Spirit Airlines Rejects JetBlue Takeover Bid

Spirit Airlines Rejects JetBlue Takeover Bid

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There’s a major development when it comes to Spirit Airlines’ future. In February 2022 it was announced that Frontier Airlines intended to acquire Spirit Airlines. Then in April 2022, JetBlue Airways swooped in and also made a bid to acquire Spirit Airlines, in what the airline positioned as a superior proposal.

There’s now an update, as Spirit Airlines has rejected JetBlue’s proposal.

Spirit board rejects JetBlue’s merger offer

It has today been announced that Spirit’s board of directors has unanimously decided that JetBlue’s takeover offer does not constitute a “superior proposal.” The main reason for this determination is that Spirit has concerns about the transaction getting regulatory approval, so the transaction with Frontier represents the best opportunity to maximize value.

Spirit thinks that between JetBlue’s Northeast Alliance with American Airlines (which is already being reviewed by the DOJ), plus regulatory concerns about an ultra low cost carrier being brought “upmarket,” this deal being approved would be far from a sure bet.

Mac Gardener, the chairman of Spirit’s board of directors, wrote the following in a letter to JetBlue:

“Spirit continues to believe in the strategic rationale of the proposed merger with Frontier and is confident that it represents the best opportunity to maximize long-term shareholder value. After a thorough review and extensive dialogue with JetBlue, the Board determined that the JetBlue proposal involves an unacceptable level of closing risk that would be assumed by Spirit stockholders. We believe that our pending merger with Frontier will start an exciting new chapter for Spirit and will deliver many benefits to Spirit shareholders, Team Members and Guests.”

This means that Spirit and Frontier will continue to advance toward completing this transaction, which is expected to close in the second half of 2022. Of course this is subject to customary closing conditions, including the completion of ongoing regulatory reviews and approval by Spirit shareholders.

It looks like Spirit will be acquired by Frontier

JetBlue tried to up its takeover offer

Shortly after Spirit announced it would move forward with Frontier, JetBlue revealed that it had tried to up its offer. Note that Spirit rejected the updated offer, so even this wasn’t enough for the airline:

  • JetBlue offered a $200 million reverse break-up fee that would become payable to Spirit in the event that the JetBlue transaction was not consummated for antitrust reasons
  • JetBlue offered a remedy package that included the divestiture of all Spirit assets in New York and Boston so that JetBlue does not increase its presence in airports covered by the Northeast Alliance; this package would have also included gates and assets at other airports, including Fort Lauderdale

This was in addition to JetBlue offering an all-cash premium, which the airline argues offered a 47-52% premium to the value of the Frontier transaction.

JetBlue really wanted to acquire Spirit, it seems!

A Spirit & Frontier merger is better for consumers

From a consumer standpoint, I’m happy to see Spirit choosing to go with Frontier, as I don’t think JetBlue taking over Spirit would be good for consumers:

  • On the one hand, I feel bad for JetBlue, in that the carrier has struggled to grow and hasn’t been able to benefit from any consolidation in the industry, due to its unique positioning, and not being in the right place at the right time
  • On the other hand, Spirit and JetBlue are different enough so that I feel like a combined airline would have brought us the worst of both worlds
  • While Spirit and Frontier are both ultra low cost carriers, they largely operate in different markets, complement one another well, and ultimately have to keep fares low to compete with the legacies, which have low basic economy fares in many markets
I’m happy to see that JetBlue will remain independent

Bottom line

Spirit will be moving forward with the Frontier takeover bid, and will be rejecting JetBlue’s takeover bid. The primary reason that Spirit’s board doesn’t consider JetBlue’s offer to be superior is because Spirit has concerns about getting regulatory approval for that deal.

What do you make of Spirit moving forward with Frontier?

Conversations (20)
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  1. Jake Guest

    It was easy to see from the get go JetBlue's motive was to eliminate competition while the Frontier Spirit merger basically kept most routes intact and enhanced the merged carriers service. I had written Sprit CEO (don't know if it was ever received) of this exact concern. Hope the merger is route taken

  2. No Name Guest

    TBH - I think it would be interesting if B6 eventually merged with AS. Not necessarily good for consumers, but interesting.

    That would make AS+B6 strong on both coasts, in some of the most important markets in the country. They would still be weak in the Midwest though, but I feel like that might be B6's best long term option.

  3. CC Guest

    It may be possibly better for employees of Spirit if they get bought by Frontier. It will be worse if bought by jetBlue. From a customer perspective, a jetBlue buyout would be much better as it will put pressure on Frontier to include more services and focus less on the "pay for everything" model. A buyout by Frontier for customers is definitely worse as it will give Frontier zero competition at that level and will...

