All the Easter Eggs in one basket?
Investing in airline stocks requires nerves of steel like the passengers of JetBlue Flight 292 who watched in horror the malfunctioning aircraft circle LA Airport on the satellite television screens at each seat until the flight crew disabled the system in preparation for the aircraft’s successful emergency landing!
Historically, airline companies do well when oil prices fall and the economy is doing good but go belly up or neck deep in debt when the reverse happens. In fact, the debt-to-equity ratio of a major airline is as high as 90%!
But Warren Buffet, who has been a staunch critic of the airline industry all these years and had even called it a 100-year death trap surprised Wall St. by investing in the Big Four (America, Delta, SouthWest, United) airlines last year!
So what’s different in the airline industry now? Airlines have found a new buzzword — PRASM (Passenger Revenue per Available Seat Mile) to impress the street.
JetBlue, the wanna be premium, low-cost carrier which offers free snacks, wi-fi and even scoops of ice creams in its Mint service reported an excellent set of numbers for its second quarter on Tuesday after a disastrous first quarter where earnings plunged by 59%!
What led to this remarkable turn-around in just one quarter is the seasonal Easter holiday rush and its “smart” fare hikes in its east-to-west coast Mint service that gives a business class like seats/service for half the regular fare!
PRASM rose 7% vs. 2Q 2016 and was the highest in the last 2 years while EPS came in at 64 cents while revenue shot up by 12%.
Listen to the recorded earnings call of JetBlue for more insights
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