Frontier Ups Bid For Spirit, Fends Off JetBlue

Frontier Ups Bid For Spirit, Fends Off JetBlue

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In February 2022 it was announced that Frontier intended to acquire Spirit. Then in April 2022, JetBlue swooped in and also made a bid to acquire Spirit, in what the airline positioned as a superior proposal. Spirit ended up rejecting JetBlue’s takeover bid, not because the offer wasn’t better (in theory), but rather because it provided more uncertainty.

In the weeks since, we’ve seen JetBlue and Frontier continue to up their offers to acquire Spirit, and we’ve just seen the latest such move from Frontier.

Frontier increases offer to acquire Spirit

Spirit Airlines and Frontier Airlines have announced the signing of a second amendment to the previously announced merger agreement. Both the Spirit and Frontier board of directors unanimously recommend that shareholders vote for these offers.

Under the terms of this updated agreement:

  • Frontier is offering $4.13 per Spirit share and 1.9126 shares of Frontier; Frontier’s stock closed at $10.54 on Friday, so that’s an offer of $24.49 at current prices
  • Frontier is increasing its reverse termination fee to $350 million, in the event that the merger isn’t approved for antitrust reasons

For context, JetBlue, meanwhile, is offering $33.50 per Spirit share, plus a $350 million reverse termination fee in the event that the merger isn’t approved for antitrust reasons. It’s a significantly better offer on paper. However, both Frontier and Spirit argue that a takeover from JetBlue would be much more likely to get regulatory scrutiny, and that odds of that deal closing aren’t great.

Frontier & JetBlue both want to buy Spirit

Are antitrust concerns warranted?

A few thoughts on this situation:

  • It seems pretty clear that Spirit’s board wants a Frontier takeover to happen, rather than a JetBlue takeover to happen
  • It seems to me like JetBlue is offering to way overpay for Spirit, and I’m not exactly sure why; I get that JetBlue sees this as a major opportunity for growth, and JetBlue is scared of being “left out” in industry consolidation again, but the two airlines just don’t seem like a good fit
  • Frontier and Spirit seem to be on the same page about claiming that a merger between those two airlines would get no real regulatory scrutiny, while a merger between Frontier and JetBlue wouldn’t be approved; JetBlue disagrees, of course

On some level I can’t help but wonder about the underlying assumptions about which merger would be approved, and which wouldn’t:

  • Is approval of a merger between two of the country’s biggest ultra low cost carrier really a sure bet? The combined airline would lead to even less competition among ultra low cost carriers, and it’s not out of the question that this could lead to higher fares
  • The question of whether a merger between JetBlue and Spirit would be approved seems to come down to how many concessions JetBlue would be willing to make, probably regarding the Northeast Alliance with American, and maybe regarding slots and gates at some key airports; I feel like JetBlue is all-in on a Spirit merger, so I could see JetBlue making those necessary concessions (making this even worse of a deal for JetBlue, but that’s a different story)

Don’t get me wrong, as a consumer I’d rather see a deal between Frontier and Spirit than a deal between JetBlue and Spirit. That’s simply because JetBlue has a unique product offering, and I don’t think that would be maintained to that level with a combined airline.

But I just don’t completely agree that a merger between Spirit and Frontier is a sure bet, while a merger between Spirit and JetBlue is sure to fail. We’ll see how this all plays out in the coming week, as a shareholder vote is scheduled to take place on June 30, 2022.

JetBlue has a pretty differentiated product

Bottom line

Frontier has increased its offer to acquire Spirit. Frontier is now offering ~$24.50 per Spirit share (based on current prices), which still falls short of the $33.50 being offered by JetBlue. The boards of both Spirit and Frontier are recommending that shareholders vote in favor of this deal.

The argument is that the JetBlue deal is much less likely to be approved by regulators. I’m curious to see how this all plays out. Assuming the vote doesn’t get pushed back again, shareholders will be voting on this on June 30.

Do you think the Spirit & Frontier deal will get approved?

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  1. Randy Gold

    Looks like Zachs jumped the gun in reporting the Frontier offer was completed. Not sure if Zachs had inside information in reporting. So now back to July 8th.

  2. Randy Gold

    Spirit sticks with its offer from Frontier. Rejects JetBlue

  3. Leigh Guest

    This is just armchair discussion.

  4. Daniel Guest

    No way JetBlue will be operating “spirit airlines” under a different operation.

    I think a lot of people are missing the point of this but out from jetblues POV. They want to acquire their planes, pilots, and airport slots. For JetBlue to buy new planes, hire/train pilots, and apply for airport slots will be a lot more costly than buying out an airline. So for jetblue fans who are afraid they’re losing the JetBlue touch, I wouldn’t worry too much.

  5. Bernardo Ng Guest

    Stop saying JetBlue wants spirits’ aircraft and pilots. Y’all no nothing about this merge if that’s what you think it’s about. JetBlue wants spirit for one reason only and that’s the same reason why JetBlue wanted virgin american, and same reason why Alaska airline wanted and bought virgin American, To gain greater access to California. More specifically, LAX and SFO. The two hubs virgin America had. Period. Now spirit is not a perfect product either...

