The changes in JBLU stock over the recent years have been far from consistent. Returns for the stock were -2% in 2021, -54% in 2022, -14% in 2023, and 42% in 2024.
In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 - indicating that JBLU underperformed the S&P in 2021, 2022 and 2023.
JetBlue's most recent quarter — Q4'24 — financial report was released on January 28, 2025. The company reported revenue of $2.3 billion, down 2.1% y-o-y, due to lower capacity, which mostly offset the gains from better occupancy rates. The company reported a 240 bps expansion in operating margin to 0.8%. Its loss of $0.21 on a per-share and adjusted basis was higher than the loss of $0.19 per share in the prior-year quarter.
Below are key drivers of JetBlue Airways that present opportunities for upside or downside to the current Trefis price estimate.
JetBlue's Passenger Yield: JetBlue's Passenger Yield has seen a rise from $0.113 in 2009 to $0.157 in 2024, driven by higher passenger fares in response to fuel price increases. Our base forecast expects this to reach $0.200 by the end of the Trefis forecast period, based on continued fare increases and stable demand. Notably, if passenger fares were to rise more significantly than anticipated, reaching $0.225 due to factors like a sharp increase in crude prices or strong demand, the potential upside to the Trefis price could exceed 40%.
Fuel Costs % Of Passenger Revenues: JetBlue's fuel expenses accounted for 26% of its passenger revenues in 2024. Our forecast indicates a near-term decline in this ratio, driven by the stabilization of crude oil prices worldwide. Looking further ahead within our Trefis forecast period, we anticipate a moderate increase, with fuel costs reaching 25% of passenger revenues by the period's end. Conversely, if fuel prices experience a greater-than-expected surge, causing JetBlue's fuel costs to rise to 27.5% of passenger revenues by the end of the Trefis forecast, there could be a potential downside of around 15% to the Trefis valuation.
JetBlue Airways, based on passenger traffic (revenue passenger miles) reported by airlines, currently ranks as the seventh-largest passenger carrier in the United States. JetBlue employs a point-to-point service model utilizing its fleet of Airbus A321s, Airbus A320s, and EMBRAER 190 aircraft, alongside the newer Airbus A220s. JetBlue prides itself on maintaining a modern and fuel-efficient fleet compared to many major U.S. airlines. The airline serves a network of destinations spanning the United States, the Caribbean, and Latin America.
JetBlue maintains significant operational hubs at Newark Liberty International Airport and New York's John F. Kennedy International Airport, both located within some of the busiest air travel markets in the U.S.
JetBlue Airways is often recognized as a "value airline" due to its service offerings, distinctive style, and competitive cost structure. The airline is known for its award-winning customer service, coupled with its attractive fares, and aims to provide customers with what it considers the best coach experience in its served markets, featuring a strong core product and reasonably priced optional enhancements.
JetBlue has strategically developed a strong presence in several high-value geographic regions, notably including New York, Boston, and Los Angeles. This positioning allows the carrier to effectively cater to higher-yield corporate travelers, which is expected to contribute to growth in passenger yield and overall profitability.
Furthermore, San Juan in Puerto Rico remains a significant focus market for JetBlue in the Caribbean. This hub facilitates the airline's expansion into various growing destinations across Latin America. While past events like hurricanes posed potential headwinds, JetBlue continues to invest in and grow its presence in these markets.
Fuel expenses remain the largest single cost component for airlines, making them highly susceptible to fluctuations in crude oil prices. For JetBlue, fuel costs typically account for a substantial portion of its total operating expenses. To mitigate the impact of fuel price volatility, JetBlue employs strategies such as fuel price hedging.
The demand for air travel exhibits a strong correlation with global economic growth. Consequently, economic downturns or recessions tend to reduce the demand for flights, negatively affecting passenger traffic for airlines. Conversely, sustained growth in the global or U.S. economy generally leads to increased demand for air travel, enabling airlines to potentially increase airfares, improve occupancy rates, and enhance profitability.
Airlines, including JetBlue, are increasingly focused on expanding their revenue generation through ancillary services. These include fees for baggage, access to onboard Wi-Fi, in-flight food and beverages, and more. As a result, airlines are investing in improving their product offerings, such as enhanced in-flight Wi-Fi and entertainment options, upgraded lounge facilities, and premium seating with extra legroom.
Studies indicate that North American airlines collectively generate significant ancillary revenues compared to other regions globally. This growth is largely attributed to more effective merchandising strategies by carriers and the introduction of a wider array of à la carte services available for purchase.
Over the past decade and a half, low-cost carriers such as Southwest and JetBlue have significantly increased their market share within the U.S. airline industry.
Looking forward, it is anticipated that these low-cost carriers will continue to expand their market share, as their generally lower fares remain attractive to a significant portion of air travelers.
The U.S. airline industry has undergone substantial consolidation over the past couple of decades, marked by several major mergers and acquisitions. These include combinations such as US Airways and America West, Delta and Northwest, United and Continental, Southwest and AirTran, and American and US Airways.
This increased industry consolidation has generally contributed to improved profitability for the remaining airlines. With fewer major players in the market, there has been a greater tendency for airlines to exercise more discipline in adding capacity. Prior to this period of consolidation, individual airlines often added capacity aggressively in an attempt to gain market share, which frequently led to an oversupply of seats, thereby impacting profit margins across the industry.
Moving forward, it is typically believed that as long as airlines maintain a disciplined approach to capacity management, the industry is likely to remain profitable overall..
