...JetBlue Airways Air travel is a large and expanding industry. It facilitates economic growth, world trade, international investment, tourism, and is critical to globalization. Over the past ten years, air travel has grown by approximately seven percent per year. However, the airline industry suffered its largest downturn between 2008 and 2009, due to the economic downturn. Airlines carried 767,627,651 passengers in 2009, down from 809,447,811 passengers in 2008. Airlines have been forced to accommodate the economic recession by cutting flights, rescheduling existing routes, and looking for new revenue streams. As the economic recession revives itself, the demand for flights has begun to increase with 787,182,312 passengers flying in 2010; a significant upturn from the previous couple of years. Business travel has grown as companies increase their international presence in terms of their investments, supply and production chains and their customers. The rapid growth of global trade markets in goods and services and international investment have all contributed to growth in business travel. The domestic travel industry in the United States is typically a low cost, low fare environment. Most of the major airlines have undergone cost restructuring. Some airlines have sought the protection of Chapter 11 bankruptcy to restructure and reduce costs and then emerged as strong low-cost competitors. The majority have entered into cross-border alliances to improve profitability...
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...JETBLUE AIRWAYS IPO VALUATION Teaching Note This case examines the April 2002, decision of JetBlue management to price the initial public offering of JetBlue stock during one of the worst periods in airline history. The case outlines JetBlue’s innovative strategy and the associated strong financial performance over its initial two years. Students are invited to value the stock and take a position on whether the current $25–$26 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 67 percent first-day rise in JetBlue stock from the $27 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies—the IPO underpricing phenomenon—and are invited to critically discuss various proposed explanations. The case provides opportunities for the instructor to develop any of the following teaching objectives, • Review the institutional aspects of the equity issuance transaction. • Explore the costs and benefits associated with public share offerings. • Develop an appreciation for the challenges of valuing unseasoned firms. • Hone corporate valuation skills, particularly using market multiples. • Evaluate the received explanations of various finance anomalies, such as the IPO underpricing phenomenon. Study Questions 1. What are the advantages and disadvantages...
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...JetBlue Airways: Managing Growth Case Analysis Instructed by: Prof. Jonathan Lee Section3 Team 2 Jie Yan | 103795915 | Ling Lu | 103999797 | Nan Liu | 103744807 | Renhan Zhu | 103943651 | Yishi Shi | 103956048 | 2014/10/20 Part I: Issue Identification In May 2007, David Barger, President and CEO of JetBlue Airways, expressed the great need to slow down the airline’s growth in response to increasing fuel costs and the consequences stemmed from the Valentine’s Day crisis. As an LCC, JetBlue had to decrease its growth rate by reducing deliveries of E190 and A320 due to its weak financial position and the market’s softening demand. Considering the performance of JetBlue after the addition of E190 to its fleet, JetBlue overestimated its capacity of handling this large scale of expansion. The new CEO, David Barger was now facing with JetBlue’s key issue that he should reconsider the distribution of E190 and A320, and building long-term managing strategies for sustainable development. Besides, with a big movement of launching E190 in 2005, some small but critical problems loomed: Compensation of pilots, satisfaction of customers and employees, challenges for staff to adopt unexpected changes, complexity resulting from the integration of E190 and A320. Without experience of operating two types of aircrafts and combining them, as well as without sufficient capital, large scale of purchases of the new aircraft would definitely lead to operational failure...
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...JetBlue Case Study Analysis JetBlue Airways Corporation Overview JetBlue Airways Corporation is an American low-fare airline, which headquartered in the Long Island City near the New York City. Its main base is John F. Kennedy International Airport. Basically, the airline mainly serves destinations in the United States, as well as many Latin American countries. As of October 2013, JetBlue serves 84 destinations in multiple countries. Low-fare airline is an airline that generally with a lower operating cost structure. In many people’s view, low-are airline also with has low ticket prices and limited services. However, JetBlue is a low-fare airline corporation with a goal of fixing everything that “sucked” about airline travel. Its passengers could get unique flying experience by providing new aircraft, simple and low fare, leather seats, free LiveTV at every seat, preassigned seating, reliable performance, and high-quality customer service. JetBlue Airways Corporation David Neeleman, the starter of JetBlue, had raised funds of $130 million for this brilliant company at the beginning. Even JetBlue has strong support from venture-capital community, it also had the intent to go public in April 2002. At that time, the whole industry was still in recession due to 9/11 attack. A company sells stock shares to the general public for the first time via security exchange, it is Initial public offering (IPO). Before IPO, there is no general shareholders in the company. After IPO,...
