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Jetblue (JBLU) Rides on Low Fuel Costs Amid Coronavirus Woes

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We recently issued an updated report on JetBlue Airways Corporation (JBLU - Free Report) .

Like many other transportation companies, Jetblue is hit by uncertainties related to the COVID-19 pandemic.

JetBlue witnessed significant fall in air travel demand in the wake of the coronavirus outbreak. Evidently, the company’s passenger revenues (contributing approximately 79.1% to the top line) declined 91.6% in the second quarter of 2020. Consolidated load factor (percentage of seats filled by passengers) slumped to 33.8% from 86% a year ago as traffic decline was more than the capacity reduction in the June quarter. With the health peril showing no signs of subsiding, passenger revenues are likely to tumble approximately 80% year over year in the third quarter of 2020.

Operating expenses per available seat mile (CASM) increased more than 100% in the June quarter to 25.9 cents due to capacity cuts. Excluding fuel, the metric escalated more than 100% to 36.95 cents. With capacity at a low level, CASM is likely to be high in the third quarter too, thereby denting the bottom line.

Nevertheless, declining fuel costs are a positive amid this global crisis. Notably, average fuel cost per gallon, including fuel taxes, declined 55.4% year over year to 96 cents at JetBlue during the second quarter. With major part of the fleet remaining grounded/under-utilized, fuel gallons consumed tanked 86.7% to 30 million. Low fuel costs have partly offset the adversity from the coronavirus-led demand slump in the second quarter.

Zacks Rank & Key Picks

JetBlue currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Zacks Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) , TFI International (TFII - Free Report) and Werner Enterprises (WERN - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings (three to five years) growth rate for Canadian Pacific, TFI International and Werner is estimated at 8%, 5.7% and 8.5%, respectively.

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