JetBlue CEO Robin Hayes said the deal would be good for investors and passengers.
“We are thrilled to deliver this compelling combination that fuels our strategic growth, enabling JetBlue to deliver our unique blend of low fares and exceptional service to more customers, on more routes,” he said in a statement. communicated.
But industry experts said the deal could lead to higher tariffs across the industry. A Frontier-Spirit deal, on the other hand, would have brought together two airlines that have very low base fares. Neither airline offers first class or business class seats.
“Spirit and Frontier play a big part in the fare you pay, even if neither of you ever flies,” said Scott Keyes, founder of Scott’s Cheap Flights, a website that helps passengers find cheaper fares. “When Delta announced the base economy fare in 2012, they described it to investors as a ‘spirit-matching fare’ because their lunch was being eaten by the world’s economy carriers. I’m not a fan of it. either fusion, but I like the JetBlue option even less.”
For this reason, it is possible that the JetBlue deal for Spirit could face rigorous antitrust scrutiny from the U.S. Department of Justice, particularly if the Justice Department considers the acquisition harmful to consumers. .
But those doubts about a deal with JetBlue were nowhere to be found in Spirit’s comments on Thursday.
“We are thrilled to join forces with JetBlue through our enhanced agreement to create the most compelling low-cost domestic challenger for dominant US carriers,” CEO Ted Christie said.
In an interview on CNBC on Thursday, Christie was pressed to criticize JetBlue’s bid in the past and his doubts about whether regulators would approve the deal.
“We have learned a lot over the past few months,” he said. “They have an aggressive strategy to get this deal done. We’re going to be on their side to make that happen because it’s good for our group. Part of the narrative is that it’s going to create a big domestic competitor to the Four. Great.”
JetBlue’s Hayes said the best argument for regulators is that this deal will provide another great national carrier and create more competition, not less.
“We are focused on getting this deal done,” he said on CNBC. “We are focused on bringing in more planes, bringing more low fares and great products to customers in more geographies than JetBlue or Spirit could alone.”
While passengers might like the low fares offered on Spirit and Frontier, they generally didn’t like the service. Spirit had by far the highest number of passenger complaints in 2021, with 11.45 complaints per 100,000 passengers, according to the US Department of Transportation. JetBlue had the second highest number of complaints on this basis at 6.38, while Frontier came third at 5.78. Frontier had by far the worst complaint rate in 2020, when it recorded 49.31 complaints per 100,000 customers.
The deal announced Thursday would pay Spirit shareholders $33.50 per share in cash, including an advance payment of $2.50 per share in cash payable upon approval of the transaction by Spirit shareholders – even before the termination of the agreement.
JetBlue will pay Spirit shareholders an additional 10 cents per month for any late closings after December of this year, which could push the price up to $34.15 per share. And if regulators block 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 Frontier incurred during the merger talks. If JetBlue is able to complete its deal for Spirit within the next 12 months, Spirit will owe Frontier an additional $69 million.
On Wednesday night, when its deal with Spirit was terminated, Frontier expressed regret but promised it could grow even without a merger.
“With JetBlue seeking to convert Spirit Airlines into a high-cost airline, Frontier will be unrivaled as an ultra-low-cost leader,” he said.