    Stop saying JetBlue wants spirits’ aircraft and pilots. Y’all no nothing about this merge if that’s what you think it’s about. JetBlue wants spirit for one reason only and that’s the same reason why JetBlue wanted virgin american, and same reason why Alaska airline wanted and bought virgin American, To gain greater access to California. More specifically, LAX and SFO. The two hubs virgin America had. Period. Now spirit is not a perfect product either as they only fly to Los an angeles and Oakland instead of San Francisco but beggars can’t be choosers. But yah it’s got nothing to do with planes or pilots and I don’t think even Ben has realized this.

    1. Never In Doubt Guest

      Stop saying such nonsense.

      Jet Blue can't hire pilots fast enough, or buy planes fast enough to grow the way it wants.

      Yes, slots in some cities are part of the reason for the deal, but not at OAK, which isn't capacity controlled so there's no need to buy an airline to get more slots. And Spirit flies to all of 7 cities from OAK, hardly a giant position.

  6. rforrest New Member

    So go with the higher JeBlue offer and collect the $350M if it does not go through, then go back to Frontier.

  7. Frank Guest

    I think JetBlue cares more about Spirit’s aircraft than people realize. They both fly airbus 320s and JetBlue’s fleet is old. By acquiring spirit they’re upgrading there fleet significantly in the process and instantly, instead of waiting years for new planes to arrive. This would cut their operating costs significantly given the current environment.

    Frontier is also an airbus customer, us a relatively new fleet so that’s not a huge focus. There’s an argument to...

    I think JetBlue cares more about Spirit’s aircraft than people realize. They both fly airbus 320s and JetBlue’s fleet is old. By acquiring spirit they’re upgrading there fleet significantly in the process and instantly, instead of waiting years for new planes to arrive. This would cut their operating costs significantly given the current environment.

    Frontier is also an airbus customer, us a relatively new fleet so that’s not a huge focus. There’s an argument to be made that because frontier and spirit are bother ultra low cost model, them merging is actually more impactful than a JetBlue/Spirit.

    The suggestion for JetBlue and Alaska to merge would seem logical in terms of business model but Alaska is working to move back to all Boeing and the Virgin merger hasn’t gone all that great.

    1. Bernardo Ng Guest

      JetBlue wants spirit to access Los Angeles. Plain and simple. Just Look at the virgin American and Alaska airlines merge. And how JetBlue missed out on that.

  8. TravelBlerd Guest

    I think this started out as a cheap way for JetBlue to obtain pilots and planes but at this point the financials are not making sense from JetBlue's perspective. I think at this point JetBlue is bidding up the price so that Frontier would be put in pretty bad financial situation after the merger.

    1. Bernardo Ng Guest

      Has nothing to do with planes and pilots and everything to do with California and Los Angeles.

    2. TravelBlerd Guest

      You really can't have that for a justification considering Spirit doesn't have a presents at SFO and minimal presents at LAX.

    3. J. Smie Guest

      Spirit and Frontier have minimal service to SFO so I don't see how that is a factor. As for LAX, Spirit is quite small there, and Frontier actually moved to BUR, which is dominated by Southwest and Avelo. No West Coast strategy at either airline right now.

  9. Mantis Guest

    I think the reasoning is that spirit and frontier don't compete much head to head in individual markets, as Spirit is primarily east coast and frontier western us. JetBlue competes more head to head against Spirit. So I agree that the frontier/spirit merger is more likely to be approved.

  10. Randy Gold

    Spirit is building a new corporate headquarters in Fort Lauderdale (actually Dania Beach) just below the airport - next to the new Marriott FLL Airport, in the new Dania Point shopping complex. I wonder want will happen to that.

    1. OCD Thinkin Member

      JetBlue has offices in the Fort Lauderdale area too.

  11. Pamela Guest

    Spirit and frontier is on bullcrap is only beneficial to them not the consumers We still will have to pay for a carry on that’s why I don’t do either airline.I rather go on a airline where you get a free carry on last time I rode frontier airlines I was charged $ one hundred dollars for carryons I decided to have luggage checked the agency charged me sixtynine more dollars. Which after I got...

    Spirit and frontier is on bullcrap is only beneficial to them not the consumers We still will have to pay for a carry on that’s why I don’t do either airline.I rather go on a airline where you get a free carry on last time I rode frontier airlines I was charged $ one hundred dollars for carryons I decided to have luggage checked the agency charged me sixtynine more dollars. Which after I got home I called corporate they gave me the $69dollars back my opinion they are thieves

  12. Sharon Guest

    JetBlue and Spirit merger would be excellent for JetBlue which is the most poorly managed airlines in the industry.

    This vote comes down to the institutional owners who have greatest voting power (vanguard, state street). JetBlue would remove thousands of seats from the market daily if the merger is approved. Devastating for competition.

    Frontier and spirit will be most beneficial to consumers.