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...JetBlue Airways: Starting from Scratch In 1999, a group of experienced individuals in the airline industry came together to start a brand new company, JetBlue Airways. JetBlue decided that its strategy was going to be very similar to Southwest Airlines (low cost airline), but focus more on technology by providing the customer with a better experience and ensure more productivity from the aircraft. The company decided that its home base was going to be JFK, with a potential of 2.5 million passengers living within just 10 miles. JetBlue would start with a fleet of brand new Airbus A320s and have to recruit a whole support organization to run the operation. Key Factors for JetBlue to Be Successful The biggest key for JetBlue to be successful is developing a dominant culture. JetBlue accomplished this by defining their core values of safety, caring, integrity, fun, and passion. These are the ground work for the company because it represents “the bedrock for the development of human resource policy and practices and management style”. These values will influence how the rest of the business will be run as subcultures will eventually be defined by other parts of the organization. This could be from supervisors making day to day decision and HR in hiring decisions. As long as the company is aware of these values and ensures that this is part of the day to day business culture – they are off to a good start. JetBlue also needs to become an innovator and risk taker to...
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...Jet Blue Airways JetBlue Airways took to the skies in 2000 under a novel concept: bringing humanity back to air travel. Based at New York's Kennedy International Airport, JetBlue, a non-union airline, distinguished itself from other low-fare carriers such as Southwest Airlines by offering seat-back entertainment systems with live television, comfortable seats and blue corn chips. During the last six years, when traditional airlines were piling up more than $40 billion in losses, JetBlue grew to $1.7 billion in annual revenue and became increasingly popular with travelers. But now that fuel prices have pushed up expenses for all airlines, and older carriers have sharply cut their own labor costs, the advantage JetBlue enjoyed as a start-up is greatly reduced. JetBlue — too new to have built up excessive costs that can now be trimmed, is trying mightily to raise fares in a bid to restore profits after surging fuel prices caused it to lose $42.4 million during the fourth quarter of 2009. The trends in the U.S. airline industry and how these trends might impact a company’s strategy The airline industry is susceptible to upturns and downturns with the trends in the economy. A growing economy and booming business mean greater demand for air travel, and a slow-down in the economy means reduced demand, consequent unutilized capacity and intensified competition. The availability of venture capital and other capital sources have an impact on the number of new entrants...
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...JetBlue Soars into the Friendly Skies October 18, 2010 Discuss the trends in the U.S airline industry and how these trends might impact a company’s strategy. Despite the unpredictable and rising costs of aircraft fuel, oil and maintenance, threats of terrorism, and fear of decreases in business and leisure travelers, the airline industry has remained resilient in recent years. According to Air Transport Association of America (ATA), (2006), the airline industry lost about 13 billion dollars during the early 1990s, and earned about 23 billion dollars from 1995 until 2000. The industry suffered additional loss of 35 billion dollars from 2001 until 2005 yet, has recently begun to show another wave of growth. Additionally, the September 11 attacks, energy conservation, and the recent economic crisis greatly influenced the airline industry’s ability to affect the long term growth. Increased competition from new low-cost airlines and lack of trained pilots added to the bleak outlook. Charging for baggage, mergers, and elimination of meals are cost-cutting initiatives which drive trends at it relates to airline passengers. The airline industry, among other commerce industries has shown pockets of recovery after some painful years. According to ATA, the industry trade organization for major U.S airlines, this year there were eight months on consecutive revenue growth. Passenger travel skyrocketing to 17 percent in comparison to last year. (Thompson, Strickland, &...
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...Analysis of JetBlue Airways JetBlue Airways is a young airline that is very successful and is also growing rapidly. In this analysis, the human resource strategies, policies, and practices will be reviewed and analyzed with suggestions as to how human resources practices and equal opportunity employment law relates to JetBlue and how these practices and laws can be beneficial to all of the organization's human resources areas but also how they can be beneficial to JetBlue as an organization with a bright future. Hiring Practices JetBlue already has impressive hiring practices because they focus on finding the right people with great attitudes. However, there are three national equal employment laws that have been identified that will impact JetBlue's hiring practices. The first law identified is the Age Discrimination Act of 1967 which prohibits "employers from discriminating against individuals who were 40 to 65 years old" (Mondy, 2012). In making sure not to discount hiring people over the age of 40 whether they have previous airline experience or not can benefit JetBlue as an organization because many workers that are over the age of 40 have a great work ethic along with great customer service skills as noted by CVS executive, Stephen Wing (Mondy, 2012). This also creates diversity in the workplace which only enhances the organization. The second law identified is Title VII of the Civil Rights Act of 1964 that was amended in 1972. Title VII prohibits an employer...
