JetBlue Airways (JBLU 1.05%) narrowed its loss forecast thanks to strong holiday travel demand trends. Investors are breathing a sigh of relief, sending the beaten-down shares up 10% as of 10 a.m. ET Thursday.
Americans are still packing into planes
JetBlue shares have lost about half of their value in the second half of 2023 due to investor fears that higher rates and a slowing economy will eat into travel demand. Airlines including JetBlue have enjoyed strong post-pandemic demand in recent years, but the focus of late has been on whether this historically cyclical industry is beginning to take a turn for the worse.
JetBlue in a regulatory filing said travel demand is holding up well. "Since late October, close-in bookings have outperformed expectations for both holiday peak and non-holiday travel periods," the company wrote. The weather has also cooperated, helping the airline post a 99.9% flight completion rate in November and 100% over the Thanksgiving peak period.
As a result, JetBlue said it now expects to report a full-year 2023 loss in the range of $0.50 to $0.40 per share, compared to a previous forecast for a loss of between $0.65 and $0.45 per share.
Is JetBlue stock a buy ahead of a busy holiday travel season?
The question for investors is whether this outperformance is a sign of a resilient consumer, or just the natural demand spike triggered by the holidays. Americans apparently are not cancelling holiday travel plans, but that does not mean they intend to spend big on vacations next summer.
The demand question is thornier for JetBlue than it is for most airlines because JetBlue is also in the process of trying to acquire Spirit Airlines.
The deal, which is currently tied up in court over antitrust concerns, was signed at a time of robust industry growth and designed to help JetBlue address a pilot and airplane shortage. If demand does fall heading into 2024 and the Spirit deal is allowed to close, JetBlue risks having to execute a complex integration during a time of deteriorating market conditions.
JetBlue is a survivor, and patient investors can afford to ride out whatever storms might be coming the industry's way. But given the continued uncertainty on both the demand and merger and acquisition fronts, there is no rush to buy in right now.
