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________________________________________________________________________________________________________________ Professor Nabil N. El-Hage, Charles M. Williams Fellow Darren Smart and Research Associate Christopher E. J. Payton prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-electronic, mechanical, photocopying, recording, or otherwise-without the permission of Harvard Business School.
N A B I L N . E L - H A G E
D A R R E N S M A R T
C H R I S T O P H E R E . J . P A Y T O N
JetBlue: Prepare for Financing
John Owen, Chief Financial Officer of JetBlue Airways Corporation, looked out over a runway at New York's John F. Kennedy International Airport on a summer day in July 2003 and pondered the company's next move. As he watched a JetBlue aircraft prepare for departure, he considered how the company itself was poised for take-off. Since its launch in February 2000, JetBlue had grown to become an air carrier with 73 flights per day and annual revenues of $635 million. In the past few months, the company had added eight new flight segments to its schedule and was expecting significant future growth. To accommodate this growth, JetBlue had recently announced that it would buy 100 Embraer E190 aircraft by 2011. Combined with an earlier commitment in 2003 to purchase 65 additional Airbus A320 aircraft, JetBlue had embarked on a $6.8 billion plane acquisition program that would increase its aircraft fleet from 45 to 252, including existing aircraft purchase commitments.
The most pressing issue for Owen was how to finance this rapid expansion. To date, JetBlue had financed its aircraft purchases through operating leases or debt financing that was secured by each plane. He believed that such financing would continue to be available to the company.
However, JetBlue's expansion required investments in areas other than just new aircraft. Owen needed to decide how to raise additional capital to fund the company's growth. Investment bankers had presented two financing proposals: a new public equity offering and a private placement of convertible debentures. Owen needed to decide which proposal, if any, to recommend to the board.
JetBlue Airways Corporation was formed in August 1998 as a low-fare, low cost, but high service passenger airline serving select US markets. The company flew point to point service between destinations and serviced a combination of...