...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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...JetBlue Airways IPO Valuation Summary In July 1999, David Neeleman announced his plan to launch a new airline that would bring “ humanity back to air travel.” Despite the fact the airline industry had 87 new-airline failures in U.S. over the past 20 years. Neeleman’s plan convinced a group of investors and quickly raised $130 million from venture-capital community. This is the way JetBlue Airways established. With its strong capital base, JetBlue acquired a fleet of new Airbus A320 aircraft and focused on low-cost, point-to-point service to large metropolitan areas with high average fares or highly traveled markets that were underserved. This strategy brought JetBlue Airways an excellent position in the beginning phase. JetBlue Airways started to expand aggressively and remained profitable even after the terrorist attacks of September 2001 by insisting on its low-fare strategy. In April 2002, barely two years since established, JetBlue meet its initial public offering (IPO). The initial price range for JetBlue shares was $22 to $24, but facing sizable excess demand, the management increased the range as $25 to $26. After the whole process of IPO including SEC review and comments, roadshow, pricing, tombstone advertisements, JetBlue finally launched in NASDAQ at $27/share as initial pricing, closed at $45/share on the first day of trading. With the proper strategy in IPO process, JetBlue make a huge success on its IPO. Questions Why JetBlue Airways can still remain profitable...
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...Mavis Lei JetBlue Airways IPO Valuation Introduction and Recommendation In July 1999, David Neeleman had announced his plan to launch a new airline company that would bring “ humanity back to air travel” despite the fact that U.S. airline industry had lot failures over the past 20 years. JetBlue had target its strategy and operating philosophy by offering customers low –fares tickets, high performance of customer service, providing new aircrafts and focused on point-to-point service to large metro areas. JetBlue’s operating strategy had produced the lowest cost per available-seat-per-mile of any major U.S. airline in 2001- 6.98 cents versus an industry average of 10.08 cents. JetBlue’s early success was often attributed to his extensive experience with airline start-ups. In 2002, Southwest airline was the pioneer in low-fare air travel. It was also the fourth-largest carrier in America and in the world. JetBlue remained profitable during the recession in the airline industry in the terrorist attacks of September 2001. To support the company’s growth, management was ready to raise additional capital through a public equity offering. With co-lead manager Morgan Stanley, the initial price range for JetBlue shares, was $22 to $24. The demand had excess the supply, 5.5 million of shares planned for the IPO while management had recently filed an increase in the IPO range ($25 to $26). The most recent IPOs among low-fare airlines were of non-U.S. carriers. Ryanair, WestJet...
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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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...HEAVY EDIT JetBlue Airlines: Getting “Blue” again?* JetBlue posted a net income $97 million in 2010. The airline continues to pursue its goal of becoming ―the Americas‘ Favorite Airline‖ and aims attainting positive free cash flow and long term sustainable growth while maintaining adequate liquidity position. Financially, the airline was far better than after the Valentine day fiasco in February 2007 and subsequent loss of $84 million in 2008. It focuses on controlling costs, maximizing unit revenues, managing capital expenditures and aims at achieving disciplined growth (see Exhibit 1).1 However, in the recent years, JetBlue appears to be moving away from its core strategy, in quite interesting ways, of being a low-cost player providing the distinctive ―JetBlue experience.‖ In its efforts to boost revenues, the airline began charging $10 to $20 for seats with extra legroom, doubled its ticket-change fee to $100, and introduced refundable tickets that cost more than nonrefundable ones. Further, the airline began charging $7 for a pillow-and-blanket kit, an amenity usually provided free of charge by other airlines.2 Breaking another low-cost rule, JetBlue moved away from ticket sales through its own Web site and signed up with travel agencies and the Galileo and Sabre global distribution systems in August 2006 and with online travel agencies such as Orbitz in January 2008. Further, it sold approximately 42.6 million shares of common stock to Deutsche Lufthansa, the German...
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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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...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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...American Airlines Strategic Report for American Airlines Jed Cullen Kevin Yamazaki Deirdre Chew April 7, 2010 April 7, 2010 Page 1 American Airlines Table of Contents Executive Summary ............................................................................................ 3 Company History................................................................................................. 4 Financial Analysis ............................................................................................... 8 Current Financial Position.................................................................................. 8 Industry Comparable Analysis ......................................................................... 12 Stock Performance .......................................................................................... 14 Management and Analyst Outlook................................................................... 15 Competitive Analysis ........................................................................................ 16 Internal Rivalry ................................................................................................. 17 Supplier Power ................................................................................................ 18 Buyer Power .................................................................................................... 19 Entry and Exit ..............
