Vote may shake up discount airline market
DALLAS — The prospect of a takeover of Spirit Airlines threatens to upend the cheap-fare end of the industry much like a series of mergers among big airlines reduced choices for travelers.
Spirit is the largest budget airline in the country, but its days as a stand-alone company appear numbered. The big question is whether it is sold to fellow discounter Frontier Airlines or to JetBlue, which operates more like the four giants that dominate the U.S. airline business.
The outcome could determine how many choices travelers have for the lowest fares.
Spirit shareholders are scheduled to vote
Thursday on whether to approve a stockand-cash offer from Frontier that is worth about $22 per share, or $2.4 billion, and give Spirit shareholders 48.5% of the combined airline. Spirit’s board has continued to support the deal in the face of a hostile bid from JetBlue worth $33.50 per share, or $3.6 billion.
JetBlue says its all-cash offer is financially superior. Frontier argues that its proposal will be better for Spirit shareholders in the long run, assuming that airline stocks recover to pre-pandemic levels.
Both covet Spirit because of its relatively young fleet of more than 170 planes and its roughly 3,000 pilots — even more valuable during a pilot shortage that could last most of this decade.
Frontier and JetBlue both claim that consumers will benefit if they win the Spirit sweepstakes. A Frontier-Spirit combination would operate about 5% of the nation’s flights, and JetBlue plus Spirit would operate more than 7%, based on July schedules, making either one a stronger competitor to American, United, Delta and Southwest.
People who follow the industry closely are divided over which deal would help consumers more.
Scott Keyes, founder of Scott’s Cheap Flights travel site, doesn’t like either deal, “but I like the JetBlue option even less.”
Keyes said removing a competitor always tends to push up fares, but the impact won’t be as bad if the buyer is another budget airline like Frontier.