JetBlue to Cut Growth In Shaky Time for Airlines
JetBlue to Cut Growth In Shaky Time for Airlines - Barron's
On Monday, JetBlue said it was cutting its capacity growth, essentially slowing down how quickly it adds new seats. For some fast-growing companies, a slowdown in growth would worry Wall Street. But for JetBlue, it’s the kind of move that investors cheer. Its stock was up about 0.5% Monday on a relatively weak day for the stock market.
Airlines always have to balance growth with demand, and lately supply seems to be outpacing demand in some markets. New travel restrictions imposed by the Trump administration may also weigh on demand in the coming months. JetBlue already estimated surprisingly weak January numbers, and shares are down 13% this year. Investors worry that slowing demand and increasing competition will cause airlines to lower their fares, hurting earnings.
On Monday JetBlue said it will reduce its 2017 capacity growth to 5.5%-7.5% from a previous estimate of 6.5%-8.5%. Last year, the company grew capacity by 8.9%, after growing by 9.5% in 2015.
Raymond James analyst Savanthi Syth thinks the move “should positively impact earnings, particularly in the second half of 2017. We believe investors will view favorably the quick response by JetBlue.”
Syth also notes that the cuts will come on off-peak months and red-eye flights, and won’t impact the peak summer months. So, most travelers probably won’t notice it. But investors probably will.