What To Expect From JetBlue’s Q1 Earnings

JetBlue Corporation (NASDAQ:JBLU) reported a rather mixed earnings the last time around. In general, the company’s top and bottom lines suffered on the after effects of the two hurricanes that hurt operations through most of the second half of 2017. This, consequently, forced the company to cut capacity by about 33% in Puerto Rico, one of its largest international markets. However, the most recent releases are painting a very different picture for 2018.

Only last month, the airline increased its unit revenue guidance for Q1. In the announcement it stated that management expects RASM to rise modestly by 3.5-5.5%. However, on Wednesday, the company signalled that it has quite easily surpassed this estimate as well. In fact, the company managed to increase RASM by a mammoth 6.1% in the quarter, putting to rest many of the fears that may have plagued investors since the last earnings call.

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• As mentioned above, the company greatly improved RASM in the quarter. This goes to show that a rise in overall demand and the expansion in the airline’s popular Mint markets have more than offset the impacts of the industry-wide capacity increase that is expect to create adverse pricing conditions through most of the year. If played correctly, we could see the airline remain ahead of the curve through the remainder of the year as well. That said, one must also keep in mind that the overall rise in RASM was also aided by higher than anticipated flight cancellations in the quarter.
• Like many of its competitors, JetBlue has also worked around ways to dilute the impact of the rising oil prices on its profitability. In this respect, in late 2016, management announced its plan to reduce structural costs by close to $250-$300 million annually by 2020. By the looks of things, this program seems to already be starting to pay off. As a result, the company expects to see non-fuel unit costs to come in around -1% to 1% in 2018, with most, if not all, of its unit cost growth coming in the first quarter.
• Further, like many of its competitors, the airline is also set to benefit from the recent tax cut. In fact, the airline expects the cut to provide a near 20% tailwind to earnings through the year.