Case 45 JetBlue Airways IPO Valuation Rev

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This spreadsheet supports STUDENT analysis of the case "JetBlue Airways IPO Valuation" (Case 45).

This spreadsheet was prepared by Professor Michael Schill. Copyright © 2004 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights
reserved. For customer service inquiries, send an e-mail [email protected]. No part of this publication may be reproduced, stored in a retrieval
system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the
Darden School Foundation.
Rev. Jan. 20, 2011

JetBlue TN v3.0

This spreadsheet supports STUDENT analysis of the case,
"JetBlue Airways IPO Valuation" (UVA -F- 1415)

Revised, February 2007
Copyright (C) 2004, by the University of Virginia Darden School Foundation.

Exhibit 7
JETBLUE AIRWAYS IPO VALUATION
Recent Valuation Multiples
Actual for 2001

AirTran
Alaska Air
America West
AMR (American)
ATA
Continental
Delta
Frontier
Midwest
Northwest
Ryanair
Southwest
United
WestJet

Price/
Share
(1)
6.6
29.1
3.5
22.3
15.0
26.2
29.3
17.0
14.6
15.7
32.1
18.5
13.5
15.9

Book
Equity/
Share
(2)
0.5
32.1
12.5
35.1
10.8
20.9
32.7
5.4
8.3
-5.1
5.5
5.3
59.6
2.8

Book Debt/ EBITDA*/
Share
Share
(3)
(4)
4.0
1.2
33.8
3.3
10.2
-4.3
69.3
-7.0
32.9
8.5
82.0
9.8
70.3
-1.4
0.0
3.2
2.7
-0.1
66.9
1.6
3.3
1.3
1.8
1.5
186.2
-37.0
1.0
2.1

EBIT/
Share
(5)
0.8
-1.7
-6.2
-16.2
-2.0
1.4
-11.8
3.0
-1.6
-4.4
0.9
1.1
-56.1
1.3

Earnings/
Share
(6)
0.3
-1.5
-4.4
-11.5
-2.6
-1.6
-9.9
2.0
-1.1
-5.0
0.7
0.7
-39.6
0.8

Trailing

AirTran
Alaska Air
America West
AMR (American)
ATA
Continental
Delta
Frontier
Midwest
Northwest
Ryanair

Market to
Total
book
Capital
EBITDA
multiple
multiple
multiple
[1/2]
[(1+3)/(2+3)] [(1+3)/4]
13.5
2.4
8.6
0.9
1.0
19.2
0.3
0.6
-3.2
0.6
0.9
-13.1
1.4
1.1
5.6
1.3
1.1
11.0
0.9
1.0
-71.6
3.2
3.2
5.3
1.8
1.6
-298.3
-3.1
1.3
51.6
5.8
4.0
26.4

EBIT
multiple PE Multiple
[(1+3)/5]
[1/6]
13.0
25.3
-37.0
-19.3
-2.2
-0.8
-5.7
-1.9
-23.8
-5.7
77.0
-16.7
-8.4
-3.0
5.7
8.4
-11.0
-13.5
-18.8
-3.1
38.5
44.0

Southwest
United
WestJet

3.5
0.2
5.6

2.9
0.8
4.4

13.4
-5.4
8.1

18.6
-3.6
12.7

27.6
-0.3
19.6

Data source: Actual numbers for 2001 are from company annual reports. Estimates for 2002 are from Valueline when available, otherwise
consensus analyst estimates are used. All stock prices are quoted as of December 31, 2001. Ryanair figures are based on the respective
American Deposit Receipt prices. Westjet figures are in Canadian dollars. 1 US dollar = 1.5870 Canadian dollars as of March 31, 2002. The
calculation procedure for the valuation multiples is defined in the lower panel based on the numbered variables defined in the upper panel.

