Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of JetBlue Are Down Today

By Lou Whiteman - Mar 5, 2020 at 3:01PM

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 airline joins United in cutting back domestic capacity due to the coronavirus.

What happened

Shares of JetBlue Airways (JBLU 1.62%) joined the stampede of airline stocks moving downward on Thursday, dropping nearly 10% after the airline decided to cut capacity in response to falling travel demand due to concerns about the COVID-19 coronavirus.

So what

In a memo to employees obtained by Reuters, the airline said it would cut capacity by 5% in the near term to address the fall in demand. The airline is also taking other steps to preserve cash, including reducing hiring, and is considering voluntary time-off programs.

A collection of JetBlue tailfins on display at an airport.

Image source: JetBlue Airways.

Airline stocks have been rapidly descending in recent weeks as it has become clear that the coronavirus was likely to depress near-term demand for travel. Leisure-focused airlines including JetBlue are expected to get hit particularly hard if vacationers decide to stay home during peak travel times including spring break, Easter, and summer vacation.

A number of large airlines have cut service to Asia and other international destinations hard-hit by the virus, but JetBlue is just the second U.S. airline to trim domestic capacity. United Airlines Holdings said Wednesday it would cut domestic flights by 10% in April, part of a broader plan to reduce costs.

Now what

JetBlue shares are down 25% year to date, which is actually a lot better than how the stocks of some of its rivals have fared. But the capacity cutback is the clearest sign yet that the travel slowdown will last well beyond the current quarter, and could make it a lost year for JetBlue and other carriers.

SAVE Chart

Airline data by YCharts

The good news is JetBlue has the wherewithal to survive a prolonged downturn, but the company's plan to revamp its operations and generate better results could take longer to implement if there is an extended downturn due to the outbreak.

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
JBLU
$8.76 (1.62%) $0.14

*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
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

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.