    1. OCD Thinkin Member

      I don't understand what you mean by a JetBlue Spirit merger would 'remove thousands of seats from the market daily'. Would you help me grasp what you mean?

    2. Sharon Guest

      If JetBlue would retrofit the spirit aircraft, available seats in the market would instantly decrease.

      JetBlue a320 seats 162. Spirit seats 186. That’s a net decrease of 24 seats per flight. Thus a JetBlue merger would literally mean less seats in a market.

  13. JamesW Guest

    As for me, I’m against the JetBlue idea because I don’t want to be stuck with Spirit-level passengers on my JetBlue flights.

    There’s a reason the internet has a “People of Walmart” meme but not a “People of Target” meme, if you catch my drift.

    1. Eve Guest

      I personally don’t like the idea of JetBlue and Spirit merging too.

      But I don’t think your example of Walmart and Target is fair. Whenever I live in US, I normally shop from Whole Foods, Jewel Osco or Trader Joe but when I need very large stacks of some common food, I go to Walmart and when I need bunch of water bottles or some diet cola, i go to Target. Both exactly feel the same to me.

    2. Fb Guest

      Yeah I do JamesW
      Your well aware too I C.

    3. Never In Doubt Guest

      Not great at critical thinking are you?

      Jet Blue wants to buy Spirit for its planes, pilots and slots. They’ll effectively shut it down and turn it all into Jet Blue.

      Nothing about that plan is going to put “Spirit-level” passengers on Jet Blue.

      If you’re going to play an elitist on the internet, don’t be an idiot too.

    4. Bernardo Ng Guest

      JetBlue wants spirit for its slots and gates in Los Angeles not their planes.

  14. SMR Guest

    As a consumer you want NK and F9 ? Mark my word if Jetblue does not get Spirit... you won't be flying on JetBlue for much longer.

  15. SMR Guest

    Tell me one reason why anyone would deny b6 and NK to merge. All other major airlines got to merge and they are much bigger players. They closed hubs , decreased service. JetBlue and Spirit would combine for less then 9% market share. We all know Frontier and Spirit are led by Indigo. A scummy company. This would hurt JetBlue and the consumer very badly if we let them destroy this. Nothing is worse then...

    Tell me one reason why anyone would deny b6 and NK to merge. All other major airlines got to merge and they are much bigger players. They closed hubs , decreased service. JetBlue and Spirit would combine for less then 9% market share. We all know Frontier and Spirit are led by Indigo. A scummy company. This would hurt JetBlue and the consumer very badly if we let them destroy this. Nothing is worse then Ted Christie. For pilots and customers alike. A huge Spirit is very bad. You can say goodbye to JetBlue at FLL if this happens. Spirit and Frontier will kick out mid priced competition then raise prices.

  16. ConcordeBoy Diamond

    Where as all this energy from JetBlue when Virgin America was on the table?

    They could have gone on to build a significant hub in one of the most lucrative markets in the country (SFO) with a backup hub at LAX (like everyone else has) and it would've completely changed the dynamic of their east coast centric ops.

    Granted, they'd still then need to discover that the Midwest exists... but still.

    1. shza Member

      Seriously. I so wish that had happened instead of VA getting swallowed by mom-and-pop, nice-but-crappy Alaska. I stuck with it for ~5 years, but I don't have to spend my own money for transnational biz class when traveling for work and Alaska's lack of a premium product (and even tearing out the better old VA seats) on premium routes eventually killed it for me once they started canceling flights just like the generics. I'm (unhappily)...

      Seriously. I so wish that had happened instead of VA getting swallowed by mom-and-pop, nice-but-crappy Alaska. I stuck with it for ~5 years, but I don't have to spend my own money for transnational biz class when traveling for work and Alaska's lack of a premium product (and even tearing out the better old VA seats) on premium routes eventually killed it for me once they started canceling flights just like the generics. I'm (unhappily) back to United starting this year. Definitely would have stuck with a B6/VA merged brand with Mint.

      On this deal -- I sort of couldn't care less. But on a short flight (e.g., OAK-LAS), Spirit with a ~$30 upcharge for the "big front seat" is a good deal, even with a carry-on. Frontier seems like the worst brand of them all.

  17. BKAloha Guest

    Why can't all three merge and call it day? JetBlue is so pressed to merge, I feel bad for them.

    1. Bernardo Ng Guest

      That would be a downgrade to JetBlue

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JamesW Guest

As for me, I’m against the JetBlue idea because I don’t want to be stuck with Spirit-level passengers on my JetBlue flights. There’s a reason the internet has a “People of Walmart” meme but not a “People of Target” meme, if you catch my drift.

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Never In Doubt Guest

Not great at critical thinking are you? Jet Blue wants to buy Spirit for its planes, pilots and slots. They’ll effectively shut it down and turn it all into Jet Blue. Nothing about that plan is going to put “Spirit-level” passengers on Jet Blue. If you’re going to play an elitist on the internet, don’t be an idiot too.

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Max Guest

JetBlue should better merge with Alaska.

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