Spirit Airlines Rejects Improved JetBlue Bid in Favor of Frontier Merger

Skift grip

The Spirit has spoken. Frontier is its privileged partner, even after a more advantageous agreement with JetBlue.

Edward Russell

Spirit Airlines said monday it will continue to pursue a $2.9 billion merger with Frontier Airlines, turning down JetBlue Airways’ surprise offer because it largely believes the risk of doing the deal was too high.

JetBlue made a $3.6 billion counterbid on April 5 for Spirit that raised eyebrows in some aviation circles.

“We don’t believe that [Department of Justice] will be persuaded that JetBlue should be allowed to acquire Spirit in an anti-competitive move that would eliminate the largest [discount] carrier,” Spirit CEO Ted Christie said in a letter to the airline’s management team on Monday.

The rejection came even after JetBlue sweetened its offer on April 29. statement On Monday, the New York-based airline presented this offer which included a commitment to divest all of Spirit’s assets in Boston and New York as well as certain gates in Fort Lauderdale – a base for JetBlue and Spirit – in order to pass the rally. regulatory. He also offered a $200 million severance fee increase. However, ending JetBlue’s controversial alliance with American Airlines in the northeast rcame off the table despite the concerns raised by Spirit.

The financial terms of JetBlue’s offer of $33 per share for Spirit, which beats Frontier’s offer by an implied value of $25.83 per share, remained unchanged.

“By creating a national competitor to the Big 4 airlines, this transaction would provide significant benefits to customers, [and] superior value for shareholders of both airlines,” JetBlue CEO Robin Hayes said in a statement. “We are confident that we can close this transaction to bring lower rates and great service to more customers.”

American, Delta Air Lines, Southwest Airlines and United Airlines make up the American Big 4. They carried nearly 80% of all US domestic travelers in 2021, according to data from the US Bureau of Transport Statistics (BTS) via Cirium.

Wall Street analysts have argued that Frontier could emerge victorious in the bidding war for Spirit. Either the Denver-based low-cost airline gains some spirit – as the Takeover Goals Committee asserted – or it emerges as the only ultra-low-cost airline in the United States, which would constitute also an enviable position in the market.

Raymond James analyst Savanthi Syth wrote on Monday that with the decision of Spirit’s board of directors, Frontier’s offer must now be put to a shareholder vote. She noted that JetBlue still has a few options, including issuing a “formal proxy to put its offer to a side-by-side vote.”

A JetBlue-Spirit merger would create an airline with a share of over 8% of U.S. travelers, while a Frontier-Spirit merger would create one with a share of just under 8% based on 2021 numbers. , according to data from BTS.

A Frontier spokesperson declined to comment.

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