JetBlue Airlines is making a huge offer to buy Spirit Airlines. The offer includes $280 million in equity and up to three seats on Jet Blue for every one seat on Spirit Airlines. Could this help end the fight between these two airlines?

JetBlue is making a huge offer to buy Spirit Airlines. The new name would be “JetBlue Airways”.

JetBlue Makes Huge Offer To Buy Spirit Airlines

JetBlue-Makes-Huge-Offer-To-Buy-Spirit-Airlines

 

JetBlue Makes a Massive Purchase Offer For Spirit Airlines

on April 5, 2022 by Gary Leff

Frontier announced a plan to buy Spirit Airlines two months ago, becoming a formidable extreme low-cost carrier. However, JetBlue has now launched a proposal for Spirit that is 40% greater than Frontier’s offer — and this is not an April Fool’s prank.

Spirit’s stock finished the day up more than 22%, outperforming Frontier’s offer by 17%. JetBlue ended the day with a 7% loss. Any agreement for Spirit, according to the market, would cost more than Frontier had proposed. At this point, I’d assume that whomever ends up sealing the sale will be plagued by the winner’s curse.

There’s little doubt that Spirit’s stockholders would be better off with the JetBlue deal’s pricing if they believe they can complete it (if the DOJ doesn’t intervene) or if the breakup fee is big enough. Spirit seems to be more useful to Frontier than JetBlue as a long-term commercial partnership. In addition, a Spirit partnership might complicate JetBlue’s Northeast Alliance with American Airlines.

Fit is a disaster

Spirit Airlines is a no-frills airline with exorbitant fares. They pack seats closer together than conventional airlines and even JetBlue.

Spirit’s model is based on low costs, low fares, and low service. While JetBlue is marginally friendlier to customers (with a bit more legroom, seat back TV, and free internet) than American, Delta, and United – though less operationally reliable – Spirit’s model is based on low costs, low fares, and low service. This is the foundation of Spirit’s business culture.

It’s fantastic that consumers in the market have a choice and product distinction; they may travel Spirit or pay extra to fly other airlines. It’s also fantastic that Spirit competes on pricing even with customers who don’t fly Spirit. However, their business strategy and culture are very different from JetBlue, which still considers itself to be a premium airline.

The heirloom The expenses of running the Spirit enterprise will rise. If Spirit planes are to fly as JetBlue, they’ll need to be retrofitted. If they’re different operations, there’ll be a lot of confusion. And if there is any product harmonization between the two, expenses will climb. Then there’s the expense of a merger.

A arrangement like this undercuts Spirit’s advantages and makes no sense as part of JetBlue’s continued operations. It does, however, provide JetBlue access to slots and gates at crowded airports that Spirit now possesses, but the Department of Justice may object to the combination.

Is This an Anti-Trust Nightmare?

Antitrust concerns have been raised concerning a Spirit-Frontier merger. The federal government is worried that this may result in less low-cost competition, while Spirit and Frontier often fight against legacy carriers whose price they can beat with lower expenses. They’re bringing on so many new planes that we can reasonably presume a Frontier-Spirit partnership will result in more low-cost flights rather than less in the future.

If there’s a cause for worry, it should be in re-Frankeifying Spirit, which has spent extensively in its product over the previous many years, enhancing its operational dependability (last summer and last weekend excepted) once free of the grip of the aviation king of cost-cutting. The surviving leadership would be Franke’s Frontier.

If the Department of Justice is concerned about a merger of Spirit and Frontier, teeth will be gnashed between the DOJ and the DOT about JetBlue-as-acquirer. While the federal government argues JetBlue is a discounter in court documents seeking to terminate the American Airlines-JetBlue joint venture (which they tried to stop immediately after it was approved), JetBlue’s ownership of Spirit would actually entail higher expenses and fewer low-cost flights.

And, given Spirit’s forays into congested airports in the Northeast, an American-JetBlue tie-up in New York would raise even more (and legitimately new) antitrust concerns, as it would give JetBlue a stronger presence in the market (more concentration) and weaken their case that they can’t compete with Delta and United on their own. American + JetBlue + Spirit would never have been allowed, and the Department of Justice would have genuine new reasons to complain.

More From the Wing’s Perspective

JetBlue is a major airline that offers low-cost flights. They recently made a huge offer to buy Spirit Airlines. The two companies are owned by the same company, so this could be good for both of them. Reference: are frontier and spirit owned by the same company.

Frequently Asked Questions

Is JetBlue and Spirit the same company?

A: Yes.

Is JetBlue worse than Spirit?

Is Spirit Airlines cheaper than JetBlue?

A: Spirit Airlines is cheaper than JetBlue by $16.

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