Airline Shares' Descent Could Mean Bargains

JetBlue (JBLU Quote) shares fell 16.6% on Friday, after the low-cost carrier warned fourth-quarter margins would be narrower than previously thought. Many analysts saw the pullback as a buying opportunity.

On Thursday night, JetBlue told investors that fourth-quarter operating margins would come in between 13% and 14%, down from the 19.7% posted in a seasonally strong third quarter and lower than the 16.8% margins it had a year ago. As the economy recovers, competition is increasing as network carriers add back capacity, hurting the industry's overall pricing power.

"We're faced with a challenging revenue environment due to capacity additions resulting in lower average fares, particularly in our western markets," said David Neeleman, JetBlue's chairman and CEO, in a statement. "This, coupled with the ongoing maturation of our newer markets and depressed traffic to southern California earlier this quarter, has caused us to revise our margin guidance." ...