JetBlue Shares Soar as Passenger Traffic Rises

Photo Credit - Zachary Wilkinson

As the airline sector of the stock market has ticked higher this year, JetBlue shares have led the pack, climbing 42 percent year-to-date. Out pacing the NYSE Arca Airline Index, JetBlue, which trades on the NASDAQ under the symbol “jBLU,” was near a 52-week high on the close Friday. A portion of JetBlue’s success has resulted from the overall success of the financial markets, with the NASDAQ up 10.1 percent year-to-date and the S&P 500 Index up 8.6 percent. Earnings per share have also been a leading factor for the share price, increasing to 19 cents per share in the second quarter of 2014, compared with 11 cents per share for the same period in 2013, according to company’s second quarter earnings release.

Among the reasons for improvement in the airline’s earnings is a 4.3 percent increase in passenger miles flown in July of 2014, compared to July of 2013. JetBlue’s passenger traffic increased 3.5 percent system-wide, supported by an expansion in both its domestic and Caribbean route systems. New international destinations from Boston were announced in May, including Liberia in Costa Rica, Puerto Plata in the Dominican Republic and the island of Saint Lucia. All are part of the JetBlue Caribbean expansion, which places it in further competition with legacy carriers American, Delta and Untied. The new routes allow JetBlue to offer both low cost service and access to major metropolitan areas.

JetBlue’s current fleet consists of 134 Airbus 320 and 321 aircraft, along with 60 Embraer 190 regional jets. At an average age of less than 10 years, the fleet is still new by airline standards. According to JetBlue’s 2013 annual report, the expected life of the aircraft is 25 years, which is in keeping with industry expectations. Both the new fleet and types chosen has led to large fuel savings, allowing JetBlue to compete effectively with carriers such as Delta, which continue to operate many of the less efficient MD-80 series aircraft. In addition to the existing fleet, the company has on order 136 new Airbus and Embraer aircraft, including 30 A320neo, and 30 A321neo aircraft. The neo versions incorporate the original airframes with new, more fuel efficient engines, which improve daily operating costs.

As the US economy continues to improve, JetBlue will likely enjoy the benefits, with further increases in passenger traffic and stable fuel costs. At $12.23 per share, the company’s forward looking price-to-earnings ratio comes in at 14.9, lower than many of the legacy carriers. That makes JetBlue an attractive growth stock for investors and may help lift the stock price over the next year.

Disclaimer: Nothing in this article should be considered investing advice. Always consult a professional financial
advisor before investing.

—Christian Pezalla