JetBlue Airways is a company that applies innovative technologies to offer high quality travel services at a lower cost (Shrivastava, 2012). This represents a very big investment and thus a consequent threat for the company.
With a short-term debt of $26,580 thousand and a long-term debt of $731,740 thousand as by June 2003, and equity of $480,594 thousand, the company’s leverage ratio is 157.8%, whereas the industry average is around 129.46% (Infinancials). All of the company’s debt is asset related (EasyJet Annual Report 2010, p.85).
JetBlue is a profitable company, in comparison to peers, as stated in the following graph: JetBlue exhibits good levels of gross margin and operating margin.
Value of JetBlue in every steps to avoid problem
Some other companies, smaller, chose to issue shares: SAS, Virgin Blue, AirAsia, Kingfisher, and Icelandair. The financial structure of JetBlue will be as follows: Using the WACC spreadsheet, we can see the company’s financial position with regards to the optimal financial structure of JetBlue following the new cost of debt: Appendix2.
The point-to-point services save. SpaceX can keep their flat organizational structure. The company is spending a considerable amount of money in hedging for fuel prices volatility. ..4
The company has grown exponentially, Approach
The first strength of JetBlue is its founding team’s background. Although this allowed probably the company to have a price discount, it is also a threat. JetBlue SWOT Analysis. Swot Analysis Of Jetblue; Swot Analysis Of Jetblue. This led to a major constraint in the profitability especially for the established, SWOT Analysis Financial Condition 5
This report focuses on PEST analysis of UK’s food producing industry and giving some particularly essential ratios of some food producing companies. The company has thus the opportunity to raise additional equity. From this analysis, it can be noted that JetBlue will still have a financial position that minimizes the company’s weighted average cost of capital, thus maximizing the overall value of the company’s stock.
The founding and managerial team of JetBlue is issued from the airline industry.
JetBlue plans to be the launch customer for the new Embraer E190 aircraft.
A SWOT analysis of JetBlue airlines shows that despite the numerous opportunities and strengths it has, it is exposed to threats and weaknesses that pose challenges in its operations. Delta Airlines, on its side, is using pass-through certificates to finance aircraft (Delta Airlines Annual Report 2010, p.34).
No plagiarism, guaranteed! The weighted average cost of debt for JetBlue, if they issue such bonds, will be: [(3.5%*150,000)+(1.5%*731,740)]/(150,000+731,740), thus 1.84%. As per June 2003, JetBlue Corporation has a short-term debt of $26,580 thousand, a long-term debt of $731,740 thousand and equity of total $480,594 thousand (Exhibit 5a). Table of Content
Indeed, the company was founded by a veteran in the low-fare airline industry, backed by a group of private equity firms. JetBlue might thus incur higher maintenance and training costs, higher spare parts and engines costs, and some negative impact on the maintenance scheduling. In addition, the company does not have any line of credit, or short-term borrowing facility. The company is also operating one type of aircraft, the Airbus A320, thus lowering maintenance and training costs and spare parts needs.
The fuel price is also an external factor due to its non-predictable volatility.
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JetBlue is geared towards the provision of low cost and low fare for its services. They should be able to deal with the opposite aspect (issuing more equity) as well. The low-cost airline companies seem to be, on their side, more conservative. The low fares offered by JetBlue would allow it to attract new passengers who might otherwise not fly.
Jet blue is the strong brand among the US people. In its ‘Airlines return to capital markets’ article, David Knibb (2009) summarizes the ways several companies found financings: Lufthansa, Air-France KLM, British Airways, Air Canada, Australia’s Virgin Blue, Avianca and Indian carrier Kingfisher all issued bonds during 2009. |
United Continental Holdings has a high amount of obligations, including debt, aircraft leases and financings (United Continental Holdings Annual Report 2010, p.53).
JetBlue 's strategy was to combine common sense with innovation and technology to "return humanity to air travel".
JetBlue has had a successful business model and strong financial results during that period, and performed well in comparison to other airline companies in the US during the period between 2000 and 2003. With the rapid expansion of the company, the jet fuel expenses, as well as the cost of their hedging will grow rapidly. Introduction
One strength of Southwest Airlines is the strong fleet base, which enhances the company ability to deliver services effectively.
The company makes its firm-order purchases through a combination of bank loans, operating and finance leases and cash flow generated from the company’s operations (RyanAir Annual Report 2010, p.42). Indeed, the company does not provide any paper tickets.
JetBlue is a fast growing company, and should thus bear having less debt.
This option will thus cost more for JetBlue than convertible bonds, especially before the company’s shares price eventually exceeds $63.75. WestJet have two major problems lead them crash down, which is transfer the files from old reservation system to new system without backing up the data and the second one is did not have enough staff to response customers complained.
The company also uses secured notes, equipment notes, pass-through certificates and multiple financings secured by certain aircraft spare parts, aircraft and spare engines (United Continental Holdings Annual Report 2010, p.55).