The U.S based airlines’ company JetBlue Airways Corp. (JBLU) has decided to sell off its in-flight television subsidiary LiveTV to Thales Avionics for a sum of 400 million U.S dollars. The initiative is a part of JetBlue’s reduction of operating cost.
The company has been witnessing sluggish growth for sometimes. Soaring maintenance and repairing cost have been eating its profit for last few quarters. JetBlue currently operates the majority of flights in the northeast of U.S.
The operating cost of the company has increased recently due to last week’s cancellation of almost 4000 flights. JetBlue chief financial officer Mark Powers said, “We believe JetBlue will benefit from reduced operating costs and capital expenditures related to running LiveTV as a subsidiary,”
JetBlue was looking for a way to reduce its cost of operation and sellout of its entertainment subsidiary seemed to be a viable option.
LiveTV LLC was acquired by JetBlue 12 years ago for a sum of almost $80 million, which means the subsidiary is currently being sold for five times profit. The purchase of LiveTV alone cost JetBlue $41 million and clearance of its debt cost %39 million.
Most analysts are of the opinion that this sell-off would yield a positive result. An analyst called Kevin Crissey who is working at Skyline Research LLC commented, “We regard this sale as a good decision,”
He also said, “JetBlue is an airline that is yet to earn its cost of capital and LiveTV requires capital to grow. Let the Thales Group deal with incremental investment and JetBlue can benefit from the nice product.”
JetBlue is currently being traded at $8.83 which is up 0.91%. However at 10.16 am in New York the stock rose 3% and its value stood at $9.02.
LiveTV currently employs nearly 450 staffs and is famous for its signature technology that lets passengers access internet 20000 feet above the sky. LiveTV’s technological innovation may continue more robustly under Thales Avionics as Morgan Johnston, JetBlue spokesman referred to LiveTV as “It’s not cored to our business” and hoped that it would be better provisioned under Thales.
Thales Group is a public company that operates in the fields of aerospace, defence and security. The company, based in France is currently the largest defence electronics equipment manufacturer in Europe. Jean Bernard Levy, the company’s CEO said, “LiveTV is a great strategic fit for Thales”
“It will improve our positioning in the high growth business of In-Flight Entertainment and Connectivity,” he added.