JetBlue Updates: Opportunistic Expansion Supports Stock Gains

Positive developments at JetBlue Airways‘ (NASDAQ:JBLU) have bolstered the stock’s value since the start of this month, enabling it to gain over 20% despite flat broader market indices. The carrier emerged as the winning bidder for two bundles of eight slot pairs: one at New York LaGuardia Airport (LGA) and the second at Ronald Reagan Washington National Airport (DCA), both of which were recently made available in an FAA auction. We expect these additions to help the carrier double its service at these airports in 2012. (See JetBlue Secures Additional Slots to Expand at LaGuardia and Reagan National, JetBlue Press Release, Dec 1)

In another noticeable development this month, JetBlue announced further expansion of its growing Boston network with the addition of non-stop service to Dallas/Fort Worth, Texas beginning May 2012. JetBlue is the largest carrier in Boston with its seat share growing at a rapid pace compared to other carriers since 2006. The market is increasingly relevant for JetBlue due to its attractive premium travel segment economics. JetBlue’s leisure focus has historically driven revenue seasonality, and the carrier is now aligning its network strategy to increase penetration into the business travel segment in order to improve revenue performance during shoulder periods – the period between the peak and low seasons – and is implementing the strategy primarily through the Boston market.

See the Full Analysis for JetBlue Here

Besides the latest expansion in the Boston market, the carrier also announced its plans to add twice-daily nonstop flights from Fort Lauderdale, FL to Kingston, Jamaica very recently (See Yeah Mon, JetBlue Adds Jamaica to Expanding Caribbean Options). Given the abundance of caution elsewhere in the domestic sector, it seems fair to be wary of JetBlue’s unrelenting bullishness. However, a closer look at its October traffic report shows that, for now at least, the airline is managing capacity as vigilantly as other carriers. While October capacity grew by 6.5% last month, this was comfortably outpaced by traffic growth of 7.6%.

Contrast that with rivals American Airlines (NYSE:AMR) and US Airways (NYSE:LCC), whose domestic capacity slumps came in step with slower traffic declines of 1.8% and 3.2% respectively. For all three airlines, the priority has been tightening capacity relative to demand. JetBlue is doing the same thing as its older rivals – it just happens to enjoy stronger demand during its growth phase. We discussed the implications of the expansion spree at JetBlue in more detail in a recent article Tight Yield Management Safeguards JetBlue Expansion.

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