Expect Previous Issues To Continue In Q3 For Jetblue
JetBlue (NASDAQ:JBLU) is expected to report earnings on 23rd October 2018. The airline has struggled throughout the year, and is expected to continue struggling through the quarter. We expect earnings to come in between $0.44 to $0.45 per share for the quarter, while revenue is expected to come in at $2.01 billion.
We currently have a price estimate of $20 per share, which is higher than the market price. You can use our interactive dashboard Q3 Outlook For Jetblue to modify key drivers and visualize the impact on JetBlue’s price estimate.
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A key metric to watch will be RASM (Revenue Per Available Seat Mile). as the company reports its earnings. Largely due to overcapacity issues RASM has been poor for the carrier, and will likely continue to be so in the quarter. Overcapacity has been a problem because the management overestimated demand while expanding capacity. Expectations for RASM are going to be anywhere between 0-3% for the quarter. Even though Jetblue has been pushing its Mint Premium Service, Jetblue’s RASM growth continues to lag its previous results. Expect the low RASM percentage to weigh on earnings.
In addition to poor RASM, fuel costs surged during the quarter and are expected to come in 38% higher for the quarter. During the quarter JetBlue finalized new pilot contracts, previously being a non-union airline, JetBlue faced increasing pressure and finally decided to allow the airline to become unionized. The increase in pilot salaries is expected to add anywhere from 3-4% in non-fuel costs.
Going forward JetBlue is making a number of key changes to improve its efficiency. It will add 12 new seats to each of its A-320’s. It is also expected to replace the E190 planes with the new A-220, this will reduce non-fuel costs by 22% for the quarter. In addition, the carrier plans to add 85 new Airbus A-321 neo’s reducing fuel costs significantly.
The macro environment is expected to weigh on earnings, and with little improvements in efficiency, and weak demand, the airline is expected to come in with earnings which will likely be lower than previous years. All-in-all, JetBlue’s quarter does not bode well for the stock in the short term.
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