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JetBlue changes CEO, may move in new direction

Operating chief David Barger replaces David Neeleman and could be more open to a merger.

May 11, 2007|Peter Pae | Times Staff Writer

The charismatic founder and chief executive of JetBlue Airways Corp. stepped aside Thursday in a move that could ease some of the recent turbulence for the once-highflying carrier.

Battered by a winter weather debacle that stranded thousands of passengers, JetBlue said David Neeleman would no longer head the airline that had redefined low-cost service and helped transform sleepy Long Beach Airport into a popular gateway.

Neeleman will remain a nonexecutive chairman but will be replaced as CEO by David Barger, the airline's longtime chief operating officer. He is seen as more open to change as the carrier faces a competitive market with several major airlines emerging from bankruptcy protection.

The leadership change is not likely to affect passengers or fares, but analysts said the move could prompt a major shift in the direction of the New York-based airline as it faces emboldened competitors and higher fuel costs.

The airline could curtail its expansion ambitions that were the cornerstone of Neeleman's leadership and perhaps even entertain proposals for a merger as a way to compete with major carriers that have been resurging financially, analysts said.

"The environment has changed," said Ray Neidl, an airline analyst for Calyon Securities. "The competitive landscape is much tougher than when Neeleman started the airline."

Moreover, Neidl said, Neeleman was "dead set against a merger," and Barger "will be more flexible." Barger, 49, has been Neeleman's No. 2 executive since the airline was founded in 1998.

Wall Street seemed pleased by the change. JetBlue shares climbed 4.7% to $10.89. Until Thursday's announcement, the shares had for days languished near its 52-week low of about $9.

Although the move was abrupt, it was not surprising, analysts said. The weather-related meltdown on Valentine's Day and then again on St. Patrick's Day may have hastened the change, they said.

JetBlue canceled nearly 1,700 flights, stranding thousands of travelers throughout the Northeast. To make matters worse, hundreds of passengers were stranded aboard planes for several hours while waiting to take off or return to the terminal. The debacle led to congressional hearings and a public relations nightmare for JetBlue.

"Words cannot express how truly sorry we are for the anxiety, frustration and inconvenience," Neeleman said at the time.

To prevent a recurrence, JetBlue drafted a "customer bill of rights," under which it promised to issue vouchers to customers who experienced delays.

The canceled flights and vouchers cost JetBlue $41 million, contributing to the company's first-quarter loss of $22 million, or 12 cents a share.

A JetBlue spokesman said that the airline's directors asked Neeleman, 47, to relinquish the CEO post after a shareholders' meeting late Wednesday.

"It's part of the board's ongoing discussion to realign the leadership," said Bryan Baldwin, a JetBlue spokesman. "David agreed with the decision."

But Betsy Snyder, an analyst at credit rating firm Standard & Poor's Corp., cautioned that removing Neeleman from day-to-day operations could fray JetBlue's relations with its employees. "Neeleman's departure from JetBlue's daily operations could negatively affect its generally positive employee relations," she said.

A personable executive who openly talked about suffering from attention-deficit disorder, Neeleman was often found on JetBlue planes working side by side with crew members passing out Terra Blue potato chips to passengers.

When not working the aisle, Neeleman sat in the last row with seats that didn't recline, because he said "pleasing the customer was more important than pleasing the chief executive."

Jason Nichols, a JetBlue pilot who had just flown to Long Beach from Chicago on Thursday, said Neeleman's announcement was a "shock to everyone."

"He is very personable," Nichols said. "If I had a gripe, I could just e-mail him and he would respond. If it was another company chief executive, I don't think I would have gotten a reply."

Neeleman, who had started two other low-cost airlines in the 1990s, started JetBlue with the idea of following the Southwest Airlines Co. model of offering low fares but with distinguishing amenities such as satellite-based TV on every seat.

In late 2001, JetBlue began service from Long Beach Airport, skirting Los Angeles International Airport and other larger regional airports in the area. Since then, the number of passengers at the airport has more than doubled and is considered one of the more popular regional airports in Southern California. JetBlue now has 28 daily flights from Long Beach and has added service to Ontario and Burbank.

As passengers on a JetBlue flight from Dulles, Va., picked up their luggage at Long Beach Airport on Thursday, several expressed degrees of sympathy and indifference toward Neeleman. But all passengers seemed to appreciate Neeleman's legacy -- especially the newer planes and the small individual television sets in front of every seat.

"I don't know him, but I like the TV," said Natalie Carneal, a Radford University sophomore on vacation from Virginia.

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