A Change in the Cockpit at JetBlue

Burned by a winter snowstorm, the airline is going back to basics with a new CEO heavily focused on operations

In its ongoing effort to tighten up operations, JetBlue Airways (JBLU) is replacing its CEO, moving company founder and grand strategist David Neeleman to the role of chairman and installing its president in the job.

The May 10 change comes three months after the airline drew widespread scorn for its near-complete shutdown following two winter storms at its New York hub. The collapse exposed Jetblue's deficiencies in managing its rapid growth and its myriad operational weaknesses, for which Neeleman shouldered much of the blame. The fiasco also cost the company more than $40 million, and prompted it to implement a new "customer bill of rights" with various service pledges.

In a statement, Neeleman described the board's selection of president and company co-founder David Barger as a "natural evolution" for JetBlue, which has grown rapidly over its seven-year history. The company has expanded from beginning with a handful of flights between New York and South Florida to true nationwide service, and new flights to several international destinations.

Analyst and investor reactions were positive, with JetBlue shares gaining 5% to $10.92 in afternoon trading on the Nasdaq. The stock remains far below its January high of $17.02.

Barger, 48, is a long-time industry veteran, having spent a decade at Continental Airlines (CAL) in various operational roles, including as vice president of its Newark, N.J. hub. He is also a director of Spanish carrier Vueling Airlines SA. Barger has been on JetBlue's board since September, 2001.

Previously, Barger also served as chief operating officer, and was replaced in March when the company hired Russell Chew, former COO at the Federal Aviation Administration. Before that, Chew was a 17-year veteran in operations with AMR Corp.'s (AMR) American Airlines, the world's largest carrier.

In a May 10 note to clients, Credit Suisse Group (CS) airline analyst Daniel McKenzie characterized the CEO switch as positive. "Management reports the change is not a result of the Feb. operational meltdown, however, we believe the Feb. disruptions likely accelerated a change that the board had been previously contemplating," McKenzie wrote. McKenzie's 12-month price target is $17.

Standard & Poor's Equity Research called the board's decision surprising, "but probably the right move." S&P rates JetBlue shares as hold, buy analyst Jim Corridore has a far lower 12-month price target of with a $12 on the shares. (S&P, like BusinessWeek, is owned by the McGraw-Hill Cos. [MHP].)

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