Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of JetBlue Airways Fell Today

By Lou Whiteman - Mar 30, 2020 at 5:19PM

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

Even after the bailout package, the recovery is not going to happen quickly.

What happened

Shares of JetBlue Airways (JBLU 4.25%) fell 9.8% on Monday, after nearly doubling last week. Investors rightly were excited last week that lawmakers in Washington were able to forge a relief package for the struggling airline industry. But even with the bailout complete, the challenge for the airlines is far from over.

So what

JetBlue has been part of the stampede by airlines to cut flights and ground planes in response to the COVID-19 coronavirus pandemic, which has cut demand for air travel and led to concerns about the health of the industry.

The industry received $50 billion in loans and grants as part of the $2 trillion economic stimulus plan, but airline rivals have been clear that the cash infusion might not be enough if the downturn continues. Even if the pandemic is brought under control in the coming weeks, the economic impact is likely to reverberate for months to come and could lead the U.S. into a prolonged recession.

A JetBlue plane on the tarmac on a cloudy day.

Image source: JetBlue Airways.

JetBlue shares lost more than 60% of their value during a 30-day period ending March 23 but rallied nearly 75% off that low last week as the bailout bill progressed through Congress. That rally is now fading as the reality of the situation comes back into focus and investors realize there is no quick fix for what ails the industry.

Now what

JetBlue is well run and has a cash runway to weather the storm for months, but if the downturn is a long one, the company could still end up in some trouble. JetBlue has neither the size and the scale of industry titans like Delta Air Lines or Southwest Airlines, nor the ability to make money at price points as low as what Spirit Airlines or Allegiant Travel can offer.

JetBlue before the pandemic had been trying to build its business around a premium product catered to business travelers. In past recessions, vacationers have come back before businesses, drawn to low fares, so if nothing else, JetBlue seems unlikely to be the first airline stock to take off after COVID-19 is finally in the past.

Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.

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
$8.83 (4.25%) $0.36

*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 08/11/2022.

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.