    It may be possibly better for employees of Spirit if they get bought by Frontier. It will be worse if bought by jetBlue. From a customer perspective, a jetBlue buyout would be much better as it will put pressure on Frontier to include more services and focus less on the "pay for everything" model. A buyout by Frontier for customers is definitely worse as it will give Frontier zero competition at that level and will put more pressure on other carriers to charge for everything. Having a larger ULCC will solidify it as a good option and others will follow. This is definitely not good for customers. Today Spirit and Frontier compete with each other. Once one is gone there will be no ULCC competition. This is bad for consumers. Prices will rise as will fees and even more charges for new items. There are already some hour-long flights operated by Frontier that are well north of $600 including none of the add ons. Already we saw AA strip lots of comforts from their planes just to be more like Frontier/Spirit. Prices haven't fallen, but services and amenities have. Any combination will be bad for all involved (except for the c-suite getting golden parachutes). The best option is stay as is. There is no reason to eliminate any one company, let alone a trend setter like Spirit.

  4. Jan Guest

    It’s ok. Who cares about failed takeovers and failing operations, TPG and OMAAT repeatedly says Jet Blue Mint is the best thing in the domestic skies.

  5. Creditian Guest

    Twitter Airlines will kneel down to money

  6. limerick Guest

    The DoJ should consider blocking B6 from merging with anyone. Their operation is a mess. Their management well over their skis. Mark my words...JetBlue is going to be acquired by AA through a SPAC, eventually.

    1. Tim Dunn Diamond

      given that AA's costs are much higher than B6', the notion that a merger between the two is foolish unless the intent is to remove even more capacity from the northeast. The reason why AA has had such a hard time competing with other airlines - esp. DL - in the NE is because AA's costs are so much higher.
      If the government were serious about increasing competition in the NE, it would dissolve...

      given that AA's costs are much higher than B6', the notion that a merger between the two is foolish unless the intent is to remove even more capacity from the northeast. The reason why AA has had such a hard time competing with other airlines - esp. DL - in the NE is because AA's costs are so much higher.
      If the government were serious about increasing competition in the NE, it would dissolve the provision that allows AA and B6 to swap slots at LGA and JFK and require that slots that AA cannot use be returned to the FAA for redistribution to airlines that want to add service. Given that the big 6 (AA, AS, B6, DL, UA and WN) all have decent access to NYC or have had the chance to do so, the ultra low cost carriers are the ones that have the potential to add more seats (they use planes w/ more seats) and price lower than the big 6.

    2. chasgoose Guest

      Well aside from the fact that the SEC is about to regulate SPACs out of existence, JetBlue is already a public company. SPACs are only used as an alternative to IPOs for taking private companies public.

  7. SMR Guest

    I do not see how there should be a single concern form the DOJ on either merger considering the size of these companies compared to how they compete with. What kind of scum would approve all those huge mergers any deny some small low cost carriers. In reality there are two major issues. Frontier and Spirit truly do compete.. I see ZERO consumer benefit. B6 and Spirit would be great.. offer consumers something better for...

    I do not see how there should be a single concern form the DOJ on either merger considering the size of these companies compared to how they compete with. What kind of scum would approve all those huge mergers any deny some small low cost carriers. In reality there are two major issues. Frontier and Spirit truly do compete.. I see ZERO consumer benefit. B6 and Spirit would be great.. offer consumers something better for a reasonable price and Frontier can compete against them with that big aircraft order. I do not see how regulatory approval is even a concern. B6 management should have never even talked with AA. This stupid NEA is so bad for the employees and even worse for the airline.

    1. Never In Doubt Guest

      "I do not see how regulatory approval is even a concern."

      I'm guessing there are often things you "do not see".

    2. Chase Guest

      You kind of miss the point of what JetBlue is aiming to do, and has EXPLICITLY stated. B6 would be getting rid of NK entirely, gutting its product and all the associated cost advantages therein. Like them or not, NK has a niche and purpose in the US aviation industry, along with Frontier. Speaking of which, F9 would actually be able to enhance and GROW the F9/NK product into a better scale that can compete...

