JetBlue has terminated its deal to acquire Spirit Airlines, although it took about a month longer than I expected. JetBlue is up almost 5% on the news, and Spirit down over 17%, in pre-market trading.
The New York-based carrier is highly troubled.
- Shares of the airline are down 23% in a year and 60% in three years.
- Their on-time performance has been at the bottom of the industry.
- They’ve degraded their inflight product over the years, reducing the differentiation between them and competitors (although still offering a bit more legroom, seat back TVs, and free Wifi).
- Employees are unhappy.
The federal government has blocked their alliance with American Airlines and their acquisition of Spirit (though much of the impetus and opportunity to grow, needing pilots and planes, went away without American’s New York slots).
They were massively overpaying for Spirit, would have faced huge integration issues when they have challenges running their own airline, and planned to move Spirit’s capacity into a higher cost model. It was unlikely a deal that would benefit shareholders, and shareholders have consistently expressed that.
With JetBlue’s CEO replaced, a new management team taking shape, and Carl Icahn taking a big stake in the airline positioned even to acquire it outright this is a perilous time for the airline.
It seems clear that JetBlue is better off without the distraction and cost of a Spirit Airlines acquisition. They should work on a new American Airlines alliance similar to American’s deal with Alaska, which the anti-trust judge outlined would be permissible (and American in its earnings call said they’d consider a new partnership). This would also make their credit card much more valuable.
They need to get their operation under control, rebuild service to Boston, shift away from long haul international growth where they’re bleeding, and walk away from Southern California. Or else, expect Carl Icahn to dismantle the carrier and sell it for parts.
I couldn’t agree with you more, Gary
JBLU tried two initiatives which involved the blessing of the feds instead of organically fixing its own problems in-house.
JBLU has floundered because they were chasing castles in the sky while ignoring their current business.
As much as some hate to admit it, Delta’s success in Boston is directly related to JBLU’s lack of focus on its core business.
It was time to stop chasing clouds and return to running the business including investing where they need to in order to compete with larger carriers
Gary, you are 100% right. They need to fix their ops if they want to win back customers. JFK is <30 mins from my house. If JetBlue could (a) run their flights on time and (b) open a lounge in T5 (even a third-party lounge), I would happily book my domestic trips with them… as far as domestic goes they have the "nicest" coach experience, and T5 is a quicker and easier experience than T4. But I routinely book away from them because I need to get where I'm going. It's not just about on time % but also about options when things go wrong… B6 has a smaller network so they need to be MORE reliable than DL/AA. I had a co-worker who was stranded overnight when B6 cancelled the flight back to JFK. B6 couldn't get them back for 2 days and they ended up booking a new ticket on AA.
JetBlue will be sold off in pieces. It’s only a matter of time. AA will finally have fixed its JFK and NYC problem, UA will gain some slots to re-enter JFK (and likely some terminal space in T5) and the rest of the spoils up for grabs.
This moves JetBlue along the path they were always destined to take: being bought by United.
The Justice Deparment won’t have any real trouble with this. UA doesn’t fly to JFK at all. Their service to LGA is nominal and slot restricteded.
They will be able to argue that they are currently a distant #3 up and down the East Coast and this merger will allow them to more vigorously compete with DL and AA than could JetBlue.
JetBlue’s big order of A220-300’s will take care of UA’s issue of a 128-seat replacemenent for their A319’s and 737-700’s.
UA even more desperately needs more planes and JetBlue’s A321’s will fit the bill. JetBlue’s A321’s are not ideal compared to UA’s order of A321neos, but they will be an improvement over UA’s A320’s, most of which were pushing a decade old when JetBlue was founded.
Oh, yeah…and remember that rumor of UA establishing a Florida flight attendant base…?
@Goforride – DOJ will absolutely object to consolidation in the New York market. I wouldn’t expect them to treat Newark separately from other area airports. “Sold off in pieces” as suggested above seems far more likely than wholesale acquired by United.
If a dismantling occurs, I bet UAL would love to buy the FLL operation. Gives them instant presence in the southeast.
Yeah, two paths for Jetblue.
Path 1: Stay independent, focus on the core east coast markets, build lounges in their core hubs, build back in Boston and get closer to AA through an AS like arrangement (maybe join OneWorld). It’s going to be hard, but it’s doable.
Path 2: Get stripped for parts. AA would love to buy the Northeast business (particularly JFK). United would love FLL. Not sure where Boston goes, but you can see value created from a private-equity style dismantling.
International is bleeding? What are your sources, or is it just another bash Jetblue article…
JetBlue flights to Europe are full of employees in Business class and the sales to Europe are less that $1000 rt.
Certainly it would be amazing if UA got both JFK and the 220s from JetBlue.
Yep, Carl is notorious for selling off pieces. UA needs the extra A321s, JFK slots, not certain FLL or MCO would be a better connection option.
That’s a nice picture of JetBlues old interior. @Gary. No respect for anything you post. 99.8% of jetblues aircraft don’t look like that.
Employees are unhappy… didn’t know Gary worked at JetBlue. I’m sure you can find enough twitter posts though.
A deal with AA…you smoking crack? Been there. Done that.
Degraded inflight product ? Explain
Most legroom in coach…best product to Europe in coach. Free WiFi for everyone. Sounds bad for sure.
Gary your reporting is a joke. Who are you kidding? They just said in a recent company event that their international is strongest revenue generator especially in Caribbean. We get it, you hate jetblue for whatever reason, likely they encroach on your interest, all I can say is that your liberal and creative facts about jetblue say a lot. VFTW is highly less credible because of the garbage you write on here.
@Goforride,
The DoJ would block UA from acquiring a significant portion of B6’s assets in the NYC area, including JFK. UA has a 400+ flights a day hub at EWR and along with DL, controls the majority of the NY Area market among the US carriers. It is more likely that in a scenario where B6 is broken up into pieces, American Airlines will be the acquirer of at least a significant portion of the JFK slots. UA may pick up some, even enough to re-enter JFK with more than a token presence, but UA will not be acquiring B6 whole.
They are Allegany / US Airways without FC. . .they had to merge with someone or go out of business. Time for AA and B6 to merge, or AA will be buying up parts and operating JFK out of 5/6 and 8!
none of the big 3 are getting any of B6 NE assets.
There could be a case for WN getting them if no one else could buy them as a group but WN has a poor track record of competing in legacy carrier hubs so I doubt they would be interested.
DL and/or UA could be interested in FLL assets but that again would be a stretch.
The real answer is for B6 to do what it needs to fix itself instead of dreaming about breaking it up.
Icahn will make more money just returning B6 to profitability which means stop chasing dumb strategies and instead return to doing its core business well
@JFK Traveler: You nailed it. If I really need to be there, I will book a backup option to JetBlue using miles, so I can cancel the backup if JetBlue operates on time. If there is no feasible backup, I probably won’t book JetBlue. I truly hope JetBlue can become reliable, because I love their in-flight experience.
@Dartagnan77 – Their transatlantic is where they are bleeding.
Not sure how you come to the conclusion that transatlantic isn’t working out. I fly back and forth weekly and JetBlue is usually not the cheapest and it’s mostly full , 80-90%. Are their fixed costs that much more?
I think the move is for AA to eventually buy B6. AA takes majority of NYC/BOS, folds in LAX to current hub, and brings back its old SJU ops. Gives up significant portion of MCO/FLL to make it work from a regulatory perspective. A220 and A321 fit in their fleet portfolio. E190 will be sent to graveyard. Icahn takes a smaller piece of AA to play nice. Or maybe Icahn flips the whole thing and tries to do it in reverse and LBO AAL.