VCs Hope JetBlue Stock Will Soar In IPO

Venture investors who backed travel plays might be kicking themselves in the wake of the fallout in the industry since Sept. 11, but if JetBlue Airways Corp. can pull off a successful IPO, its VC backers may soon be smiling all the way to the bank.

The discount airline filed for a $125 million IPO last week, with Morgan Stanley, Raymond James, UBS Warburg and Merrill Lynch listed as the underwriters. The number of shares of common stock and price range has not yet been disclosed.

The filing is a major step towards vetting some realized returns for JetBlue’s private equity investors, including Soros Private Equity Partners, Weston Presidio and JPMorgan Partners, the private equity arm of J.P. Morgan Chase & Co. The firms backed CEO David Neeleman with an initial $130 million, and pumped in an additional $13 million in two subsequent rounds. Information on just how much each investor stands to garner from the offering was not available in the company’s prospectus.

Although the nation’s major airlines collectively lost $57 billion last year due to recession and the aftermath of Sept. 11 – some have even filed for government bailouts – discount airlines such as Dallas-based Southwest Airlines and New York-based JetBlue have managed to stay profitable.

JetBlue reported revenue of $320 million and a profit of $38.5 million in the year ended Dec. 31, 2001. That compares favorably with a loss of $21.3 million the company recorded in the previous year.

Additionally, Dec. 31, 2001, JetBlue reported cash and cash equivalents of $117.5 million, compared to $34.4 million at Dec. 31, 2000. The airline also has no lines of credit, other than a short-term borrowing facility for certain aircraft pre-delivery deposits, which allows JetBlue to borrow up to $32 million prior to November 2004, with $28.8 million outstanding as of Dec. 31, 2001, according to the company’s prospectus.

Based out of New York’s John F. Kennedy International Airport, the carrier offers one-class service to nearly 20 eastern and western U.S. cities. As of Dec. 31, 2001, JetBlue operated 102 flights per day, including 50 flights between JFK and Florida and 24 flights between JFK and upstate New York. Founded in 1999, JetBlue (proposed ticker JTB) has a fleet of 21 Airbus A-320s. It will use the IPO proceeds to double its level of service this year, adding planes and cities to its schedule at a time when other airlines are struggling.

3-2-1: Take-Off

Going forward, JetBlue plans to follow the same strategy it has always has – to offer high-quality customer service at a low price. JetBlue plans to stay competitive by emphasizing its low operating costs and offering point-to-point flights to overpriced or under-served large markets. And don’t forget, JetBlue staples – leather seats and satellite TV – for everyone.

Despite the challenges that lie ahead, Jonathan Schrader, an analyst at Morningstar Inc., said that JetBlue could indeed have a successful IPO. “In general, they do a good job in operation despite all of the problems right now. I would say they are ranked at the top of the class. They are no Southwest Airlines, which is of the highest caliber, but they are comparable to Continental and Northwest Airlines.”

Still, Continental Airlines Inc. hasn’t had an easy go of things since Sept. 11, either. The airline was forced to postpone the IPO of Express Jet Holdings, its regional carrier. Continental had hoped the offering would fetch upwards of $300 million in proceeds.

Danielle fugazy can be contacted at