...University of Law and Economics Case Study 26 “JetBlue Airways IPO Valuation” Lecturer: Kou Lim Hong Prepared By: 1. Ms. Khoun Davy 2. Ms. Khoun Dalin 3. Ms. Chiem Sothana 4. Mr. Soksithika 5. Mr. Oag Sothearith 6. Mr. Mov Vandara MFM, Group 2 team 6 2011-2012 Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Introduction of Case Study JetBlue Airway Background JetBlue airways are a low cost airline established in July 1999 by David Neeleman. David Neeleman was experienced in the operations of airline and start up airlines. The airline was to provide new levels of service in the airline travel industry, concentrating on customer service and low fares. Introduction of Case Study JetBlue Airway Background David Neeleman plan was to commit to innovation in people, policies and technology to keep the companies planes full and thus the company profitable. To ensure this goal and the company’s future David Neeleman assembled and impressive management team and group of investors. JetBlue’s COO was to be David Barger ex-vice president of Continental Airlines. John Owen who was executive vice-president and treasurer of Southwest Airlines agreed to become JetBlue’s CFO. Introduction of Case Study JetBlue Airway Background David Neeleman...
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...Jet Blue Airways case study Introductіon Twelve years ago JetBlue was a breath of fresh air in an airline industry bogged down by the ways of legacy carriers that were unconcerned with customer service and known for price gouging. JetBlue was revolutionary. With a fleet of new planes -- all Airbus A320s, which cut down on repair costs -- a staff that worked primarily from home, and 40% of ticket sales executed online, the company emerged as the premier low-cost carrier focused on providing extra-friendly, efficient service (LaMotta, 2010). Jet blue was a discount airline carrier that offered passengers low fares; operated point-to-point systems; used two types of aircraft; served only snacks; and maintained quick turnaround times at airports. Its operating costs were low, especially compared to those of other major U.S. airline companies. In the first quarter of 2008, for example, JetBlue’s total operating expenses amounted to 12.77 cents per revenue passenger mile, compared to 20.95 cents per revenue passenger mile for Delta and 13.85 cents per revenue passenger mile for Southwest (Michael, 2010). According to (Enterprise, 2011) JetBlue Airways is a low-cost passenger airline that provides customer service primarily on point-to-point routes. The company primarily operates in the US. It is headquartered in Forest Hills, New York and employs 12,532 people. The company recorded revenues of $3,286 million during the financial...
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...Case Study 1: JetBlue Airways IPO Valuation 08 Fall AFF5300 Case Studies in Finance- March 2013 Executive summary This report examines the decision of JetBlue management to price the initial public offering (IPO) of JetBlue Stock on the April 2002, a few months after the terrorist attack in September, 2001. First, the paper provided a brief introduction to JetBlue Airways and its industry. This paper revealed JetBlue’s innovative strategy and the associated strong financial performance over its initial two year. It followed by, a discussion on the advantages and disadvantages of going public (IPO) for JetBlue. The paper later provided an insight analysis of the company comparison multiples valuations (EBIT and PE multiples valuations) and the discounted cash flows to value JetBlue’s share price. It reached a conclusion that JetBlue Airways IPO should be in a range of $25 to $26 per share. By: Tam Huynh (24675512) Contents 1.0 Introduction 2 2.0 The Airline Industry and JetBlue 2 3.0 JetBlue’s Going Public 2 3.1 The Advantages of going public 3 3.2 The Disadvantage 3 4.0 JetBlue’s Valuation 3 4.1 The comparable Companies Analysis 3 4.1.1 P/E Multiple 3 4.1.2 EBIT Multiple 4 4.2 Discounted Cash Flow Analysis 5 4.2.1 Weighted Average Cost of Capital 5 4.2.2 Discounted Cash Flow Share Price Valuation 5 5.0 Recommendations and Conclusions 5 References 7 1.0 Introduction The terrorist attacks of September 2011 had a severe...
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...| JetBlue Airways | | Valuation of an IPO Case Study | | JetBlue Airways | | Valuation of an IPO Case Study | 2014 Ivan McClure, Imtiaz Saboor, Vanessa Lopes, Gilberta Pjetri 2014 Ivan McClure, Imtiaz Saboor, Vanessa Lopes, Gilberta Pjetri TABLE OF CONTENTS * History * Advantages & Disadvantages of an IPO * IPO Process * Weighted Average Cost of Capital (WACC) * Similar Company Analysis * Discounted Cash Flow Analysis * Final Decision History David Neeleman, an experienced entrepreneur in airline startups, announced that JetBlue would bring “humanity back to air travel” on July 1999. He was convinced that his commitment and innovation would keep the planes full and moving despite the fact that 87 new-airline startups had failed in the last twenty years. An impressive new management team and growing group of investors shared Neeleman’s vision. JetBlue’s management team included David Barger, former vice president of Continental Airlines. Neeleman received strong support in funding from high-profile firms such as Weston Presidio Capital, Chase Capital Partners, and Quantum Industrial Partners, and quickly raised $130 million. Neeleman’s goal was to “fix everything that sucked about air travel”. His strategy was built on that goal as well providing the passengers with new aircraft, simple and low fares, leather seats, free Live TV at every seat, pre-assigned seating, and high quality customer service...
