Hype Keeps Building For JetBlue IPO

Low-fare airline JetBlue raised the price range of its initial public offering on Wednesday, indicating that demand for the stock is strong heading into its expected Nasdaq debut later this week.

The airline increased the price range for the IPO of 5.5 million shares, which are set to begin trading Friday, to $25 to $26 a share from $22 to $24 a share, according to a Securities and Exchange Commission filing. The company will trade under the symbol JBLU.

At the new price level, JetBlue should raise between $138 million and $143 million. Morgan Stanley, Merrill Lynch, Raymond James and UBS Warburg are managing the offering.

"The increase in range carries a very heavy weighting for market psychology," said David Menlow, president of IPOFinancial.com. "It indicates that people think this is the right stock at the right time."

Seat Backs and Tray Tables

While the airline industry suffered steep losses in 2001, JetBlue had net income of $38.5 million. The carrier's strategy has been to focus on underserved markets in large metropolitan areas that have high average fares. JetBlue, which is based in Kew Gardens, N.Y., flies to several cities in Florida and upstate New York along with a handful of locations in the western U.S. The company plans to add routes next month, including service from New York to Puerto Rico.

In its two-year existence, JetBlue has built a reputation for offering low-cost quality service, flying a fleet of new Airbus A320 airplanes and providing free televised programming at every seat.

JetBlue is the first of a series of upcoming airline IPOs. Republic Airways and the regional operations of two major carriers, ExpressJet from Continental (CAL) and Pinnacle Airlines from Northwest (NWAC), are planning to go public.

Move About the Cabin

Menlow said it's important for investors to be aware of the potential risks of JetBlue's offering, even though excitement seems to keep building about the company's prospects. "It would be foolish for people to think they can buy this stock without risk of loss from the entry level," Menlow said. "This is a situation where investors need to pay attention to the risk factors."

Among the potential risks outlined in JetBlue's prospectus is the impact of Sept. 11 on the industry. The company also pointed out that many startup airlines in the past have failed. JetBlue also said that significant increases in fuel costs could hurt its operations, estimating that in 2001, a 1-cent increase in the price of a gallon of fuel would have increased its costs by $551,000.

"Not that I expect any of them to happen," Menlow said. "But the risks in the prospectus are very real."

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