JetBlue Airways Corp. (JBLU:US), the U.S. carrier that pioneered real-time television on aircraft seat-back screens, agreed to sell its LiveTV LLC to Thales SA (HO), concluding a three-year effort to divest the unit.
Thales, a French aerospace and defense company, will pay $400 million in cash for LiveTV, a wholly owned JetBlue subsidiary, the New York-based airline said in a statement today. The purchase expands Thales’ avionics business.
JetBlue is selling LiveTV as it works to reduce operating costs and meet goals for return on invested capital and as airlines focus on providing improved onboard Wi-fi that enables passengers to use their own electronic devices for in-flight entertainment.
“We regard this sale as a good decision,” Kevin Crissey, an analyst at Skyline Research LLC in Mahwah, New Jersey, said in a report today. “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.”
Shares of JetBlue rose 0.7 percent to $8.81 at the close in New York. The stock has gained 3.2 percent this year compared with the Standard & Poor’s 500 Index which is down 0.1 percent.
The deal will allow JetBlue to focus on running the airline and give LiveTV to owners that specialize in technology development, JetBlue Chief Financial Officer Mark Powers said in an interview today.
“The whole TV inflight product has been core to our brand, but it’s not really core to running an airline,” Powers said. “You can preserve your access to the innovation and plug into things through a contract. You don’t need to own the company.”
JetBlue purchased LiveTV in September 2002 for $41 million in cash and the retirement of $39 million in LiveTV debt. The airline hired an adviser to explore a LiveTV sale in 2008 when fuel prices spiked. In March 2011 it said it was considering selling the unit, although it didn’t expect a sale “near term.”
JetBlue renewed an effort to sell the unit in November 2012, Powers said today. Proceeds for the disposal may be used to pay cash for aircraft or prepaying debt, he said.
The carrier, ViaSat Inc. and LiveTV have recently developed in-flight broadband connectivity JetBlue markets as Fly-Fi. Concurrent with the closing of the sale, JetBlue will enter into long-term agreements with LiveTV to continue providing support for its live TV and Fly-Fi services.
LiveTV produced $72 million in revenue last year, down from more than $80 million in 2011 and 2012, Crissey said. He has a buy rating on the stock.
Earnings from the unit were not sufficient for JetBlue to have to report them separately in U.S. regulatory documents, Powers said.
The sale, which is subject to regulatory and other approvals, is expected to be completed in mid-2014.
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