Wolfe Research’s Hunter Keay and Jared Shojaian think United Continental (UAL) and JetBlue (JBLU) should swap planes. They explain:
Getty Images We believe both United Continental and JetBlue have fleet inefficiencies that contribute to poor margins for both airlines. If United Continental acquired JetBlue's 60 E-190s (and the 24 on order), in a transaction like the one Delta Air Lines (DAL) and Southwest Airlines (LUV) announced in 2012 when Southwest Airlines agreed to sublease its 88 B717s to Delta Air Lines, we believe both companies would benefit. This would also represent no incremental capacity to United Continental, by our math…
We rate shares of both United Continental ($54 TP) and JetBlue ($15 TP) as Outperform. We think both companies are underearning their potential (for different reasons), and we expect material earnings and margin improvement next year. And both companies could help in this improvement by one relatively straightforward transaction.
they need to do something. Shares of United Continental have gained 1.8% to $41.80 at 3pm today, while JetBlue has risen 1.4% to $11, a far cry from Delta Air Lines’ 3.7% rise to $40.16 and Southwest Airlines’ 3.2% advanced to $27.71.
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