JetBlue proposal to buy Spirit would have local repercussions
In what appeared to be a surprising move, JetBlue presented an all-cash offer to buy Spirit Airlines, which had been in talks to merge with low-cost rival Frontier Airlines. If the deal goes through, it could bring changes to the Puerto Rico market, where they all do business.
JetBlue submitted an offer of $33 per share in cash, which would work out to $3.6 billion.
“The proposal represents a premium of 52% to Spirit’s undisturbed share price on Feb. 4, 2022, and a premium of 50% to Spirit’s closing share price on April 4, 2022. JetBlue firmly believes its proposal constitutes a ‘superior proposal’ under Spirit’s merger agreement with Frontier and represents the most attractive opportunity for Spirit’s shareholders,” it stated in a press release.
The combination of the two airlines would position JetBlue as the “most compelling national low-fare challenger” to the four large dominant US carriers by accelerating its growth and expanding the reach of the “JetBlue Effect,” which occurs when legacy carriers react to JetBlue’s unique combination of low fares and award-winning customer service with lower fares, company officials said.
“JetBlue triggers significantly greater fare decreases from legacy airlines when it enters a new market than when ultra-low-cost carriers enter a market,” it stated.
“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both,” said JetBlue CEO Robin Hayes. “When we grow and introduce our unique value proposition onto new routes, legacy carriers lower their fares and customers win with more choice.”
“The combination of JetBlue and Spirit — coupled with the incredible benefits of our Northeast Alliance with American Airlines — would be a game changer in our ability to deliver superior value on a national scale to customers, crewmembers, communities, and shareholders. The transaction would accelerate our strategic growth and create sustained, long-term value for the stakeholders in both companies,” Hayes said.
The combined company would maintain the JetBlue brand and continue to be based in New York City. The current merger proposal assumes the rebranding and retrofitting of Spirit’s fleet as JetBlue, introducing a superior onboard experience to Spirit customers, it noted.
The combined airline would have a fleet of 455 aircraft with 312 Airbus aircraft on order. The joint fleet would be one of the youngest and most fuel efficient in the industry, Hayes said.
“While JetBlue and Spirit are different in many ways, we also have much in common, including a focus on keeping our costs low so we can profitably expand and offer an attractive alternative to the dominant ‘Big Four’ airlines. We would conduct a full review of Spirit’s product offering, operational and customer technology, and talent pool to optimize the combined airline,” said Hayes.
The transaction would also allow JetBlue to grow in its focus cities like Los Angeles, Fort Lauderdale, Orlando, and San Juan, as well as in legacy hubs where the dominant carriers control with high fares, including Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta, and Miami.
The combination would introduce JetBlue for the first time to new destinations, including St. Louis; Memphis, Tenn.; Louisville, Ky., Atlantic City, N.J.; Myrtle Beach, S.C.; and four additional destinations in Colombia.
While JetBlue is the dominant carrier at the Luis Muñoz Marín International Airport (LMM) airport, where it has its own terminal, Spirit also has a significant presence there. Both carriers currently also fly into regional airports in Aguadilla and Ponce.
The execution of a definitive merger agreement between JetBlue and Spirit would be subject to approval by each company’s Board of Directors and completion of the transaction would be subject to customary closing conditions, including receipt of required regulatory approvals and approval of Spirit’s shareholders.