      You kind of miss the point of what JetBlue is aiming to do, and has EXPLICITLY stated. B6 would be getting rid of NK entirely, gutting its product and all the associated cost advantages therein. Like them or not, NK has a niche and purpose in the US aviation industry, along with Frontier. Speaking of which, F9 would actually be able to enhance and GROW the F9/NK product into a better scale that can compete with other US carriers, B6 included. They may generally go after different segments of the passenger population than the majors, but NK and F9 have successfully been a massive headache to them, and brought the ability to travel to a far greater percentage of the US population.

      The DOJ has to look at the transaction to see if it harms or benefits the greatest percentage of the US population. The B6 one simply does not the way it is being currently structured.

  8. Chase Guest

    JetBlue has so many self-inflicted handicaps within its operation that it really should step back and focus on improving it’s entire operation before pursuing something as [stupid, yet] ambitious as this takeover. Pretty much EVERYTHING on the outside of the airplanes it operates (meaning hard and soft product) needs to be reworked in order for it to be seen as a legitimate contender in the market.

    1. chasgoose Guest

      Two of B6’s biggest issues are it’s lack of planes and pilots. They aren’t getting new planes for awhile based on their place in line with Airbus and there’s currently a big pilot shortage. Their interest in Spirit is mostly being able to quickly acquire more planes and pilots than they would otherwise be able to.

  9. Tim Dunn Diamond

    As many of us believed, JetBlue cannot have the Northeast Alliance agreement w. American and a merger with Spirit; the boards of both companies see it. B6' solution is to keep NK's shareholders waiting for a lengthy DOJ review on TWO major issues - the NEA and the NK merger - while F9 proposes a fairly straightforward merger review.
    Further, while B6 continues to push the NEA, the latest DOT data shows that the...

    As many of us believed, JetBlue cannot have the Northeast Alliance agreement w. American and a merger with Spirit; the boards of both companies see it. B6' solution is to keep NK's shareholders waiting for a lengthy DOJ review on TWO major issues - the NEA and the NK merger - while F9 proposes a fairly straightforward merger review.
    Further, while B6 continues to push the NEA, the latest DOT data shows that the operational performance gap between B6 and its competitors grows larger even as AA increases its focus on being on-time. With a 20 point gap between B6 and Delta on both a systemwide basis and in JFK, LGA and BOS, and DL also has much lower flight cancellation, better baggage handling, and consumer complaint ratios than either AA or B6, there is no reason any rational person would risk flying B6 in any form including in a partnership with AA. B6 management believed their finances would be better off running the operation at max capacity but that not only hasn't worked during the pandemic but as the airline industry recovers, B6 has to pull back capacity even as other airlines will see much better financial results.
    B6 is one of the few airlines that doesn't expect to be profitable in the 2nd quarter - a shocking admission of how badly B6 management has messed things up.
    And let's not forget that the DOJ could still win the case to require changes in the AA/B6 NEA so B6 could end up w/ less than what they have now PLUS what they hoped to have with NK.
    B6 is the strategic basketcase of the airline industry.

    1. DesertGhost Guest

      With all due respect, my only response to your first sentence has to be, "Prove it."

      You have no **proof** that the NEA and a Spirit/JetBlue merger, either separately or together, won't ultimately go forward. And I have no proof to the contrary. We're all entitled to our opinions, but we aren't entitled to make up our own "facts."

      While the DOJ could win its case against the NEA, it also could lose....

      With all due respect, my only response to your first sentence has to be, "Prove it."

      You have no **proof** that the NEA and a Spirit/JetBlue merger, either separately or together, won't ultimately go forward. And I have no proof to the contrary. We're all entitled to our opinions, but we aren't entitled to make up our own "facts."

      While the DOJ could win its case against the NEA, it also could lose. That's why both American and JetBlue seem to be making no effort to settle at this point. But, given history, brinksmanship is quite common in cases like these.

      I could be wrong, but I think you're hoping the NEA gets rejected because it's shown it can provide some serious competition to the "perfect airline" at JFK and LGA. The main competition at LGA, EWR, and JFK is among the legacies and JetBlue (at JFK), not ULCCs. The NEA lawsuit and potential ULCC/LCC mergers probably won't change that a whole bunch.

      It seems to me that Delta is more than capable of competing in New York. It's interesting that your comments routinely seem to suggest that you have little faith that it can. That's apparently why you seem to use DOT data as a weapon, not a tool.

    2. Tim Dunn Diamond

      When Spirit's board says that they doubt the ability of JetBlue to retain the NEA and acquire Spirit and B6' board "sweetens" the deal to specifically exclude parts of the NEA, it is only you that wants to believe that the NEA and a merger can coexist.

      The reason I am opposed to the NEA is because it is anti-competitive. The worst clause in the whole thing is for AA to transfer slots to...

