JetBlue Looking At A Weak Start To 2017

by Trefis Team
JetBlue Airways
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JetBlue Corporation (NYSE:JBLU) is all set to report earnings for the first quarter of FY 2017 on April 25. The company posted positive figures in the previous quarter, beating the consensus estimates for earnings and revenues comfortably. The company posted a positive earnings surprise of almost 2%, with revenues coming in around $1,641 million, up about 3% year-over-year. Revenues were driven primarily due to the airline’s strategy to restrict its capacity growth in order to bring back its unit revenue in the positive range. While revenues could continue to remain positive this quarter on the back of this strategy, earnings are expected to take a hit on rising costs. Analysts estimate earnings to come in around $0.25 per share, down about 12% year-over-year.

Probable Highlights:

  • As mentioned previously, the bottom line is expected to be hurt by rising expenses. The recently inked labor deals and maintenance costs are bound to drag on earnings this quarter. The company expects the consolidated operating cost per available seat mile, excluding fuel, to grow in the range of 3%-5%. However, for the full year, the airline plans to restrict the unit cost growth to 1%-3% in order to maintain its margins.
  • JetBlue has forecast fuel consumption in the quarter to be around 194 million gallons. Additionally, fuel costs are estimated to rise by about 16 cents in the quarter, up from $1.56 per gallon recorded in the last quarter, as oil prices continue their accent to normalcy. This is bound to weigh on earnings further.
  • Operating revenue is anticipated to decline by about 4.8%. The airline plans to spend $305-$365 million in the first quarter and $1.2-$1.4 billion in the fiscal year on re-fleeting and maintenance of its airplanes.
  • The negatives aside, the company has highlighted plans on increasing its capacity by a large margin over the coming year. To accommodate for the consequent surge in demand, the low-cost carrier intends on expanding its premium service, Mint, significantly. In this respect, the company hopes to operate more than 70 Mint flights by December 31, 2017. This could definitely attract more passengers, and should help boost the top line as early as this quarter.
  • Further, the company is more than committed to reducing its debt significantly over the year, giving much needed respite to investors. JetBlue expects to repay debt of approximately $50 million and $195 million in the March quarter and the full year 2017, respectively. This move is bound to raise optimism regarding the stock which has suffered since the last earnings call.

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