This Could Be Big for JetBlue Stock
JetBlue Airways Corporation (NASDAQ:JBLU) stock, the fifth-largest U.S. airline, could see more competition from Southwest Airlines Co (NYSE:LUV). The heart of this competition is at Long Beach Airport in California, a JetBlue hub, which has just given Southwest Airlines more slots. This is actually a good thing for JetBlue stock.
In response to Southwest Airlines’ increased slots, JetBlue Airways has added nine new daily departures and arrivals. Its’ competitor’s new presence allows JetBlue to take on its biggest rival, Southwest, which is the recognized leader of low-cost airlines, famous for dictating the market at regional airports. (Source: “Southwest’s Long Beach Airport takeoff could spur fresh rivalry with JetBlue,” Los Angeles Times, February 23, 2016.)
This could be a major bullish factor for JetBlue stock, even as Southwest might duplicate routes served by JetBlue. The reason why this arrangement can work for JBLU stock is that Long Beach Airport has expanded its overall traffic, meaning that it did not take slots away from JetBlue and redistribute them to Southwest. Instead, JetBlue will also likely increase its traffic at the airport where it already dominates.
Moreover, Long Beach Airport is considering allowing international flights. This is something that plays into JetBlue’s expansion plans. The airline has long wanted to serve Mexico routes from Long Beach, CA.
JetBlue is also expanding to Europe. On February 22, it launched a partnership with TAP Portugal to offer daily flights between Lisbon and the United States. The first flights will be from Boston to Lisbon, starting June 11. A few weeks later, the company will launch flights between Lisbon and New York.
The much quieter next-generation jet engines, such as the “Geared Turbofan” propelling Bombardier’s “C Series,” will make it possible for further traffic increases at small regional airports. Indeed, it was the quieter engines already used by JetBlue’s fleet of Airbus “320-321s” and Embraer “190s” that prompted Long Beach Airport to expand in the first place. This opens up more opportunities for JetBlue.
As for Long Beach specifically, apart from its growth plans, the airport can address the rather high demand for flights between Los Angeles and San Francisco.
For the record, Long Beach is one of the smallest regional airports in the U.S. In 2015, it served 2.5 million passengers—departures and arrivals. Compare that to the 75 million passengers who landed in LAX.
JetBlue is a market leader. Its passengers can take advantage of a less stressful travel experience and get to most American cities comfortably from Long Beach. Additionally, the airport is located reasonably close to the center of Los Angeles. In fact, for many residents of the LA area, it is closer than LAX.
JBLU stock now has mean rating of “Outperform;” five analysts have recommended the shares as a “Buy,” three have it as an “Outperform,” and seven recommend it as a “Hold.” The mean price target for JBLU stock is $28.12, with a high target of $33.00 and a low share price target of $24.00.
Long Beach is one of the keys to JBLU stock’s upside. It can become a major hub linking low-cost U.S. carrier traffic (including from Southwest, which does not have international destinations) with low-cost international traffic open routes out of Long Beach to Mexico. JetBlue already serves several Caribbean and Latin American destinations.
While the airline majors fight over traffic at major hubs like LAX, Long Beach is quietly growing—along with JBLU stock.