=DJ JetBlue Opens -2: Demand Allowed Strong IPO Pricing >JBLU
By Raymond Hennessey Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Taking off with strong demand despite what has been a turbulent IPO market, jetBlue Airways Corp. (JBLU) was trading sharply higher in its market debut Friday.
JetBlue, Kew Gardens, N.Y., the popular East Coast discount airline, traded on the Nasdaq Stock Market recently at $37.51 a share, 39% above the $27 price set on its initial public offering.
There was strong prepricing demand for the IPO. Coming into this week, jetBlue expected to sell 5.5 million shares at $22 to $24 a share. Recently, though, that price range was raised to $25 to $26 a share, and, in the end, the offering priced above that range.
Also, an additional 366,667 shares were added to the offering, led by Morgan Stanley (MWD) and Merrill Lynch & Co. (MER), at the time of its pricing.
JetBlue is a low-cost airline, operating out of New York's John F. Kennedy Airport. It runs 108 flights a day, mostly between JFK and Florida and upstate New York, though it does run flights into the west and has a West Coast base in Long Beach, Calif.
The company operates 24 airplanes, all Airbus A320 planes, a uniformity designed to cut down on maintenance and operating costs. JetBlue plans to add 59 more planes by the end of 2007, and is using much of the proceeds from the deal to buy new airplanes.
It is a relatively new company. JetBlue started operations in February 2000, and had, before its IPO, attracted investments from FleetBoston Financial Co.'s (FBF) BancBoston Ventures, J.P. Morgan Chase & Co. (JPM), Massachusetts Mutual Life Insurance Co., and financier George Soros.
The airline is known for its no-frills approach, best seen by asking travelers to clean up after themselves before they leave the plane.
But there are nice touches, as well. Televisions, for instance, are installed in seat backs, something not normally associated with discount air travel.
"They're doing it right," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles. Though its low-cost, "these guys still have all the bells and whistles," he said.
A big draw for investors was that jetBlue is also profitable, a rarity for the airline business nowadays. Through what had been one of the toughest periods for airlines, jetBlue reported net income of $38.5 million in 2001, though that included $18.7 million in revenue from the government's airline bailout after the terrorist attacks. Still, it was profitable even without the federal money. Its earnings came on revenue last year of $320.4 million.
Like other airlines, jetBlue was hurt by the Sept. 11 terrorist attacks, though it said in offering documents filed with the Securities and Exchange Commission that its "level of operations and passenger traffic have recovered substantially to the levels we had originally anticipated before", though the yields - or revenue per passenger per mile traveled - have not.
The enthusiasm over the jetBlue IPO came, though, against a backdrop of poor performance by airline IPOs. Of the 66 domestic airline IPOs to be held, just eight trade above their offering prices, said Richard Peterson, chief market strategist at Thomson Financial in New York.
Of course, investors haven't had many opportunities to put money into airline IPOs for quite some time. JetBlue marked the first airline IPO since Midway Airlines - which filed for bankruptcy protection in August - went public on Dec. 5, 1997, Peterson said.
More deals are in the offing. Next week, ExpressJet Holdings Inc., the regional jet business of Continental Airlines Inc. (CAL) plans to sell 26 million shares at between $14 and $16 a share through Citigroup Inc.'s (C) Salomon Smith Barney and Morgan Stanley.
-Raymond Hennessey, Dow Jones Newswires; 201-938-5354; raymond.hennessey@dowjones.com
(END) DOW JONES NEWS 04-12-02 |
