JetBlue CEO Robin Hayes said the deal would be fruitful for investors and passengers.
“We are excited to offer this compelling combination that will turbocharge our strategic growth, enabling JetBlue to deliver a unique combination of low pricing and exceptional service to more customers, on more routes,” he said in a statement.
But industry experts said the deal could lead to higher prices across the industry. By contrast, the Frontier-Spirit deal would have combined two airlines with very low base fares. None of the airlines have seats in First Class or Business Class.
For this reason, Spirit’s JetBlue deal will likely face strong antitrust scrutiny from the US Department of Justice, particularly if the Department of Justice considers the acquisition to be harmful to consumers.
But those doubts about a deal with JetBlue were found nowhere in Spirit’s comments Thursday.
“We are thrilled to unite with JetBlue through our enhanced agreement to create the strongest national low-fare competitor to the dominant US airlines,” said CEO Ted Christie.
While passengers may like the lower prices offered on Spirit and Frontier, they usually don’t like the service. According to the US Department of Transportation, Spirit had the highest number of passenger complaints in 2021, with 11.45 complaints per 100,000 passengers. JetBlue came in second in terms of the number of complaints on this basis with 6.38, while Frontier came in third with 5.78. Frontier had the worst complaints rate in 2020, when it registered 49.31 complaints per 100,000 customers.
The deal announced Thursday will pay Spirit shareholders $33.50 per share in cash, including an advance payment of $2.50 per share in cash payable based on Spirit shareholders’ approval of the transaction — even before the deal closes.
JetBlue will pay Spirit shareholders an extra 10 cents a month for any delay in closing after December of this year, which could raise the price to $34.15 a share. And if regulators stop the deal, JetBlue will pay Spirit $70 million, and its shareholders will receive an additional $400 million.
Spirit will have to pay Frontier $25 million to cover costs incurred by Frontier during the merger discussions. If JetBlue can close its deal with Spirit within the next 12 months, Spirit will owe Frontier an additional $69 million.
On Wednesday evening when its agreement with Spirit was terminated, Frontier lamented but vowed it would be able to grow even without a merger.
“As JetBlue strives to transform Spirit Airlines into a high-cost airline, Frontier will be unparalleled as a very low-cost leader,” she said.
#JetBlue #announces #deal #buy #Spirit #Airlines #Prices