JetBlue makes offer for Spirit Airlines, could spark bid war
JetBlue Airways has offered to buy Spirit Airlines for about $3.6 billion and break up a plan for Spirit to merge with rival budget carrier Frontier Airlines.
Spirit announced Tuesday that it had received an unsolicited offer from JetBlue. It stated that its board would evaluate the offer and determine what is best for shareholders.
Frontier used that same argument in February to support its proposed acquisition of Spirit, saying that creating the nation’s fifth-biggest airline would save consumers $1 billion a year.
JetBlue offered $33 per share in cash, which it said puts a 37% higher value on Spirit than does the Frontier offer. However, Frontier’s bid would let Spirit shareholders keep 48.5% of the combined airline. Frontier claimed that its cash-and stock offer was worth $2.9 Billion, but a dip in Frontier shares has decreased its value since February.
JetBlue is not the same kind of so-called ultra-low-cost-carrier. Although its base fares are generally more expensive than those on Spirit and Frontier, it offers many of the same amenities, such as free TV and internet at every seat.
JetBlue’s strength on the East Coast, including Florida, would mean much more overlap with Spirit. Frontier stated Tuesday that this would result in less competition, higher fares, and fewer choices for travelers.
Moreover, Frontier and Spirit are small enough that their deal might not get close scrutiny from antitrust regulators, although several leading liberal Democrats in Congress raised concern about the merger to the Biden administration. Last year, the Justice Department and several states sued to block a more limited partnership between JetBlue Airlines and American Airlines. That challenge is still pending. Colin Scarola is an analyst who covers airlines at CFRA Research. He said that the Biden administration is more likely than a Frontier/Spirit combination to oppose a JetBlue/Spirit deal because it could result in higher prices.
However, he views the JetBlue offer as superior, and so “Spirit will likely take the risk and accept the JetBlue bid. It’s just too much more money to pass up.”
JetBlue is three times bigger than Frontier and nearly twice the size of Spirit. It has lost in the past in acquisitions, losing out in the bid for Virgin America to Alaska Airlines.
Frontier is controlled by private equity firm Indigo Partners, which once owned a major stake in Spirit.
One area where all three are very similar is consumer complaints. Last year, Spirit received the most complaints to the U.S. Transportation Department, followed by JetBlue
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