Industrials | United States
WSD Target Price
Annualized Return Since Publication
Target Equity Value (Δ)
Source: Bloomberg end of day market data; not adjusted for dividends (December 13, 2016).
Returns assume a long investment position on the date that WSD Capital Management published its thesis, and an exit on the date that the WSD Target Price is realized.
Returns do not reflect any fees, expenses or taxes.
The returns are hypothetical and do not reflect the actual results of WSD Capital Management’s investment activities, nor is it necessarily indicative of future results of WSD Capital Management’s investment activities.
JetBlue Airways (“JetBlue”) is a leading passenger carrier in Boston, Fort Lauderdale/Hollywood, Los Angeles/Long Beach, Orlando and San Juan.
WSD Capital Management announced its investment in JetBlue on October 24, 2016. We were attracted to JetBlue given the company’s attractive valuation, favorable RASM trajectory, and prospects for unit revenue growth and margin expansion through its Mint premium transcontinental service. We see significant opportunity for JetBlue’s management to enhance long-term shareholder value by investing in RASM accretive initiatives, which has boosted JetBlue’s RASM by over 20 percent on Mint routes since 2014.
Additionally, we believe crude oil prices are destined to revert to a downward trend due to an unfavorable supply/demand backdrop and chronic glut that will benefit carriers going forward. In the case of JetBlue, it is our expectation that a combination of fuel hedges and lower crude oil prices will push the average price per gallon of fuel below $1.50 in the fourth quarter of 2017.
In November 2016, Berkshire Hathaway disclosed investments in the four largest U.S. carriers that prompted a pronounced sector rotation. We exited our investment in JetBlue after the company’s common stock realized its target price in December 2016.