Bloomberg: Carl Icahn’s JetBlue stake might leverage changes

George Ferguson, senior intelligence analyst at Bloomberg Intelligence, has highlighted that Carl Ichan will ""likely use his almost 10% stake in JetBlue to push for changes, including taking the company private or push for a new merger or potential acquisitions"". Ichan, who disclosed a 9.91% stake in the US airline via a securities and exchange filing, said he acquired them “in the belief that they were undervalued and represented an attractive investment opportunity”. He added that he also intends to pursue discussions with JetBlue’s board of directors “regarding the possibility of board representation”. Although a merger or acquisition with another regional or low-cost carrier might “be a fix,” Ferguson does not believe this is viable, given that JetBlue’s proposed merger with Spirit was blocked by a federal judge. Instead, JetBlue’s order book of 129 aircraft (including 54 A321neos) could offer value to the airline, highlights Ferguson. With additional long range A321s an uncertain priority in a market where transatlantic demand may have peaked, these slots could be traded back to Airbus, while JetBlue maintains its focus on domestic and Caribbean markets. JetBlue could also trade some of its more sought-after slots at JFK, LaGuardia and Ronald Reagan Washington National airports. Additionally, JetBlue’s two Enhance Equipment Trust Certificates (EETC) could provide nearly $250 million if paid off, although Ferguson believes a make-whole payment is unlikely given the current Treasury rate. Bloomberg Intelligence calculates the cost of this payment on the 2020 ETC at about $600 million while the 2019 ETC’s payment is $615 million. Both are backed by ‘desirable’ A321 aircraft. With Cirium data indicating 167 of JetBlue’s aircraft are not on lease or held in EETCs, with a equity value of around $2.4 billion, this unencumbered value could be unlocked through sale or leaseback of the aircraft (although the nearly 20-year-old A320s representing the most numerous type will be harder to achieve financing or leasing for than newer models).