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Can Investors Expect JetBlue Airways’ Revenue to Improve In 2017?

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1Q17 results

For 1Q17, JetBlue Airways’ (JBLU) revenues stood at $1.60 billion, a 0.8% year-over-year oy YoY decline from revenue of $1.62 billion in 1Q16. Passenger revenues fell 1.8% in 1Q17 while ancillary revenues rose 10.4%—almost half the high double-digit growth it was clocking in 2016.

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Unit revenue trends

Unit revenue is a measure of passenger revenue earned by the airline per available seat mile.

JetBlue Airways’ revenue per available seat mile or RASM, commonly known as “unit revenue,” fell 4.8% to 11.81 cents. This fall in unit revenues spooked investors earlier in the quarter, likely causing the decline in JetBlue’s stock.

After JBLU’s unit revenue decline reduced to just 1.5% in 4Q16, investors were expecting unit revenues to improve in the first quarter of 2017. However, JetBlue’s guidance in 4Q16 made it clear that the airline didn’t expect a good 1Q17.

Outlook

JetBlue expects unit revenues to rise 3%–6% this quarter, helped by April’s double-digit unit revenue improvement. Investors can expect revenues to improve.

Investors can gain exposure to airlines by investing in the SPDR S&P Transportation ETF (XTN), which invests ~3% of its holdings in Southwest Airlines (LUV) and Alaska Airlines (ALK), 2.8% in Allegiant Travel (ALGT), 2.7% in United Continental (UAL), 2.7% in American Airlines (AAL), and 2.7% in Delta Air Lines (DAL).

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