JetBlue Bids $3.6 Bln For Spirit In U.S. Low-Cost Carrier Battle – Reuters

A logo of low cost carrier Spirit Airlines is pictured on an Airbus plane in Colomiers near Toulouse, France, November 6, 2018. REUTERS/Regis Duvignau/File Photo

WASHINGTON, April 5 (Reuters) – JetBlue Airways (JBLU.O)said Tuesday it made an unsolicited $3.6 billion bid for Spirit Airlines (SAVE.N), potentially snarling merger plans between the ultra-low-cost carrier and Frontier Group Holdings (ULCC.O). read more

JetBlue offered $33 a share all cash, about 33% higher than Frontier’s offer of 1.9126 shares of stock and $2.13 in cash, which would value Spirit at $24.93 per share as of Tuesday’s closing price.

Shares of Spirit rose 22% to $26.92, their highest level since mid-February. Airline stocks have suffered over the last two years as air travel dropped dramatically during the COVID-19 pandemic.

JetBlue said the deal would make it a stronger competitor to the largest four U.S. airlines that control nearly 80% of U.S. passenger travel and boost operations in key markets like the northeast and Florida. It would operate Spirit under the JetBlue brand.

JetBlue, the sixth-largest U.S. airline, said the tie-up would position it “as the most compelling national low-fare challenger to the four large dominant U.S. carriers.”

The move comes as airlines face higher fuel and labor costs, and work to attract more leisure travelers, who have returned at a faster rate than business travelers since restrictions were relaxed.

The deal will get considerable scrutiny from the U.S. Justice Department because both (JetBlue and Spirit) are important discount carriers, said Andre Barlow of Doyle, Barlow and Mazard PLLC.

“I think the administration is concerned about consolidation that could lead to higher prices. This one impacts consumers, so I think it gets a tough look,” he said.

The Justice Department declined to comment.

The department filed an antitrust lawsuit against American Airlines (AAL.O) and JetBlue over their partnership, alleging it would lead to higher fares in busy Northeastern U.S. airports. It is unclear if JetBlue would seek to continue that partnership if it was successful in acquiring Spirit.

Frontier said it was “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.” American did not immediately comment.

JetBlue said the deal if completed is expected to deliver $600 million-$700 million in net annual synergies and that the combined airline is projected to have annual revenue of about $11.9 billion based on 2019 revenue.

Sprit’s 52-week high of $39.19 is $6 above the reported offer from JetBlue. Just before COVID lockdowns became widespread, Spirit shares traded around $45.

Spirit declined to comment beyond a written statement that it would review the offer.

Frontier said its Spirit deal “is in the best interest of consumers and shareholders and would deliver $1 billion in annual savings for consumers” and argued “significant East Coast overlap between JetBlue and Spirit would reduce competition and limit options for consumers.”

In February, Frontier and Spirit proposed a merger that would create the fifth-largest U.S. airline.

Spirit’s customer service has often faced criticism and the airline canceled 35% of its flights Monday amid weather issues.

“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both,” said JetBlue Chief Executive Officer Robin Hayes.

The Spirit-Frontier deal faced criticism from some lawmakers and public interest groups warned in March that a merger between the carriers “would destroy competition in the only competitive market segment of the highly consolidated airline industry.”

The proposed tie-ups come as the U.S. airline industry is grappling with volatility in travel due to COVID. At the same time, costs are soaring on a combination of sharply higher fuel prices and rising wages.

Reporting by David Shepardson and Diane Bartz in Washington, and Kannaki Deka in Bengaluru; Editing by Maju Samuel, Bernard Orr

Our Standards: The Thomson Reuters Trust Principles.