May 19, 2022

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JetBlue makes a bid to Spirit in a bid to block the deal with Frontier

JetBlue makes a bid to Spirit in a bid to block the deal with Frontier
JetBlue’s cash offer is about 33% more than the value of Frontier’s stock and cash offer for Spirit. Such a deal would prevent Frontier and Spirit combined from leapfrogging JetBlue to become the fifth largest airline in the country after the four airlines – American (AAL)And the United (UAL)And the delta (DA) And the Southwest (love) – That among them more than 80% of the country’s air traffic.

“The combination of the two companies will position JetBlue as the most compelling low-fare competitor to the dominant major US airlines by accelerating JetBlue’s growth,” JetBlue said in its statement.

Spirit said it would “work with its financial and legal advisors to evaluate the JetBlue proposal and pursue the course of action it determines to be in the best interest of Spirit and its shareholders.”

For its part, Frontier defended its offer, calling it the best deal for travelers and shareholders.

“Together, Spirit and Frontier will provide $1 billion in annual savings to consumers and deliver more ultra-low fares to more destinations across the country, creating an ultra-low-cost US airline,” Frontier said, adding that the merger would provide “shareholders” with upside potential. significant to the merged company as a result of the mergers.”

Both Spirit and Frontier as they are known in the industry operate as ultra-low-cost carriers, with very low base rates and additional charges for anything else a passenger needs, including carry-on baggage.

They rely more on leisure travelers looking for deals, and they carry fewer business travelers than their larger competitors. Business travel has also recovered from the epidemic much slower than hiking travelSpirit and Frontier rebounded faster than its larger competitors.

While passengers may like to view the lower fares from Spirit and Frontier, they generally give the airlines poor customer satisfaction scores.

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Spirit had the highest number of passenger complaints in 2021, with 11.5 complaints per 100,000 passengers, according to statistics maintained by the US Department of Transportation. JetBlue had the second highest number of complaints on this basis with 6.4, but that’s down 43% from the previous year. Frontier ranked third in the industry with 5.8. In 2020, Frontier had the worst complaints rate when it registered 49.3 complaints per 100,000 customers.

Frontier and Spirit also had the industry Worst customer satisfaction ratings For 2021, according to the US Customer Satisfaction Index, while JetBlue was ranked third best in that indicator.

“Customers don’t have to choose between a low price and a great experience, and JetBlue has shown that it is possible to have both,” said Robin Hayes, CEO of JetBlue.

The US aviation industry has been reshaped by mergers in the past 25 years. Today’s four largest airlines were formed from a series of mergers Among the 10 airlines. If JetBlue or Frontier ends up with Spirit, it would be the first airline merger in the US since then Alaska Airlines buys Virgin America in 2016.
However, the Biden administration has taken a more hardline stance regarding Antitrust implications of corporate mergers and the need to protect competition in order to benefit consumers. have even File a lawsuit to stop the alliance Between JetBlue and American airlines are allowed to book passengers on each other’s flights, although this is not a complete merger.

Frontier played a role in the case, saying that since only 18% of the routes operated by Frontier or Spirit are operated by both carriers, its deal would be much better relative to the airlines’ competition. I argued that combining JetBlue-Spirit would reduce competition and lead to higher prices.

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“It is surprising that JetBlue is considering such a merger at this time given that the Department of Justice is suing to block its suspended alliance with American Airlines,” Frontier said.

JetBlue stock Soul (save) And the border (FRNT) All were slightly lower in after-hours trading after the announcement.