JetBlue feels the heat

Washington DC
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JetBlue Airways unveiled in May a major and surprising boardroom shake-up to address its slackening operational and financial performance.

Founder David Neeleman has ceded day-to-day management to his long-time number two David Barger. Neeleman becomes board chairman and Barger, a former Continental Airlines executive, becomes chief executive and president.

New York-based JetBlue says Neeleman retains a considerable ownership stake and will be actively involved in its long-term strategy and branding. But the shake-up focuses attention on heightened pressures in the entire low-cost carrier sector as rejuvenated legacy carriers mount a competitive response.

JetBlue, which after launching in 2000 became known as the "hippest" US carrier, has lurched from misstep to disaster over the past two years. It has struggled to integrate the Embraer 190 into its fleet, floundered in many of its transcontinental experiments, sold off five of its older Airbus A320s and slowed deliveries of others. It revised its business model, a variant of the pure no-frills model, by adding a second fleet type and re-entering global distribution systems.

In the past year-and-a-half it has posted only two quarters of profits as its shares lost the lustre they had held since JetBlue went public in 2002. As New York City area airspace has grown more congested with competing growth at neighbouring airports LaGuardia and Newark, JetBlue has reworked its operations staff, adding former FAA manager Russ Chew as chief operating officer and appointing a former Delta New York JFK manager to run its hub.

But its failure to manage interrupted operations during northeastern blizzards in February and March led to a $22 million first-quarter loss, a deficit nearly equal to its cumulative 2005/2006 net deficit of $21 million.

While Neeleman and Barger insist the changes reflect "a natural evolution" of the airline, most analysts say the changes demonstrated that Neeleman's repeated public apologies and promises of a customer service commitment just were not enough. Its shares rebounded on news of the shuffle. But Standard & Poor's analyst Betsy Snyder warns Neeleman's relegation could "negatively affect its generally positive employee relations".