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Why JetBlue Airways' August Performance Worried Investors

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Part 2
Why JetBlue Airways' August Performance Worried Investors PART 2 OF 7

Can JetBlue Airways’ Passenger Demand Match Its Capacity Growth?

JetBlue Airways’ traffic growth

For August 2017, JetBlue Airways’ (JBLU) traffic has risen 5.0% year-over-year (or YoY), lower than its capacity growth of 5.4% YoY.

Can JetBlue Airways’ Passenger Demand Match Its Capacity Growth?

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By comparison, peers Southwest Airlines (LUV) and Alaska Air’s (ALK) traffic growth outpaced their respective capacity growth for the month. Spirit Airlines’ (SAVE) traffic growth lagged its capacity growth for the month.

Year-to-date 2017, JBLU’s traffic has risen 4.6% YoY, again slightly lower than the 4.8% YoY capacity growth. For the full-year 2016, JBLU’s traffic had risen 9.6% YoY, and in 2015 it had clocked growth of 10.3% YoY.

Global passenger travel

According to International Air Travel Association’s (or IATA) latest monthly report, global passenger travel demand continues to grow at a strong pace. For July 2017, global travel demand rose at a strong pace of 6.6% YoY. YTD July 2017, passenger travel demand has clocked growth of 7.7% YoY.

Although the demand continues to remain robust, IATA expects demand to slow down going forward in 2017 as the backing from lower airfare falls.

Mint service could do well

JetBlue Airways’ premium mint service has been a huge success in all the markets it has been launched in so far. This was evident in JBLU’s unit revenue growth in the months following the Mint service launch.

We can thus expect a similar fate for the other recently launched Mint services and that RASM growth could ramp up. Despite these expectations, the lagging traffic growth has investors worried. Move on to our next article to find out why this is a concern.

Investors can gain exposure to JetBlue Airways by investing in the First Trust Nasdaq Transportation ETF (FTXR), which holds 3.4% of its portfolio in JBLU.

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