On Nov 8, 2013, we upgraded our recommendation on passenger airline, JetBlue Airways Corporation (JBLU) to Outperform from Neutral.
Why the Upgrade?
We believe that JetBlue displays a strong brand name and is constantly trying to improve its service offerings and in-flight experience. Additionally, the company’s emphasis on enhancing medium and short haul routes along with its cost control initiatives should prove beneficial going forward.
Detailed Analysis
We believe JetBlue will benefit from growing travel demand, schedule redesigning, optimization of unit revenues, capital expenditure management and disciplined growth. The company’s product differentiation, ticket pricing flexibility and in flight experience are expected to attract customers.
JetBlue is making continued progress in expanding its product and service offerings on board and on the ground to increase its ancillary revenues. Furthermore, JetBlue recently announced the availability of Mint – a cost effective premium service offering – which is expected to fuel demand for its luxury seats.
Going forward, the company aims to start services in Worcester, Massachusetts. Internationally, the company has plans to start services to Port-au-Prince, Haiti with nonstop daily flights from both New York City and Fort Lauderdale-Hollywood. Adding new routes enhances JetBlue’s growth prospect and strengthens its network.
Recently, JetBlue signed an interline agreement with British Airways, wherein both carriers will connect their networks in the eastern coast of America, including New York City, Boston Orlando and Washington D.C. This partnership as well as those with other carriers strategically fit the company’s growth prospects. Based on these positives we have upgraded our recommendation.
JetBlue Airways currently carries a Zacks Rank #2 (Buy).
Stocks That Warrant a Look
Other stocks that are worth considering within this sector are U.S. Airways Group Inc. (LCC), Spirit Airline Inc. (SAVE) and Alaska Air Group Inc. (ALK). LCC and SAVE currently hold a Zacks Rank #1 (Strong Buy) while ALK carries a Zacks rank #2 (Buy).
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