Estimates for 2002
EBIT/
Share
(7)
0.8
2.7
-4.5
12.4
-6.4
11.1
8.4
0.6
1.6
7.2
1.2
1.4
NA
1.6

Earnings/
Share
(8)
0.3
-0.8
-4.1
-3.9
-7.2
-1.2
-3.1
0.4
0.8
-2.5
0.9
0.7
-15.4
0.6

Leading
EBIT
PE
multiple Multiple
[(1+3)/7]
[1/8]
13.9
20.0
23.3
-38.8
-3.0
-0.8
7.4
-5.7
-7.5
-2.1
9.8
-22.4
11.8
-9.4
26.6
45.9
11.2
17.4
11.5
-6.3
30.3
34.1

14.3
NA
10.6

when available, otherwise
ased on the respective
s as of March 31, 2002. The
defined in the upper panel.

28.4
-0.9
26.9

Exhibit 8
JETBLUE AIRWAYS IPO VALUATION
Historical Annual Growth Rates for Low Fare Airlines

$ Revenue Growth
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source: Compustat

AirTran

456%
186%
-4%
49%
18%
-20%
35%
-22%

ATA

Frontier

1%
21%
18%
2%
20%
21%
39%
23%
-58%

49%
125%
39%
56%
105%
79%
237%

Ryanair

20%
N/A
N/A
39%
68%

$ Gross Equipment Growth
Southwest

-20%
5%
28%
32%
51%
101%
42%
46%
32%
35%
45%
18%
35%
49%
10%
-5%
24%
14%
10%
14%
20%
21%
18%
13%
10%
16%
19%
19%
16%
12%

AirTran

2204%
175%
-40%
-4%
108%
15%
24%
7%

ATA

11%
24%
23%
5%
4%
17%
22%
15%
-1%

$ Gross Equipment Growth
Frontier

186%
66%
26%
50%
50%
43%
-6%

Ryanair

25%
15%
29%
11%
21%

Southwest

177%
55%
61%
54%
35%
59%
66%
68%
57%
27%
23%
35%
20%
27%
13%
1%
11%
18%
17%
11%
28%
36%
13%
11%
19%
12%
9%
14%
19%
-2%

Exhibit 13
JETBLUE AIRWAYS IPO VALUATION
JetBlue Financial Forecast
$ figures in millions

1
Estimate
2002
34

2
Estimate
2003
48

3
Estimate
2004
62

4
Estimate
2005
74

5
Estimate
2006
86

6
Estimate
2007
98

$17.638
$0.156
$0.133

$18.414
$0.044
$0.152

$19.224
$0.044
$0.152

$20.070
$0.044
$0.152

$20.953
$0.044
$0.152

$21.875
$0.044
$0.152

$9.449

$0.521
$22.336
$0.050
$9.449

$0.547
$23.453
$0.050
$9.449

$0.574
$24.626
$0.050
$9.449

$0.603
$25.857
$0.050
$9.449

$0.633
$27.150
$0.050
$9.449

$0.665
$28.507
$0.050
$9.449

$320.414
$283.082
$10.417
$26.915
$9.151
$17.764

$599.693
$502.225
$17.709
$79.759
$27.118
$52.641

$883.877
$723.277
$26.251
$134.349
$45.679
$88.671

$1,191.908
$975.135
$35.603
$181.170
$61.598
$119.572

$1,485.194
$1,214.826
$44.618
$225.750
$76.755
$148.995

$1,801.982
$1,473.635
$54.446
$273.901
$93.126
$180.775

$2,143.772
$1,752.773
$65.146
$325.853
$110.790
$215.063

$234.000
$33.910
$529.508

$290.373
$63.467
$802.172

$328.345
$93.542
$1,104.266

$344.762
$126.142
$1,413.425

$310.286
$157.181
$1,679.092

$325.800
$190.707
$1,950.446

$342.090
$226.879
$2,227.390

$29.557

$30.076

$32.599

$31.039

$33.526

$36.172

Actual
2001
21

Number of aircraft
$ Revenue/plane
Expected inflation
Operating margin

$15.258

$ Depreciation/plane
$ CapEx/New planes
Expected inflation
NWC Turnover

$0.496
$21.273

Revenue
Cash expenses
Depreciation
EBIT
Tax
NOPAT
Capital expenditure
Net working capital
Fixed assets
∆ Net working capital

$0.084

34%

FCF
DCF
NPV
Less : preferred shares
Less : long term debt
Add :cash
Equity value
Shares

