Please ensure Javascript is enabled for purposes of website accessibility

JetBlue Airways Corporation Earnings: Profit Sinks in a Challenging Environment

By Adam Levine-Weinberg - Oct 24, 2017 at 1:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The popular discount-chic airline allocates a lot of its capacity to Florida and the Caribbean, so it was disproportionately hurt by Hurricanes Irma and Maria.

Three months ago, JetBlue Airways (JBLU -6.86%) appeared to be turning the corner, having stabilized its profitability. Unfortunately, a pair of hurricanes that hit some of its most important markets derailed JetBlue's profits during the third quarter.

Even so, JetBlue managed to post stronger results than most of its competitors last quarter. While hurricane-related revenue headwinds will continue to pressure JetBlue's performance in the fourth quarter, the company's strong underlying results bode well for 2018.

JetBlue Airways results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Change


$1.81 billion

$1.73 billion


Total unit revenue

12.67 cents

12.55 cents


Cost per available seat mile excluding fuel

8.07 cents

7.86 cents


Net income

$179 million

$199 million


Pretax margin




Adjusted EPS




Data source: JetBlue Airways Q3 earnings release. Chart by author.

What happened with JetBlue Airways this quarter?

Entering the third quarter, JetBlue estimated that it would post solid unit revenue growth of about 1% despite increasing capacity 6.5% to 7.5% year over year. Meanwhile, it expected non-fuel unit costs to rise 1.5% to 3.5% year over year. Hurricanes Irma and Maria upended JetBlue's plans, though, forcing the carrier to cancel more than 2,500 flights.

The net result on unit revenue was fairly muted. Revenue per available seat mile (RASM) rose 0.9% year over year last quarter. By contrast, the flight cancellations drove up non-fuel unit costs by approximately 2.75 percentage points, more than offsetting a 2-percentage-point tailwind related to the timing of various maintenance costs. Without the storm, non-fuel unit costs would have been roughly flat on a year-over-year basis.

A JetBlue Airways plane about to land, with water in the background

Two big hurricanes negatively impacted JetBlue's results last quarter. Image source: JetBlue Airways.

Leaving aside the hurricanes, JetBlue fared much better than most of its competitors in the midst of an industry fare war. Net income declined just 10% year over year, all of which was hurricane-related.

With its stock price remaining somewhat depressed, JetBlue continued to aggressively return cash to shareholders last quarter. It completed a $130 million accelerated share repurchase in the third quarter and has now repurchased $380 million of stock in 2017, completing a $500 million buyback authorization that was supposed to run through 2019.

What management had to say

While acknowledging the storm-related headwinds, JetBlue's management encouraged investors to focus on the big picture. "Despite unprecedented ATC challenges, repeated hurricane events, and a competitive industry pricing environment, we've been able to sustain solid margins, make progress toward our long-term margin commitments and return capital to our shareholders," remarked CFO Steve Priest.

JetBlue CEO Robin Hayes echoed these comments regarding JetBlue's long-term focus. "We are confident that the adjustments we are making to our network will limit any ongoing financial impact in 2018. Despite the short-term challenges, we remain focused on our long-term margin commitments to our shareholders," he said.

Hayes also tried to quantify the impact of the hurricanes on JetBlue's earnings, noting, "Our third quarter results were impacted by two hurricanes that reduced our EPS by approximately 6 cents."

Looking forward

While Hurricane Irma and Hurricane Maria both struck during September, they are expected to have a bigger impact on JetBlue's profitability this quarter than they did in the third quarter. JetBlue has a big footprint in Florida and the Caribbean, and the destruction caused by Maria in particular will continue to depress demand for months, if not years.

JetBlue projects that hurricane-related impacts will reduce its fourth-quarter revenue by $70 million to $90 million. Most of this lost revenue will flow through to the bottom line, reducing operating income by $50 million to $70 million and EPS by $0.10 to $0.13. Maintenance events that were postponed from the third quarter will also push JetBlue's non-fuel unit costs higher.

In total, JetBlue expects RASM to fall 0% to 3% this quarter, while non-fuel unit costs will rise 5% to 7% and fuel prices will increase to roughly $1.83/gallon, from $1.56/gallon a year ago. This implies that JetBlue's pretax margin could fall by nearly half from the 16.7% result posted in the fourth quarter of 2016.

On the bright side, JetBlue believes that a combination of recovering demand in Florida and capacity adjustments in the Caribbean will lead to better results by the beginning of 2018. This puts the carrier in position to resume its comeback next year.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

JetBlue Airways Corporation Stock Quote
JetBlue Airways Corporation
$8.35 (-6.86%) $0.61

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.