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...JET BLUE - CASE STUDY EBS 5103 STRATEGIC MANAGEMENT Analyzing Strategic 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...
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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 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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...The University of the West Indies, St. Augustine Faculty of Social Sciences Department of Management Studies M.Sc. Aviation Management AVMT 6001 – Accounting for Business Decisions AVMT 6001 – Group Project 2 Managerial Accounting - JetBlue Airways Corporation Group Members: Cherrish Bridgemohan - 807001633 Rajiv Debie - 04708006 Israel Duncan - 814004144 Kenrick Duncan - 814002425 Neil Shepherd - 814004177 Signatures: Cherrish Bridgemohan ___________________________ Rajiv Debie Israel Duncan Kenrick Duncan Neil Shepherd ___________________________ ___________________________ ___________________________ ___________________________ November 16, 2014 Table of Contents I. II. Table of Abbreviations ........................................................................................................................ 5 Executive Summary............................................................................................................................ 6 III. Introduction......................................................................................................................................... 7 IV. Background – JetBlue Airways ......................................................................................................... 7 V. Management Accounting Information.............................................................................................. 8 Financial Accounting versus Management Accounting ...........................
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...JetBlue Airways: Regaining Altitude In this case study we discuss about the company known as Jet Blue. JetBlue is a United States domestic airline company who operates on a low-cost´ principle which translates into cheaper airfares to its customers. In February 2007 JetBlue underwent a particular event that could have been its last. Since its beginning in 1998 JetBlue became the 11 largest companies in the industry within six years. Aside from Southwest airlines, JetBlue was the only company who had been able to keep its books positive while the United States had undergone a terrorist attack and all other companies were reporting loses. The many problems that unfolded in the course of only a few short days were all caused by one main issue, a lack of communication and communication training in a crisis situation. What once was a vision has now become a reality that defines JetBlue as a company. Run by CEO David Neeleman’s expertise and experience in the industry, the company boasted in customer satisfaction and provided practical and luxury amenities to all passengers. Neeleman envisioned the ultimate flying experience for his customers. Every seat would come equipped with a television that featured dozens of free channels provided by satellite signal. Finally, to keep costs down, JetBlue would offer a virtually unlimited supply of appealing in-flight snacks instead of soggy meals that no one really wanted. It is obvious that David Neeleman and JetBlue set out to exceed customer...
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...------------------------------------------------- MARKETING ------------------------------------------------- CASE ANALYSIS JETBLUE * SYNOPSIS This case illustrates the success that JetBlue Airline has achieved since founded in 1999, though it had trouble in 2007 during Valentine´s day and a few more, it managed to overcome the issue and become one of the most known companies for excellent customer service. The author mentions that JetBlue truly cares about the customer because JetBlue doesn´t sell just airplane tickets and its customers neither seek for airplanes tickets when buying at JetBlue. They buy the whole experience in which each detail included in the service made the customer feel special with things such as ´´legroom seats´´, plenty of food and drinks and a zone for entertainment which seeks to satisfy the client while they wait for their flight even though if its delayed among other tangible elements that the company offers. All the actions of JetBlue are encouraged to reflect their slogan “Happy Jetting”. Furthermore, another topic highlight in the case is the culture that the company professes, the way they treat each other, “the human side of the equation”. An example of this is the opportunity to workers to do their job from home. Employees are so satisfied with the company that they care for it, which reflects in how they do their job and their attitude towards clients. As the CEO communicated, “everything can be copied, except the culture”. All this combination...
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...JetBlue Airways JetBlue Airways books Windows XP Professional for efficiency, reliability, and security. Published: December 2001 To maintain its high level of customer satisfaction and build even higher levels of operational efficiency, JetBlue Airways implemented Microsoft® Windows® XP Professional for all its users. The remote support, easily customizable interface, and user migration tools enabled the airline to implement Windows XP Professional without additional training and support a widely distributed work force with a small IT staff. In addition, JetBlue expects that the improved reliability and security features, such as support for Smart Card logon, will enable it to maintain a reliable, more secure environment for all users. Situation JetBlue Airways took flight on February 11, 2000, from New York City to Ft. Lauderdale, Florida. Nearly two years later, it serves 18 cities across the United States with a fleet of new planes equipped with roomy, all-leather seats, each of which features free LiveTV satellite television offering 24 channels of DIRECTV. The airline not only reports a profit in its second year of operation but also has received several customer-service-related awards. It earned the highest scores of any airline in the Conde Nast Traveler 2001 Business Travel Awards and was ranked #2 Best Domestic Airline for comfort and service in the 2001 Zagat Airline Survey. Those kudos come as a result of a unique low-fare, low-cost business model...
