JetBlue makes offer for Spirit Airlines, could spark bid war

Apr 5, 2022, 1:46 PM | Updated: Apr 6, 2022, 12:13 pm

JetBlue Airways has offered to buy Spirit Airlines for about $3.6 billion and break up a plan for Spirit to merge with rival budget carrier Frontier Airlines.

Spirit said Tuesday that it received an unsolicited bid from JetBlue. It said its board will evaluate the offer and decide what’s best for shareholders.

In a statement, New York-based JetBlue said combining with Spirit would lead to lower fares by creating “the most compelling national low-fare challenger” to the nation’s four biggest airlines: American, Delta, United and Southwest.

Frontier used that same argument in February to support its proposed acquisition of Spirit, saying that creating the nation’s fifth-biggest airline would save consumers $1 billion a year.

JetBlue offered $33 per share in cash, which it said puts a 37% higher value on Spirit than does the Frontier offer. However, Frontier’s bid would let Spirit shareholders keep 48.5% of the combined airline. Frontier said its cash-and-stock offer was worth $2.9 billion, although a dip in Frontier’s shares has reduced its value since February.

Shares of Florida-based Spirit soared 22% after The New York Times first reported the JetBlue bid Tuesday. JetBlue shares fell 7%.

A Frontier-Spirit tie-up would combine Denver-based Frontier’s route map in the western United States with Spirit’s network along the East Coast and the Caribbean. Both are budget airlines that offer rock-bottom fares and make up some of the difference by charging extra for many things that bigger airlines include in the ticket price, including carry-on bags and soft drinks.

JetBlue is not the same kind of so-called ultra-low-cost-carrier. Its base fares are generally higher than those on Frontier and Spirit, but it offers amenities they don’t, including free TV and free internet at every seat.

JetBlue’s strength on the East Coast, including Florida, would mean much more overlap with Spirit. In a statement Tuesday, Frontier argued that would lead to less competition, higher fares and fewer options for travelers.

Moreover, Frontier and Spirit are small enough that their deal might not get close scrutiny from antitrust regulators, although several leading liberal Democrats in Congress raised concern about the merger to the Biden administration. The Justice Department and several states sued last year to try to block a much more limited partnership between JetBlue and American Airlines — that challenge is pending.

Colin Scarola, an analyst who covers airlines for CFRA Research, said the Biden administration is more likely to oppose a JetBlue-Spirit deal than a Frontier-Spirit combination because it could lead to higher prices.

However, he views the JetBlue offer as superior, and so “Spirit will likely take the risk and accept the JetBlue bid. It’s just too much more money to pass up.”

JetBlue is three times bigger than Frontier and nearly twice the size of Spirit. It has failed before in acquisitions, having lost out in its bid for Virgin America to Alaska Airlines.

Frontier is controlled by private equity firm Indigo Partners, which once owned a major stake in Spirit.

One area where all three are similar: consumer complaints. Spirit had the highest rate of complaints to the U.S. Transportation Department last year, followed by JetBlue and Frontier.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

(Facebook Photo/City of San Luis, Arizona)...
Associated Press

San Luis authorities receive complaints about 911 calls going across border

Authorities in San Luis say they are receiving more complaints about 911 calls mistakenly going across the border.
4 days ago
(Pexels Photo)...
Associated Press

Daylight saving time begins in most of US this weekend

No time change is observed in Hawaii, most of Arizona, Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam and the Northern Marianas.
12 days ago
Mexican army soldiers prepare a search mission for four U.S. citizens kidnapped by gunmen in Matamo...
Associated Press

How the 4 abducted Americans in Mexico were located

The anonymous tip that led Mexican authorities to a remote shack where four abducted Americans were held described armed men and blindfolds.
12 days ago
Tom Brundy points to a newly built irrigation canal on one of the fields at his farm Tuesday, Feb. ...
Associated Press

Southwest farmers reluctant to idle farmland to save water

There is a growing sense that fallowing will have to be part of the solution to the increasingly desperate drought in the West.
19 days ago
A young bison calf stands in a pond with its herd at Bull Hollow, Okla., on Sept. 27, 2022. The cal...
Associated Press

US aims to restore bison herds to Native American lands after near extinction

U.S. officials will work to restore more large bison herds to Native American lands under a Friday order from Interior Secretary Deb Haaland.
19 days ago
(Photo: OCD & Anxiety Treatment Center)...
Sponsored Content by OCD & Anxiety Treatment Center

Here's what you need to know about OCD and where to find help

It's fair to say that most people know what obsessive-compulsive spectrum disorders generally are, but there's a lot more information than meets the eye about a mental health diagnosis that affects about one in every 100 adults in the United States.

Sponsored Articles

(Photo by Michael Matthey/picture alliance via Getty Images)...
Cox Communications

Valley Boys & Girls Club uses esports to help kids make healthy choices

KTAR’s Community Spotlight focuses on the Boys & Girls Club of the Valley and the work to incorporate esports into children's lives.
...
Fiesta Bowl Foundation

Celebrate 50 years of Vrbo Fiesta Bowl Parade magic!

Since its first production in the early 1970s, the Vrbo Fiesta Bowl Parade presented by Lerner & Rowe has been a staple of Valley traditions, bringing family fun and excitement to downtown Phoenix.
(Photo via MLB's Arizona Fall League / Twitter)...
Arizona Fall League

Top prospects to watch at this year’s Arizona Fall League

One of the most exciting elements of the MLB offseason is the Arizona Fall League, which began its 30th season Monday.
JetBlue makes offer for Spirit Airlines, could spark bid war