The airline’s revenue forecast highlights the challenges it faces.
JetBlue Airways (JBLU -18.77%) reported a lower-than-expected quarterly loss but lowered its full-year forecast on Tuesday. Investors are growing impatient waiting for this airline to take off, sending shares down 15% as of 10:30 a.m. ET.
Shrinking, not growing
JetBlue has taken investors on a wild ride since the pandemic. Airline stocks initially recovered nicely thanks to strong pent-up demand, and JetBlue outmaneuvered Frontier Group Holdings to acquire Spirit Airlines, creating a pathway for growth.
But the Spirit deal fell apart earlier this year due to regulatory opposition, leaving tough questions about how JetBlue will navigate back to profitability and fuel growth from here.
JetBlue lost $0.43 per share in the first quarter, $0.09 better than Wall Street had expected, on revenue that came in at $2.2 billion as forecast. But the airline warned that second-quarter revenue would likely drop as much as 10% year over year, more than double analyst expectations, and said full-year sales would also likely be lower than expected.
Since the Spirit deal was abandoned, JetBlue has been more focused on cutting costs than growth, dropping some unprofitable routes. But the cuts are taking their toll on revenue, and profitability still appears to be a ways off.
Is JetBlue a buy following its earnings report?
The results highlight the gap between JetBlue and larger rivals including Delta Air Lines and United Airlines Holdings, who both forecast more good times ahead. JetBlue had hoped the added scale from Spirit would help it to narrow the gap, but now faces an uncertain future.
The airline industry has traditionally been cyclical, and larger, better-diversified carriers tend to outperform smaller niche players when times are tough. JetBlue appears likely to be flying in circles for the foreseeable future, meaning investors would be wise to seek other accommodations.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