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...Southwest Airlines Operations – A Strategic Perspective September 1, 2014 by Airline Editor Southwest Airlines Operations – A Strategic Perspective By Mukund Srinivasan Background: Southwest Airlines is the largest airline measured by number of passengers carried each year within the United States. It is also known as a ‘discount airline’ compared with its large rivals in the industry. Rollin King and Herb Kelleher founded Southwest Airlines on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and a simple fare structure. The airline began with one simple strategy: “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline.” This approach has been the key to Southwest’s success. Currently, Southwest serves about 60 cities (in 31 states) with 71 million total passengers carried (in 2004) and with a total operating revenue of $6.5 billion. Southwest is traded publicly under the symbol “LUV” on NYSE. Facts: * The first major airline to fly a single type of aircraft (Boeing 737s) * The first major airline to offer ticketless travel system wide including a frequent flier program based on number of trips and not number of miles flown. * The first airline to offer a profit-sharing program to its Employees (instituted in 1973). * The first major airline to develop...
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...STRATEGIC MANAGEMENT CASE STUDY SOUTHWEST AIRLINES SÜLEYMAN SİNAN ÖZTÜRK EBS 5103 STRATEGIC MANAGEMENT INSTRUCTOR: DR. AHMET BEŞKESE BAHÇEŞEHİR UNIVERSITY May 2013 Contents CONTENTS ................................................................................................................................... 2 INTRODUCTION: ......................................................................................................................... 3 THE HISTORY: .............................................................................................................................. 3 CASE ANALYSIS: PESTEL FRAMEWORK................................................................................. 5 CASE ANALYSIS: MICHAEL PORTER’S FIVE FORCES FRAMEWORK ................................. 7 CASE ANALYSIS: COMPETITIVE PROFILE MATRIX .............................................................. 9 CASE ANALYSIS: VALUE CHAIN ANALYSIS ......................................................................... 10 FINANCIAL ANALYSIS ............................................................................................................. 12 SWOT ANALYSIS ....................................................................................................................... 16 SPACE MATRIX .......................................................................................................................... 18 TOWS MATRIX: ..............................
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...Does “LUV” really last? Many relationship experts have stated that “LUV” is eternal and that it is like a muscle that must always be worked out to keep it in shape, in order for it to last forever. While some may disagree that “LUV” can’t last forever, when it comes to relationships, the “LUV” that is in question is Southwest Airlines. What once was a small commuter air service, has now grown to be one of the largest and most successful major airline companies in the United States. So how did Southwest Airlines become so successful? It all began with the founders Rollin King, an entrepreneur, and Herb Kelleher, an attorney, who demonstrated strategic leadership from the beginning. The strategic leadership began when the these two gentlemen saw an opportunity that would be beneficial due to the inconvenience and expense of ground travel by either bus, train, or automobile between three major cities, which were Houston, Dallas, and San Antonio. Due to this, the establishment of Southwest Airlines came into existence by providing point-to-point short haul flights to less popular and less congested airports. Shortly after its establishment, like any other new businesses, Southwest faced many barriers in the beginning phases, which pertained to safety issues, inspections, and flight operations, which Southwest was able to overcome due to Herb Kelleher’s legal experience. After overcoming the barriers, the strategic leadership continued with the incessant building of the organization...
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...Abstract Brands rushed into social media, viewing social networks, video sharing, online communities, and microblogging sites as the panacea to diminishing returns for traditional brand building routes. But as more branding activity moves to the Web, marketers are confronted with the stark realization that social media was made for people, not for brands. In this article, we explore the emergent cultural landscape of open source branding, and identify marketing strategies directed at the hunt for consumer engagement on the People’s Web. These strategies present a paradox, for to gain coveted resonance, the brand must relinquish control. We discuss how Webbased power struggles between marketers and consumer brand authors challenge accepted branding truths and paradigms: where short-term brands can trump longterm icons; where marketing looks more like public relations; where brand building gives way to brand protection; and brand value is driven by risk, not returns. # 2011 Kelley School of Business, Indiana University. All rights reserved. 1. The party crashers: Marketers and the Social Web Brands today claim hundreds of thousands of Facebook friends, Twitter followers, online community members, and YouTube fans; yet, it is a lonely, scary time to be a brand manager. Despite marketers’ desires to leverage Web 2.0 technologies to their advantage, a stark truth presents itself: the Web was created not to sell branded products, but to link people together in collective conversational...
