Feb 16 (Reuters) -

JetBlue Airways agreed to name two members from activist investor Carl Icahn's firm to join its board, the airline said on Friday, potentially avoiding a proxy fight and sending its shares up more than 5% in extended trading.

Jesse Lynn, general counsel of Icahn Enterprises and Steven Miller, portfolio manager of Icahn Capital, will join its board, JetBlue said in a statement.

Icahn disclosed a stake of about 10% in the airline on Monday, saying in a filing he believed the shares were undervalued.

"We appreciate the constructive engagement we have had with JetBlue's board and leadership team," Icahn said in a statement.

Lynn and Miller will serve as non-voting observers to the board through JetBlue's annual meeting of stockholders this spring, after which time they will join the board as full voting members.

With the additions of Lynn and Miller, the JetBlue board will expand to 13 directors, 12 of whom are expected to be independent, the airline said.

Icahn has built his reputation over the years as a corporate raider and activist shareholder, pressuring companies make changes to their business strategies and boost their stocks.

The Wall Street Journal was the first to report Icahn was close to a deal to join JetBlue board. (Reporting by Kannaki Deka in Bengaluru; Editing by Anil D'Silva)