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Jet Blue Will Always Have a Place in My Stock Market Portfolio

12 March 2007 - Features - Editor

There are no reasons for stock market optimism at first sight: 2005 profits have plummeted far below the level for the previous year. The airline has demonstrated notorious vulnerability to OPEC quirks and geo-political pressures on fossil fuel prices. There is no dearth of skeptics on the shaky business model of low cost carriers. Above all, Jet Blue Airways Corporation seems to be in an unholy and a nearly permanent mess after a mere spell of harsh winter weather!

Nevertheless, I love the company and will remain invested no matter what stock market Gurus may say. There are 3 sound business reasons for my loyalty: I have no emotional ties to the CEO or to the other stake holders!

Firstly, we are a great fan of niche marketing. Stock market sentiments may rise and fall, but a brand which fills an unmet need, has to win in the long run, and provide relatively superior returns on investment. Domestic civil aviation in the United States is about as differentiated as hot dogs in Manhattan, but Jet Blue has been clever in selecting point-to-point routes to under-served destinations and the country’s metros which attract the best fares. Similarly, extra leg room, leather seats, video screens, inviting refreshments, and thoughtful shopping on board, are simply strokes of genius in terms of creating a new space between unbelievable fares and the classic full service airline offers. Great minds are at work in Jet Blue!

Here is a management which thinks on its feet, creating new stock market values all the time. Contracts of employment with pilots and other crucial categories of staff are win-wins all around, and far better than anything militant unions could have negotiated. Marketing and business associations with allied service providers on the ground, and with suppliers of the goodies sold on board, enhance passenger values, and dip in to wallets more often as well! Most of all, I like the alacrity with which the CEO has admitted to goof-ups after the February 2007 schedule dislocation. Such honesty and humility is refreshing after an age of corporate scandals, and I believe that Jet Blue will win back disgruntled customers before a new 10 K is due to be filed with the Securities and Exchange Commission.

Skies are not always calm and clear. Jet Blue has some way to go before it can acquire the management capabilities to stay airborne in the tough business environment in which it operates. It might well prove to be an attractive target for an acquisition by a larger airline or an investor on the prowl, but that should not worry any stock market quarter. Do make a note in your 2008 diary to come back to this URL and share a toast with us! Cheers!

 


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