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JetBlue's Union Vote Doesn't Rankle Investors

NEW YORK (TheStreet) -- JetBlue Airways (JBLU - Get Report) is becoming the last major U.S. airline to have unionized pilots, but the effects on the company's costs may not be as drastic as feared.

After the stock dropped yesterday on news of the vote, it was trading recently at $8.64, up 5 cents. The shares have risen over 20% during the past year.

On Tuesday, JetBlue pilots voted to join the Air Line Pilots Association union as 71% of pilots eligible to vote in the month-long election backed joining the ALPA. The pilots' union drive had failed in two previous attempts.

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Lee Moak, ALPA's president, said in a statement that the aviation landscape has changed drastically over the past few years, and in order for JetBlue to have a say in the industry, its pilots had to unionize.

The move to unionize could lead to higher pay and benefits for pilots. JetBlue has enjoyed low costs and labor flexibility as workers did not have the organization in the past to demand changes, and the company has been able to pass any cost savings onto customers.

Still, analysts say that workers won't want to damage the company and may work with the airline on compromises. ALPA contracts vary for different airlines, and so any new agreement may not match the salaries and benefits at larger airlines.

JetBlue executives see the airline as one built for leisure travel, and have said that they have no interest in joining the wave of consolidation that has swept the U.S. airline industry.

David Neeleman, the airline's founder and former chief executive, has argued, however, that JetBlue's higher costs are a disadvantage and an indicator that the airline might not be able to operate independently forever.

JetBlue said it and ALPA would form negotiating committees once the National Mediation Board, which conducted the election, authorizes the union.

JBLU Chart

JBLU data by YCharts

At the time of publication, the author had no position in any of the stocks mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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