Does JetBlue Airways’s Capacity Growth Support Analyst Estimates?

Like other airlines, JetBlue Airways (JBLU) has taken advantage of falling crude oil prices to expand its existing fleet. JetBlue’s double-digit revenue growth has been fueled by double-digit growth in its capacity.

Historically, JetBlue Airways has seen the highest capacity growth among the seven major airlines. Spirit Airlines (SAVE) has seen the highest growth, followed by Alaska Air Group (ALK) and JBLU. The three legacy carriers—United Airlines (UAL), American Airlines (AAL), and Delta Air Lines (DAL)—have seen single-digit growth.

JBLU has recorded consistent capacity growth in the first six months in 2016, and its capacity growth has exceeded traffic growth in four of these months. For the six months ended June 2016, JBLU’s capacity has grown by 12.6% and traffic has grown by 12.1%.

Despite concerns of overcapacity in the airline industry, JetBlue Airways is expected to maintain its capacity growth of 8.5%–10.5% in 2016. However, it will cut capacity across some unprofitable routes.

The aggressive growth in capacity has impacted JetBlue’s capacity utilization, as it fell in four of the six months of 1H16. The capacity utilization, as measured by the load factor, fell by 0.3% for the six months ended June 2016.

JetBlue Airways’s (JBLU) traffic growth has been in line with the industry’s scenario. The company has seen continuous growth in traffic, with February being the strongest with over 19% growth. However, despite the strong traffic growth, unit revenues came in at the low end of previous guidance, signaling slower recovery.

JBLU’s increasing capacity is expected to support revenue growth going ahead. However, declining load factor is a huge concern.

The Guggenheim S&P MidCap 400 Pure Growth ETF (RFG) holds 0.84% of its portfolio in JBLU.