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...Strategic Report for JetBlue Airways Harkness Consulting Innovation through Collaboration Rosanna Smart Alisher Saydalikhodjayev Sayre Craig April 14, 2007 Table of Contents Executive Summary ………………………………………………..3 Company History ………………………………….………………..4 Competitive Analysis ………………………………………………7 Internal Rivalry …………………………………………………………. 8 Entry ………………………………………………………………………… 9 Substitutes and Complements …………………………………….. 11 Supplier Power ………………………………………………………….. 12 Buyer Power …………………………………………………............... 13 Financial Analysis ………………………………………………….14 SWOT Analysis ………………………………………………………23 Strategic Issues and Recommendations …………………..25 References ……………………………………………………………30 Harkness Consulting 2 Executive Summary From its initial flight in February 2000, JetBlue emerged into the heavily competitive airline industry as the little airline that could. While legacy carriers declared bankruptcy, JetBlue trounced its competition by offering low‐cost, customer‐focused service. Under the direction of the energetic David Neeleman, JetBlue became a major player in the airline industry. Operating domestic flights on a point‐to‐point system, JetBlue primarily manages East‐West and Northeast‐Southeast routes. While this route structure initially proved profitable for the company, rising costs and heated price competition are currently threatening JetBlue’s market share. The com...
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...Management Cases “JETBLUE AIRWAYS” UFUK CANDAR FOYA BAHÇEŞEHİR UNIVERSITY Table of Contents INTRODUCTION 3 BRIEF SUMMARY 3 ENVIRONMENTAL ANALYSES: 4 VALUE CHAIN ANALYSIS: 10 FINANCIAL ANALYSIS: 13 SWOT ANALYSIS: 19 SPACE MATRIX: 21 TOWS MATRIX: 24 QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM): 25 CONCLUSION: 26 INTRODUCTION Within case analysis assignment, the JetBlue case is analyzed strategically in this document to set answers for following basic questions: * To make a set of recommendations based on the analysis, * To describe exactly what need to be done for success, * To explain why the proposals will solve the problems, * To suggest how best to implement the proposed solution After giving a brief summary regarding the case of JetBlue has and drawing a general picture of the company, several strategic analysis methods will be used to analysis JetBlue. BRIEF SUMMARY The economic downturn in the late 1990s and 9/11 terrorist attacks in 2001 have severe consequences on airline industry. The demand for air travel dropped and led to decrease in flights and revenue. The security costs increased. Airlines significantly reduced capacities. As a result low-cost strategies with new route services became important. Rebounding of economy by the end of year 2003, the demand for business and leisure travel was expected to grow in low-cost competition marker after flight reductions and fewer routes. JetBlue started operations...
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...Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy From 1998 through 2010 the airline industry went through several states with just trying to survive, then adapt, recover, and rethinking. During this period they have had SARS, 9/11, war, as well as the different financial crisis between 2008 and 2010. Fuel costs alone went from 46 billion in 2000 to more than 149 billion in six years (Wensveen, 2010). Some trends that have come out of this, is an increase in travel demand with the IATA revising estimates upward by 1.2 percent. Consolidation of airline suppliers is a trend that airlines have to really take notice of as a way to manage products, inventories, and as a way to get closer to customers. In today’s “green” world the airline industry has to find a way to go green. Going green requires a major change in how airlines handle business such as investing in eco-friendly fuels, additional training of their pilots to learn how to fly using less fuel, and changing to shorter routes. These trends can force a company to rethink its strategy in the airline industry. Airlines know that without major changes they will continue to lose money at an alarming rate. Research and development needs to become an important part of airlines. R&D brings innovation which helps to bring new life to an old industry. A lot of the innovation will need to be directed at customer service, since that is where they make their money. For any new...
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...JetBlue, Cases in Advanced Human Resource Management Jet Blue case study Western Governors University Abstract This paper includes discussions of the processes JetBlue initially utilized to staff their start-up airline, and the challenges faced in obtaining the desired employees to achieve the five core values which are: Safety; Caring; Integrity; Fun; and Passion. Company leadership and human resources began by working together to establish the company values in order to identify the traits desired for employees. Descriptive discussion of the recruiting efforts used, laws that needed to be considered; selection processes; appraisal systems; compensation; and benefits, are included within. When staffing the new airline began research needed to be done in advance of any recruitment efforts could starting. Hours of work were invested prior to the first interview in order to prepare to find the ideal candidates. National employment laws and statutes had to be identified in order to comply with the requirements of each. Three examples of such laws are The Equal Pay Act of 1963; The Age Discrimination in Employment act; and the 1990 Act of Americans with Disabilities (ADA). The first National Employment law that we will discuss is the “Equal Pay Act of 1963” (Mondy, 2008, p. 59). This law forbids the employer from paying employees of opposite genders different amounts, if the same job is performed; they have equal skills and...
