A row of Spirit Airlines aircraft on the runway at Orlando International Airport on May 20, 2020 in Orlando, Florida.
Chris O’Meara/AP
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Chris O’Meara/AP
A row of Spirit Airlines aircraft on the runway at Orlando International Airport on May 20, 2020 in Orlando, Florida.
Chris O’Meara/AP
JetBlue Airways has agreed to buy Spirit Airlines for $3.8 billion and create the country’s fifth-largest airline if the deal gets antitrust approval.
Thursday’s deal ended a months-long bidding war and went into effect a day after Spirit’s attempt to merge with fellow low-cost carrier Frontier Airlines. fell apart.
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Frontier-Spirit merger promises better deals and service; critics are not so sure
Spirit CEO Ted Christie finds himself in the awkward position of having to defend the JetBlue sale after vehemently objecting to it, saying the antitrust authorities would never allow it.
“Obviously, a lot has been said over the past few months, always with our stakeholders in mind,” Christie said on CNBC. “We’ve been listening to the people at JetBlue and they have a lot of good thoughts about their plans for this.”
JetBlue CEO Robin Hayes has argued all along that a larger JetBlue would create more competition for the four airlines that control about 80% of the US market – American, United, Delta and Southwest.
Shares of Spirit, based in Miramar, Fla., rose 3.5% at Thursday’s open to $25.15, still below the price offered by JetBlue. JetBlue shares were virtually unchanged.
Fees are likely to rise after the deal
Spirit Airlines regularly scores worst, or close to worst, when airlines are ranked by the number of consumer complaints. However, some consumer advocates I’m afraid prices will go up. if he disappears.
Spirit and similar competitors Frontier and Allegiant charge minimum fares that appeal to the most frugal travellers, though they charge additional fees that can add to the cost of a flight.
“The spirit will disappear, and with it its low-cost structure,” said William McGee of the anti-merger American Economic Freedom Project. “Once Spirit is taken over by (JetBlue), there is no doubt that tariffs will go up.”
Others, however, say Frontier will grow – it has a large number of aircraft on order – and fill any gap left by Spirit in the cheapest segment of the air travel market.
If approved, the deal is expected to close in the first half of 2024.
JetBlue and Spirit will continue to operate independently until the agreement is approved by regulators and Spirit’s shareholders, with their separate loyalty programs and customer accounts.
The companies said they expect to complete the regulatory process and close the deal no later than the first half of 2024. If that happens, the combined airline will be based in JetBlue’s hometown of New York and Hayes will lead it. It will have a fleet of 458 aircraft.
JetBlue said Thursday it will pay $33.50 per share in cash for Spirit, including a $2.50 per share cash upfront due after Spirit’s shareholders approve the deal. In addition, a fee of 10 cents per share will be charged monthly from January 2023 until closing to compensate Spirit shareholders for any delay in obtaining regulatory approval.
If the deal is not closed due to antitrust considerations, JetBlue will pay Spirit a $70 million reverse gap fee and pay Spirit shareholders $400 million less any amounts paid to shareholders prior to the termination.
Spirit and Frontier announced their merger plan in February, and Spirit’s board of directors supported the deal even after JetBlue made a more expensive offer in April. However, Spirit’s board was never able to convince the airline’s shareholders to agree. The merger vote was delayed four times before breaking off on Wednesday when Spirit and Frontier announced their decision. termination of their agreementwhich made the Spirit-JetBlue merger inevitable.
JetBlue expects to save between $600 million and $700 million a year after the deal closes. The combined company is expected to generate approximately .
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9 billion in annual revenue based on 2019 revenue.