JetBlue May Have Finally Been on a Good Path, but Icahn’s Investment Changes Things – Cranky Flier

Welcome back to the second part of Carl Icahn week. I wrote about what Icahn did to TWA back in the 1980s on Tuesday. Now, we can try to read the tea leaves and see what this may mean for JetBlue.

There will be no Cranky Weekly Review presented by Oakland International Airport tomorrow since we are up in Oakland for the Cranky Network Awards. We aren’t livestreaming this year, but follow along on Twitter/X tonight to see the winners announced. We will have a highlight video available as soon as our videographers can get it together.

We’ll get back to normal next week.

Things have been moving rapidly at JetBlue as of late, and that’s a mix of good and bad news. I like the moves that the airline has been making, but the airline’s future now looks rather cloudy since it’s unclear exactly how its new activist investor — Carl Icahn — plans to wield his new power.

I have recently become cautiously hopeful that JetBlue would start doing good things. CEO Robin Hayes’s tenure officially ended this week, and the changes were notable and encouraging in his wake. New CEO Joanna Geraghty may have been Robin’s number two, but she was quick to put her own stamp on the management team. She named Warren Christie to replace herself as COO. With more than 20 years at the company, that might seem like a red flag, but everyone I’ve spoken with has had nothing but positive things to say.

Then during the last quarterly earnings call, Joanna announced her plan to fix JetBlue as a standalone carrier. The alliance with American is dead, but the Spirit merger is still under appeal. Despite that, Joanna has to see the writing on the wall, and she has put together a plan that’s a little light on details but unquestionably pointing in the right direction.

Lastly, the big news dropped that Joanna had hired Marty St George to come back to the airline after a few years away at Norwegian and then most recently at LATAM. Marty left JetBlue in 2019, but all indications are that the parting of ways wasn’t exactly his idea. It was Robin’s airline, and when Joanna ascended to the President role in 2018, my assumption is there wasn’t room for all three.

By hiring Marty back, Joanna shows that there is no bad blood between them, or if there was, it won’t stop her from doing the right thing for the airline. It certainly suggests that she is her own person, and most importantly, it shows she knows what she knows, and what she doesn’t. Marty brings back a wealth of commercial knowledge that is far from Joanna’s forte. Marty also had a remarkable rapport with the front line when he was there previously, and the airline desperately needs more of that these days. Joanna knows that Marty will be able to complement her skills.

With all of this coming together, it seemed like the stars might finally align, and JetBlue would be able to make some real strides in becoming a functional company. And then Carl walked in.

Carl Icahn disclosed that he has taken just shy of a 10 percent stake in JetBlue, because he thinks the shares are undervalued. This announcement alone caused JetBlue’s shares to jump by 20 percent, because people know what happens when Icahn gets involved. This is also how the TWA adventure began, but I don’t expect this will take the same path.

With TWA, Icahn was maneuvering a very complicated situation involving needed union concessions as well as a competing leading bid under Lorenzo. None of that is what’s happening at JetBlue now. Icahn has gotten his company two board seats, and my guess is that he will try to use that presence to beat JetBlue into doing what he wants. I can’t imagine he would want to actually take the airline over.

What Icahn may very well be thinking, however, is that from a position on the board, he can push hard to make the moves that are best for shareholders in the near term. This could end up meaning he wants to sell the airline, either as a whole or broken up into spare parts. After all, those New York and Boston assets are quite valuable, and you can be sure other airlines would be interested. Same goes for Fort Lauderdale to a lesser extent.

I’ve always thought splitting the airline up and giving the northeast to American along with Florida to United would make some sense, but that idea is not possible in any way during the current administration. If Biden is re-elected, that means that nothing could happen for years, and that’s where things get squirrely.

Would Icahn try to pick apart pieces that can pass regulatory muster? He isn’t in this for a long-term strategy. If he has to wait to do a bigger deal, he might push for smaller deals to be done that weaken the airline and leave it in a worse place. If he can make money on it, then it’s not off the table.

Maybe Icahn believes in what Joanna is saying, and he thinks there’s room to buy cheap and make a lot of money by riding the wave. And maybe he just wants to have board seats to make sure the company follows through, is held accountable. That would certainly be the best possible outcome for the management team. But it’s also not likely. He doesn’t really work that way.

As of now, we don’t know where this is going, but it should make people nervous. Had this happened under the previous regime, I would say it wasn’t a bad plan. The airline was rudderless and needed some kind of kick in the pants. But now with a new management team and the beginning of a plan, it would be a shame to see that effort cut off at the knees before it even begins.