With Frontier deal dead, Spirit ponders sale to Jetblue
Spirit Airlines and Frontier Airlines agreed Wednesday to abandon their merger proposal, opening the way for Jetblue Airways to acquire Spirit after a months-long bidding war for the budget carrier.
The decision by Spirit and Frontier to terminate their deal was announced while Spirit shareholders were still voting on the proposal. It was apparent that despite the support of Spirit’s board, shareholders were prepared to reject the deal.
Spirit CEO Ted Christie said he was disappointed in dropping the merger with Frontier.
“The Spirit board of directors will continue our ongoing discussions with Jetblue as we pursue the best path forward for Spirit and our stockholders,” he said in a statement.
The Frontier offer was worth more than $2.6 billion in cash and stock, far short of Jetblue’s all-cash bid of $3.7 billion.
A combination of Spirit with either Frontier or Jetblue would create the nation’s fifth-largest airline, although it would be still quite a bit smaller than American, United, Delta and Southwest.
Attention now will turn toward regulatory hurdles to a deal between Spirit and Jetblue. Spirit’s board stood by the Frontier deal for months, in the face of a higher-priced offer from Jetblue, by arguing that antitrust regulators would never let Jetblue buy the nation’s biggest budget airline and remove it as a competitor to higher-priced carriers. Not surprisingly, Jetblue disagreed with that view.
The Biden administration was always likely to take a close look at either deal. The president and his top antitrust official in the Justice Department have both indicated a dislike for corporate mergers.
Some analysts said that the small size of Frontier and Spirit would have earned them a pass from antitrust regulators in previous administrations, but not any more. Still, a Jetblue deal does appear more problematic, in part because the Justice Department is already suing to break up a regional partnership in the Northeast between Jetblue and American Airlines.
Michael Boyd, president and CEO of Evergreen-based Boyd Group International, said a merger between Frontier and Spirit made more sense, given the airlines’ similarities. Jetblue and Spirit “have almost nothing in common,” he said.
Boyd described Jetblue as a full-service carrier with an array of amenities, whereas Spirit is “bare bones,” operating on a different model.
“I don’t know why Jetblue wants this,” he said. The move is “literally like putting a railroad company together with a steamship company.” He predicted that Jet Blue will soon find itself tied up in figuring out what to do with Spirit. As for the future of Frontier, “they’ll be fine,” Boyd said, calling the failed merger “no harm, no foul.”