JetBlue Q2 Earnings: Stellar Quarter Leads To Positive Unit Revenue For First Time In Two Years

JetBlue Corporation (NYSE:JBLU) started the year off in a rather disappointing fashion, with earnings plummeting by about 59% in the first quarter. Despite the fall, management remained optimistic that the company’s results would bounce back through the year. As predicted, JetBlue managed to pull off an incredible quarter this time around, buoyed by the favorable timing of the Easter weekend. The company reported double-digit growth in revenue and earnings in Q2, while the outlook for the rest of the year shows immense promise.

Key Highlights:

• After almost a year of declining unit revenues, JetBlue managed to get revenue per available seat mile (RASM) growing again in the quarter. Previously, management had guided towards a 3-6% increase in RASM year-over-year. However, eventually, the company reported a stellar 7% year-0ver-year increase in RASM in Q2. The key metric was benefited by mainly two factors – higher than expected number of flight cancellations during Q2 and incentive payments from its credit card partnership. Despite this, RASM would have grown in the high end of the company’s guidance.
• As expected, JetBlue said that ex-fuel costs per available seat mile rose by about 5% to 8.16 cents. The increase in costs is attributed to the recently ratified labor contracts that are expected to hurt earnings for the remainder of the year. That said, the wage increase is a temporary issue which will resolve itself by the end of the year, with growth in costs coming in lower starting as early as Q3.
• Average jet fuel price paid in the quarter jumped by close to 12.3%. However, both the ex-fuel CASM and jet fuel price paid came lower-than-expected. This helped JetBlue’s bottom line which rose by almost 16.7% year-over-year in Q2, while earnings per share rose by a mammoth 21%.
• Additionally, the Mint markets continue to remain RASM and margin builders. The company witnessed a marked improvement in its most established Mint markets in the second quarter as well. RASM improvements in New York during the quarter are testament to this fact.
• Going forward, the company is expects to see a good performance in Q3 as well. The company expects to see RASM increase by about 0.5-1.5% on the back of tougher year-over-year comparisons and less favorable timing of holidays. Costs are expected to moderate substantially over the second half of the year. The company expects ex-fuel CASM to grow by a modest 1.5-3.5%. Additionally, management expects JetBlue’s EPS to see an increase in Q3 as well, albeit, at a much slower rate.

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