JetBlue, Alaska Air stocks slump amid normalizing fares, domestic travel demand
Low-cost carrier JetBlue (JBLU) says airline fares are heading back towards pre-pandemic levels as pent-up COVID demand for domestic travel normalizes and travelers opt for longer, international destinations.
On Tuesday, JetBlue cut its annual earnings forecast and issued third quarter guidance below Wall Street expectations. The stock fell as much as 8% during the trading session. Year-to-date shares are up about 9%.
“As we head into the third quarter, we continue to see many of the same trends, including strong demand during peak periods. However, during off-peak periods, we are now seeing demand trends normalize,” Joanna Geraghty, chief operating officer of JetBlue, said during the company’s second quarter earnings call on Tuesday.
“We have seen fares normalizing back to 2019 levels,” she added.
The airline also noted a “greater-than-expected shift of pent-up COVID demand to long-haul international markets, which is pressuring demand for domestic travel during the peak summer travel period.”
Alaska Air (ALK) echoed similar commentary last week, noting domestic leisure airfares coming off their peaks along with traveler preference for longer flights to international destinations.
“As a primarily domestic leisure carrier, this summer presents a unique situation with the unprecedented surge in international demand, not dissimilar to the domestic surge last year,” Alaska Airlines CEO Ben Minicucci said during the company’s earnings call last week.
“We believe pent-up international demand has had the effect of a larger pull from would-be domestic travelers than has historically been the case,” he added.
Alaska Air’s stock is up about 10% year to date. On Tuesday shares fell 1% in sympathy with JetBlue.
Airlines with more international exposure have outperformed their domestic peers year to date. United Airlines (UAL), Delta (DAL), and American Airlines (AAL) are up 40%, 36%, and 26% respectively.
"The preference for longer international flights bodes well for carriers such as UAL, AAL, and DAL who dedicate a larger percentage of their fleet/routes to international flights," Christopher Raite, senior analyst at Third Bridge, told Yahoo Finance in an email.
He added, "Declining domestic fares hurt all U.S. carriers, but those more domestically focused are likely to be disproportionately impacted given the resurgence in international travel" and lagging business travel recovery.
JetBlue also noted it is facing near-term headwinds from a challenging operating environment in the Northeast and the termination of a revenue-sharing agreement in the Northeast with American Airlines as it looks to close on the purchase of Spirit Airlines.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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