Despite the sharp drop in ticket prices, the airline companies are still enjoying hefty profits due to the plunge in oil prices. JetBlue Airways Corporation (NASDAQ:JBLU) has performed better than its competitors and will continue to fare well due to its innovative revenue generating plans. The company is modifying its hedging plans to benefit most from the decline in oil prices.

The scenario

The unexpected plunge in crude oil prices proved to be a blessing for the airline industry over the last few months. However, the airlines companies were not ready to pass on the fare benefits to their customers. They continued with high air fares due to the strong demand prevailing in the industry. Now, finally the air travelers have entered in a phase where the airline companies are passing some benefits to their customers.

The Bureau of Labor Statistics disclosed that air fares declined 3.1% sequentially last month and they are down 6% YOY. This decline comes after a 5.6% decline in air fares in the month of July, the sharpest monthly decline in 20 years.

The impact

The weak air fare environment is not encouraging news for the company. In fact, lower air fares prompted Spirit Airlines to reduce their margin guidance. Consequently, its share price had declined nearly 40% in the past few months. There is a growing fear that airline companies including JetBlue will cannibalize their fuel savings by minimizing fares to extend market share.

Here, it is important to analyze how the weak fare environment will impact airline stocks like JetBlue? Historically, the airline firms tried to extend their market share by competing on prices. Airline companies have learned from past and therefore are now staying away from price competition. Despite the weak fare environment, airline companies are sitting on large profits as oil prices are declining much faster than air fares. While fares are down 6% YOY, fuel prices have plunged more than 35% in the same period.

JetBlue Airways Corporation (NASDAQ:JBLU) will continue to make significant profits as it is changing its hedging plan to benefit from the oil plunge.

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Steve Kanaval: Portfolio Manager/Writer/ Market Analyst Steve began his career in the Trading Pits in Chicago making markets at the Chicago Mercantile Exchange (NYSE:CME) the Chicago Board of Trade and the CBOE in the early 80’s. He ran the Morgan Stanley Derivative Prop Trading for the firm specializing in Index Arbitrage. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90’s managing large portfolios. Steve is known as an expert in MicroCap Technology Stocks and the emerging Digital Currency markets as a Portfolio Manager for his Family Office. Steve has managed portfolio’s in volatile asset classes for 3 decades as a commodity trader, hedge fund manager and digital currency trader and miner. Steve publishes his views on the asset classes in a public forum and has published more than 10,000 articles simplifying these complex and volatile assets for readers. His work is published on multiple sites including Bloomberg,,, CryptoCurrencyNews as a paid contributor. His work includes research, journalism and archived video on important market volatility related to stocks, digital currency and other volatile misunderstood asset classes. He offers a humorous, unique insight and the related back stories and drivers for readers interested in volatility and emerging market assets. Full disclosure Steve is long 25 digital currencies and sits on the board of multiple public companies involved in digital currencies, and owns shares in these companies from time to time.