What Will Drive JetBlue’s Near Term Growth?

JetBlue Corporation (NASDAQ:JBLU) reported a rather mixed earnings through the first half of 2018. While unit revenues continued to show improvement through the beginning of the year, the key metric declined in Q2 at the hands of the unfavorable Easter holiday timing. Further, the company seems to be suffering greatly as global fuel prices continue to inch up. That said, the management expects things through the second half of the year to improve notably. We have created an interactive dashboard What Is The Outlook For JBLU on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings.

As mentioned previously, unit revenues had taken quite a hit in the previous quarter.  That said, things are expected to improve over the coming months. For the rest of FY 2018, the company sees passenger revenues to come in better than expected on improved air travel demand and better pricing conditions.

Additionally, the company has laid out plans to improve ancillary revenues to aid with overall growth. The company has a series of initiatives underway, encompassing co-brand and loyalty, and longer-term travel products. We expect to learn more on this on Investor Day which is scheduled in October.

As mentioned above, the company’s margins in the year thus far were hurt on a disadvantageous holiday calendar.  However, that was only part of the reason for the unsatisfactory display. Fuel prices have jumped by almost 20% since the beginning of the year, weighing on earnings as well. However, management is well aware of the situation and is already implementing strategies to mitigate the impact of higher fuel costs in order to improve margins. In this respect, the company is expected to make a series of adjustments to both capacity and ancillary revenue in the coming months.

Further, the company recently made changes to its fleet in order to increase overall efficiency. It introduced the A220-300 in an attempt to replace a notable portion of the invested capital with more productive assets. This adds momentum to the margin benefits it expects to see as the company looks to restart the A320s, while growing its Airbus A321 fleet. Accordingly, we believe the EPS to show steady improvements over the decade.

Overall, while 2018 seems a little rocky for the airline, we expect to see 2019 recover from all the present shocks and emerge well poised for growth. We expect margins to improve in the coming year as unit revenues jump on higher demand for air travel.