Future Jetblue Bases?

[bolterbolter]

Yes, I am a pilot for a major, one of big four, who is not getting furloughed, but am really excited by the jetblue story.

One thing though that is starting to get my attention; your stock price is really getting high, so the strike price for the options for new guys would be around 60-four, three and two times higher than the "old guys." Which would mean my package would be: 1/4, 1/3 and 1/2 smaller than if I would have been hire sooner. Since jetblue is growing superfast, you'd be like a middle level LUV guy who won't see the stock appreciation like the old guys.

There's far more to jetblue than money, I understand that, but when you are make a jump like that, you want to make sure that you don't make a dumb mistake.

And I understand that my airline could tank, I get all that, but your stock price, since its such a major part of your compensation and "retirement," is something I really need to understand.

My view, your company was doing great, and with the announcement of the EMB-190, your stock doubled because it is such a bright move. Seeing ERJ-145 and Canadiar's flying around, you see how much better the EMB-190 will be.

 

[jetblue320]

JBLU

Bolter X2,

Yes, the stock price is high right now and yes, that is a big part of the decision process to make a major move. However, the secret is in the timing if your stock option strike price is your main concern. Most certainly the stock will split very soon. I am not an insider (officially) but I am on the inside and I would reckon that it will be before the end of the year. In some respects, it might be a wash if you hire on with a high strike price and then the split follows shortly after. Rumor has it the split might be 3/1 this time!

Example 1:

You have a grant date of 12/1/03 with 6000 options @ $60.
The "value" of this grant is $360,000 and will cost you the same to exercise it all. On 12/15/03 the stock splits 2/1. You now have 12,000 shares @ $30 each or the same value of $360,000. Hopefully the stock rises back to it's original $60 per share soon (in it's short 17 month history it has done it once already) and then your value is $720,000. But regarldess of how many splits follow or what the ratio is your price to exercise your entire portfolio will remain at $360,000. Your strike price is now cut in half to $30 per share.


Example 2:

The stock is $60 and splits 2/1 on 12/15/03. You hire on with a grant date of > 12/15/03. You will be granted 6000 shares @ $30 per share which will have a value of $180,000 and cost you the same to exercise them all. Assuming the price rises to $60 as in Example 1, your value will rise to $360,000 which is half of the value of $720,000 but you only paid half as much for it. And again, it will always cost you $180,000 to exercise this portfolio example regardless of how many splits or the ratio of them. Your strike price will remain at $30 per share until the next split and will be adjusted accordingly.

The "wash" I spoke of is in how you cycle in. In example one, your portfolio is at a greater value initially, but cost you more over the life of it. In example two, you have to wait out one more split than in example one, but it cost you half as much for it. The best advice I can give you is to seek professional advice from someone who know about options, specifically Incentive Stock Options (ISO). Those are the kind that JB issues. The only bad part of seeking advice from a Pro is that they won't make the decision for you, which is what we REALLY want. Unless your advice comes from a qualified close friend. Even then, they probably want to stay friends!


I know you are probably a smart saavy guy that already knew the basics so please don't think I was trying to insult you with my elementary examples. I wasn't. I was just making a point.

The secret is in the cycle you fall into. Your statement about us "old JB guys" is true. Our stuff was a much better deal. But then again, it was a much greater gamble. It could have turned out to be worthless. Heck, wait until all the JB Bashers out there get ahold of this post and I assure you lots of them will chime in and say they WILL be worthless. Well, maybe there are right, maybe they aren't. One thing IS for sure. JBLU stock has defied every known current principal of the stock market. Every analyst will tell you that it is overrated, under valued, and a whole lot of other things. If that is so then why is it one of the hottest things out there? And, if you ask them off the record if they personally own any JBLU I would bet they do, or have and made a bundle!

Please bear in mind that in my examples above that the options do have a vesting schedule and other tax liabilities and limitations. Your mileage may vary...you know....

One thing is for sure, almost every JBLU guy that I talk to routinely (and that is a lot of them) they all say it boils down to one thing regardless of your strike price, they all say "Hey, it's free money".

If you really get scared thinking it's going to tank, sell what you can when you vest and walk away with it. That's the beauty of it, it's yours once you vest. Not under someone else's control like in a lot of the other airline pensions.

Hope this gives you some insight.

C Ya

 

[bolterbolter]

How much of a split did JBLU undergo in Nov/Dec 2002?

 

[TUPAK]

Bolter,

The split was 3 for 2 last year.

I live in DC and the commute isn't too bad to NY. It is great going out of DCA with US Airways. As said before, it usually gets dicey out of IAD with ACA's J41s and CRJs because of the smaller aircraft which are usually overbooked. Going to NY if I'm not concerned about time of arrival (i.e. flying the next day) then I will try ACA out of IAD to JFK or LGA. If I have to get there that day to fly later that day then I just go to DCA-LGA so I won't have to stress the commute. Going back to DC, JFK Terminal 7 is a pain in the rear but the gate agents are super when you finally get there and they will try their best to get you on. If I travel over to LGA to get home then I just go US Air to DCA. I usually travel DCA-LGA and LGA-DCA at least 70% of the time versus IAD-NYC and NYC-IAD just to relieve the commuting stress. You always have a 4-5hr drive to NY in your hip pocket as a last resort - luckily, I haven't had to use this option yet!

