JetBlue Airways IPO
In April 2000, JetBlue first started in New York City’s John F. Kennedy Airport.
Even after the 2001 terrorist attacks, company remained profitable and was growing aggressively.
To support their growth and offset portfolio losses by their venture capital investors, management was ready to raise additional capital through a public equity offering.
With representatives of co-lead manager Morgan Stanley and the JetBlue board was trying to come to an agreement on the offering price of the new shares. The initial price range was from $22 to $24. Facing sizable excess demand for the 5.5 million shares planned in the IPO, management had recently filed an increase in the offering price range to $25 to $26. NASDAQ was prepared for JBLU (the company’s ticker symbol) to begin trading on the exchange.
JetBlue Airways
Ex-Continental Airlines vice-president, David Barger, had agreed to become the new JetBlue president and CEO.
John Owen had left his position as executive vice president and former treasurer for Southwest Airlines to fill the CFO role at JetBlue.
In 1999, David Neeleman, announced to launch a new airline. He had received strong support for his business plan from the venture capital community. He had quickly raised $130 million in funding from such high profile firms such as Weston Presidio Capital, Chase Capital Partners, and George Soros’s priv...
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...ed not only raising the short-term capital requirements, but also maintaining access to future capital raising and providing positive returns to the crewmembers and other s involved in direct IPO share purchases.
Since maintaining access to capital markets was considered vital to JetBlue’s aggressive growth plans, discounting the company’s IPO price seemed like a reasonable concession to ensure a successful deal and generate a certain level of investor buzz.
By 2002, the U.S. economy had been stalling for nearly two years. The Federal Reserve had attempted to stimulate economic activity by reducing interest a yield of 5%, short-term rates were at 2%, and the market risk premium was estimated to be 5%.
However, he did not have enough money, so he issued 4 million shares to raise
Delta Airlines was founded by C.E. Woolman, who was an agriculture extension agent. He was not as aggressive,
In 1978, deregulation removed government control over fares and domestic routes. A slew of new entrants entered the market, but within 10 years, all but one airline (America West), had failed and ceased to exist. With long-term growth estimates of 4 percent for air travel, it's attractive for new firms to service the demand. It was as simple as having enough capital to lease a plane and passengers willing to pay for a seat on the plane. In recent news, the story about an 18-yr British...
JetBlue Airways entered the market in 2000 from a position of financial strength, leadership capability and several rare advantage points uncommon to others in the industry: 1) David Neeleman, the founder, had several years of industry experience as a result of having successfully launched and sold an airline (Morris Air), bringing both explicit and tacit knowledge into the his new venture; 2) Neeleman was afforded the opportunity to work directly with his idol, Herb Kelleher, at Southwest Airlines (the king of the low-cost leaders) after Southwest purchased Morris Air from Neeleman; and 3) Substantial financial support from venture capitalists who had funded Neeleman's previous ventures and were more than willing to support and capitalize on his idea for a new low-cost passenger airline.
David Neeleman, CEO and director began JetBlue in 1999 and flying since 2000 after his previous airline company-Morris Air was brought by Herb Kelleher, the Southwest Airline founder. He signed a 5-year non-compete agreement not to launch another airline. Kelleher hired Neeleman at Southwest but was not happy with the structured environment he did not control and was fired (Essentials of Entrepreneurship p78).
Features that draw customers in include assigned seating (contrary to its competitor, Southwest Airlines), leather seats, more leg room, and superior on-board service. Furthermore, JetBlue is one of only a few airlines that offers each passenger free Direct TV and XM satellite radio entertainment. Finally, with regard to customer service, JetBlue focuses intently on attracting and motivating a talented workforce. The company gives each employee a sense of ownership in the operations. This value and respect bestowed on each employee translates into a motivated, productive workforce that focuses on customer satisfaction and exceeds consumer expectations.
The high-risk, cyclical nature of our business demands a strong financial base. We must retain the capital resources to meet our current commitments and make substantial investments to develop new products and new technology for the future. This objective also requires contingency planning and
Furthermore, the new entity had a solid capital structure with 40% equity and also 43.3% subordinated debt
...ember 25). Boeing hails ME investments. Times of Oman [Muscat], p. 1. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1073420766?accountid=27203
... a bigger segment for instance the low and average income earners. Therefore, P’kolino Company needs to invest more in terms of capital since it may need to spend huge finances at the early stages as compared to later stages. Additionally, if P’kolino Company fails to meet the targeted sales, it needs extra capital for the provision purposes.
Gittell, J. H. (2003). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.
As Boeing’s CEO, Frank Shrontz promised to increase earnings and return on equity. Boeing had a history of making money when its competitors did not, but Mr. Shrontz wanted higher returns. The airline industry was characterized by large cash outflows for R&D and manufacturing and long payback periods over long life cycles for each new airframe design. Companies had to have deep pockets to keep the operation going while waiting for a return on their investments. If Mr. Shrontz could increase the return on equity for Boeing, it would increase the likelihood of Boeing’s continued success well into the future.
After the Air mail Act in 1934, which separated the ownership of aircraft manufacturer and airlines, the President of the UATC had to be resigned and he moved to another airline at the time, which is Trans-Canada Airlines, now Air Canada. After this fall, Boeing’s company was broken into several parts, the first one was aircraft manufacturing, the second part is the parts supplier, and the third part is the United Air Lines airline group. After having a separate airline, they needed a new president to fresh sta...
The positioning of Southwest Airlines is a reliable, low cost, no frills airlines. The positioning of JetBlue Airlines is a low cost, reliable airline that provides extra services to its passengers. JetBlue positioning is a low cost airline with several extras to passengers. These are the perceptions of customers of airlines in the US market.
This policy aimed to reduce interest rates and stimulate investment