JetBlue CEO Robin Hayes said the deal will be fruitful for investors and passengers.
“We are thrilled to offer this compelling combination that enhances our strategic growth by enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, across multiple routes,” he said in a statement.
But industry experts said the deal could lead to higher rates across the industry. A Frontier-Spirit deal, by contrast, would have brought together two airlines that have very low base fares. None of the airlines have first class or business class seats.
“Spirit and Frontier plays a big part in the fare you pay, even if you never fly on either,” said Scott Keyes, founder of Scott’s Cheap Flights, a website that helps passengers find cheaper fares. “When Delta announced the basic economic fare in 2012, it described it to investors as a ‘Spirit-matching fare’, because their lunch was being eaten by the world’s budget carriers. I’m not a fan of either merger. , but I like the JetBlue option even less. ”
Because of this, it’s possible that the JetBlue deal for Spirit will face strong antitrust scrutiny by the U.S. Department of Justice, particularly if the Department of Justice considers the takeover to be 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 JetBlue through our enhanced agreement to create the most compelling low-cost domestic challenger for dominant US carriers,” said CEO Ted Christie.
In an interview with CNBC on Thursday, Christie was pressured over past criticism of the JetBlue offer and her doubts about regulatory approval of the deal.
“We have learned a lot in the last few months,” he said. “They have an aggressive strategy to carry out this deal. We will be by their side to make sure it happens, because it is good for our group. Part of the narrative is that this will create a great national competitor to the Big Four.”
JetBlue’s Hayes said the best argument for regulators is that this deal will provide another major domestic carrier and create more competition, not less.
“We are focused on getting this deal done,” he told CNBC. “We are focused on bringing more airplanes, offering lower fares and great products to customers in more geographies than JetBlue or Spirit could do on their own.”
While passengers may like the low fares offered on Spirit and Frontier, they generally didn’t like the service. Spirit recorded by far the largest number of passenger complaints in 2021, with 11.45 complaints per 100,000 passengers, according to the U.S. Department of Transportation. JetBlue had the second most complaints on this basis with 6.38, while Frontier finished third with 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 have paid Spirit shareholders $ 33.50 per share in cash, including an upfront payment of $ 2.50 per share in cash payable upon approval of the transaction by Spirit shareholders, even before the closing of the agreement.
JetBlue will pay Spirit shareholders an additional 10 cents a month for any delay in closing after December of this year, which could raise the price to $ 34.15 per share. And if regulators block the deal, JetBlue will pay Spirit $ 70 million and its shareholders would receive another $ 400 million.
Spirit will have to pay Frontier $ 25 million to cover costs incurred by Frontier during the merger discussions. If JetBlue manages to close the deal for Spirit within the next 12 months, Spirit will owe Frontier another $ 69 million.
On Wednesday night, when its deal with Spirit was terminated, Frontier expressed regret but vowed that it will be able to grow even without a merger.
“With JetBlue looking to convert Spirit Airlines into a high-cost airline, Frontier will have no equal as an ultra-low cost leader,” he said.