JetBlue names former British Airways exec CEO, shares rise

September 18
10:07 PM 2014

JetBlue Airways (JBLU.O) on Thursday named Robin Hayes, its current president and a former British Airways executive, to succeed Dave Barger as chief executive, sending the airline's shares up in after-market trading.

Analysts had widely expected the appointment, which takes effect Feb. 16, 2015, because Barger's contract was to expire that month.

They also anticipated that the New York-based airline will introduce checked baggage fees and other changes, in step with competitors in the industry.

Cowen and Co said last month that it expects JetBlue to outperform the market under new management and increased its price target for the airline's shares to $15 from $10.

"JetBlue has struggled with their hybrid model catering to the business (traveler) and the leisure traveler," Cowen wrote in a note. "We believe a management change would lead to a change in philosophy and likely morph the model similar to one of Spirit Airlines, although not as extreme."

The note suggested JetBlue might benefit from adding seats in economy class. The airline does not charge customers for their first checked bag either, as many competitors do.

Hayes came to JetBlue after 19 years at British Airways, where he oversaw the carrier's operation in the Americas, among other things. He then served as JetBlue's executive vice president and chief commercial officer from 2008 until becoming its president last year.

On Thursday, he promised to preserve JetBlue's culture, although he did not shed light on the company's strategy.

"We will continue to expand our network in underserved markets and roll out new products that enhance the JetBlue Experience and create value for our shareholders," Hayes said in a press release.

Founded in 1999, JetBlue began flying in 2000 with the idea of breaking the low-cost carrier mold by offering leisure travelers and business travelers a better deal than budget rivals. It offered amenities such as free in-seat entertainment, wifi and snacks, and power outlets at every seat. Last year it introduced a business class service with lie-flat beds on trans-U.S. routes.

JetBlue sought to keep operating costs and ticket prices low by flying a single aircraft type, Airbus A320s. It won passengers from the larger, legacy airlines that had higher costs. But after those companies lowered costs by streamlining and reorganizing in bankruptcy, JetBlue's cost advantage diminished.

It is now introducing larger A321 jets to try to regain some cost advantage, and it added smaller Embraer jets for regional routes. Analysts have criticized its relatively low profitability and suggested it would need to charge fees as its low-cost competitors have, something Barger had resisted.

The announcement Thursday dispelled any uncertainty about the company's future executive. JetBlue shares were up 4.6 percent after the bell at $11.85.

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