Downgrade sinks JetBlue stock price
Saturday, March 11, 2006
BY SUSAN TODD
Star-Ledger Staff
JetBlue Airways may be flying into some turbulence, according to a Wall Street analyst who downgraded the airline's stock yesterday.
Shares fell as much as 9 percent during trading after Prudential analyst Bob McAdoo blamed the company's difficulties on management's poor market selection rather than higher oil expenses. McAdoo said the airline's longer flights to West Coast locations such as San Jose and San Diego have never proven to be profitable.
By comparison, its service between New York City and Buffalo, N.Y., Burlington, Vt., and Florida cities have generated consistent profits. A tell-tale sign of trouble, he said, was that 17 out of the last 20 markets JetBlue has added since 2004, including Boston, have proved unprofitable.
"Although we are bothered by current losses and the lack of short-haul flying," McAdoo said, "we are far more concerned that the current market-selection process seems to be pointing toward possible financial meltdown."
McAdoo said JetBlue's long- haul strategy was based on the airline's efforts to secure more gates at John F. Kennedy International Airport. In order to secure more gates, JetBlue shifted from its winning short-haul strategy.
In response to questions about McAdoo's report, Brandon Hamm, a JetBlue spokesman, said the company is looking at all of its options to return to profitability.
"Our route-planning team will continue to look at what routes work for us," he said.
The 17-page research note triggered alarm bells on Wall Street, where shares were trading heavier than usual through the day. But it wasn't the first dose of bad news for JetBlue, a Long Island-based carrier which started flying out of John F. Kennedy in 2000.
Last month, the company reported a $32 million loss for the fourth quarter. Management also hinted of more difficulties during 2006.
Earlier this week, the airline's competitiveness showed signs of weakening after it canceled two daily flights to Tampa from Newark Liberty International Airport. Only five months ago, JetBlue moved into Newark with great fanfare.
In his research note, McAdoo, a former executive at People Express that became part of Continental Airlines, acknowledged he has been a supporter of JetBlue from the start.
There have always been parallels between the two, he said.
"We have felt a connection to JetBlue," he said, "and thus have felt a need to dig deeper into the JetBlue issues."
Saturday, March 11, 2006
BY SUSAN TODD
Star-Ledger Staff
JetBlue Airways may be flying into some turbulence, according to a Wall Street analyst who downgraded the airline's stock yesterday.
Shares fell as much as 9 percent during trading after Prudential analyst Bob McAdoo blamed the company's difficulties on management's poor market selection rather than higher oil expenses. McAdoo said the airline's longer flights to West Coast locations such as San Jose and San Diego have never proven to be profitable.
By comparison, its service between New York City and Buffalo, N.Y., Burlington, Vt., and Florida cities have generated consistent profits. A tell-tale sign of trouble, he said, was that 17 out of the last 20 markets JetBlue has added since 2004, including Boston, have proved unprofitable.
"Although we are bothered by current losses and the lack of short-haul flying," McAdoo said, "we are far more concerned that the current market-selection process seems to be pointing toward possible financial meltdown."
McAdoo said JetBlue's long- haul strategy was based on the airline's efforts to secure more gates at John F. Kennedy International Airport. In order to secure more gates, JetBlue shifted from its winning short-haul strategy.
In response to questions about McAdoo's report, Brandon Hamm, a JetBlue spokesman, said the company is looking at all of its options to return to profitability.
"Our route-planning team will continue to look at what routes work for us," he said.
The 17-page research note triggered alarm bells on Wall Street, where shares were trading heavier than usual through the day. But it wasn't the first dose of bad news for JetBlue, a Long Island-based carrier which started flying out of John F. Kennedy in 2000.
Last month, the company reported a $32 million loss for the fourth quarter. Management also hinted of more difficulties during 2006.
Earlier this week, the airline's competitiveness showed signs of weakening after it canceled two daily flights to Tampa from Newark Liberty International Airport. Only five months ago, JetBlue moved into Newark with great fanfare.
In his research note, McAdoo, a former executive at People Express that became part of Continental Airlines, acknowledged he has been a supporter of JetBlue from the start.
There have always been parallels between the two, he said.
"We have felt a connection to JetBlue," he said, "and thus have felt a need to dig deeper into the JetBlue issues."
