Carl Icahn buys a huge stake in JetBlue at bargain prices

JetBlue’s stock soared more than 14% in premarket trading Tuesday after financier Carl Icahn disclosed late Monday that he had taken a 9.9% stake in the company.

Icahn paid an average of $3.56 a share for his 33.6 million shares of the stock, according to the filing. Shares of JetBlue closed Monday at $6.07 a share before leaping to nearly $7 a share in morning trading.

The activist investor’s filing said he has discussed, and intends to continue to discuss, the possibility of gaining a seat or multiple seats on the airline’s board, and he said that he could buy additional shares.

His purchases started on January 26, a week after a federal court blocked JetBlue’s proposed purchase of Spirit Airlines. JetBlue and Spirit are appealing the decision, but JetBlue said in a filing last month that it believed it could still exit the deal because the court ruling had blocked it from closing by a deadline set in the merger agreement. Analysts had suggested that JetBlue was only interested in pursuing the deal, assuming it was allowed by the court, at a significantly lower price.

JetBlue and Spirit both lost money in 2023 as larger airlines reported stronger profits. JetBlue said it had an adjusted loss of $151 million for 2023 and that with recent cost-cutting plans it would be “approaching breakeven” in 2024. It also recently announced changes among its top executive ranks. Some analysts have suggested that Spirit might not be able to survive without a merger.

JetBlue had been interested in buying Spirit as a way of getting both the aircraft and pilots it needs to expand. It won a bidding war for Spirit waged against Frontier Airlines. Both Spirit and Frontier had been pioneers in the practice of having passengers pay an ultra-low base fare but then requiring extra for everything else, including carry-on baggage. The presence of Spirit has led the major airlines to offer cheaper “basic economy” seats of their own on most flights.

The proposed $3.8 billion deal would have created the nation’s fifth-largest airline. JetBlue had argued it would allow greater competition with the four major US airlines — American Airlines, United, Delta and Southwest — which between them control about 80% of US air travel. But the US Justice Department argued, and the federal judge in the case agreed, that JetBlue buying Spirit would raise fares for passengers by removing Spirit from the marketplace.