Confidence in Airline Performance in Difficult Market Conditions: An Analysis of JetBlue's Financial Market Results

JetBlue started operations in February 2000 and went public in April 2002. This paper examines the stock market's reaction to JetBlue's Initial Public Offering (IPO) and subsequent price movements of the stock. The authors examine the shares of JetBlue's competitors for signs of a price reaction that would indicate whether the euphoria surrounding JetBlue's IPO carried over to other firms in the sector. JetBlue's accounting and stock performance are compared to the relative performance of Southwest Airlines (SWA), a representative of the low-cost carrier group. Both JetBlue's and SWA's financial conditions and the relative performance of their stock are compared to two mainline U.S. carriers, Continental and Northwest, representatives of the conventional-cost carrier group. Since JetBlue's IPO took place just a few months following September 11, 2001, the ability of low-cost carriers to weather the economic impacts of 9/11 is compared to that of conventional-cost carriers. Findings suggest that JetBlue's overall success, as well as that of other low-cost carriers, can be explained from an operational standpoint through its lower and more variable cost structure, its lower breakeven load factor, and the business and leisure traveler migration from conventional-cost airlines to low-cost airlines. Markets value low-cost airline stocks as growth stocks, while conventional-cost airline stocks are treated as cyclical. Low-cost carriers emerged from 9/11 in a stronger market position than did conventional-cost airlines.

Language

  • English

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: pp 38-57
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 01000982
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jun 15 2005 11:40PM