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JetBlue (JBLU) Slips to Sell on Virgin America Deal Loss

On Apr 5, Zacks Investment Research downgraded low-cost carrier JetBlue Airways Corporation JBLU by a notch to a Zacks Rank #4 (Sell).

JetBlue lost the Virgin America Inc. VA deal to Alaska Air Group, Inc. ALK who clinched it for $4 billion, inclusive of debt and capitalized aircraft operating leases.

Notably, both the carriers have been vying for Virgin America in a bid to strengthen their presence in the west coast. Hence, losing out on the deal has dealt a major blow which will not only weaken JetBlue’s presence in the region but will also intensify competition.

Also, of late, JetBlue has been expanding its reach in the Latin America and Caribbean markets and the addition of Virgin America would have helped the company strengthen its services in Cancun, Mexico – a popular tourist spot which is being currently served by Virgin America.

On the other hand, after the recent deal loss, it is to be seen whether JetBlue considers the option of merging with Hawaiian Holdings Inc. HA – a company with significant presence in the west coast.

Meanwhile, JetBlue’s disappointing performance with respect to PRASM (passenger revenue per available seat mile) in February concerns us as the metric declined 10.5% in the month from the year-ago levels.

JetBlue cited capacity additions (which increased 19.6% during the month) as one of the reasons behind the decline. Moreover, the carrier expects a 7% to 8% of annualized decline in PRASM for the first quarter of 2016.

In addition, downward estimate revisions reflect pessimism regarding the stock’s prospects. The Zacks Consensus Estimate for 2016 and 2017 moved south by 6.1% and 7.1% to $2.48 and $2.36 per share, respectively, over the last 30 days.

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JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report
 
HAWAIIAN HLDGS (HA): Free Stock Analysis Report
 
ALASKA AIR GRP (ALK): Free Stock Analysis Report
 
VIRGIN AMERICA (VA): Free Stock Analysis Report
 
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