Today I will analyze and compare United Airlines (UAL) and JetBlue Airways (JBLU) to determine which airline stock is currently a better buy.

Despite the macroeconomic headwinds, the travel industry has been experiencing bullish momentum in 2022, as the demand environment continues to be strong. Moreover, the post-pandemic rebound in commercial and non-commercial flights should enable the global passenger air transport market to reach $657.15 billion by 2025, with a CAGR of 6% between 2020 and 2025. 

It is also important to note that the airline industry, represented by the U.S. Global Jets ETF (JETS), is down only 2.89% year-to-date (YTD), compared to the SPDR S&P 500 Trust ETF’s (SPY) 13.06% loss over the same period, thus confirming early rebound signs. 

Keeping this in mind, in today's article, I will analyze and compare two airline stocks, United Airlines Holdings, Inc. (UAL) and JetBlue Airways Corporation (JBLU), to see which carrier company is a better buy at current levels.

United Airlines operates as an air transportation company in the US, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. The company also offers a variety of other services for third parties, including catering, ground handling, training, and maintenance services. JetBlue Airways is a New York-based air passenger transportation company with a mainline fleet of about 252 aircraft, serving 107 destinations in the US and 24 countries in the Caribbean and Latin America.

YTD, UAL has risen 8.79%, while shares of JBLU have plunged around 24.58% over the same period.

Recent Developments

On April 25th, Stephen Trent, an analyst from Citi, raised its price target on United Airlines from $58 to $71, maintaining a "Buy" rating. Trent noted that the company's strong demand and recovery in business travel impressed the Street. The analyst said, "shorter distance flights are good news for passenger yields." Also, the company was recently upgraded to "Peer Perform" from "Underperform" at Wolfe Research.

Recent Quarterly Performance & Analysts Estimates 

On April 20th, United Airlines reported earnings for the first quarter of 2022. United Airlines' first-quarter revenue rose 135.1% year-over-year to $7.57 billion, driven by the significant increase in passenger revenue to $6.35 billion versus $2.32 billion in 1Q21. However, its total revenue figure was 21.1% below 1Q19 levels. Besides, United Airlines missed the analysts' revenue estimates by $110 million. Notably, UAL's Non-GAAP EPS stood at ($4.24), missing Wall Street consensus by $0.02.

It is also worth mentioning that its net loss increased 1.4% YoY to $1.38 billion in Q1. But the company's Adjusted EBITDA has been reported at ($747 million), representing a significant improvement compared to the prior-year figure of ($2.1 billion).

For the second quarter, the analysts expect UAL's EPS to stand at $1.81. Moreover, Wall Street expects UAL's FQ2 revenue should increase to $11.94 billion, implying a 118.15% year-over-year increase.

JetBlue Airways disclosed its quarterly report on April 26th. For its first quarter ended March 31st, 2021, JBLU's total operating revenues increased 137.4% year-over-year to $1.74 billion, standing in line with Wall Street's consensus. The company's revenue growth was mainly related to a 139.5% YoY increase in passenger revenue to $1.6 billion due to the return in demand for travel. Notably, revenue passengers grew by 83.2% YoY to 8.2 million in Q1. Also, JetBlue Airways reported a Non-GAAP EPS of ($0.80), beating analysts' estimates by $0.05.

Notably, JetBlue Airways' net loss increased 3.2% year-over-year to $255 million in 1Q22. However, after adjusting its net loss for special items such as mark-to-market and certain gains and losses on investment, the company's adjusted net loss was $256 million in 1Q22 versus $467 million in 1Q21.

The company’s EPS is expected to grow 82.96% year-over-year to ($0.11) in its fiscal second quarter of 2022. Analysts expect JetBlue Airways' revenue to rise 63.28% year-over-year to $2.45 billion in the current quarter.

Comparing Options Market Sentiment

Looking at the September 16th, 2022 option chain for UAL and JBLU, we can determine options market sentiment by analyzing the open interest levels. On United Airlines' occasion, the open calls/open puts ratio at the $48.00 strike price comes in at 1.2x, implying a neutral options market sentiment. When it comes to JBLU, the open calls/open puts ratio at the $11.00 strike price stands at 3.19x, indicating a bullish market sentiment.  

Conclusion 

I believe that JetBlue is a better investment than United Airlines at these levels. While both carriers should capitalize on the airline industry's rebound in the second half of 2022, I think JetBlue looks relatively better based on its higher-than-expected first-quarter report, promising forward growth rates, and strong bullish options sentiment.

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UAL shares were trading at $46.46 per share on Wednesday morning, down $1.17 (-2.46%). Year-to-date, UAL has gained 6.12%, versus a -12.42% rise in the benchmark S&P 500 index during the same period.

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About the Author: Oleksandr Pylypenko

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.

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