-$249.579
-$243.499
-$222.186
-$147.712
-$124.105
-$98.053
-228.498327 -204.1012237 -170.506268147 -103.77964992 -79.8290223104 -57.7441622545
1,607
-210.44
-301.373
117.522
1,213
40.6
WACC
9.23%
Price

29.87

7
Estimate
2008
108

8
Estimate
2009
113

9
Estimate
2010
117

$22.838
$0.044
$0.152

$23.843
$0.044
$0.152

$24.892
$0.044
$0.152

$0.698
$29.933
$0.050
$9.449

$0.733
$31.430
$0.050
$9.449

$0.770
$33.001
$0.050
$9.449

$2,466.475
$2,016.188
$75.383
$374.904
$127.467
$247.437

$2,694.213
$2,201.876
$82.816
$409.520
$139.237
$270.283

$2,912.325
$2,379.616
$90.035
$442.673
$150.509
$292.164

$299.329
$261.032
$2,451.336

$157.148
$285.134
$2,525.667

$132.004
$308.217
$2,567.635

$34.152

$24.102

$23.083

-$10.661
$171.850
$227.113 5021.945
-5.7481929674 84.8291398684 102.638480595 2269.556

Price / Earnings multiple
Trailing
Airlines (positive earninPrice/share Earnings/ SharePE Multiple
Airtran
6.6
0.26
25.29
Frontier
17
2.03
8.37
Ryanair
32.05
0.73
44.02
Southwest
18.48
0.67
27.59
Westjet
15.85
0.81
19.57
Average
0.9
24.968
Median
0.73
25.29
JetBlue Trailing
28.84
1.14
25.29
JetBlue Leading
34.12

AirTran
Alaska air
America west
ATA
Frontier
Ryanair
Southwest
WestJet
Average
Median
Jetblue Trailing

Total Capital Multiplt trailing
Price/Share Book Equity/ShaBook Debt/Sha
6.6
0.49
3.96
29.1
32.12
33.8
3.5
12.47
10.2
14.95
10.79
32.9
17
5.36
0.01
32.05
5.54
3.33
18.48
5.26
1.79
15.85
2.82
0.97

27.5

5.16

8.59

EBIT Multiple
Trailing
Airlines (positive earnings)Price/share Book Debt/Share EBIT/ Share
Airtran
6.6
3.96
0.81
Frontier
17
0.01
2.99
Ryanair
32.05
3.33
0.92
Southwest
18.48
1.79
1.09
Westjet
15.85
0.97
1.32
Average
1.426
Median
1.09
JetBlue Trailing
1.426
JetBlue Leading

Discounted cash flow analysis
Southwest Capital Structure

Market Value Equity
16,071,992.00
Market Value Debt
1,842,000.00
Enterprise Value
17,913,992.00
Southwest D/E Ratio
0.11
0.1146093154
JetBlue Beta
SW Levered beta
1.10
SW Unlevered beta
1.02
Southwest tax rate
31%
JetBlue Tax Rate
34%
Jetblue D/E Ratio
0.31 estimate using median total capital multiple
Jetblue Levered beta
1.23

Jetblue - Cost of Capital
Pretax cost of debt
Tax Rate
After - tax cost of debt

7.91%
34%
5.22%

Dividends of preffered Stoc
16,970
Convertible P/S
210,441
Cost of P/S
8.06%
Equity Beta
1.23
Rf
5.00%
Rm-Rf
5.00%
Cost of Common Stock
11.15%
Debt to cap
23.80%
Preffered to Cap
16.62%
Common to Cap
59.58%
WACC
9.225913%

12.4100%

ple
Leading
Earnings/ Share PE Multiple
0.33
20
0.37
45.95
0.94
34.1
0.65
28.43
0.59
26.86
0.58
31.07
0.59
28.43
1.2

28.43

Total Capital Multiple
2.37
0.95
0.6
1.1
3.17
3.99
2.88
4.44
2.44
2.625
2.625

Trailing
Leading
EBIT Multiple
EBIT/ ShareEBIT Multiple
13.04
0.76
13.89
5.69
0.64
26.58
38.45
1.17
30.26
18.6
1.42
14.27
12.74
1.59
10.58
17.704
1.12
19.12
13.04
1.17
14.27
17.70
1.2
19.12

otal capital multiple

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