JetBlue Airways’ capacity growth
JetBlue Airways’ (JBLU) capacity rose 3.7% YoY (year-over-year) in May 2017. That’s far below its 8.2% YoY rise in April 2017. A similar trend was seen last quarter when it increased its capacity by 8.6% YoY in January and then reduced the growth rate to 0.10% YoY in February and 2.9% YoY in March.
Airline capacity is measured by ASMs (available seat miles). ASM is calculated as the number of seats available multiplied by the number of miles.
Year-to-date (or YTD) as of May 2017, JetBlue Airways’ capacity has risen 4.6% YoY. That’s lower than all its regional peers as well as niche legacy player Alaska Air (ALK). Ultra-low-cost carrier Spirit Airlines (SAVE) recorded the highest capacity growth of 13.2%. Alaska Air recorded a capacity growth of 5.1% YoY, and peer Southwest Airlines (LUV) increased its capacity 4.8% YoY in the same period.
Legacy carriers, on the other hand, continue to show lower capacity growth than their regional peers. Delta Air Lines (DAL) has recorded a 0.40% fall in capacity YTD as of May 2017. American Airlines’ (AAL) capacity was flat for the same period, while United Continental’s (UAL) capacity has risen 3.1% YoY.
What to expect
For the second quarter of 2017, JBLU is expecting a 4.0%–6.0% YoY rise in capacity, which is similar to its earlier guidance. For 2017, capacity growth is expected to be 5.5%–7.5% YoY, again in line with its earlier guidance.
Next, let’s look at airline traffic growth. It’s important to keep track of this measure since there’s no point adding capacity if an airline is unable to utilize it. Also, history shows that airlines are known to overbuild in good times and suffer when they’re unable to fill up seats when the cycle turns around.
You can gain exposure to JetBlue Airways by investing in the iShares S&P Mid-Cap 400 Value (IJJ), which invests 0.98% of its portfolio in JBLU.