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JetBlue's September Traffic Falls, Hurricanes to Mar Q3 & Q4

Zacks Equity Research
Updated

JetBlue Airways Corporation JBLU reported unimpressive traffic data for the month of September. The low-cost carrier also provided an update pertaining to the expected impact of the devastating hurricanes (Irma and Maria) on its results for the third as well as fourth quarter of 2017.

Notably, traffic — measured in revenue passenger miles (RPMs) — decreased 4.4% year over year to 3.28 billion. Consolidated capacity (or available seat miles/ASMs) contracted 0.9% to 4.09 as well.

Another important metric, load factor (percentage of seats filled by passengers) decreased 300 basis points (bps) to 80.2% as the traffic contraction was more than that of capacity, thus leading to empty planes.

Moreover, the company registered a completion factor (system wide) of 90.7% in September with 70.1% flights on schedule. On a year-to-date basis, this Long Island City, NY-based carrier posted a 3.7% increase in RPMs while ASMs rose 4.2%. Nonetheless, load factor fell 40 bps year over year to 84.8% as capacity expansion outweighed traffic growth.

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Hurricanes Likely to Dampen Q3 Results 

JetBlue expects its top line to be hurt to the tune of $44 million in the third quarter of 2017, results of which are scheduled to be revealed on Oct 24. Additionally, operating income is likely to be adversely impacted in the range of $30 million to $35 million. The bottom line in the same quarter is expected to be hurt between 6 cents and 7 cents as well.

Meanwhile, capacity is projected to expand approximately 3.7% in the third quarter. Owing to the weather-related setbacks ASMs have been trimmed to the tune of approximately 2.7 percentage points.

Also, revenue per available seat mile (RASM: a key measure of unit revenue) is anticipated to increase approximately 0.9% in the quarter under review (the metric has been positively impacted to the tune of approximately 0.3 percentage points owing to the hurricanes).

Furthermore, the hurricanes have increased the projection for unit costs, excluding fuel, to the tune of approximately 2.75 percentage points. The metric is expected to grow between 2.75% and 3.25% for the quarter. Fuel cost per gallon is projected to be $1.71.

Irma and Maria to Mar Q4 Results too

JetBlue has significant exposure to Florida with two hubs in the state — Orlando and Fort Lauderdale, besides a hub in Puerto Rico. Naturally, the company’s operations have been significantly hurt by Irma and Maria. As a result, its fourth-quarter results are likely to be dampened due to the disruptions.

Currently, the low-cost carrier expects the negative impact of the hurricanes on its top line to vary between $70 million and $90 million in the final quarter of 2017.  Operating income is also likely to be adversely impacted between $50 million and $70 million. The fourth-quarter bottom-line is expected to be hurt in the band of 10 cents to 13 cents.

Capacity growth is trimmed to the tune of approximately 3 percentage points, owing to less flights to the Caribbean region following the calamities. RASM growth is expected to be hurt between 1% and 2% in the final quarter of 2017, mainly due to Irma’s impact.

Notably, JetBlue is not the only carrier to be hurt by the natural calamities. Operations of fellow-carriers like Southwest Airlines LUV and United Continental Holdings UAL have also been disrupted by the turbulence.

Price Performance

JetBlue has been hurt by multiple headwinds like high costs apart from the recent natural calamities. Consequently, the stock has underperformed its industry on a year-to-date basis. Shares of the company have declined 8.4%, as against its industry’s rally of 16.3%.

Zacks Rank & Stock to Consider

JetBlue carries a Zacks Rank #5 (Strong Sell). Investors interested in the airline space may consider Deutsche Lufthansa AG DLAKY sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Deutsche Lufthansa have surged more than 80% in the last six months.

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Southwest Airlines Company (LUV) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
 
Deutsche Lufthansa AG (DLAKY) : Free Stock Analysis Report
 
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