JetBlue Airways (NASDAQ:JBLU), the high-flying newcomer in the intensely competitive and beleaguered airline industry, shocked investors and customers when Wired Magazinereported and then confirmed the company had violated its privacy statement in September 2002 and released 5 million passenger names, addresses, and phone numbers to a defense contractor investigating national security issues.

JetBlue shareholders might have a number of questions regarding this incident. Will there be executive departures? Is the privacy statement weak? Will the company be investigated by the Federal Trade Commission (FTC) for unfair business practices and sued by customers? What will be the impact of all these questions on their high-flying stock?

When you are growing as fast as JetBlue, finding who failed and taking action could have serious business consequences. Any executive departures -- there have been none so far -- could leave a short-term vacuum in this leanly staffed company.

The privacy statement, as worded, is excellent. "Not shared" should have said it all. Even though JetBlue received no money for the data it released, management's lack of stewardship will certainly be questioned by the FTC, which has also reviewed Microsoft (NASDAQ:MSFT) privacy promises and an Eli Lilly (NYSE:LLY) security breach recently. Neither company was fined. Both had to issue press releases saying they would take "appropriate measures" regarding their FTC complaints.

In today's litigious society, someone will certainly take JetBlue to court. Besides distracting the executives, the press may decide to give this serious coverage, which could discourage customers, and Wall Street.

Last Friday, Whitney Tilson took a close look at the challenges JetBlue faces. With a price-to-earnings ratio almost equal to that of profitable Southwest Airlines (NYSE:LUV), and a stock price that has tripled within the last year, the market is expecting few, if any, problems. Short term, there will be some airline passengers who decide that privacy is more important than the excellent product JetBlue offers. But for customers who want low fares, new planes, free entertainment at every leather seat, and an airline that is not in or about to go into bankruptcy, JetBlue is still going to be their choice.

So far, the market reaction to this news has been muted. JetBlue is within one dollar of its 52-week high. For Foolish investors, though, the cumulative effect of a high stock price, tarnished leadership, FTC review, and more press coverage to come on this incident may finally be pushing the risk of ownership too high.

Motley Fool contributor W.D. Crotty does not own shares in JetBlue, though he is a frequent JetBlue traveler. He welcomes your feedback at [email protected].