JetBlue & Spirit Terminate Merger Agreement: What's Next?

Before anyone starts complaining, let's not forget the internal JetBlue memo that stated it would raise prices on Spirit routes by 30 to 40 percent once the deal closed. "Save the consumer hundreds of millions of dollars" . . . yeah, right.

I wonder if a Spirit-Frontier deal would also be viewed as anti-competitive as many markets could end up with just one LCC/ULCC option that could dictate prices. Avelo, Sun Country and Allegiant really don't compete with Spirit or Frontier head-to-hear, their networks cover markets/niches that Spirit and Frontier largely don't (smaller markets for Avelo and Allegiant and MSP for Sun Country).

@ Lee -- Though in fairness, it's not really an apples-to-apples comparison. Spirit fares include virtually nothing, while JetBlue fares include quite a bit. The fares are just bundled differently.

@ dx -- The argument could definitely be made, though I don't think the DOJ would challenge it in the same way.

I understand so many of our antitrust laws are based around the Sherman Act, but that has never made much sense to me. You just need to prove that consumers in a single market would be harmed, rather than looking at the bigger picture.

I don't think there has been any airline merger ever where consumers in a single market weren't harmed. I mean, if you look at the Alaska and Hawaiian merger, it seems like a guarantee that fares between some markets served by both Alaska and Hawaii would increase, since a competitor would be eliminated.

If the DOJ does choose to challenge a merger, odds are good that it will be successful. The question is whether the DOJ would bother challenging it. Given the current market dynamics, I have to think that the DOJ wouldn't consider doing that.

30-40% of $29 🙂

Let's face it Spirit will never make money again on their current fare structure. That is nice that you as the customer get to ride around below the airlines cost but it is not sustainable. Airfare is ridiculously cheap considering you can still get transcons for $99 each way if you book ahead..same price as 2001. Jetblue would have been a much bigger disruptor if they merged with Spirit. Would have kept DL and UA in check in NY.. AA in check in Florida and Texas and I could have seen expansion big time on the west coast and lots more connecting traffic. Now you have two airlines that may or may not survice on their own. Gov't had no business stopping two smaller airlines from becoming 1 when theye still would be the smallest of the major airlines outside of maybe Alaska.

So noted. But, in terms of on-time/cancel rate, they would have made a perfect match.

Bloomberg’s default risk model is currently showing a 20% chance of default in the next year. Moody’s and S&P have their bonds rated Caa2/CCC+ so also on the verge of bankruptcy. This could happen sooner than later.

Frontier buying spirit is a no-brainer. They will get national scale, route rationalization, very significant cost savings from things like eliminating a headquarters, cutting back on fleet growth, etc. The US market needs a national ULCC and this will give us one. DOJ is the wildcard, but perhaps two ULCCs becoming a more viable national carrier doesn't raise anti-trust in the way Jetblue buying (and eliminating) Spirit would have.

Frontier and Spirit will likely try to hook up. JetBlue will wait for a new administration and a possible future hook up with AS/HA. Or will try to become a niche player among the US4.

neither NK or B6 is in any better or worse shape right now.
B6 wasn't profitable and isn't expected to be any time soon.
Both have liquidity.
They both have to figure out how to survive and thrive on their own.
Trying to merge unhealthy companies never works; the notion that either can merge with anyone right now is foolish.
Either one is liquidated and the rules of what can be acquired changes but let's also not inflate any chances that any of the big 4 and esp. AA or UA will have in acquiring any assets from B6 or NK with its much less valuable asset package.

B6 should have never tried to interfere with F9/NK merger proposal but the long term impact might be that all 3 companies are worse off now with F9 the first to start the process of figuring out how to survive on their own, giving them an advantage over B6 and NK.

I have a strong feeling, American is still looking for opportunity here and come November if the Republicans take back the administration, they will go for another push for B6 Alliance!

Always maintained that NK+F9 made far more sense than NK+B6.

