JetBlue (JBLU) Gains as New Bag Fees Will Bolster Bottom Line

While customers may not be happy about it, JetBlue Airways (NASDAQ: JBLU) investors are applauding the company's move to add bag fees. Using a tiered-structure, JetBlue will now charge $20 for the first bag checked online for the first tier and $25 if the bag is checked at the gate. The second back will cost you $35.

Shares of JetBlue are up 4% mid-day to $21 amid the news.

Credit Suisse analyst Julie Yates said fair options at JetBlue are expected to drive $65 million in operating profit in 2015, ramping to a run rate of $200 million by 2017. This will be achieved through "annualization, expansion of the airline, as well as dynamic pricing," the analyst said.

She added, "Similar to the implementation of the company's Even More product, fare options was rolled out in a simplified fashion, with static pricing that will likely increase over time as fees become optimized via technology that varies price by time of day/flight."

The firm expects stock outperformance to continue in the 2nd-half and reiterated an Outperform rating price target of $25.

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