Hope this helps and good luck,

TUPAK

 

[bolterbolter]

Here's some analysis from an Amatuer.

JBLU's Market Cap is 4 Billion

LUV's Market CAP is 14 Billion

LUV has about 400 jets right now. JBLU wants to grow to 400 jets.

So lets say JBLU equals LUV's market Cap. That'd be about a 3.5 fold increase. If JBLU's stock price right now is 60, and its going to increase 3.5 times to equal LUV's market Cap, that'd be a pre-split price of 210.

Assuming a strike price of 60, and a gain of 210, you would see an appreciation of 150. 150 x 6000 options equals 900,000 dollars. Again, that's when it equals LUV in 2011 (yeah, I know that LUV has got expansion plans) but I am just comparing similar sized companies.

So, for guys/gals getting hired right now, you are probably looking at a retirement roughly valued at 900,000. For you early lucky guys, double and triple that.

So, measure your retirement at where you're at now, and compare.

 

[Skygod]

Split

JetBlue Airways sets 3-for-2 stock split
Tuesday October 7, 9:13 am ET

CHICAGO, Oct 7 (Reuters) - Low-cost air carrier JetBlue Airways Corp., one of the few U.S. airlines to post consistent profits since the Sept. 11 attacks, on Tuesday declared a three-for-two split of its high-flying stock.

New shares will be distributed on Nov. 20 to shareholders of record on Nov. 10.

The stock, which has been publicly traded for only 18 months, has risen sharply from its initial price of $27 as the New York company has capitalized on its low-cost structure to fuel rapid growth, often at the expense of major carriers.

JetBlue recently suffered a public relations black eye, when it admitted having shared passenger data with a Pentagon contractor. Lawsuits are pending.

But JetBlue, like its bigger low-cost model Southwest Airlines continues with expansion plans, last week announcing it would begin service to Boston.

JetBlue has maintained a cost advantage through several factors, including a nonunionized labor force and flying only one type of plane, the Airbus A-320. But the airline recently announced an order for 100 Embraer 190 aircraft with options for another 100.

The order was a sharp contrast to fleet plans set by the major U.S. carriers, which are either holding steady or continuing to pare back their aircraft holdings.

JetBlue stock closed on Monday at $67.53 on the Nasdaq after touching an all-time high of $67.91.

 

[jetblue320]

Here's some analysis from an Amatuer.

JBLU's Market Cap is 4 Billion

LUV's Market CAP is 14 Billion

LUV has about 400 jets right now. JBLU wants to grow to 400 jets.

So, for guys/gals getting hired right now, you are probably looking at a retirement roughly valued at 900,000. For you early lucky guys, double and triple that.

So, measure your retirement at where you're at now, and compare.

BolterX2,

I trimmed some of your post but only to make a point. I think your math is a bit off perhaps. I wouldn't get too deep into market caps because although they may directly effect the stock price over a given period and other merrill lynch jargon, the "retirement" you refer to is quite simple. Your shares will continue to multiply with each split. Your strike price is reduced accordingly but your cost to exercise all your options will remain the same. Example: an original JB pilot had 6000 shares at a $1 each, it split 3/2 in Dec. 2002, now he has 9000. It splits again in Nov. 2003 3/2 and he has 13,500 shares. Shortly after the split the price rises to $68 (like it was today) and he has $900,000 in portfolio value (assuming he sells it all upon vesting). He waits out 3 more splits of 3/2 and it is valued at $3,098,250 assuming the stock price stays at $68. If you throw a single 2/1 split in the mix you are looking at $5 million. A far cry from $900,000. It will always cost him $6000 to exercise these options. The new guys, well, they don't have such a low strike price for sure but that means they might have to sweat out a few more splits to retire. Their cost might range from $150,000-$300,000 to exercise them all but in the grand scheme, it's still PDG [pretty darn good]. The old guys already did their sweating in the early days wondering if we would ever get off the ground.

Is my math a bit far fetched? Perhaps, but only time will tell. The math is correct, the future of stocks will always be a mystery. Remember, life is a box of chocolates. (Gosh I loved that movie).

See ya

 

[Michael Knight]

What jetblue320 said is correct. It is really the purchase price that makes the difference. For example, if it costs jetblue 320 about $6000 for his current 9000 shares and my 9000 shares cost $206,000 then we will always have a $200,000 difference in total value. That won't change.

So, several years from now, if jetblue320 has not sold any shares and has 1,000,000 worth of stock then I would have 800,000 in value. He could more readily afford to purchase and hold the shares which is very nice but overall value will always be 200K. So, if someone comes on now and the difference is 500K well, that will be it, they will always have a total stock options value 500K less than those that were here at the start.

Certainly fair in my opinion as those that came on early risked more.