JetBlue Airways has been in a rough financial situation for quite some time. The airline put a lot of money and effort into a failed takeover of Spirit Airlines, and JetBlue has in general had an issue with its business model.
The airline offers consumers more (more legroom, free Wi-Fi, seat back entertainment, drinks and snacks, etc.), without being able to command a revenue premium. Furthermore, JetBlue hasn’t been able to capitalize on its frequent flyer program and long haul flying as much as the “big three” carriers, which is where most of their profits come from.
There’s now an interesting update when it comes to JetBlue’s most prominent investor.
Icahn cuts JetBlue stake in half
In February 2024, it was disclosed that activist investor Carl Icahn purchased a 9.91% stake in JetBlue. He called the shares undervalued, and was pursuing representation on the board.
I think one important thing to note is that Icahn isn’t just your average airline investor, but he’s quite a controversial figure, dating back decades. In the late 1980s, he took over TWA in a leveraged buyout. However, he then turned around and basically screwed over the airline, selling off many of the carrier’s assets, before leaving the airline with a significant amount of debt.
So when Icahn invested in JetBlue, people were skeptical. Did he have similar plans for JetBlue as he had for TWA, or did he actually believe in the airline, and want it to thrive independently?
Well, there’s now an interesting update. As flagged by @xJonNYC, regulatory filings show that Icahn has roughly halved his ownership stake in JetBlue, as he has gone from a nearly 10% stake, to a roughly 5% stake in the airline.
For what it’s worth, on the day that it was announced that Icahn purchased a stake in JetBlue, the carrier’s stock price was $6.07, though a day later it climbed all the way up to $7.38. Meanwhile yesterday, when it was revealed that Icahn had sold so many shares in the airline, the stock closed at $6.09. So JetBlue’s stock is basically at the same level as it was pre-Icahn.
What was Icahn’s play for JetBlue?
One certainly has to wonder why Icahn took such a big stake in JetBlue, only to sell it months later, especially when claiming that JetBlue was undervalued, and wanting representation on the board:
- Was it all a bluff, and was he just looking to make a quick buck by driving up JetBlue’s share price?
- Has he decided in recent weeks that JetBlue doesn’t have as much potential as he initially thought, so he decided it wasn’t worth his while?
- Was he not getting the influence he was hoping he could get at the airline, and therefore lost interest?
JetBlue has quite the uphill battle in returning to profitability, though I absolutely think the airline can be saved with some revenue optimization and a tweak in customer experience. While Icahn’s investment in JetBlue certainly helped JetBlue’s stock price (at least briefly), I’m not sure he would’ve necessarily done much to change JetBlue’s trajectory.
Bottom line
Activist airline investor Carl Icahn bought a 10% stake in JetBlue a few months ago, and has now sold roughly half of his shares. At the time, he claimed the airline had a lot of potential and fought for representation on the board, but clearly his plans have changed. What we don’t know is why…
What do you make of Icahn selling roughly half of his JetBlue shares?
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