JetBlue bids for Spirit Airlines, complicating Frontier merger

JetBlue offers a better deal than Frontier, but will they be a better match for Spirit?

JetBlue submits a $3.6 billion all-cash bid.

JetBlue made an unsolicited bid of $3.6 billion for the purchase of Spirit Airlines yesterday, only two months after Spirit and Frontier agreed to merge to form a low-cost airline giant. The Airline has said its board is evaluating JetBlue’s proposal and will “pursue the course of action it determines to be the best in the interests of Spirit and its stockholders.”

With airlines still feeling the bite of the pandemic years, consolidation offers could help them stay competitive. Now that restrictions have been lifted, interest in leisure travel is quickly increasing, and airlines are scrambling to hire pilots and crew to meet demand. The combination of Spirit and Frontier into a single low-cost carrier would’ve made them the fifth-largest airline in the US.

JetBlue currently stands in the sixth position, but is hoping this new deal will help them steal the coveted fifth spot from Frontier. A series of airline consolidations in the noughties left four major airlines controlling almost 80% of the US market. These megacarriers own around 1000 aircraft each, compared to the 270 and 157 owned by JetBlue and Spirit, respectively. These mergers may be the only way for an airline to compete with the big four “legacy” carriers.

Frontier A319 moments before landing. @ Andres Porco / Travel RadarTrading in Spirit shares was halted early yesterday as the stock shot up by 22% to $26.92. JetBlue has offered $33 a share in their all-cash bid, trumping Frontier’s offer of 1.9126 shares of stock and $2.13 billion cash by over 33%. However, a high cash offer is only one factor; Spirit will also have to consider how compatible the two airlines are.

A good match for Spirit?

The Frontier-Spirit merger seemed a natural pairing, with both airlines operating a similar business model, but can the same be said of JetBlue? Spirit and Frontier are ultra-low-cost carriers and are hoping that pooling their resources will help them to reduce their airfares further. On the other hand, JetBlue targets a different demographic, but CEO Robin Hayes doesn’t think this will be an issue:

“We can all agree that Spirit has a very different brand and product than JetBlue, and so at first glance, you may not think we’d make a great pair. However, when you dig deeper, you’ll realize we could be a perfect match. After all, our strong belief has always been that Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue is the only airline that offers both.”

And perhaps he has a point,; Spirit and Frontier only operate aircraft in the A320 family, which also makes up the majority of JetBlue’s fleet. Spirit also have its headquarters in Florida, a key market for JetBlue. However, Frontier warns that this could be bad for customers, noting that “the significant East Coast overlap between JetBlue and Spirit would reduce competition and limit options for consumers,”. Adding:

“It is surprising that JetBlue would consider such a merger at this time given that the Department of Justice is currently suing to block their pending alliance with American Airlines.”

referencing the Department of Justice (DoJ) antitrust lawsuit against JetBlue. The case will determine whether JetBlue’s alliance with American Airlines breaches US monopoly laws. Both the DoJ and American have declined to comment on the latest offer on Spirit.

What are your thoughts on the potential JetBlue-Spirit deal? Let us know in the comments below!