The Little Airline That Could
The troubles of U.S. legacy airlines are well documented. But there's a smaller airline out there that's been making all the right moves lately. It's hard to ignore a company on a roll like JetBlue (NAS: JBLU) . Its second-quarter earnings report was a mix of good and bad news, but I like the plans the company has made for the future.
Unlike many of its peers in the airline industry, JetBlue does a nice job actually making money. Though the company fell short of analyst expectations for the second quarter, it did finish with a $25 million profit. Revenue rose more than 22% to $1.15 billion. Profits would have been higher if not for fuel costs that were $160 million more than last year. Maintenance expenses were also up. But, again, the company actually made money.
The thing I like best about JetBlue, besides its ability to not hemorrhage cash like AMR's (NYS: AMR) American Airlines, is its growth strategy. The airline has a two-pronged attack for the second half of this year.
First prong: business travelers
JetBlue is targeting business travelers with a three-month unlimited flying pass out of two of its hubs -- Long Beach, Calif., and Boston. It's a simple deal that allows customers who belong to JetBlue's loyalty program to purchase unlimited flights from mid-August through mid-November. Remarkably, if there's a seat available, customers with the pass can book a flight up to 90 minutes before departure.
Programs like this go a long way toward establishing customer loyalty. As we've seen with JetBlue competitor Southwest Airlines (NYS: LUV) , loyalty goes a long way in this industry. Consider that Southwest ranks 10th among major and regional airlines for best mishandled-baggage performance and 10th in on-time performance, yet it has the fewest customer complaints of any U.S. airline.
Second prong: leisure travel to the Caribbean
JetBlue expects 25% of its capacity to come from the Caribbean and Latin America this year. CEO Dave Barger said JetBlue is positioned to pick up the slack when other airlines pull out of the region. He expects competition to drop 15% in the third quarter.
JetBlue is adding international service to Westchester County Airport in White Plains, N.Y., and the airline will make one daily round-trip flight from White Plains to Nassau in the Bahamas. The White Plains location is a tiny two-gate airport located in northern Westchester County, minutes from Fairfield County, Conn., and about 40 minutes from Manhattan -- in other words, smack-dab in the middle of affluence. Flights commence Nov. 15, just in time for the company to cash in on holiday travel.
Will this stock fly?
Even if both of these initiatives may seem insignificant, they represent something much greater. They show that a company in a troubled industry is making calculated moves to grow revenue and develop customer loyalty. Those are winning qualities for the long term.
At the time this article was published Fool contributorAimee Duffydoesn't own shares of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Southwest Airlines. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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