JetBlue Airways, the only carrier offering passengers live satellite television programming, has agreed to acquire LiveTV, the provider of the system and other wireless technologies.
JetBlue will pay $41 million in cash and retire about $40 million of LiveTV debt for the acquisition, which is expected to have no material impact on the carrier's earnings over the next few years and then be mildly profitable. Included in the price is around $30 million worth of hardware already installed on JetBlue aircraft or in inventory.
LiveTV, owned by Harris and Thales Avionics, will operate in the same way as it does now, but as a wholly owned subsidiary of JetBlue, with oversight from JetBlue's technical operations and marketing departments. LiveTV has not been profitable, although it has been moving in that direction as JetBlue's A320 fleet increases. It also has a letter of intent from Frontier Airlines to install LiveTV equipment on its Airbus A320s.
"This is not to be construed in any way as a shift in our business strategy," says John Owen, JetBlue's chief financial officer. "We're still focused on running a low-cost airline. This is an acknowledgement of what LiveTV means to us."
JetBlue chief executive David Neeleman adds that the airline attributes a lot of its success to customer acceptance of live television. "We are uniquely positioned to know the value of this product to our company," he says. "It's an integral part of our brand and there's very little downside." JetBlue has offered customers LiveTV with up to 24 channels of DirecTV programming free of charge since April.
Neeleman also says JetBlue abandoned the idea of a secondary stock offering after a survey of its large investors showed "very little interest" in selling their shares when the 180-day lock-in period expires this month.
Source: Airline Business
