Using the leading P/E multiple method of valuation is standard practice in the airline industry (Yale School Of Management, 2002). However, in our analysis (figure 1) the comparison sample size had to be reduced to include only low-cost airlines with positive
earnings which limited the scope of the relative values. Due to the small sample size, the average P/E r
atio was skewed high towards Frontier’s outlying performance.
Therefore we determined that the median P/E ratio of comparable companies provided a more accurate figure With predicted earnings per share in 2002
of $1.20, JetBlue’s price per share would be $34.12