After two years of disruption inflicted by the COVID-19 pandemic, the U.S. airline industry
is headed toward another period of uncertainty driven by competing bids for Spirit Airlines,
the industry’s low-cost carrier.
JetBlue Airways has offered $33 per share in cash to buy Spirit, known for its no-frills
approach.
That bid follows a less-expensive merger proposed in February between Spirit and Frontier Airlines,
its rival in low-cost travel.
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And in today's video, we are going to talk about “AMAZING JetBlue News!”
So without any further ado, Let's begin.
JetBlue Airways made a $3.6 billion all-cash offer for Spirit Airlines, raising questions
about Spirit’s deal to combine with rival discount carrier Frontier Airlines.
Spirit said its board was evaluating JetBlue’s proposal and will “pursue the course of
action it determines to be in the best interests of Spirit and its stockholders.”
Spirit and Frontier, both low-cost airlines, agreed in February to merge in a deal that
the companies said would save consumers about $1 billion a year.
JetBlue’s chief executive, Robin Hayes, said in an interview that the acquisition
would allow the carrier to offer more quality, affordable flights, helping it to better compete
against the airlines that dominate the U.S. market.
“This is about really allowing a bigger JetBlue to compete against four large legacy
airlines, bringing the JetBlue experience to more customers, bringing more JetBlue flights
into high-fare legacy hub airports, and offering real competition,” he said.
On the surface, they aren’t exactly a match made in heaven.
Spirit is a true ULCC, lightweight, efficient, and no-frills; JetBlue is very much a hybrid
airline, offering better services at affordable price points, but not truly low-cost.
Spirit on Monday rejected JetBlue’s $3.6 billion all-cash offer and said it was sticking
with a deal to merge with fellow ultra-low-cost carrier Frontier Airlines, an agreement struck
in February valued at $2.9 billion.
Spirit’s stock fell more than 9% on Monday after it announced it was turning down the
JetBlue offer in favor of the Frontier deal, while JetBlue’s rose more than 2%.
Miramar, Florida-based Spirit cited regulatory concerns in turning down the offer, saying
it doubted a JetBlue acquisition would get approved, in part because of JetBlue’s Northeast
partnership with American Airlines, which the Justice Department sued to block last
year.
The DOJ argued in its suit that it would drive up fares and hurt competition, specifically
mentioning the importance of smaller carriers like JetBlue.
Spirit believes a deal with JetBlue wouldn’t dissipate the DOJ’s concerns and may not
benefit passengers.
“We struggle to understand how JetBlue can believe DOJ, or a court will be persuaded
that JetBlue should be allowed to form an anticompetitive alliance that aligns its interests
with a legacy carrier and then undertake an acquisition that will eliminate the largest
ULCC (ultra-low-cost carrier) carrier,” Mac Gardner, the chairman of Spirit Airline’s
board of directors, said in a letter to JetBlue.
At first glance, Frontier looks to be the better option, but how does that pan out when
we consider routes, fleet, and what’s best for the passengers?
Whichever way Spirit jumps, its suitors have a fairly compatible fleet makeup.
All three airlines are heavily Airbus at present, with large fleets of A320 family jets forming
the backbone of their operations.
With Frontier, the dominant aircraft type would become the A320neo, the new technology
Airbus with better fuel efficiency and fewer miles on the clock.
Both Spirit and Frontier have very similar and very large fleets of this aircraft type.
Close behind would be the A320ceo, mainly from Spirit, as Frontier has been phasing
out these older aircraft as more neos arrive.
Frontier actually has the youngest fleet of the three airlines.
Its average fleet age is 5.7 years, helped by that large fleet of very young A320neos.
Spirit’s deal with Frontier is expected to close in the second half of 2022.
The deal will make Frontier / Spirit the fifth largest airline in the US.
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