JetBlue CEO Weighs 2015 Departure as Contract Expires

JetBlue Airways Corp. (JBLU) Chief Executive Officer Dave Barger is considering departing when his contract expires in 2015, and the board has begun planning for a possible successor as the airline struggles to win over investors.

Barger, 56, hasn’t made a final decision and hasn’t given the board official notice about his plans, said Ann Rhoades, who has been a director for New York-based JetBlue since 2001. Named to the job in 2007, Barger is the second CEO in the airline’s history and was part of the founding leadership team.

“I’d be crazy to tell you he isn’t obviously thinking about it,” Rhoades said in an interview. “We’ve talked about it a lot. It’s evident it would be something he’d look at now that he’s getting closer to the contract time, and he’s been here 15 years now.”

While JetBlue avoided bankruptcy last decade when many peers sought court protection, the carrier is missing out on a rally in the industry and the U.S. stock market. The shares are down 21 percent during Barger’s tenure, trailing a 23 percent gain for the Standard & Poor’s 500 Index.

JetBlue, now the fifth-largest U.S. carrier, began reviewing in 2013 how it should be organized “if we wanted a different focus,” Rhoades said. One of the board’s goals was to ensure a successor was in place “just in case,” she said.

Succession Planning

“It is customary and good practice for a public company board, as is the case with JetBlue’s board, to engage in regular and ongoing succession planning discussions and leadership evaluation,” General Counsel James Hnat said in an e-mailed statement. “Dave remains engaged and focused on leading a great airline for JetBlue’s customers, crewmembers and shareholders.”

Barger’s age puts him in the middle of the pack among CEOs in the 11-carrier Bloomberg U.S. Airlines Index, based on data compiled by Bloomberg. JetBlue doesn’t have a mandatory retirement age, according to Hnat, who said Barger isn’t commenting on his plans.

Robin Hayes, 48, was promoted in December to president, a post that had been held by Barger during his term as CEO. The board charged Hayes, a former British Airways executive, with expanding margins, ensuring competitive operating costs and increasing revenue.

Barger “has been such a good leader, people get concerned,” Rhoades said. “That’s why we named Robin so early, in the event he could be a potential successor.”

‘Perfectly Capable’

JetBlue’s failings include not reaching its goal for return on invested capital, said Hunter Keay, a Wolfe Research Inc. analyst in New York. The board isn’t providing incentives for executives to pursue “more aggressive strategies” such as adding more seats to JetBlue planes and focusing on investor returns over customer satisfaction, said Keay, whose underperform rating is the equivalent of sell.

“Dave Barger is perfectly capable of turning JetBlue around,” Keay said in an interview. “It doesn’t have to be that complicated. The only question is whether Dave Barger truly personally believes in that sort of strategy.”

JetBlue rose 1 percent to $8.28 at 9:51 a.m. in New York. The shares fell 4 percent this year through yesterday while the Bloomberg airlines index rose 22 percent. Analysts’ average rating on the stock is lower than all but one of the carriers in that gauge, according to data compiled by Bloomberg.

When JetBlue soared 49 percent in 2013 for the biggest annual advance since going public, it still lagged behind the airlines index, which jumped 78 percent. The carrier began flying in 2000 and held an initial public offering in 2002.

JetBlue shuffled its management structure in late April, naming new leaders in areas such as operations, inflight service and planning. Rob Maruster left his position as chief operating officer a day before those changes were announced.

Barger was picked to replace founder David Neeleman in May 2007, three months after winter storms erased almost 1,700 flights and stranded more than 130,000 passengers. Aggravating the disruptions were JetBlue’s use of part-time, home-based reservation agents, a shortage of airport personnel and a lack of airport computer kiosks for automated rebookings.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net Stephen West

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