In a previous article, we discussed the revenue-side measures that JetBlue (NASDAQ:JBLU) is taking to improve its profitability. In this article, we explore the cost-side measures that JetBlue is taking to improve its margins and return on invested capital (ROIC). JetBlue is adding more fuel-efficient airplanes to its fleet in an attempt to lower its operating costs. The carrier is also set to cut its non-aircraft capital expenditures in 2015, which will boost its ROIC. In all, through these revenue and cost-side measures, JetBlue is aiming to lift its profit and ROIC in line with those of leading U.S. airlines.
We currently have a price estimate of $13 for JetBlue, around 10% below its current market price. JetBlue’s stock has risen by about 15% over the past month, primarily driven by the sharp decline in global crude oil prices. We currently estimate JetBlue to post earnings of 70 cents per share in 2014, compared with its consensus earnings estimate of 69 cents per share.
See our complete analysis of JetBlue here
JetBlue’s Fleet Investments Will Reduce Its Operating Costs
JetBlue is adding more Airbus A321s to its fleet. The carrier estimates that this new airplane is 12% more cost efficient than the Airbus A320, which currently constitutes the bulk of its fleet. [1] So, the addition of more A321s will reduce JetBlue’s overall operating cost. In addition, JetBlue is equipping its A320s with sharklets – curved extensions at wingtips – which improve the lift that an airplane generates from surrounding
Article source: http://www.trefis.com/stock/jblu/articles/269198/how-is-jetblue-planning-to-improve-its-profitability-part-2/2014-12-11
