Richard Branson once joked that the best way to become a millionaire was to be a billionaire and buy an airline. JetBlue (JBLU) shareholders should heed the warning. For full disclosure, JetBlue was a name I had recommended to clients in 2011 -- but we took the position off the table in the first quarter of this year as it staged a financial about-face. And it's been headed lower ever since.
To be clear, JetBlue isn't the worst company in the world. But the headwinds in the airline industry coupled with small-cap scale are making it more challenging than ever to compete with the big boys. And the big boys are only getting bigger -- industry consolidations are creating larger airlines than ever before that are better able to cut costs across massive networks. While increased routes have boosted JBLU's revenues, profitability has been tenuous thanks to growing maintenance and repair costs. Despite incurring the costs one of the youngest fleets in the airline business, it costs more than ever to keep those planes flying.And JBLU needs to keep those planes flying if it wants to pay for those leases. The one-two punch of huge ongoing lease obligations and low margins makes this a tough stock to love. There was a time when I liked JetBlue a lot (and I certainly wouldn't recommend shorting it with the headline risk of an acquisition) but the red flags are waving too blatantly to ignore in 2013. To see these stocks in action, check out the at Red Flag Stocks 2013 portfolio on Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
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