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JetBlue Founder Steps Aside

Ted Reed

David Neeleman's nine-year run as CEO of the airline he founded has come to an end.

JetBlue(JBLU Quote - Cramer on JBLU - Stock Picks) said Thursday that Dave Barger has been appointed chief executive, effective immediately. Barger retains his post as president.

Neeleman, the founder and top executive at JetBlue since 1998, will become nonexecutive chairman of the board. JetBlue shares rose 4.7% Thursday, closing at $10.89.

"I think the board has been talking about this for a long time," Neeleman told the Associated Press. He said the change does not result directly from the carrier's severe operational problems in the wake of February and March storms that grounded flights and left many of its customers stranded, noting: "It's just really good governance, to separate the chairman and the CEO role."

The move typifies the type of change companies make as they evolve from an entrepreneurial stage to one where operations take precedence. In that regard, the winter's operational breakdown apparently provoked an action that would ultimately have had to be taken. Neeleman "is the visionary and agreed with the board's decision to have him take a more strategic role as chairman, with Dave Barger running the day-to-day operations of the airline," said JetBlue spokesman Bryan Baldwin.

A Legacy of Innovation

Neeleman, who first took the title of chairman in 2002, has been among the airline industry's leading innovators, building JetBlue into one of the four principal carriers in the world's richest aviation market, New York City.

His concepts have included using Kennedy International Airport for a domestic hub, which the airline industry had long considered to be an impossibility, and providing a high level of comfort and service in coach.

But JetBlue has always lived on the edge of the industry. Its share price soared, then sputtered. The airline shifted strategy several times, starting with a list of widely scattered cities to serve from Kennedy with a fleet of Airbus A320s, then becoming heavily involved in transcontinental routes, and eventually moving to serving midsized cities with a smaller aircraft.

Early this year, JetBlue made news -- and the wrong kind of it -- when a Valentine's Day storm resulted in about 1,200 canceled flights, stranded thousands of passengers and cost the carrier roughly $41 million.

Neeleman very publicly took responsibility. He expressed contrition for the incident, assured the flying public it wouldn't happen again and offered a passenger bill of rights. He was generally applauded for his efforts.

The next month, however, another winter storm put JetBlue back in the headlines. Although the airline had made preparations to prevent a repeat, its Web site and telephone system malfunctioned, leaving many travelers uncertain about the status of their flights

Baldwin said JetBlue last year began "a realigning of our leadership structure [as] part of our natural evolution as a growth company -- from a startup to a $3 billion company." The carrier hired Trey Urbahn as chief revenue office in November. In March, it hired Russell Chew, a 17-year veteran of American(AMR Quote - Cramer on AMR - Stock Picks), as chief operating officer.

"David's talents are entrepreneurial," Baldwin said. "As a company grows from startup to major player, the skills needed for senior leadership roles evolve. Public company benchmarking is customary to split the CEO and chairman positions due to the specific areas of responsibility those positions hold."

Barger, a 10-year veteran of Continental(CAL Quote - Cramer on CAL - Stock Picks), joined JetBlue in 1998 as president and chief operating officer.

The carrier began flying in February 2000. Since its first flight from Kennedy to Fort Lauderdale, Fla., JetBlue has grown into a major airline with 52 destinations and more than 575 daily flights.