JetBlue’s bid for Spirit centers on adding planes to fleet
JetBlue Airways executives explained to Wall Street on Wednesday why they’re offering to pay $3.6 billion for Spirit Airlines, a proposed combination that has received a chilly reception from investors.
JetBlue does not want Spirit’s low-cost business model and certainly doesn’t want Spirit to be last in government-compiled customer complaints. It does want Spirit’s Airbus fleet and its large order stack for more planes.
“When I consider the key benefits of this transaction,… first, between Spirit and JetBlue we have a really compelling ordering book,” Robin Hayes, JetBlue CEO, said during a conference call with analysts. “The supply of new airplanes over the next several years is very challenging.”
Buying Spirit “is speeding up what it would take us years to do” alone, Hayes said.
JetBlue has more than 280 planes. Spirit had 173 at the start of 2022, and has orders to receive another 120 from Airbus through 2027, according to regulatory filings.
JetBlue announced late Tuesday that it will challenge a $2.9-billion Frontier Airlines offer. This offer was initially supported by Spirit’s CEO in February. It is possible that there will be a bidding war. Frontier declined Wednesday to comment on whether it would sweeten its offer after JetBlue has joined.
Spirit stated that its board is looking into the unsolicited JetBlue offer. So far, investors are not impressed by the JetBlue move. They sent JetBlue shares down nearly 9% on Wednesday and more than 15% since news of the offer broke.
JPMorgan analyst Jamie Baker said the merits of a JetBlue-Spirit merger are not as clear as other possible U.S. airline combinations, although it would let JetBlue expand faster than it could otherwise do in growth markets like South Florida and Los Angeles. Raymond James analyst Savanthi Syth downgraded JetBlue shares to “market-perform.” She stated that while airline mergers are not always easy, combining workforces and JetBlue will incur debt. This could also impact JetBlue’s partnership with American Airlines in Northeast.
The Justice Department sued American to block the deal — a trial is set for this fall — and antitrust regulators may object to JetBlue and Spirit’s overlap on the East Coast, especially Florida.
Hayes stated that JetBlue is confident regulators will allow Spirit to buy it, but admitted that it would be a lengthy regulatory process. “
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