How Has JetBlue Performed In Comparison To Its Peers?

Over the last few years, JetBlue Corporation (NYSE:JBLU) has done phenomenally well. Its top line, in the period between 2010-2015, has grown by an average of 11.8%, the fastest in the industry. With the Alaska-Virgin America merger, the carrier was the fifth largest airline in terms of number of passengers. JetBlue established its brand by being economical and yet offering amenities like in-flight entertainment, TV at every seat, and Sirius XM satellite radio, which are not available at other low-cost carriers such as Spirit. Furthermore, in 2013 it launched its premium seating program, Mint, to entice business class or first class customers to its airline. The Mint program, with its lie-flat seats, and moveable partitions that can create small suites on the airplane, proved to be immensely successful, marking a cornerstone in JetBlue’s history.

In the following note, we compare JetBlue’s year to date performance, in terms of different metrics, to its peers in the industry.

• Capacity

JetBlue’s capacity growth in the last half decade has been the highest in the industry. Even as other players in the market focused on trimming the excess capacity built up in the system, due to excess investments in fleet, supported by the drop in oil prices, JetBlue continued to expand. It believed the headwinds in unit revenues to be systemic, and decided to wait it out, rather than cutting capacity.

Despite all time high capacity growth, JetBlue continued to improve its occupancy rate, unlike most other airlines. The improvement in occupancy rate signifies the fact that the company didn’t have superfluous capacity in the system.

• Unit Revenues

JetBlue, like its peers, faced a challenging year in terms of unit revenue growth. Unit revenues, or passenger revenue per average seat mile (PRASM), were under the pump throughout 2016 due to the strong dollar, low fuel prices, geopolitical turmoil, and increasing competition from low cost carriers. However, due to lower scale of its operations internationally and a great brand image, JetBlue didn’t suffer as much as other airlines from declining yields. Further, the unit revenues were helped by the launch of JetBlue’s operations in Mexico and Cuba.

Given the recent ascension of oil prices, on the back of OPEC’s decision to cut production, it becomes imperative for the airline to be able to turn around its unit revenues.

• Operating Costs

JetBlue has successfully managed to keep a lid on its operating costs in the last few years. Although its costs were higher than peers in the period between 2011-2016, they were almost half in the last two years. This is likely attributable to the fact that JetBlue has managed to stay a low cost carrier. Its expenditure on wages has also grown organically, as it didn’t have to sign any new contracts with pilots. Furthermore, its sales and marketing expense, along with maintenance, has grown conservatively over the years.

As the oil prices start rising again, and the company’s fuel expenditure goes up, this fiscal discipline will go a long way in promoting bottom line growth for the airline.

• Bottom-line

As a result of its performance exceeding its peers, in terms of unit revenues and costs, JetBlue managed to improve its pre-tax margin year on year. In 2016, the company expects the pre-tax margin to come in better than the other players in the industry.

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

• How Did JetBlue Perform Operationally In November?
• Millennials And Their Increasing Contribution Toward Air Travel
• How Did JetBlue Perform Operationally In October?
• Higher Expenses Weigh On JetBlue’s Q3’16 Results, Even As Unit Revenues Improve
• JetBlue’s Q3’16 Earnings Preview: Reduction In Capacity Expansion To Arrest The Decline In Unit Revenues
• How Did JetBlue Perform Operationally In September?
• How Has The State Of Air Travel In The U.S. Changed Over The Years?
• How Has JetBlue’s Financial Position Improved Over The Last Few Years?
• Is Renewable Diesel The Way Forward For The U.S. Aviation Industry?
• How Did JetBlue Perform Operationally In August?
• Can Passenger Airlines Revive The Growth In The Air Cargo Industry?
• How Are The U.S. Carriers Taking Advantage Of The Restoration Of Diplomatic Ties Between U.S. And Mexico/Cuba?
• Why Has Trefis Revised Its Price Estimate For JetBlue To $18 Per Share?
• Capacity Growth Fuels JetBlue’s Q2’16 Revenues, Slightly Offset By Declining PRASM
• JetBlue’s Q2’16 Earnings Preview: Capacity Expansion And Mint Services To Drive Results
• What Impact Will Crude Oil Prices Have On JetBlue’s Enterprise Value?
• How Are US Air Fares Correlated To Crude Oil Prices?

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

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research