By Shivansh Tiwary
(Reuters) -Shares of JetBlue Airways surged 13% in early trading on Tuesday after activist investor Carl Icahn said he took a nearly 10% stake in the low-cost carrier.
Icahn said his company had been in discussion with JetBlue about possible board representation after the airline’s $3.8 billion merger with ultra-low-cost carrier Spirit Airlines was blocked by a U.S. judge last month.
Both airlines have asked for an expedited appeal to the judge’s ruling and a U.S. appeal court will hear arguments in June.
Icahn, in the filing, called shares of JetBlue undervalued, saying it represented an attractive investment opportunity. He has made a career out of buying companies he sees as undervalued and the JetBlue purchase is one of his first big moves in 2024.
“We are always open to constructive dialogue with our investors,” JetBlue said on Tuesday.
Many analysts had questioned the merits of the deal over fears Spirit’s grim financial health may become a drag for JetBlue. “JetBlue dodges a bullet,” J.P. Morgan analysts had said after the judge blocked the deal.
Last month, the airline said it was evaluating deeper cost cuts after it forecast higher expenses and a fall in revenue in the current quarter as it grapples with uneven travel demand.
Wild swings in travel demand between peak and off-peak periods have forced airlines to adjust schedules and capacity to more profitable routes.
JetBlue has said it will move underperforming capacity to premium leisure and popular markets.
The company’s stock has gained 24% since the merger ruling.
“Key items to watch are what Icahn can or cannot do on the board level, to put ‘Neutral/High Risk-rated’ JetBlue on a better strategic path,” Citi analyst Stephen Trent wrote in a note.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Sriraj Kalluvila)