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...FIN 4414 Financial Management Course Syllabus Spring 2010 Term INSTRUCTOR: Dr. T. Craig Tapley Graham-Buffett Master Lecturer of Finance Section: Section: Room: 2109 – Monday and Wednesday, Periods 3-4 (9:35 a.m. – 11:30 a.m.) 7111 – Monday and Wednesday, Periods 5-6 (11:45 a.m. – 1:40 p.m.) 112 Matherly Hall Office Hours: Wednesday (2:00 p.m. - 3:00 p.m.) Thursday (1:00 p.m. - 2:30 p.m.) CONTACT INFORMATION: Office: Phone: Fax: E-Mail: 329 David Stuzin Hall (352) 392-6654 (352) 392-5237 ctapley@ufl.edu http://vista.courses.ufl.edu/ Class Webpage: COURSE MATERIALS: TEXTBOOK 1. Financial Management: Theory and Practice (12th Edition), Eugene F. Brigham and Michael C. Ehrhardt, Thompson/South-Western, 2008, ISBN: 0-324-42269-5. The official textbook for the class will be an excellent reference book as you start your career, as you may easily find that there will be times, on the job, when you need to reference prior material, or formulas, covered in your corporate finance classes at UF. However, books have become somewhat expensive, so you may, instead, purchase the 11th or 10th Edition of the book, typically at a cheaper price, through various online booksellers. However, there are minor differences between the 10th, 11th, and 12th editions; mainly in the order of the chapter. These differences should not impact your ability to perform well in this class, but you may need to map the chapters in the 10th or 11th Edition to those assigned in the 12th Edition. This is...
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...Business Horizons (2011) 54, 193—207 www.elsevier.com/locate/bushor The uninvited brand Susan Fournier a,*, Jill Avery b a b Boston University School of Management, 595 Commonwealth Avenue, Boston, MA 02215, U.S.A. Simmons School of Management, 300 The Fenway, M-336, Boston, MA 02115, U.S.A. KEYWORDS Branding; Brand management; Social media; Web 2.0; Co-creation Abstract Brands rushed into social media, viewing social networks, video sharing, online communities, and microblogging sites as the panacea to diminishing returns for traditional brand building routes. But as more branding activity moves to the Web, marketers are confronted with the stark realization that social media was made for people, not for brands. In this article, we explore the emergent cultural landscape of open source branding, and identify marketing strategies directed at the hunt for consumer engagement on the People’s Web. These strategies present a paradox, for to gain coveted resonance, the brand must relinquish control. We discuss how Webbased power struggles between marketers and consumer brand authors challenge accepted branding truths and paradigms: where short-term brands can trump longterm icons; where marketing looks more like public relations; where brand building gives way to brand protection; and brand value is driven by risk, not returns. # 2011 Kelley School of Business, Indiana University. All rights reserved. 1. The party crashers: Marketers and the Social Web Brands...
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...Strategies to Fight Low-Cost Rivals * Nirmalya Kumar From the December 2006 Issue * Strategies to Fight Low-Cost Rivals Strategy & Execution HBR Article Executive Summary Reprint: R0612F Companies find it challenging and yet strangely reassuring to take on opponents whose strategies, strengths, and weaknesses resemble their own. Their obsession with familiar rivals, however, has blinded them to threats from disruptive, low-cost competitors. Successful price warriors, such as the German retailer Aldi, are changing the nature of competition by employing several tactics: focusing on just one or a few consumer segments, delivering the basic product or providing one benefit better than rivals do, and backing low prices with superefficient operations. Ignoring cut-price rivals is a mistake because they eventually force companies to vacate entire market segments. Price wars are not the answer, either: Slashing prices usually lowers profits for incumbents without driving the low-cost entrants out of business. Companies take various approaches to competing against cut-price players. Some differentiate their products—a strategy that works only in certain circumstances. Others launch low-cost businesses of their own, as many airlines did in the 1990s—a so-called dual strategy that succeeds only if companies can generate synergies between the existing businesses and the new ventures, as the financial service providers HSBC and ING did. Without synergies, corporations...
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