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%.
...s created and focused on a JetBlue model that combines the best within the industry. In an industry that is highly competitive in every process and system, HR is one of the few ways to differentiate a player. Key issues include non-union environment and customized employment packages. They differ greatly from the current firms that are overly regulated and overtly mismanaged. Many companies are plagued with huge pensions, and the inability to motivate their staff. Tensions among employees do not bode well for long-term viability for many of these firms. JetBlue's sources of competitive advantage are it's the alignment of its people, systems and culture. Although JetBlue's strategy is one of a low-cost structure, JetBlue's strength is the dedicated and passionate workforce working with the values set forth by the company: safety, caring, integrity, fun and passion.
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).
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...
However, he did not have enough money, so he issued 4 million shares to raise
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
Delta Airlines was founded by C.E. Woolman, who was an agriculture extension agent. He was not as aggressive,
... 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.
This policy aimed to reduce interest rates and stimulate investment
Although JetBlue focuses on service value through highly productive personnel and aircraft, potential consumers are still interested in value when they fly; the Price aspect of the marketing mix. Customers are interested in quality service at a reasonable price.
The target market of JetBlue airlines is customers who along with low cost seek services. The services provided by JetBlue included in-flight entertainment, TV on every seat, satellite radio, extra leg room, free unlimited snacks, and leather seats. The target market of JetBlue is also the leisure traveler, the low cost ticket seeking traveler, and the cost conscious business traveler. JetBlue has actually, posed a threat to the other low cost airlines like the Southwest Airlines.
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.