(Reuters) - JetBlue Airways Corp (JBLU.O) said it would sell its in-flight entertainment business, LiveTV, to French defense electronics company Thales Group (TCFP.PA) for $400 million as it looks to cut costs.
JetBlue has struggled with high maintenance and repair costs over the past few quarters. The carrier, which has 80 percent of its operations in the U.S. Northeast, said earlier this week that it canceled nearly 4,000 flights because of winter storms.
“We believe JetBlue will benefit from reduced operating costs and capital expenditures related to running LiveTV as a subsidiary,” JetBlue Chief Financial Officer Mark Powers said in a statement.
New York-based JetBlue is expected to use the proceeds from the sale to fund aircraft deliveries, analyst Helane Becker of Cowen & Co wrote in a note to clients.
JetBlue has to take delivery of nine Airbus A321 in 2014 and has a backlog of 136 aircraft with Airbus (AIR.PA) and Embraer
JetBlue was looking at strategic options for its entertainment business, Powers had said on a post-earnings conference call in January.
“You don’t need to actually own the company to maintain the ability to retain (its services),” Powers said then, referring to LiveTV.
JetBlue said on Thursday it would sign agreements with LiveTV to continue the service after the sale.
LiveTV, founded in 1998 in Melbourne, Florida, also counts Frontier Airlines, AirTran, Alitalia and Virgin Blue as customers.
JetBlue said it expects the sale to be completed in mid-2014.
The company’s shares rose as much as 5 percent in morning trade on the Nasdaq before giving up most of those gains to trade nearly flat at $8.82 by midday. The stock has gained more than a quarter of its value in the past 12 months.
Reporting by Sagarika Jaisinghani and Sweta Singh in Bangalore; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila and Maju Samuel