Spirit Airlines Rejects JetBlue Offer, Proceeds With Sale To Frontier

Spirit Airlines announced that their board has unanimously rejected JetBlue’s offer to pay more for the airline than Frontier, with whom the ultra low cost carrier had entered into a sale agreement.

JetBlue’s offer involved paying more but undermining Spirit’s low cost advantage and walking away from their more profitable business model. Instead JetBlue wanted Spirit for its planes, pilots, gates and slots.

However Spirit says that even though JetBlue was willing to pay more, they believe there’s a strong chance the deal would never go through. This is clearly because of expected opposition by the federal government on anti-trust grounds.

  • There have been concerns expressed over Frontier-Spirit, but would mean more planes operating under a low cost model than if Spirit were swallowed by JetBlue (which plans to walk away from the ultra low cost model for Spirit).

  • There’s a chance that JetBlue’s acquisition would be approved in exchange for the New York-based carrier walking away from its joint venture with American.

I view Spirit-Frontier as better for customers. More low cost flights are better even if you do not fly either airline since that’s more competition for legacy carriers, driving down price.

And while I have strong reservations about joint ventures generally, I believe that the American-JetBlue tie-up (separately being litigated by the federal government) is good for consumers because it creates a viable third competitor in the New York market.

I’d expect lawsuits, and JetBlue can still move forward with a tender offer.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. 1) The AA/B6 NEA joint venture is a joke as it doesn’t provide a full service, seamless competitor to either Delta or UA in the NYC market. It would be far preferable for customers if both AA and JetBlue sough to compete instead of collude in the market, including by offering competitive schedules, lounge access and other amenities out of both Laguardia and JFK

    2) On the other hand, JetBlue must be joking if it think it can acquire Spirit and keep the NEA. Also, Spirit’s point about JetBlue simply cancelling many of Spirit’s low fare routes are actually true. If JetBlue were serious about acquiring Spirit, they would cancel the NEA altogether; but they won’t, so they aren’t.

  2. Unbelievable! I would agree that the JetBlue acquisition bid was problematic, for JetBlue. But to turn down a $33/share cash bid, when your stock is trading at $23 and the only other offer is worth $25? Insane- there will be a class action lawsuit, but this decision is so far out of the money, I wouldn’t be surprised if the new Spirit/Frontier actually lost this suit, for once. What was the BOD thinking? Their job is to look after the shareholders.

  3. I believe that the Spirit BOD will have an adequate defense to the expected stockholders’ suit. They would cite multiple press reports as to the probably anti-trust action against the Jet Blue merger and point out that even if the government failed to stop the merger, its expected suit would delay the merger for a long time during which there is real risk that the economics of the airline industry would deteriorate resulting in diminished value of the Jet Blue merger or even its failure to consummate.

  4. @George

    Your point is valid. The BOD would counter that they are expecting the long term share value of the combined Frontier Spirit to exceed $33

  5. All a big circus by B6 to distract from the abysmal performance of senior management

  6. As many of us believed, B6 cannot have both the NEA with AA and a merger wiht NK and the boards of both companies know that.
    The worst part is that the DOJ could still win the case against the NEA even as DOT data shows that B6′ operational reliability is further behind the rest of the industry than ever and esp. DL, its largest and most direct competitor. There is no reason why any rational customer would choose AA/B6 over DL
    Even as the airline industry recovers, B6 is having to pull capacity in order to get its operation back on track and they will be the only US airline not expected to be profitable in the 2nd quarter.

    B6 is the strategic basketcase of the airline industry.

  7. Either merger would be bad for the flying populous when it comes to ticket prices. That said, I do think that merging with Frontier could have great potential for future revenue/strength/stock performance.

  8. A buyout by Frontier would solidify the “charge for everything” model and put pressure on the other airlines to adopt that ‘cheap’ model. (Looking at you AA…) Fares won’t lower as there will be no competition between two different ULCCs. A buyout by Jetblue would solidify the better service and amenities and actually put pressure on the ULCCs to keep the prices low as a reason to fly them as everything gets charged for. Let’s face it – if Frontier abolishes its biggest competitor, what reason do they have to keep prices low? None! There are some routes that carry over $600 r/t for a 1 hour Frontier or Spirit flight with NOTHING included. They will wipe out their main competitor, raise prices, and keep the same level of ‘charge for everything’ and double-down on that to charge for even more things. The best path forward is as all is today. Deny this elimination of a competitor. Anytime a competitor is eliminated it is terrible for employees, suppliers, customers, and the public. The only ones that make out well is the C-suite that will get golden parachutes.

  9. Braniff or Hughes AirWest should buy Spirit. Colored aircraft equates to higher customer satisfaction.

  10. JetBlue merging with SPIRIT was a foolish proposal from the initial announcement, two vastly different products and operations. Maybe when the dust settles the NEA between JetBlue and AA can be further developed when they are more of a seamless operation in practice and not just a talking point in the back offices. AA and JetBlue could become a formidable third alternative in the NE Corridor if developed correctly over time but as of right now it is still in the initial stages……JetBlue pax should not except immediate access to all of AA perks because this is no where’s close to a merger, it is a partnership.

  11. Bluff. Jetblue will raise the pot & chase. Spirit knows Jetblue needs Spirit more than Spirit needs Jetblue.

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