      When Spirit's board says that they doubt the ability of JetBlue to retain the NEA and acquire Spirit and B6' board "sweetens" the deal to specifically exclude parts of the NEA, it is only you that wants to believe that the NEA and a merger can coexist.

      The reason I am opposed to the NEA is because it is anti-competitive. The worst clause in the whole thing is for AA to transfer slots to B6 when AA has demonstrated it can't use those slots; there are carriers including NK and F9 that will use those slots if AA cannot. Transferring them to B6 without giving other carriers an opportunity to use them is something that has never been allowed outside of a merger which the DOJ controls.
      Despite your inability to accept it, the NEA is anti-competitive ON SOME LEVELS because it contains provisions that only the DOJ has the authority to approve and the DOT instead approved the NEA. It is bad enough when companies collude among themselves but when the government can't even figure who is in charge, the uncertainty for business is HUGE.
      The fact that you try to turn EVERY COMMENT that finds legitimate criticism as either a death wish for AA or something to benefit DL shows your lack of objectivity - not mine.

  10. George Guest

    Ben, spirit and frontier overlap on 76 routes compared to spirit and jetblue overlapping on only 48

  11. Sharon Guest

    JetBlue is too late, yet again.

    Just like its service, its business strategy team is all over the place. IT should focus on increasing its performance on the routes it has perform becoming straddles with more debt.

    1. DCAWABN Guest

      As a consumer, I'm also confused on what B6 is trying to be. They have a very decent hard and soft product across their Y offering, and now a very competitive, albeit limited, TATL J offering. Plus the routes that have Mint have a great domestic F product - all compared against the US3. However, this is marred by their very limited network (comparatively) and their generally abysmal on-time performance. It's like one half of...

      As a consumer, I'm also confused on what B6 is trying to be. They have a very decent hard and soft product across their Y offering, and now a very competitive, albeit limited, TATL J offering. Plus the routes that have Mint have a great domestic F product - all compared against the US3. However, this is marred by their very limited network (comparatively) and their generally abysmal on-time performance. It's like one half of the company is actively trying to get B6 into a newly-formed US4 while the other half is trying to create a US version of Ryanair. It's one giant mess of an identity crisis. Unless I'm literally flying to FLL or BOS, I actively avoid them because it's a crap shoot.

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Tim Dunn Diamond

As many of us believed, JetBlue cannot have the Northeast Alliance agreement w. American and a merger with Spirit; the boards of both companies see it. B6' solution is to keep NK's shareholders waiting for a lengthy DOJ review on TWO major issues - the NEA and the NK merger - while F9 proposes a fairly straightforward merger review. Further, while B6 continues to push the NEA, the latest DOT data shows that the operational performance gap between B6 and its competitors grows larger even as AA increases its focus on being on-time. With a 20 point gap between B6 and Delta on both a systemwide basis and in JFK, LGA and BOS, and DL also has much lower flight cancellation, better baggage handling, and consumer complaint ratios than either AA or B6, there is no reason any rational person would risk flying B6 in any form including in a partnership with AA. B6 management believed their finances would be better off running the operation at max capacity but that not only hasn't worked during the pandemic but as the airline industry recovers, B6 has to pull back capacity even as other airlines will see much better financial results. B6 is one of the few airlines that doesn't expect to be profitable in the 2nd quarter - a shocking admission of how badly B6 management has messed things up. And let's not forget that the DOJ could still win the case to require changes in the AA/B6 NEA so B6 could end up w/ less than what they have now PLUS what they hoped to have with NK. B6 is the strategic basketcase of the airline industry.

2
chasgoose Guest

Well aside from the fact that the SEC is about to regulate SPACs out of existence, JetBlue is already a public company. SPACs are only used as an alternative to IPOs for taking private companies public.

1
Chase Guest

You kind of miss the point of what JetBlue is aiming to do, and has EXPLICITLY stated. B6 would be getting rid of NK entirely, gutting its product and all the associated cost advantages therein. Like them or not, NK has a niche and purpose in the US aviation industry, along with Frontier. Speaking of which, F9 would actually be able to enhance and GROW the F9/NK product into a better scale that can compete with other US carriers, B6 included. They may generally go after different segments of the passenger population than the majors, but NK and F9 have successfully been a massive headache to them, and brought the ability to travel to a far greater percentage of the US population. The DOJ has to look at the transaction to see if it harms or benefits the greatest percentage of the US population. The B6 one simply does not the way it is being currently structured.

1
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