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.
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.
The regional carriers are taking share from major carriers. Most of the regional airlines have increased the number of revenue passenger miles on a continuous basis. After the rapid solution from the government regarding the delay of flights due to the “Sequester”, the revenue should continue to increase. Further, the price of oil, which accounts for carriers’ major expense, has not fluctuated much. Therefore, the operating expenses should not increase significantly. Overall, the future for regional carriers seems good.
Do I invest in JetBlue?
JetBlue Airways Corporation (NASDAQ:JBLU) is another carrier that I believe will continue to grow. Not only did they report strong numbers for the first quarter of 2013, but the company has issued press releases that suggest growth is not over. Airlines show growth when they fly new routes, and JetBlue has added Philadelphia as its 78th city. The airline will operate five daily flights from Boston Logan International Airport to Philadelphia International Airport. Further, the company has inaugurated two routes from Bradley Int. Airport in Hartford, CT, to Fort Myers, FL and Tampa, FL. It also plans to fly daily from New York’s JFK to Port-au-Prince, Haiti.
Lastly, JetBlue Airways Corporation (NASDAQ:JBLU) was awarded with the highest honors in airline customer satisfaction among low-cost carriers by J.D. Power. It was the ninth time in a row that the airline was awarded this recognition. For me, this is further proof of the company’s commitment towards customer satisfaction, and it is likely that more customers utilize JetBlue Airways Corporation (NASDAQ:JBLU) as their airline of choice. For these reasons, the stock should be in any growth portfolio.
The article Is This Carrier Going to Fly Higher? originally appeared on Fool.com and is written by Robinson Roacho.
Robinson Roacho has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines. Robinson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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