JetBlue Airways Slips Despite Strong May Traffic - Analyst Blog

Leading passenger airline JetBlue Airways Corporation JBLU slipped 1.88% on Wednesday trade on Nasdaq despite registering strong traffic growth in the month of May. The carrier reported airline traffic – measured in revenue passenger miles or RPMs – of 3.20 million, up 7.0% year over year, representing the fourth consecutive month of high traffic post a dip in numbers in Jan 2014.

Consolidated capacity (or available seat miles/ASMs) was also up 7.0% year over year at 3.75 billion. However, the load factor or percentage of seats filled by passengers was 85.2%, up merely 10 basis points.

Passenger revenue per available seat mile (PRASM) increased 4% year over year. The company registered a completion factor of 97.6%, with on-time performance of 77.3%.

In the first five months of this year, JetBlue has generated RPMs of 15.04 billion (up 3.8% year over year) and ASMs of 17.96 billion (up 3.6%). However, load factor, trickled down to 83.7% from the year-ago figure of 84.1%.

Although JetBlue's May figures were positive, they failed to excite shareholders owing to certain macro issues. Recently, the World Bank cut its global growth outlook for 2014 from 3.2% to 2.8%, which weighed on the airline stocks. However, the news that affected the sector most was German airline giant Lufthansa's profit warning for 2014 and 2015, which pulled down most of the stocks within the industry.

Lufthansa − Europe's second largest airline expects its 2014 operating profit could slide to €1 billion ($1.35 billion) from its previous guidance of €1.3–€1.5 billion ($1.75–$2.0 billion). The German flag carrier also slashed its 2015 profit expectations by €650.0 million ($878 million). Weaker-than-expected passenger and cargo performance, labor trouble among pilots and devaluation of Venezuelan currency led to the cautioned outlook.    

Few days ago, the airline industry suffered yet another blow when the International Air Transport Association (IATA) trimmed down its earlier provided 2014 profit outlook by $700 million to $18 billion.

However, amid such profit concerns, IATA has shown optimism about the performance of Middle East and North American aviation companies and expects global revenues of $746 billion, up by $1 billion from the previous guidance. Further, we expect this Rank #3 (Hold) stock to deliver traffic growth in the future owing to slot wins at the Reagan Washington National Airport and expansion in major growth regions across the Americas.

Other Stocks

Better-ranked stocks in this sector include Delta Air Lines Inc. DAL, Southwest Airlines Co. LUV and American Airlines Group Inc. AAL. All the three stocks sport a Zacks Rank #1 (Strong Buy).