JetBlue, Icahn reach deal to give activist two board seats

JetBlue Airways Corp. agreed to give two board seats to Carl Icahn, heading off a potential proxy fight after the activist investor revealed a nearly 10% stake in the carrier.

Jesse Lynn, general counsel of Icahn Enterprises, and Steven Miller, portfolio manager with Icahn Capital, will join the carrier’s board, JetBlue said in a statement Friday. The duo will serve initially as non-voting observers before gaining full voting rights after JetBlue’s annual shareholder meeting this spring, the company said. Their addition will expand the airline’s board to 13 members.

JetBlue Chairman Peter Boneparth said the carrier welcomed the additional directors. 

“With their experience on public company boards, often when navigating key inflection points, they will add useful insights as we set JetBlue on a path back to long-term sustainable growth and shareholder value creation,” he said in the statement.

The move comes just days after the billionaire investor disclosed a stake making him JetBlue’s third-largest shareholder. He called the shares undervalued in a regulatory filing and revealed plans to seek “board representation.”

The agreement puts a spotlight on new JetBlue Chief Executive Officer Joanna Geraghty, who took over the top job Feb. 12, the same day Icahn’s stake was announced. The carrier already was taking steps to cut costs and return to profitability after a federal judge blocked its planned $3.8 billion takeover of Spirit Airlines Inc. The carriers are appealing the decision, though JetBlue has warned that the deal could be terminated.

Icahn last year pledged to refocus on activism following a bruising fight with Hindenburg Research, which accused Icahn Enterprises of being over-leveraged and over-valued. The recent investments in JetBlue and American Electric Power Co. mark Icahn’s first publicly announced positions since the Hindenburg fight.

The JetBlue stake harks back to one of Icahn’s most famous plays as a corporate raider from the 1980s. The hedge fund manager took over Trans World Airlines, loading it with debt and sending it toward bankruptcy in the early 1990s after several turbulent years.

JetBlue shares rose as much as 5.9% after the market close in New York on Friday. The stock rose 29% this year through the close of regular trading.