Why Did JP Morgan Just Upgrade JetBlue?

In a report published Tuesday, analysts at JP Morgan upgraded

from Neutral to Overweight. The price target was raised from $19 to $28. The analysts believe that the market needs to see beyond RASM while judging the value of an airline stock. Although JetBlue has witnessed RASM outperformance so far in 2015, the analysts expect the 2016 RASM to worsen before it gets better. "Not only will JetBlue face tougher comps than most, but ten aircraft deliveries and the start of a 10 percent capacity increase on its 130 A320s will weigh heavily on RASM," the analysts said. However, the analysts also expect the company to witness the "best ex-fuel CASM year in a decade" in 2016, despite the flight attendant training scheduled for 1H16. The U.S. airline industry today has the lowest number of airlines operating since deregulation and 90 percent of the domestic market is monopolized by four companies. This sector is witnessing record margins, buybacks and aggregate market cap at present. "What the industry once struggled to earn in a year it now generates with ease by April. Evolution cannot be denied, though the sustainability of current trends remains open for debate," the analysts stated.