2018?
• How Much Value Will JetBlue’s International Operations Contribute To Its Revenue By 2020?
• How Will JetBlue’s Equity Value Be Impacted If Crude Oil Prices Average At $50 Per Barrel In 2018?
• Capacity Expansions And Fuel Cost Savings Drive JetBlue’s Earnings in 2015
• How Did The Oil Slump Impact JetBlue’s Operating Margins In 2015?
• What Is JetBlue’s Fundamental Value Based On 2016 Expected Numbers?
• How Has JetBlue’s Revenue And EBITDA Composition Changed Over The Last Five Years?
• What Is JetBlue’s Revenue And EBITDA Breakdown?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for JetBlue Corporation

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1. JetBlue announces June quarter profit, jetblue.com, July 2016 [↩]