Just a couple of months after initially expressing its intentions to sell off LiveTV, JetBlue Airways Corp. (JBLU - Analyst Report) has divested its in-flight entertainment subsidiary to French defence electronics company, Thales Group for a cash consideration of $399 million. However, post the deal, JetBlue fleets will continue to offer LiveTV’s in-flight entertainment and connectivity systems.
Melbourne, FL-based LiveTV is a provider of satellite based television service, radio and movie programming service to commercial airlines and has been a subsidiary of JetBlue since 2002. It has 450 employees and Virgin Blue, Alitalia, Frontier and United Continental Holdings Inc. (UAL - Analyst Report)-owned United Airlines as its customers.
LiveTV is an integral part of JetBlue’s popular on-board experience as it allows passengers to watch television 30,000 feet above ground. In 2013, the company had introduced a Ka-band satellite based fast Internet service for airlines by collaborating with ViaSat Inc. (VSAT - Analyst Report).
New York-based JetBlue announced that divesting the asset will reduce the operating expense and capital expenditure associated with running the subsidiary. Further, the company is getting a fivefold return on what it invested in 2002.
Net connectivity and in-flight entertainment are increasingly becoming an integral part of air travel as passengers want to stay connected even on the move, and have constant access to social media and professional networks.
On the other hand, the deal is a strategic one for Thales Group, which offers technological advancements for commercial carriers and aircraft manufacturers. The deal, if completed, will boost Thales’ position in the fast growing on-board entertainment business. LiveTV will be in a much better position under Thales to offer its service to other U.S. mainstream carriers and extend its operational reach.
JetBlue, which had previously hinted at exiting the business, will enrich its cash balance through the transaction and will use the same to obtain delivery of its pending aircraft. Notably, JetBlue is expected to add 9 Airbus A321s to its fleet in 2014.
JetBlue currently carries a Zacks Rank #3 (Hold). American Airlines Group Inc. (AAL - Analyst Report), which carries a Zacks Rank #1 (Strong Buy), is also worth considering.