The smaller, more efficient aircraft is the trademark of Embraer’s success. In 2009 when the global ecnomic crisis hit sales fell by a substantial amount. Executive jets are normal goods so the overall decrease in consumer income along with fewer buyers led to a sharp decrease in demand. Another factor that causes demand to shift left is the tastes and preferences of the buyer. During rough financial periods people tend to look down on Executive Jets as unnecessary and overkill.
For many years the British government continually subsidized the losses. It was not until the early 90’s when British Airways had its eye toward the heavily traveled transatlantic market. US Airways, In 1953, all American Airways, which had been a regional carrier serving remote communities of Pennsylvania and West Virgina, changed its name to Allegheny Airlines. The firm grew rapidly under government regulation during the 1950s, and 1960s, based on a network of routes assigned to it by the Civil Aeronautics Board. Allegheny subcontracted its less profitable routes to smaller, more efficient carriers, each of those, in turn, fed into Allegheny’s route system that was expanding rapidly through a series of acquisitions.
Introduction Despite the recession of American airline industry, JetBlue Airway’s profitability and productivity were still growing sharply after the terrorist attacks of September 2001and the distress of SARS in Asia areas in 2003. Therefore, the management decided to raise funds by initial public offering (IPO) in order to enforce the growth strategy. This article will analysis the advantages and disadvantages of JetBlue’s IPO by SWOT analysis, then, the recommended price will be provided calculated by P/E ratio and DCF methods and the limitations will be demonstrated as well. SWOT analysis of JetBlue: Strengths 1. JetBlue has a professional and experienced leadership team who dare to implement the innovations during the worst period in airline history.
Case Summary and Important facts Despite the fact the airline industry had 87 new-airline failures in the US over the past 20 years. David Neeleman convinced a group of investors and quickly raised $130 million from venture-capital community. With its strong capital base, JetBlue acquired a fleet of new Airbus A320 aircraft and focused on innovation, providing the most valuable and the most excellent travel experience, low-cost, point-to-point service to large metropolitan areas with high average fares or highly traveled markets that were underserved, mainly on central and Western routes in the US. During 2001 and 2006, the airline industry was facing a number of external stress, such as the 911 terrorist attacks, Iraq War, SARS, high price of petroleum, ect. The airline industry in US has been challenged and many of firms were bankrupt.
Some of these innovations included the widespread use of jet aircrafts and computerized reservation systems. PAN AM also co-founded the global airline industry (IATA). PAN AM created a brand for itself and became a cultural icon of the 20th century with it famous blue logo and the use of the word “Clipper” to refer to aircraft and call names within its organization. As a result, PAN AM became the unofficial flag carrier for the U.S. During PAN AM’s jet era, its flagship airport was located at John F. Kennedy Airport in New York. From the late 1980s to early 90s, it was forced to sell all of its routes due to financial distress to United Airlines and Delta Airlines.
[pic] Case Assignment : Jet Blue Airlines Inc. JetBlue Airways: Case Assignment Introduction: The company JetBlue Airways Inc. is a low-cost carrier also called LCC which is located in the New York, U.S. With its outstanding customer service model and differentiation as its core attempt to drive its business , JetBlue maintains great competitive advantage in the aviation market. The company started in 1999, founded by David Neeleman who enforced the company´s fast growth within few years. The business plans were set up by Neeleman that enforced the fast growing of the company. The company has been grown too fast and showed that it would be unsustainable in the long run. The fast growth of the company caused other internal and external problems in the years beteween 2005-2006.
Disney shares jumped 84 cents, or 2.5 percent, to $34.57 in after-hours trading. The shares gained 44 cents to end the regular trading session at $33.73 before the earnings were announced. Tourists from abroad also took advantage of the weak dollar, increasing park attendance and spending. Resort revenue grew 11 percent to $2.73 billion, and hotel bookings at the resorts through 2008 were trending higher than last year, the company said. "We're definitely benefiting from the dollar weakness ... in two ways," Chief Executive Robert Iger told analysts on a conference call.
Market Analysis – Southwest Airlines What is the market structure for your good or service selected in Week Two? After almost thirty years of service, Southwest Airlines has emerged as one of the world's premier airlines. The Southwest approach to business and the industry at large have enabled the company to continue to grow at profit in times of true economic downturn. Presently, the market for air carriers is saturated and highly fragmented. Overcapacity has led the major United States airlines to compete with Southwest's low fare pricing strategy.
The basic idea was that unit costs, such as direct labor, declined as a function of cumulative output. As a result, the faster Airbus could sell planes, the more profitable it would become. This was especially true in the early years when cumulative output doubled relatively quickly. Discount rate and operating margins – Using a discount rate of 11.0% and operating margin of 15% the factors in Table 1 imply a NPV of negative $296 million and NPV of free cash flows (FCF) of negative $5,139 million. Assuming 2% growth, the terminal value has a NPV of $4,843 million for 2009 and beyond.
Such technological advancement placed a lot of financial burden on the operations of Jet Blue. The airline industry continues to feel the effect from the U.S economic slowdown and rise of crude oil/jet fuel prices, which have risen to record numbers with no predictable end in sight. The slow economic growth has compelled both business and individual travelers to cut back on travel expenditure thereby compelling airlines such as Jet Blue to initiate energy conservation measures, targeting specific markets and exploring the possibility of partnership with other airlines. Linked to the volatility of jet fuel prices is the increased in competition posed by new entrants to the airline industry. New entrants such as Virgin America are bracing the competition by offering lower fares to customers.