JetBlue (NASDAQ:JBLU) stock has gotten caught in the same downdraft as the rest of its industry. Since the novel coronavirus started to make its impact felt, the airline stocks have gotten pummeled. JBLU stock has fallen from $19 to $8 so far this year. That said, don’t throw in the towel on JetBlue just yet.
The New York City-based carrier has a bit of a different business strategy than the large legacy airlines. JetBlue started operations in 2000 with a focus on higher-margin routes serving wealthy areas with high numbers of leisure travelers. It now has bases across the East Coast along with one in Southern California and one in San Juan, Puerto Rico.
JetBlue’s smaller size and differentiated business strategy make it stand out from its larger U.S. rivals. JetBlue’s unique focus may allow it to bounce back from the coronavirus crisis faster than its peers. In addition, it has a stronger financial position than many peers as well. So after reporting earnings last week, where does JetBlue stand today?
Quarterly Earnings and JBLU Stock
Bulls and bears alike found something to suit their case in JetBlue’s recent earnings report. For bulls, the company’s adjusted loss of just 42 cents per share wasn’t bad at all considering the circumstances and also the size of losses at rival airlines. Additionally, the company announced aggressive measures to shore up its balance sheet and stem its negative cash flow situation.
Bears can rightly say that those past results hardly matter, as the future will be far worse.
In March, JetBlue’s revenues fell 52%. And JetBlue estimates that it will see a 90% decline for Q2, including a 94% plunge in April. That’s a full-on collapse, and it’s not reassuring how little things will bounce back in the rest of Q2 as opposed to April.
I know some airline bulls expect a major pick-up by the end of summer, but don’t get too attached to that theory yet.
Small Size Is an Edge
One thing that could help JetBlue is its relatively smaller size. Because the company doesn’t have such an extensive route network, it potentially has more flexibility in terms of where it focuses its flying going forward. The legacy carriers, by contrast, have more fixed routing obligations, particularly to meet the needs of business travelers and frequent fliers.
JetBlue’s service is more aimed at tourists and leisure travel. If the theory is true that leisure travel comes back faster than business travel, JetBlue should be a winner. As far as the work-from-home trend goes, JetBlue is relatively insulated compared to some of its rival airlines.
Additionally, JetBlue focuses more on point-to-point travel. That’s in contrast to the legacy carriers that live and die by their hub-and-spoke route networks. Because JetBlue doesn’t have a huge feeder network of routes around the country, it has much more flexibility to only prioritize routes where demand comes back quickly.
By contrast, the larger carriers have to keep flying their lesser routes. Otherwise, negative scale effects kick in — as they stop service to smaller cities, their overall network shrinks and load factors drop further. JetBlue won’t have that problem.
Relatively Strong Financials
In March, JetBlue was burning through just under $20 million per day in cash. This was already far less than rivals in the industry, such as Delta (NYSE:DAL), who are consuming three times as much, or even more. And in their latest earnings report, JetBlue suggested that they’ll be able to slash their spend to just $10 million a day going forward.
Against that outflow, JetBlue has $3.1 billion in liquidity as of its report last week. That means that it has the cash to keep operating for many months as it will be using up just $300 million or so of that reserve per month to stay in business. This will allow it to survive until revenues start to meaningfully recover.
JBLU Stock Verdict
In short, I agree with our Faisal Humayun, who explained why JetBlue is among the few attractive picks in the airline industry. As Humayan showed, JetBlue’s balance sheet is extremely robust compared to rivals.
When you combine that inherent strength with JetBlue’s more niche operational strategy, you could have a formula for success. Look, it’s not going to be easy for JetBlue, or any airline at this point.
I have no investments in the industry right now, as it’s early in the bottoming process still. But if you are looking at taking a position in an airline, one with a strong balance sheet, like Jetblue or Southwest Airlines (NYSE:LUV), is better than the alternatives.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.