JPMorgan analyst Jamie Baker pointed to some potential upside for JetBlue Airways Corporation (JBLU) from M&A discussions.
Baker and his team think that the United Airlines (UAL) alliance with JetBlue (JBLU) could just be the tip of the iceberg. Investors were advised to keep an eye on the ongoing rail M&A developments, which have two players with more than 20% market share, Norfolk Southern (NSC) and Union Pacific (UNP), looking to combine to control as much as 45% market share.
Baker said the firm believes that JetBlue (JBLU) is much more likely to be acquired than to file for Chapter 11. He highlighted that a JetBlue (JBLU)-United Airlines (UAL) tie-up would only achieve parity with American Airlines (AAL) and Delta Air Lines (DAL)’s respective domestic market shares of 16%, while a JetBlue (JBLU)-Alaska Air (ALK) tie-up would result in a mere 7% market share, which would make it just the 5th largest domestic carrier. Meanwhile, a Southwest Airlines (LUV)-JetBlue (JBLU) merger would lead to 22% domestic market share.
“To summarize, we think there could be another round of airline consolidation under the current administration (or the next one, perhaps) depending on the outcome in the rail space,” wrote Baker.
Shares of JetBlue (JBLU) were up 0.9% in premarket trading. The market cap on the airline stock is $1.51 billion.