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JetBlue Airways Corporation (JBLU): Is This Carrier Going to Fly Higher?

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Most airline companies have outperformed the S&P 500 this year. JetBlue Airways Corporation (NASDAQ:JBLU) has rallied 18% while the S&P 500 has rallied 15%. In the past one year, the company has rallied 40%. It recently released its earnings report for 1Q 2013, and more recently, the April monthly traffic report. It seems that the company had a great first quarter, but will it continue providing investors with capital appreciation?

JetBlue Airways Corporation (NASDAQ:JBLU), a $1.90 billion market capitalization company, is a regional carrier operating domestic and international routes to the United States, the Caribbean, and Central and South America. The company is inaugurating new routes to Lima, Peru, and Port-au-Prince, Haiti. At first glance, the company seems to be expanding. It is trading with a price/earnings ratio of 19.29, and a forward P/E of 9.51. Its Price/earnings-to-growth ratio is 0.74.

Quarterly earnings

According to the company’s 1Q 2013 earnings report, it was able to increase its total revenue 8% from $1.2 billion in 1Q 2012 to $1.29 billion in 1Q 2013. However, its total operating expenses grew 11%, from $1.11 billion to $1.24 billion for the same period. As a result, its operating margin declined from 7.4% to 4.5%. As a result, its net income declined from $30 million in 1Q 2012 to $14 million in 1Q 2013, or $0.05 per share.

The company’s revenue passenger miles (RPMs) grew 7.6% from 7.9 billion in 1Q 2012 to 8.5 billion in 1Q 2013. Its available seat miles (ASM) increased 6.3% from 9.5 billion to 10.1 billion for the same period, and its load factor increased from 82.9% to 83.9%.

April traffic report

The traffic report for April was released on May 10. Its RPMs increased 4.7% from 2.86 billion in April 2012 to 2.99 billion in April 2013. Its ASM also increased from 3.35 billion to 3.57 billion over the same period. Finally, its load factor declined by 1.5% from 85.2% to 83.7%.

To put this data in perspective, the performances of JetBlue Airways Corporation (NASDAQ:JBLU), Alaska Air Group, Inc. (NYSE:ALK) and Southwest Airlines Co. (NYSE:LUV) may be compared. The following table summarizes the performance in April for these carriers.

in thousands P/E Market Cap. RPM % Change ASM % Change Load Factor % Change
JetBlue Airways. 19.01 $1.87 B 2,995,141 4.70% 3,577,046 6.50% 83.70% -1.50%
Alaska Air Group 15.13 $4.65 B 2,375,000 8.50% 2,758,000 8.90% 86.10% -0.30%
Southwest Airlines 27.63 $10.18 B 8,735,895 1.50% 11,233,131 4.10% 77.80% 2.00%

Alaska Air Group, Inc. (NYSE:ALK) reported an 8.5% increase in its revenue passenger miles to 2.37 billion. Further, the number of available seat miles increased 8.9% to 2.75 billion. However, its load factor remained constant. Southwest Airlines Co. (NYSE:LUV)’ RPM increased a modest 1.5% to 8.73 billion. Its available seat miles increased 4% to 11.23 billion. Overall, its total load factor increased 2%.

These companies still have plenty of room to grow. Alaska Air Group, Inc. (NYSE:ALK) showed signs of growth by inaugurating new routes such as Boston-San Diego, Salt Lake City-Seattle, Portland-Atlanta, Portland-Dallas/Fort Worth. Alaska Air Group is confident in its revenue-generation ability, and it shows it by creating new routes.

Southwest Airlines Co. (NYSE:LUV) has become the largest regional carrier, and the company should continue to take market share from Delta Air Lines, Inc. (NYSE:DAL) and United Continental because of its low prices. Although riding in a Southwest aircraft is a little uncomfortable, the ticket prices are unmatched and a little pain is fine. The carrier will be flying a new route from Houston to Ronald Reagan Washington National. This new route will take a significant market share from United, since Houston International Airport is one of its main hubs. Finally, the company is confident in its revenue-generation ability, and its solid balance sheet was a positive factor for a hike in its dividend payment from $0.01 to $0.04 per share.

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