JetBlue offers Spirit Airlines in the midst of Frontier negotiations

JetBlue Airways made an unsolicited cash bid in a proposed $ 3.6 billion deal to buy a low-cost airline Spirit Airlines, Spirit announced Tuesday.

JetBlue is seeking to acquire Spirits’ ordinary shares for $ 33 per share, Spirit said, adding that its board of directors will evaluate the proposal and pursue the best interests of Spirits and its shareholders.

The combination “would place JetBlue as the most compelling national low-cost challenger to the four major dominant U.S. carriers by accelerating JetBlue’s growth,” JetBlue said in a statement, saying it would get Delta Air Lines, American Airlines, United Airlines and Southwest Airlines to lower prices more than they would when ultra-low-cost airlines enter new markets.

The announcement comes amid a time of change for the aviation industry, which saw interest in travel plummet at the start of the coronavirus pandemic. Flights have since returned to near-pre-pandemic levels, though several airlines have been caught unprepared by the rising demand in recent months.

Tuesday’s bid introduces a significant factor in an ongoing merger effort involving Spirit and the low-cost carrier Frontier Airlines, which would create the country’s fifth-largest carrier.

JetBlue said the proposed deal would be “superior” to Spirit’s existing deal with Frontier, representing a 50 percent premium over Spirit’s recent closing price. Any agreement will require approval from federal regulators.

In a statement in response to JetBlue’s bid, Frontier said the latest offer “would lead to more expensive travel for consumers.” Frontier cited “significant east coast overlap between JetBlue and Spirit,” which it said would reduce competition and consumer opportunities.

Frontier, Spirit announces merger to create fifth-largest U.S. airline

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

Last year, the Department of Justice filed a lawsuit challenging an alliance between American and JetBlue Airways that allows airlines to sell each other’s seats on select flights in the Northeast.

Under the Spirit and Frontier agreement, Spirit shareholders would receive 1.9126 shares in Frontier shares plus $ 2.13 in cash for each existing Spirit share they own, according to Spirit. Frontier said the deal has “significant upside potential” for shareholders of both companies.

Spirit said it would respond to JetBlue “in due course.”

JetBlue said their offer would allow the airline to double its “long-term commitment to Florida,” in addition to growing in Los Angeles, Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta and San Juan, Puerto Rico. The larger JetBlue would also fly to St. Louis, Memphis, Louisville, Atlantic City and Myrtle Beach, SC, for the first time, stood there.

David Dague, an aerospace industry expert and principal at management consulting firm Arthur D. Little, said the size of the JetBlue-Spirit combination would dwarf the size of the Frontier-Spirit Union. “The combination of the two is a much more competitive entity compared to the big four,” Dague said, adding that it would also allow JetBlue to offer more generous terms to Spirits shareholders.

JetBlue and Spirit would also become leading players in some of the strongest leisure markets, including trips to the Caribbean and Florida that lift airlines from the depths of the pandemic, Dague said. They would become the largest U.S. carrier going to the Caribbean and the second largest in Florida, Dague said.

Buying Spirit would also bring a new supply of pilots to JetBlue, addressing a nationwide shortage, Dague said. The merger “makes them competitive in this industry because trying to secure enough pilots will be something that all airlines in the United States are going to struggle with,” he said.

Any merger among the country’s airlines would be the first since Alaska Airlines announced it would acquire Virgin America in 2016. Prior to that, American Airlines and US Airways announced their intention to combine operations in 2013, creating the world’s largest airline.

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