Ting's Jet Blue case

JetBlue Airways IPO Valuation Ting Xiao

Contents Discounted Cash Flow approach Multiples comparables approach Conclusion 1 2 3

Discounted Cash Flow approach Two-step From year 2010 to infinity From year 2002-2010 WACC

CF(2002-2010) ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],CF(2010-infinity)

[object Object],[object Object],[object Object],CF(2010-infinity)

WACC Pioneer model in low-fare air travel that needs to be followed The most stable one in historical annual growth of low-fare airlines (see Exhibit 8) Like JetBlue, they all belong to low-fare airlines that compare to other groups (see Exhibit 12) Idea: Why choose Southwest?

WACC-9.91% Weights Re Rd Equity: 16,071.99 Debt: 1,842 E/(E+D)=0.9 D/(E+D)=0.1 Rf : 5% Rm-Rf : 5% Beta: 1.10 CAPM: 10.5% Weighted average of cost :6.91% Tax rate:34% Rd : 4.561%

DCF approach ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Multiples comparables approach ,[object Object],[object Object],[object Object],[object Object],Low-fare US Airlines Low-fare Foreign Airlines Big 5 Low-fare Regional Airlines Level Of Relevance

Continued ,[object Object],[object Object],(Median and Mean) (From Southwest )

Conclusion $24.8 (from Southwest ) $15.1 (from Mean) $24.1 (from Median) $57.1 (from DCF approach) Increase the Price to $28!

Ting's Jet Blue case

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Ting's Jet Blue case