Billionaire investor Carl Icahn takes near-10% stake in JetBlue, echoing his iconic TWA deal

• Carl Icahn revealed a near-10% stake in JetBlue worth about $200 million on Monday.
• The activist investor said the airline's stock is undervalued and he's seeking board representation.

JetBlue Airways' fight to restore profitability after years of losses, and to refocus after its planned merger with Spirit Airlines was blocked last month, has caught the eye of a famous activist investor: Carl Icahn.

The billionaire financier has built a 9.9% stake in the budget airline from scratch this year, he revealed in a SEC filing on Monday.

His fleet of investment vehicles spent about $120 million for 33.6 million shares, valued at $204 million as of Monday's close. Icahn and his team partly financed the purchases with margin debt, and own nearly 16 million of the shares through forward contracts.

That makes Icahn the third-largest investor in JetBlue after BlackRock and Vanguard Group, Bloomberg reported.

The Icahn Capital CEO and Icahn Enterprises chairman scooped up the shares because he believes they're "undervalued" and present an "attractive investment opportunity," he said in the filing.

Icahn noted that he'd spoken to JetBlue management and directors about securing representation on the company's board, and plans to hold further talks on the subject.

JetBlue's stock price has slumped by nearly two-thirds in recent years, from more than $20 in May 2021 to about $7 today, slashing the airline's market value to about $2 billion.

Shares surged 15% in premarket trading on Tuesday, as Icahn's show of confidence spurred other investors to pile in.

The company's operating revenues climbed to nearly $10 billion last year, its latest earnings report shows. However, it posted a $310 million net loss, partly due to almost $200 million in exceptional costs related to the blocked Spirit merger and union contracts.

The airline's plan to acquire Spirit for $3.8 billion was nixed by a federal judge in January, but the company still hopes to close the deal.

Shades of TWA

It recently appointed a veteran employee as its new CEO, and rehired its former chief commercial officer as its president, as it seeks to revitalize its business.

Icahn's latest bet comes months after his company was targeted by a short seller, and carries shades of his takeover of Trans World Airlines (TWA) in the 1980s. The corporate raider slashed costs and clashed with striking flight attendants as he fought to turn around the ailing airline.

"The company would have been bankrupt if I hadn't come along and saved the damn thing," he said in a documentary released last year titled, "Icahn: The Restless Billionaire."

At best, he delayed the inevitable: TWA filed for bankruptcy in 1992, about four years after he took it private via a leveraged buyout.

There's no indication that Icahn plans to seize control of JetBlue, and he's probably not looking to run an airline again given his difficulties last time around. But he clearly sees JetBlue as cheap and believes he can help unlock its potential value.