JetBlue: The Year In Review

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JetBlue Airways

Like most of its competitors, JetBlue Corporation (NASDAQ:JBLU) posted rather amazing first half results, while getting hurt on adverse weather towards the second half. Despite being on track to do well in Q3, operations suffered significantly as unprecedented weather conditions forced the airline to cancel over 2,500 flights. The hurricanes accounted for a near 6 cent negative impact on the quarter’s earnings per share, and is expected to hurt earnings further in Q4 as well.

Even so, the company managed to report significantly better results than most of its competitors throughout the year. While the hurricane related headwinds continue to weigh on the airline’s performance in Q4, JetBlue’s strong underlying results could bode well for 2018.

Key Highlights From The Year:

  • Probably the most worrying news this year was the company’s decision to reduce capacity in Puerto Rico for the foreseeable future, as the island begins to rebuild after Hurricane Maria. This comes as a major blow to the airline, which is the largest air carrier in the region. Management has decided to cut capacity by about 33% for a few months as leisure trips to the country experience an understandable dip. We can expect to see capacity fully restored towards the end of 2018, when resorts and hotels begin to open up again. Until then, the company hopes to redeploy this capacity in other profitable leisure destinations.
  • After almost two years of declining unit revenues, JetBlue managed to get revenue per available seat mile (RASM) growing again in Q2. 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 the quarter. Throughout the remainder of the year, the company managed to keep this key metric from slipping into the red again. However, the adverse weather conditions may force RASM to fall by about 0-3% in Q4. While this situation is not ideal, it is absolutely understandable.
  • The Mint markets continued to remain RASM and margin builders this year. The company witnessed a marked improvement in its most established Mint markets throughout 2017. RASM improvements in New York and other new markets are testament to this fact. Due to the success of the program, the company expanded the service across several new sectors in the year including three new transcontinental sectors – New York-San Diego, New York-Las Vegas, and Boston-San Diego.
  • Like most of its competition, heavy costs hurt margins significantly in the year. While the first two quarters saw margins shrink on new labor contracts and rising oil prices, the bottom line towards the second half of the year was hurt on heavily reduced capacity induced by the hurricanes that swept through the East Coast and the Caribbean. We can expect to learn more about this, and the company’s strategy in reducing these costs, in the upcoming earnings call.
Relevant Articles
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  2. What’s Next For JetBlue Stock After A 35% Fall This Year?
  3. Here’s What To Expect From JetBlue’s Q2
  4. Will JetBlue Stock Recover To Its Pre-Inflation Shock Highs?
  5. What Led To A 62% Fall In JetBlue Stock Since 2019?
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