JetBlue Airways Corporation (JBLU), United Continental Holdings Inc (UAL): This Airline Is Too Risky for a Long-Term Investment

Though United Airlines is the largest of the three, its top-line growth slowed considerably in 2012, and it swung to a loss on the bottom line.

While JetBlue has delivered healthy top-line growth over the past several years, one statement in its last 10-Q was somewhat concerning: “Although we have experienced revenue growth in 2013, this may not continue.”

That statement doesn’t guarantee anything, and it could just be JetBlue underplaying its potential, but it certainly doesn’t exude confidence.

Good news/bad news

In the second quarter, JetBlue’s revenue came in at $1.34 billion vs. $1.28 billion in the year-ago quarter. On the other hand, average fare declined 1.3% to $157.51. Average fare is an important metric, since it’s similar to comps (or same-store sales) in the retail sector. It indicates organic growth minus any new additions to help aid that growth.

A telling chart

JetBlue and Southwest Airlines are both known for their top-notch customer service and overall positive experiences. However, both are dealing with weak macroeconomic trends and volatile fuel prices, and JetBlue is seeing increased costs. These factors make long-term stock performance trends for airlines even more concerning. Consider the 10-year chart below:

JBLU data by YCharts

Conclusion

JetBlue is a fundamentally sound and well-run company. It’s simply in an industry that must constantly deal with stiff headwinds, making consistent top and bottom-line growth difficult to come by. This, in turn, makes life frustrating for investors. While JetBlue has the potential to reward shareholders via a short-term trade, it’s not a route you want to take if capital preservation is one of your top priorities.

The article This Airline Is Too Risky for a Long-Term Investment originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines.

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