Set To Fly High: 3 Reasons To Buy This Low-Cost Airline

While the airline industry has improved significantly over recent years, JetBlue (JBLU) has been one of those troubled carriers that appear to be jumping from one crisis to another and then another. It has dealt with hurricanes, soaring costs, delays and, more recently, flight cancellations. Consequently, the company fell short of its targets in the last two years. However, the airline is in a much better shape at present and is expected to report solid earnings in 2014 and beyond.

Simplifying business while growing network
On Mar. 13, JetBlue announced the sale of its wholly owned subsidiary LiveTV to Thales Group for $400 million, almost five times what it paid in 2002. LiveTV is the leading provider of in-seat entertainment for Jetblue and other commercial airlines. Partnering ViaSat, it introduced Ka-band satellite-driven onboard connectivity, a gaming-changing technological advancement. With passengers inclined to stay connected and interact with both social media and professional networks while travel, JetBlue unequivocally has a certain edge over others in terms of in-flight entertainment. The sale highlights JetBlue’s intent of keeping things simple while focusing on its core-business. Regardless of the sale, JetBlue retains access to LiveTV’s technology.

In addition, the airline has a strong network that is growing with time. This is mainly because of its presence in key markets, particularly in Boston and New York, that positions it favorably in the industry and, in turn, allows it to draw agreements with other airlines. As a matter of fact, it is the largest domestic carrier at New York’s JFK Airport and a top carrier in Boston. Therefore, partnering with Jetblue is an advantageous proposition for many internationa...

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...nt sale of the LiveTV will allow it to further reduce its debt burden while continuing to invest in aircraft for its growth plan.

With improving cash flows and more reasonable debt load, the airline will be in a strong position to start paying a dividend to its shareholders towards the end of this year. Alternatively, it could also choose to resume its share repurchase program.

Bottom line
With as many as 32 partnership agreements, mostly with international carriers, JetBlue is virtually a global airline. The company has reduced its risks and made moves to bring more predictability to its costs in order to boost it revenues. It is also transitioning to a more cost-efficient fleet of aircrafts, which would further hold its costs down. With a strengthening balance sheet, it should be able to return cash to shareholders while still investing in its future growth.