Why Not JetBlue?

Warren Buffett taking a stake in the four major U.S. airlines— American Airlines, Delta Air Lines, United Continental, and Southwest Airlines— quickly became big news after the billionaire almost suffered a big loss in 1995, leading the octogenarian to speak out against airline investments in years past.

It’s unclear what made Buffett change his mind about airlines, though it could be because of cheaper oil and increased travel. Speculations aside, clearly something has changed, as his investments totaled 1.3 billion before factoring in Southwest (which was announced after the original 3), leaving us with another question: Why did Buffett leave out JetBlue?

JetBlue is the 5th largest airline in the United States, plus the preference among millennials. The company prides itself on being a low-cost airline with innovative features, such as the JetSuite. JetSuite is essentially a private jet with commercial fairs and private terminals, allowing passengers to arrive moments before departure and have a less stressful experience overall.

Over the last five years, JetBlue’s stock has increased 400%, though the last quarter they did suffer a small loss. It seems that even that wasn’t enough to catch Buffett’s attention.

Buffett most likely ignored JetBlue because of the companies size. The market value of JetBlue is right around $7 billion, whereas the other major airlines range from $20 billion to $36 billion. Plus, JetBlue is still focusing on regions— it has under 100 destinations— rather than the entire nation. It transported about 35 million passengers in 2015, compared to American Airlines 200 million passengers and 350 destinations.

There are 3 types of companies that Buffett avoids all together: young companies, expensive companies, and ones that he doesn’t understand. I’m not sure the level of expertise Buffett has on airlines, but JetBlue definitely fits the first two criteria so it’s definitely not something Buffett would have on his radar. Perhaps, as the company grows, they will catch his eye.

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