Frontier Airlines’ one-month effort to acquire Spirit Airlines ended abruptly on Wednesday, and both companies dropped the offer and brought JetBlue Airlines’ spirit rival bids to life.
The announcement was made shortly before Spirit announced the results of a shareholder vote on Frontier’s takeover offer. Spirit repeatedly postponed the vote as it tried to convince shareholders to support the deal and disregard the appeal of the more valuable JetBlue offer.
In a statement, Spirit CEO Ted Christie said, “I’m disappointed that I had to close the merger with Frontier, but the team members’ dedication to the deal over the past few months. I’m proud of my efforts. ” “The Spirit Board will continue to hold ongoing discussions with JetBlue, pursuing the best path for Spirit and its shareholders.”
Frontier cash and equity trading was worth about $ 2.8 billion, based on Wednesday’s closing price. JetBlue’s full cash offer is worth $ 3.6 billion.
Frontier said he was disappointed that Spirit’s shareholders did not rally behind the deal. The airline, which has been expanding aggressively since its listing last year, said it was ready for growth.
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The merger of Frontier and Spirit would have created a national budget career. The two airlines complement each other and share a low-cost business model with different geographical strengths.
Spirit executives had previously questioned JetBlue’s intentions, suggesting that the offer may have been solely aimed at ruining the combination with the Frontier. Mr Spirit also said antitrust regulators would probably interfere with the Jet Blue merger, but experts said both transactions would be subject to strict federal scrutiny.
The Frontier and Spirit decision does not mean that JetBlue’s offer will be accepted. It’s not clear if the majority of Spirit’s shareholders will support JetBlue’s latest offer. And even so, regulators can upset the combination and demand strict concessions that airlines don’t want.
The Justice Department has already sued JetBlue and American Airlines, blocking alliances between these airlines at Boston and New York airports, and a trial is scheduled for early this fall.
The acquisition of Spirit will accelerate JetBlue’s expansion plans and create the fifth largest airline in the country. Together, airlines dominate 10.2% of the market and are still lagging behind the four major airlines in the country. United Airlines, the fourth largest airline, has a market share of 13.9 percent.
Frontier reported quarterly results at about the same time that trading with Spirit was closed. The airline reported a profit of $ 13 million for a three-month revenue of $ 909 million that ended in June. This is a 65% year-on-year improvement in revenue and a 32% decrease in profit.
Six years ago, JetBlue was in a bidding war similar to Virgin America, but Alaska Airlines won and completed the acquisition in 2018. Since then, JetBlue has struggled to grow as fast as expected.
You can change that by buying a spirit, but airline mergers are notoriously difficult, union integration, sometimes outdated and incompatible computer systems, fleets of aircraft mismatches, and different companies. I need a culture.
The Transport Workers’ Union, which represents JetBlue’s flight attendants, booking agents and other workers, said it opposed the acquisition of Spirit.
“I believe workers and airline passengers should be worried,” union chairman John Samuelsen said in a statement. “I would like you to be aware that in the event of a JetBlue-Spirit transaction, regulators can intervene and combine these airlines, which can lead to reduced consumer employment and fewer options. “
Spirit, a low-cost carrier with a moderate reputation for service, keeps costs and fares low by charging extra for everything from seat selection to carry-on baggage. JetBlue rank High customer satisfaction We offer more premium options and free perks, such as well-known branded snacks and wireless Internet access.
JetBlue states that the acquisition will provide a better customer experience and lower fares, demonstrating a history of reducing traveler costs when entering new markets. The Justice Department said JetBlue’s presence in Boston created “substantial savings for consumers,” and airlines had a similar effect in New York. Quoted.
However, some aviation experts are wondering how JetBlue can lower fares than the already low prices of the Spirit. If anything, some of JetBlue’s plans will almost certainly cost these people, such as removing some seats from Spirit planes to increase foot space and selling larger premium seats. Insisted that it would be raised.
In a phone call with analysts and reporters Wednesday, Frontier CEO Barry Biffle said his airline would benefit if JetBlue acquired Spirit.
“If they merge, you probably take one of the most similar careers to us and hit a 40% higher cost, which creates a lot of runways in front of us,” he said. rice field.
Peter Ebis Contribution report.
