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Morgan Stanley Trims JetBlue Air Outlook

Morgan Stanley cut its estimates on JetBlue Airways (JBLU).

Analyst William Greene says the discount carrier's lowered operating margin guidance is disappointing, but the news isn't unexpected given lackluster traffic results at major airlines and Southwest Airline's pre-announcement on Thursday.

Late Thursday, JetBlue reduced its earnings outlook, citing lower fares and the California wildfires, which hurt travel.

In recent months, JetBlue announced plans to purchase more planes, which could revive the capacity that was wiped out over the last year. but also will reduce average fares amid an increasingly competitive low-cost carrier environment.

Greene says industry capacity discipline eroded fast as the economy picked up. He also says JetBlue's planned capacity for 2004 suggests current industry yield weakness will not soon abate. As such, Greene cut 91 cents 2003 earnings per share estimates to 86 cents, cut the $1.17 2004 estimate to $1.05, and trimmed the $1.47 2005 estimate to $1.35.

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