It was only a matter of time before
JetBlue Airways
issued updated third-quarter guidance. It was never going to be higher.
The low-cost airline joined many of its peers in delivering a revenue warning Thursday. But
JetBlue
(ticker: JBLU) stock, which has fallen in tandem with its rivals after their respective warnings, jumped about 3% Thursday.
The carrier said it expects third-quarter revenue to be at the lower end of its previous guidance range for a 4% to 8% decline year-over-year.
In discussing the outlook, JetBlue’s management summarized all the headwinds facing U.S. carriers, particularly those more exposed to domestic travel.
It warned that close-in, or short notice, leisure bookings in September have been lower than expected, confirming the trend of softening domestic demand flagged by its rivals. Secondly, it said fuel prices have increased significantly—the carrier now expects a price of $2.95 per gallon for the third quarter, up from a previous range of $2.75 to $2.90.
Finally, air traffic control and bad weather in the Northeast have also impacted revenue and led to higher disruption costs. As a results, costs excluding fuel will rise near the high end of its previous 2.5% to 5.5% range.
To say the stock has had a rough quarter is an understatement. The shares have tumbled 50% since the beginning of July, falling to their lowest level since 2012 last week. That’s after it surged 30% in June amid strong summer travel demand.
Aside from all the well-known headwinds, the uncertainty over JetBlue’s proposed merger with
Spirit Airlines
(SAVE) is another factor keeping the shares under pressure. The Justice Department has sued to block the tie-up, and the trial is due to begin next month.
Being one of the last to update on guidance probably hasn’t helped—the stock has fallen each time a peer has lowered forecasts.
All things considered, the new guidance is perhaps not as bad as it might have been, which could be one reason for today’s move higher. Analysts were forecasting a 6% drop in revenue anyway, and “the lower end” of a 4% to 8% decline isn’t a million miles off that.
The upcoming Spirit merger trial also offers a sliver of hope for the stock but the headwinds facing low-cost carriers are blowing an almighty gale.
Write to Callum Keown at [email protected]
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