Thursday, February 22, 2007
Airlines
Airlines
The Airlines have been receiving much publicity after JetBlue stranded its passengers on a grounded plane for hours. JetBlue was formerly the only airline that I would have considered investing any of my hard earned money into.
After the incident, today JetBlue has announced that it will cut its first quarter earnings. The company has taken heavy losses after thousands of flights had to be cancelled due to poor weather in the northeast. I think the company could have made it trhough the first quarter without coming out to restate its earnings outlook. But this is just the JetBlue way, maximum disclosure to its investors even if it may hurt its share price.
Oddly, the price of JetBlue shares improved today from 12.90 to $13.37. I would not have expected this from a company that announced it expected to lose money in the first quarter, although both JetBlue the corporation and the investors behind it are a little different to begin.
The company is now busy hammering out a “bill of rights” or a list of services that JetBlue fliers should not only expect, but also receive while on it’s flights. I think this is a positive for the airline industry that has taken a more scandalous look after the terrorist attacks and frequent flier scams.
Higher gas prices have threatened the profitability of most major airlines. Southwest and JetBlue are the only companies who have seemingly circumvented higher costs. JetBlue has traditionally been a low cost airline while Southwest enacted a contract to buy fuel at a set price. This has proved to be one of the smartest business moves Southwest could make, effectively locking the price of oil at slightly less than $60 a barrel.
JetBlue expects to return to profitability in the summer months as travel picks up. This quarter was really just a fluke in the growth of a baby airliner. I think JetBlue could rise to the status of Southwest, a bigger jet line known for its entertaining crew and classless flights. Southwest trades under the ticker symbol LUV.