Jetblue

Executive Summary

It has been two years since 2002 when the JetBlue plane touch-based New York City’s John F. Kennedy (JFK) airport. The company’s first year was strong showing potential in opportunity and growth – up until the U.S. airline industry was in the doldrums due to the aircraft terrorist attacks that occurred on September 2001. Many of the largest carriers in the country filed for bankruptcy and asked the federal government for their aid to remain existent. Despite the challenging times, few people considered the airline industry as a profitable venture, and others became hesitant. However, David Neeleman, CEO and founder of JetBlue Airways, saw this as an opportunity. JetBlue remained profitable and grew aggressively. By supporting their growth as well as offsetting portfolio losses, JetBlue Airways raised additional capital through its Initial Public Offering (IPO) and became public.

This case study will focus on the IPO process – its definition, underwriting process and uses, as well as the pros and cons of going public. Additional insights on the summary of the company’s history and background will be discussed. Given the financial and non-financial data in the case, our group will tackle on how to come up with the valuation for this IPO and recommend an offering price.

Company Background

Founded on February 1999 by David Neeleman, JetBlue Airways Corporation (formerly known as “NewAir”) is an American low-cost airline that is headquartered in the Long Island City and an operating base at the John F. Kennedy (JFK) international airport. Its idealism was “to bring humanity back to air travel”. As of 2011, JetBlue Airways flies to 71 destinations in multiple countries, including Aruba, The Bahamas, Barbados, Bermuda, Colombia, Costa Rica, Jamaica, the Dominican Republic, Mexico, Sint Maarten, Puerto Rico and the United States.

JetBlue has a strong and experienced management team: Ex-Continental Airlines vice president to president and...