The Spirit Airlines and Frontier Airlines merger is over.
Spirit Airlines shareholders have formally rejected the bid to merge with Frontier, opening
the door to a possible Spirit-JetBlue deal.
Let’s look at this dramatic turn of events in today’s video.
On Wednesday, July 27th, Spirit Airlines announced that it terminated the merger agreement with
Frontier Group Holdings, the parent company of Frontier.
The announcement came hours before the Spirit Airlines shareholders were set to bid on the
proposal from Frontier, a vote that the carrier has been delaying as it sought to appeal to
shareholders to support the merger.
During the last few months, JetBlue has been fiercely bidding to acquire Spirit, confident
that it could swing the votes of Spirit’s shareholders away from the Frontier offer.
Now it seems the door is wide open for JetBlue to step in, a move that could create the fifth-largest
carrier in the United States.
Ted Christie, President and CEO of Spirit Airlines, said,
“While we are disappointed that we had to terminate our proposed merger with Frontier,
we are proud of the dedicated work of our Team Members on the transaction over the past
many months.
Moving forward, the Spirit Board of Directors will continue our ongoing discussions with
JetBlue as we pursue the best path forward for Spirit and our stockholders."
Frontier Airlines is clearly not delighted with the news, but is endeavoring to put a
positive spin on the situation.
In a release that arrived moments after Spirit's announcement, the carrier sought to highlight
its strong foundation and positive attributes as a standalone carrier.
Bill Franke, chair of Frontier's board and the managing partner of majority shareholder
Indigo Partners, said in a statement:
“While we are disappointed that Spirit Airlines shareholders failed to recognize the value
and consumer potential inherent in our proposed combination, the Frontier Board took a disciplined
approach throughout the course of its negotiations with Spirit.
We were focused on offering the appropriate value for Spirit, while prioritizing consumers
and the best interests of Frontier, our employees and shareholders.”
The airline highlighted its rapid growth in the leisure segment, and its strong position
of having low overheads and ultra-low unit costs.
On the other side, JetBlue provided its own statement on Spirit’s move, saying:
"We are pleased that the merger agreement with Frontier has been terminated and we are
engaged in ongoing discussions with Spirit toward a consensual agreement as soon as possible.
We remain fully committed to completing this transaction so we can create a compelling
national challenger to the dominant airlines with more opportunities for all."
Spirit’s management had been actively trying to move away from the JetBlue offer.
According to Spirit’s management, the “unsolicited tender offer” from JetBlue is not in the
best interests of the airline and its stockholders.
Instead, it reportedly faces “substantial regulatory hurdles”, especially while the
Northeast Alliance with American Airlines remains in effect.
Nonetheless, ending the Frontier-Spirit merger doesn’t mean JetBlue’s offer will be accepted.
According to JetBlue, its proposal to acquire Spirit would position JetBlue as the quote
“most compelling national low-fare challenger to the Big Four airlines.”
Together, the airlines would control 10.2% of the market, behind United Airlines, American
Airlines, Delta Air Lines, and Southwest Airlines.
JetBlue has offered around US$3.7 billion to acquire Spirit, and plans to refurbish
Spirit’s planes in JetBlue style, featuring seatback screens and legroom.
At this point, it is possible that no deal gets done, and the three airlines remain independent.
What’s your reaction to this latest development?
Are you relieved or disappointed?
Let us know by leaving
a comment.