The former creatures an ULCC with national scope, to take on both WN and the Legacies.

The latter created a larger fleet for JetBlue, and airline that still doesn't have a clue what it actually is or wishes to be, nearly a quarter century after its creation.

creates*

DOJ would have to challenge the merger of NK and F9 just based upon their whole argument to challenge the B6 and NK merger.

Um, no they wouldn't.

Particularly seeing as a big part of their argument was that the previous merger attempt would've removed a ULCC... which wouldn't be happening with NK+F9.

jetblue fares really don't include much though. JetBlue's base fare "blue basic" does not include checked baggage, carry-on bag, itinerary changes, cancelation, or seat selection. Additionally, they earn miles at 1/3 the standard rate and board dead last. I guess you get a cup of water for free, but otherwise I am not actually sure there is anything included in JetBlue's base fares over Spirit's

In a Spirit/Frontier merger they could claim they'd be able to drive fares down even more because of economies of scale. Whether that actually ends up happening I wouldn't bet money on.

I never book Spirit or Frontier because I don't know how much I'll end up paying in total until I check the bag prices from their website. When I look for a flight, I look for dozens of options at a time and I don't wanna spend a few minutes per each flight option to check the bag prices on Spirit/Frontier. It's not a flat rate, and the prices vary significantly by the route/date/time. This uncertainty totally turns me away.
I might fly them if they change all the fees to flat rates or if they allow free carry-ons to everyone.

I believe Spirit will come to the realization that their business model is not sustainable and attempt to change their model to one that is. The following statement seems to suggest just that.
“we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the Guest experience”

Alaska should buy them too and bring them into OneWorld!

But yes, I would rather AA have a win here too. The NE alliance was competitive and good for consumers all along. Ridiculous that JetBlue backed out of defending it to focus on the (ridiculous from the start) Spirit takeover.

LOL, hc, comparing an airlines basic economy to another airlines entire business model is a false equivalency. Also, even "if" a customer is only earning 1/3rd of miles, at least that airline has a fungible miles currency, whereas the other has none to speak of, and on many other airlines the "basic" fare earns zilcho.

What do jetBlue fares include that Spirit don't, exactly? Basic economy on jetBlue doesn't include a carry on bag or seat assignment, and these fares are more expensive than Spirit fares.

No chance that they make a significant business model change if they remain independent.

Clearly the answer is B6 jumps into bed with AS - an excellent West Coast presence coupled with B6's NE-centric presence will result in an airline that enables basically bugger all in terms of uplift for anyone! /s

I dont think its that ridiculous of a comparison. Blue basic is hardly some trivial part of Jetblue's business. When you search fares on Google Flights, Expedia, SkyScanner, etc. the price that shows up is always the Blue Basic Fare class. When jetblue touts their low fares and does marketing, the prices they're advertising are always going to be the blue basic fare. I've read anecdotally industry wide that half or less do not go for the fare class upsell in cases where basic economy is offered. Buying up to Blue from Blue basic is regularly around $100 in my experience and doesn't even include checked bag, big front seat, priority boarding, etc. I've never flown spirit so dont know much about its loyalty program, but it says "Members get up to 12 points on every dollar spent, all the way up to 20 points per dollar spent. With point redemptions starting at 2,500, get to your next reward flight faster than ever." seems like same operating principle as trueblue, no?

The same goes for UA, DL, or AA basic econ that doesn't include carryons, seat selection, change ticket option etc. for the lowest adevrtised fares.

At least JB has free WiFi.

Where does JetBlue fit in? They are not one of the four legacy airlines but not a discount or cheap airline, though they used to be considered so although they really were not.

I believe AA and B6 will restart there Northest Alliance as the judge in the merger case has reopened the door to that possibility.

Fearful for JetBlue. Carl Icahn is a predator and a snake. He tears companies apart, never builds. What is JetBlue thinking??