JetBlue Costs View Bleak on Pilot Contract Ratification

JetBlue Airways Corporation JBLU has issued an update on the third quarter and full-year outlook, following the recent pilot contract ratification.

The company expects a one-time expense of $70-$80 million in 2018 including a $50-million ratification incentive among other contractual provisions. Its expectation for non-fuel unit costs remains unaltered in the range of 0-1% (on a compounded basis) for the 2017-2020 period.

JetBlue continues to project capacity increase between 7.5% and 9.5% for the third quarter and between 6.5% and 7.5% for the full year. Additionally, third-quarter fuel cost, net of hedges, also remains unchanged at $2.33 per gallon.

Non-fuel unit costs are now anticipated to rise in the band of 3-5% in the third quarter. Previous guidance had called for a 1-3% increase in the metric. The same for 2018 is predicted to expand 0.5-2%. Earlier outlook was a year-over-year change between -1% and 1%.

The company estimates an effective tax rate of 25-26% in 2018. Meanwhile, capital expenditures are forecast between $310 and $360 million and between $1,000 and $1,200 million in the third quarter and the current year, respectively.

Zacks Rank & Key Picks

JetBlue has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Transportation sector are CSX Corporation CSX, Canadian National Railway Company CNI and Union Pacific Corporation UNP. While CSX sports a Zacks Rank #1 (Strong Buy), Canadian National Railway and Union Pacific carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of CSX, Canadian National Railway and Union Pacific have rallied more than 45%, 11% and 46%, respectively, in a year.

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