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JetBlue Shares Grounded After Canceling Northeast Service

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Though airlines had a banner 2013, this year is off to a pretty rocky start for the industry. Difficult conditions at many of America’s major airports have led to a huge number of cancellations and have created a ripple effect throughout the country.

While this trend hit a number of major airlines, JetBlue (JBLU - Free Report) appears to really be struggling. The surging airline was an all-star in 2013 but the latest round of storms have wreaked havoc on its Northeast-U.S. focused service, leading to massive delays and cancellations.

In fact, JBLU announced that it was suspending all flights from its New York-area airports, as well as its Boston hub from 5pm Eastern Time on Monday until 10am Eastern Time on Tuesday. In total, JetBlue cancelled more than half of its daily schedule, according to Anders Lindstrom, a spokesman.

This pause in service looks to allow the company to catch up and reposition its planes in order to meet demand. Obviously, it will inconvenience many travelers, though at least it will avoid issues of passengers being stuck on the tarmac and other problems which JetBlue and other airlines have faced in the past.

“While we have to reduce operations in our Northeast cities today, we’ll take the opportunity to use some of those planes and crews for extra sections between cities where we they’re most needed and move crews in preparation for starting back up on Tuesday,” JetBlue said on its website according to Bloomberg.

Market Impact

Shares of JetBlue faced some serious turbulence on the news, with JBLU slumping by over 4.3% in the session. Volume was elevated too, with more than 10.5 million shares moving hands on the day.

And unfortunately for JBLU, many other airline stocks weren’t as hard hit by the storms—nor do many have such a concentrated focus on some of the hardest hit areas— so their stocks managed to hold up well in Monday trading.

For example, United Continental (UAL - Free Report) and Southwest Airlines (LUV - Free Report) fell by about 1.4% on the session, as Southwest was hampered by Chicago Midway issues, and United—with a big presence both at O’Hare and Newark-- was also hit.

However, American Airlines—(AAL - Free Report) —and Delta (DAL - Free Report) both finished the day in the green with AAL actually rising by about 1.8% on the day. Many regional carriers were not lucky either, though JBLU was clearly the loser on the day in the airline space.

Bottom Line

This is obviously a setback for JBLU, though some could view it as an attempt to get ahead of the situation instead of playing catchup over the next few days. Weather is anticipated to be quite poor in the Northeast over the next few days and delays for other airlines are certainly possible.

Given this, and assuming this doesn’t cause analysts to revise their estimates of JBLU’s earnings, this could present an interesting buying opportunity for the stock. The company currently has a Zacks Rank #2 (Buy), and the airline segment is currently in the top 9% of all industries.

Just note that the company has had significant weather troubles before, so be ready for some more short term volatility if the company can’t get back to its full schedule soon. But if JBLU can rebound from this, and if the solid trends underpinning the airline market remain, this could be a great time to take a closer look at this company and other beaten down firms in the airline space.

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Author is long LUV.  

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