Jetblue Ipo Valuation Report

Project Finance:

Case Study: JetBlue Airways IPO Valuation

Table of Contents

1 Introduction: 3

2. Case Study Questions: 4

2.1. What are the advantages and disadvantages of going public? 4

2.2. What different approaches can be used to value JetBlue’s shares? 6

2.3. At what price would you recommend that JetBlue offer its shares? 8

2.3.1. The DCF Method: 9

2.3.2. Comparable company valuation method: 12

2.4. What are the steps that a company goes through in advance of a listing? 13

3. Company current performance 16

1 Introduction:

The following case study is in relation to the Initial Public Offering (IPO) of JetBlue airways.

JetBlue airways are a low cost airline established in July 1999 by David Neeleman. David Neeleman was experienced in the operations of airlines and start up airlines. He started Morris Air which became a pioneer in ticketless travel which was later acquired by Southwest Airlines. After the sale of Morris Air he joined Canadian low fare airline West Jet. He also developed the e-ticket system Open Skies which was purchased by Hewlett-Packard in 1999.

The airline was to provide new levels of service in the airline travel industry, concentrating on customer service and low fares.

The starting of new airlines had proven to be a very difficult task over the past twenty years, with 87 new start up airlines failing over the twenty year period.

However Neeleman felt that with his vision for an airline his new company would break the mould and survive in this highly competitive industry. His 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 Neeleman assembled an 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...