Airlines Week In Review: United & JetBlue

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In the past week, United (NYSE:UAL) offered a voluntary severance package to its flight attendants, as the carrier is seeking to reach a single bargaining agreement which covers all its flight attendants. United also announced to add 50 Embraer E175 jets to its fleet in an effort to improve the fuel efficiency of its fleet. Separately, JetBlue (NASDAQ:JBLU) announced a new CEO, Robin Hayes, who will succeed the company’s current CEO and founding team member, Dave Barger.

United

On Monday, September 15, United announced that it is offering a voluntary severance package to its approximately 23,000 flight attendants. The carrier said that it will make a lump sum payment of up to $100,000 to flights attendants who choose to leave the company. [1] Currently, United is seeking to reach a joint collective bargaining agreement which covers all its flight attendants. The carrier’s flight attendants are currently represented through two separate contracts which are a legacy of the pre-merger days of United and Continental. United has been able to sign unified contracts featuring a single seniority list with most of its employee groups including pilots, dispatchers and storekeepers, but the carrier is yet to reach a similar agreement with its flight attendants and technicians. The company believes that this voluntary severance package will help it achieve the objective of a unified joint collective bargaining agreement with its flight attendants. United hopes to attract at least 2,100 flight attendants through this offer. [2]

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Additionally, Wednesday, September 17, United announced to add 50 Embraer 175 regional jets to its fleet, in addition to the 70 E175s that the carrier is already adding to its fleet. [3] Deliveries against this new order will begin in 2015 and continue through mid-2017. These E175s, which seat 76 passengers, are replacing older, less cost-efficient 50-seater regional jets in United’s fleet. Therefore, we figure this fleet restructuring will help lower United’s operating costs going forward. See United’s Fleet Restructuring Will Add Growth To Its Earnings.

– We currently have a stock price estimate of 45.20 for United, approximately 10% below its current market price.

– United’s stock price has fallen by nearly 2% over the past week.

– We currently estimate United to post earnings of $4.44 per share in 2014, compared with its consensus earnings of $4.55 per share.

See our complete analysis of United here

JetBlue

Separately, Thursday, September 18, JetBlue announced that its current CEO, Dave Barger, will step down in February next year. [4] Dave is a founding member of JetBlue and has led the airline as its CEO since early 2007. He will be replaced by Robin Hayes, who is currently JetBlue’s President and has occupied the position of Executive Vice-President and Chief Commercial Officer in the past. We figure as the carrier is in solid shape financially, posting steady growth in passenger traffic, revenue and profit, this is a good time for leadership change.

– We currently have a stock price estimate of $12 for JetBlue, around 5% ahead of its current market price.

– JetBlue’s stock price has fallen by nearly 10% over the past week, primarily due to a downgrade Monday, September 15, from Neutral to Underperform by a Bank of America analyst. [5]

– We currently estimate JetBlue to post earnings of 71 cents per share in 2014, compared with its consensus earnings of 68 cents per share.

See our complete analysis of JetBlue here

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Notes:
  1. United Airlines and the Association of Flight Attendants to offer enhanced early out program for Flight Attendants, September 15 2014, www.unitedcontinentalholdings.com []
  2. United Continental, flight attendants reach buyout agreement, September 15 2014, online.wsj.com []
  3. United Airlines to Add 50 E175 Aircraft to United Express Fleet, September 17 2014, www.unitedcontinentalholdings.com []
  4. JetBlue Announces CEO Succession, September 18 2014, www.jetblue.com []
  5. BoA downgrades JetBlue shares, September 19 2014, www.benzinga.com []