Several Wall Street analysts have been agitating for JetBlue Airways (JBLU) to replace Chief Executive Officer David Barger when his contract expires in February. He’s too passenger-friendly, they say, and impedes measures that could increase the airline’s profitability.
Whether you agree with this assessment depends in part on whether you’re an investor, a passenger—or David Barger. Neither he nor the company are discussing his plans, but in an interview on Monday he made it clear that the steady drumbeat of implied criticism and share price upgrades based on his anticipated departure are increasingly annoying.
“You want to compare my track record to bankruptcies and layoffs?” asked Barger, referring to the Chapter 11 restructurings of Delta (DAL), United (UAL), and American (AAL) and the subsequent mergers that radically reshaped all three. “Go ahead. I’ll take that comparison.”
Speculation that JetBlue’s directors and Barger were considering a change at the top was first reported by Bloomberg News in May. The latest nudge for Barger to leave the company came on Aug. 20 when Cowen & Co. analyst Helane Becker upgraded the stock and raised her target price by $5, to $15 per share, partly on the prospect of a CEO change. “We believe JetBlue could make a management change at the top in order to foster a change in strategy throughout the company,” Becker wrote. “We believe a management change would lead to a change in philosophy and likely morph the model similar to one of Spirit Airlines (SAVE), although not as extreme.”
JetBlue has already announced that it will add fees in 2015, most likely with new “fare families” that will include a fee for a first checked bag. (That would leave Southwest (LUV) the only U.S. airline without a fee for checking a suitcase.) JetBlue also plans to raise the fares for its new “Mint” first-class cabin on flights between New York and California and will probably begin charging for speedy Internet access. Still, the airline is keen to avoid customer backlash, and Barger says that a first-bag charge and other fees will be implemented “in a JetBlue way.”
Barger, a Detroit native and former Continental Airlines executive, also argues that Wall Street has consistently downplayed JetBlue’s “hybrid” business model as a friendlier alternative to bare-bones discounters such as Spirit and the full-service global network carriers. “I may be alone among CEOs in the industry, but I don’t believe we’re a commodity [business],” Barger said after speaking at the Boyd Group International conference in Las Vegas.
As for JetBlue’s “contrarian” business model of becoming something different, between the budget airlines and the behemoths, Barger says his board fully agrees with having the company continue to build its franchise. And in airline years, 15 is just a baby; JetBlue is still building its franchise and adding planes, the CEO says. To the equity analysts, he says: “It’s a free country. You can write what you want.”
