A better story emerges for JetBlue

Maybe you missed it, but JetBlue (JBLU) had a big day on Tuesday, with its shares rising nearly 8% to $6.35.

The surface reason was the company's report of strong traffic and revenue growth for March. Unit revenue rose 17% from the year-ago period. Traffic increased 9.1% to 2.45 billion revenue passenger miles.

There's more to the JetBlue story, however, and it has a lot to do with United Airlines parent UAL (UAUA), Continental Airlines (CAL) and US Airways (LCC).

Here's why.

There have been reports that UAL and US Airways are deep in talks about a merger. The deal hasn't been announced. It may not even happen.

That's because Continental would rather be the merger partner. And Continental has fewer problems than US Airways.

One problem is that US Airways carries a lot of debt. It was $4.02 billion at the end of 2009, 54% of assets and up from $3.6 billion at the end of 2008.

Continental's debt of $5.3 billion is about 41% of assets.

The next problem is that US Airways and UAL have very complicated labor contracts and UAL is prone to strikes.

The last problem is what group would run a combination of the two.

Now, here's why the outcome matters to JetBlue.

First, it is a low-cost carrier and doesn't have the messy contract problems.

Far more important is this: Any merger of UAL with US Airways or Continental would mean that planes would be taken out of service. You tighten up the availability of seats overall, and JetBlue, with its lower costs, could well come out ahead.

In fact, as Marketwatch noted, the legacy carriers -- United, AMR's (AMR) American, Delta Air Lines (DAL), US Airways and Continental -- cut 21% of their capacity between 2003 and 2009. Low-cost carriers like JetBlue, Southwest Airlines (LUV), Alaska (ALK) and AirTran (AAI) have added capacity. 

Already, as the Street.com reported, JetBlue is a dominant player at New York's John F. Kennedy International Airport and Boston's Logan. It cut a deal with American Airlines so that JetBlue passengers traveling to Europe can connect with American flights at JFK.

It may get some landing slots at Reagan National Airport in Washington, D.C., as Delta and US Airways work out their own swap of slots.

Does that mean JetBlue is a buy? Maybe, for those investors who are also prepared to unload it quickly.

Airlines are vulnerable to oil prices, which can destroy any hope of profits if they rise quickly. And rising crude oil prices can gut consumer confidence and kill business and personal travel demand.