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...JetBlue Strategic plan Michele Branam STR581 March 26, 2013 Billie Hutson, PhD TABLE OF CONTENTS Abstract …………pg. 4 Introduction pg. 5 MISSION, VISION, AND VALUE STATEMENT…………………………………PG. 5 ENVIRONMENTAL ANALYSIS…………………………………………………..PG. 5 ENVIRONMENTAL SCAN………………………………………………................PG. 6 SWOT ANALYSIS PG. 6 PEST ANALYSIS………………………………………..………………………..…PG. 8 STRATEGY…………………………………………………………………………..PG. 9 VALUE DISCIPLINE..……………………………………………………….……...PG. 9 GENERIC STRATEGY………………………………………………………………PG. 10 GRAND STRATEGY………………………………………………………………..PG. 10 RECOMMENDATIONS.…………………………………………………………....PG. 11 OBJECTIVES………………………………………………………………………...PG. 11 FUNCTIONAL TACTICS…………………………………………………….……..PG. 13 ACTION ITEMS…………………………………...………………………………..PG. 13 MILES STONES AND DEADLINES………………………………………………PG. 14 TASKS AND OWNERSHIP………………………………………………….……..PG. 14 RESOURCE ALLOCATION………………………………………………………..PG. 14 KEY SUCCESS FACTORS…………………………………………………………PG. 15 BREAK EVEN ANALYSIS………………………………………….…….……….PG. 16 FORECASTED FINANCIALS……………………………………………………...PG. 17 BUDGET……………………………………………………………………………PG. 18 CONTINGENCY PLAN……………………………………………………………PG. 18 CONCLUSION…………………………………..………………..…………..…….PG. 18 REFERENCES………………………………………………………………………PG. 20 Abstract The airline industry received devastating blows from the global economic downturn of 2008. An uncertain and volatile market, JetBlue will adopt a strategic...
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...Organizational Plan Introduction JetBlue is known as the airline that promises, and also delivers. JetBlue delivers Air flight of the future, with new jets and the lowest fares available. JetBlue has proved to the world that one can have it all. JetBlue’s Airways started in 2000 with the mission as stated by the founder Neeleman: “to bring humanity back to air travel by offering passengers low fares, friendly service, and high-quality product” (Ford, 2004, p.139). JetBlue has five core values that they operate by on a daily basis, which includes, safety, caring, integrity, passion and fun. JetBlue continues to adapt to the changing environment, and its community by evaluating the risks and opportunities for adjustment to the changes presented (Jetblue.com/green, 2012). Main Goal JetBlue Airlines main goal is to provide cheap tickets to consumers with continued profit to the business as a whole. This includes the internal and external stakeholders. The internal stakeholder combines the customers, the investors and the crewmembers. Some of the external stakeholders are the environmental conditions, the government and the competing airlines. To accomplish the goal, the stakeholder should include in the primary goal for the company’s success. For example, consumers should be able to purchase cheaper tickets when comparing prices to other airlines with more incentives. Crewmembers should be rewarded for efficient work with provided benefits. That would then increase crewmembers satisfaction...
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...Yale School of Management 135 Prospect Street, New Haven, CT 06511 JetBlue Airways October 9, 2002 Time Frame 12 Months Recommendation SELL Recommendations: Buy: >20% Undervalued Hold: Fair Market Value Sell: >20% Overvalued “If you want to become a millionaire, start with a billion dollars and launch a new airline…” - Richard Branson, founder of Virgin Atlantic Airways Team Members: Brad Anen brad.anen@yale.edu (203) 865-6166 % Returns Over the Last 12 Months (Prices are as October 7, 2002) mike.bizzario@yale.edu (203) 675-9244 Begonya Klumb begonya.klumb@yale.edu (203) 772-0718 Carla Sayegh carla.sayegh@yale.edu (203) 773-1177 Portfolio Manager: Sean O’Dowd Sean_odowd@yale.edu Airline Index (^XAL): S&P 500: JetBlue (JBLU): (59.80)% (26.70)% (20.73)% JBLU Current Price: JBLU Target Price: $35.75 $29.44 Projected (Short) Return: Mike Bizzario 17.65% Yale School of Management Page 2 of 17 RECOMMENDATION: SELL • • • • Short-lived, well-funded track record is unsustainable in current economic climate. Threat to cost structures within airline industry due to potential invasion of Iraq and resultant oil price increases. Immediate shorting opportunity due to overvaluation as compared to the industry (JetBlue P/E ratio is higher than the industry average by 18%) valuation ratios. Height of financial performance is already reflected in the JBLU’s stock price, and we are bearish about...
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