jetBlue Airways Corporation Firm Valuation Travis Steele

jetBlue is overvalued by 2.4% The current market price for jetBlue is $6.84, our valuation prices the company at $6.68 jetBlue’s performance to date has been driven by offering innovative amenities and lower fares for consumers Strong trend towards increasing operating margins and efficiency In the long term jetBlue will lose its competitive advantage, but will maintain market share through brand loyalty jetBlue’s creative marketing strategy will help maintain strong revenue growth 2

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Key macro drivers of industry profitability and demand 4 The Airline Industry  The Company  Marketing  Outlook  Valuation Airline Industry Profitability & Demand Substitutes Economic Conditions Oil Prices Regulatory Environment Health/Safety Concerns

Airlines are emerging from the worst decade in industry history 5 Data Source: US DOT Form 41 via BTS, Schedule P12; US DOT Form 41 P-12, Account The Airline Industry  The Company  Marketing  Outlook  Valuation 7/11/08- Oil Reaches record high of $ per barrel 9/11 Terrorist Attacks Financial Crisis

In the past decade, low cost carriers have gained market share 6 Data Source: US DOT Form 41 via BTS, Schedule P12. Total Market Share by Revenue The Airline Industry  The Company  Marketing  Outlook  Valuation

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jetBlue offers a distinctive flying experience Live TV 4” extra leg room than traditional carriers Free snacks Youngest fleet in the industry (avg. age 4.3 years) Unique Amenities Strong presence around NY/Boston area Growth into underserved routes, including international destinations Geographic Differentiation Highest overall consumer satisfaction rating from JD Power five years in a row jetBlue promise: “To continue to bring humanity back to air travel” High Quality Customer Service 8 The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue’s profits trend upwards 9 The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue’s margins outperformed the industry in The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue is in a strong cash position today 11 The Airline Industry  The Company  Marketing  Outlook  Valuation

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Capturing business travelers is essential to jetBlue’s growth Business traveler demand is becoming more price sensitive as businesses strive to cut costs Since 2009, jetBlue has positioned itself well to appeal to this customer class Launched ad campaign and promotional programs aimed at business travelers 13 The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue relies on social media as part of its innovative marketing strategy 14 The Airline Industry  The Company  Marketing  Outlook  Valuation

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As competition increases among low cost carriers, jetBlue will lose its competitive advantage 2002 jetBlueSouthwestVirgin AmericaFrontierAirTran Low Fares Satellite TV Leg Room Free Snacks No Bag Fees Premium Music Wi-Fi Ambience Lighting 16 The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue may lose some of its competitive advantage, but will benefit from strong brand loyalty 2010 jetBlueSouthwestVirgin AmericaFrontierAirTran Low Fares Satellite TV Leg Room Free Snacks No Bag Fees Premium Music Wi-Fi Ambience Lighting 17 The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue is well positioned for future growth, but faces risks  Fuel hedging  High utilization rate  Low operating costs  Brand loyalty  Delivery of new planes  High level of debt  Unionization of labor  Industry consolidation  Substitutes to air travel The Airline Industry  The Company  Marketing  Outlook  Valuation 18 Influences on growth: Potential risks:

The Airline IndustryThe CompanyMarketingOutlookValuation We recommend buying jetBlue Airways

jetBlue’s revenue growth depends on the size of its fleet 20 The Airline Industry  The Company  Marketing  Outlook  Valuation

jetBlue’s operating margin averages around 6% 21 The Airline Industry  The Company  Marketing  Outlook  Valuation

After accounting for fuel and other operating costs jetBlue averages about 6% operating margins 22 The Airline Industry  The Company  Marketing  Outlook  Valuation

Discounting our future cash flows to present value we get a share price of $ The Airline Industry  The Company  Marketing  Outlook  Valuation

P/EFuture P/E Recommend ationPEG Ratio JetBlue Southwest Delta AmericanN/A

jetBlue is overvalued by 2.4% The current market price for jetBlue is $6.84, our valuation prices the company at $6.68 jetBlue’s performance to date has been driven by offering innovative amenities and lower fares for consumers Strong trend towards increasing operating margins and efficiency In the long term jetBlue will lose its competitive advantage, but will maintain market share through brand loyalty jetBlue’s creative marketing strategy will help maintain strong revenue growth 25

Price of jet fuel is projected to continue rising, as the economy grows and demand increases 26 Source: US Energy Information Administration