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...edition of Barron’s, a tag line in the “Marketweek” column reads, “Airlines and other money-losing companies.” 1 This tag line reflects the intense rivalry and the massive financial losses undergone in the airline industry in the past few months due to the economic recession and the 9/11 terrorists attacks. Amidst this airline industry malaise, however, JetBlue Airlines (”JetBlue”) launched service in February 2000 and generated over $41 million in profits in 2001.2 In this report, we explore the question, “Is JetBlue’s strategy conducive to sustaining profitability?” The answer is a resounding “Yes”. At the one thousand foot level, we believe that even in the unattractive airline industry in which companies try to differentiate on qualities other than price -- but in the end often compete on price -- JetBlue has a unique formula for success. It competes head-to-head with the majors, particularly Southwest Airlines (“Southwest”), on price, cost structure, features, and customer satisfaction. However, the company has carved a niche in which a “live and let live” strategy should prevail. Indeed, a rival attempting to bankrupt JetBlue may well cause more harm to itself than to its target. Airline Industry Overview Background At one time the airline industry resembled the utility industry to the extent that regulators determined what firms could and could not do. In the 1970s, a time of runaway inflation, and rising unemployment, many agreed that something had to change. In 1978 Congress...
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...Memorandum TO: FROM: DATE: September, 27 2013 RE: One-Page Memo on JetBlue Case Study The purpose of this memorandum is to discuss the JetBlue case study, and review my answers to the specified questions. I will elaborate as to which price I believe JetBlue should choose for their initial public offering (IPO), and why JetBlue should choose that price. The first step in determining JetBlue’s IPO price is analyzing specific ratios of publicly traded competitors in JetBlue’s industry. I analyzed the Price-to-Earnings multiples, Cash Flow multiples, Total Assets multiples, and the Revenue multiples of the direct competitors of JetBlue. JetBlue’s direct competitors include; AirTran, Alaska Air, American West, MidWest, and Southwest. JetBlue’s relative stock prices are as follows: |JetBlue's Stock Prices Implied By Different Multiples | |Airline |P/E Multiple |CF Multiple |TA Multiple |Revenue Multiple | |AirTran |$36.41 |$23.71 |$45.20 |$9.24 | |Alaska Air |$47.23 |$27.64 |$30.69 |$8.92 | |American West |$29.04 |$30.82 |$26.24 |$8.39 | |MidWest |-$15.60 |-$11.42 |$39...
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...CASE STUDY # 1 JETBLUE AIRWAYS PROF. AHSAN DURRANI Submitted by: IMRAN UL HAQUE (4282) Q.NO.4 WHAT IS YOUR ASSESSMENT OF JETBLUE`S FINANCIAL PERFORMACE DURING FISCAL YEARS 2003-2007? ANALYZE THE FOLLOWING RATIO`S. | 2007 | 2006 | 2005 | 2004 | 2003 | Gross Profit Margin | | | | | | Operating Profit Margin | 0.0595 | 0.0537 | 0.0282 | 0.0877 | 0.1673 | Net Profit Margin | 0.0063 | (0.00042) | (0.01176) | 0.0364 | 0.103 | Return on Total Assets | 0.0398 | 0.032 | 0.0394 | 0.0949 | 0.1984 | Return on Stockholder Equity | 0.017 | (0.0011) | (0.022) | 0.061 | 0.154 | Earnings Per Share | 0.10 | - | (0.13) | 0.30 | 0.71 | Current Ratio | 1:0.89 | 1:1.085 | 1:0.94 | 1:0.85 | 1:1.75 | Quick Ratio | 1:0.74 | 1:0.909 | 1:0.855 | 1:0.998 | 1:1.733 | Working Capital | (146) | 73 | (41) | (74) | 276121 | Debt to Asset Ratio | 0.544 | 0.586 | 0.598 | 0.5524 | 0.508 | Long-term Debt to Capital Ratio | 1:0.46 | 1:0.542 | 1:0.54 | 1:0.5 | 0.463 | Debt to Equity Ratio | 2.942 | 2.983 | 2.55 | 2.0491 | 1.655 | Times Interest Earned | 1.23 | 1.062 | 0.74 | 2.67 | 8.25 | Common stock A $100 investment in JetBlue common stock on December 31, 2002, was worth only $49 five years later. In contrast, a $100 investment in the S&P 500 index was worth $182 at the end of the same five-year period. Industry observers quipped that it was better to place money under a mattress than invest in an airline stock. According to the expert, “Airlines are...
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