Southwest vs. Jet Blue: Which Airline Stock Is Clear For Takeoff?

When it comes to customer service, airliners could
use some
work. At least, that’s what the latest ASCI (American Consumer
Satisfaction
Index) report says. This year, the airline industry scored 69 out of
100. Of
the 43 industries that were covered, only cable and internet service
providers
scored lower.

This year’s dogs were United
(UAL)–which
scored lowest at 62 and Delta (DAL)–which
scored 68.

Still, some players in the industry are doing
better than
others. For the second year running, Jet
Blue
(JBLU) topped the list with a score of 83. And Southwest
Airlines
(LUV) lived up to its ticker symbol–the company
has made the top two for the past two decades straight. This year,
Southwest Airlines
was awarded an 81.

But when it comes to Portfolio
Grader rankings
, none flies higher than LUV, which
is currently an A-rated buy
. In an
industry plagued with politics and regulations, Southwest is by far the
most
efficient passenger airline in the U.S. To start, the company has been
smart in
hedging its fuel costs, so it is able to undercut the competition. And
with
airline tickets and fees being as high as they are, passengers
recognize the
value in flying Southwest. With nearly 700 aircraft in its fleet,
Southwest
serves 97 destinations across 41 states, the District of Columbia and
Puerto
Rico.

Recently, higher fares helped drive
stronger-than-expected
first-quarter earnings. According to management, the average one-way
fare has
now topped $150, a 4% increase over last year. Looking ahead, the
company says that lower fuel costs should counteract losses seen from
government budget cuts. This year, analysts expect Southwest Airlines
to post 3.2%
sales growth and 88% earnings growth–over double the industry
average. All
the while LUV yields 1.2%–a generous dividend by airline standards.

That includes even customer favorite Jet Blue,
which is
expected to grow earnings by just 30% this year. Also,
while analysts have been scrambling to
hike up this year’s earnings projections for Southwest, they’ve been
cutting
their estimates for Jet Blue. While Jet Blue has seen passenger traffic
increase,
it hasn’t been able to reduce costs the way Southwest has. On top of
this, the
company has been struggling in terms of cash flow, so it receives a D
for its
Fundamental Grade. This, coupled with lackluster buying pressure, keeps
JBLU
grounded at a C-rated hold.

The bottom line? It pays to keep the customer
happy. But it pays even better to keep the
customer
happy while keeping costs low.

Sincerely,

Louis Navellier

Louis Navellier

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