Why JetBlue CEO Dave Barger Was Chased Out By Wall Street

New York (TheStreet) - JetBlue (JBLU)  said Thursday that Dave Barger, its embattled CEO who has been under pressure from Wall Street, will step down in in five months when his contract expires.

The iconoclastic consumer-friendly carrier, founded in 1998, has had just two CEOs in its history, and now both have been hounded out of office by Wall Street investment banks and investors. Founder David Neeleman left in 2007, after a snowstorm led to an operational meltdown at the carrier's JFK hub, and on Thursday, Barger, an operations guy who was part of the founding group and Neeleman's successor, has stepped down.

Barger will be replaced on Feb. 16, the day after his contract is up, by JetBlue President Robin Hayes, who had been widely expected to succeed him. Hayes, whio joined JetBlue in 2008, is a veteran of 19 years at British Airways

In the current round of historic airline industry profits, JetBlue has simply not kept pace, a failure that has been blamed largely on its eschewal of bag fees and its apparently failed effort to offer a premium product with extra legroom, when JetBlue already provided more legroom in coach than its rivals.

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 Wall Street opposition to Barger has been mounting since May, when JP Morgan analyst Jamie Baker upgraded JetBlue to overweight, noting that "management has not historically been the most committed to capital returns, but is seemingly willing to adjust senior ranks going forward.

"The current CEO's contract is down to under 10 months," Baker noted. At the time, JetBlue shares were trading around $8. Baker set a target of $10.

 By the end of July, shares had risen to around $11. On July 30 Baker wrote a note in which he modeled for a first bag fees that could boost annual revenue by $200 million, and for slower capacity growth, which led him to raise his target price to $13.50.

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On Thursday, shares closed at $11.33. In after-hours trading following the announcement of Barger's impending departure, shares were up 50 cents to $11.83.

 Many other analysts began calling for the imposition of fees and for Barger's departure. In mid-August, Imperial Capital analyst Bob McAdoo raised his one-year target price for JetBlue to $20 from $10, saying "Investor interest is focusing on possible management and strategy changes that could great enhance earnings."

McAdoo proposed a list of changes that he said would add as much as $550 million to the base pretax income of $279 million. He recommends adding a first bag fee, resulting in an estimated $150 million to $200 million in annual revenue and adding seats, which could add $250 million to annual pretax income.

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