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Frontier Airlines increased its offer by $2 per share to acquire Spirit, and the Spirit Airlines board unanimously recommends it over JetBlue’s more lucrative – but regulatorily more risky – offer. That’s still less than the closing price of Spirit Airlines stock on Friday.
JetBlue wants Spirit Airlines shareholders to vote against merging with Frontier Airlines. They’ve reiterated their offer of more money to buy Spirit. They’ve reduced their offer from $33 to $30 per share but are dangling an additional 10% – back up to $33 per share in cash – subject to negotiation and due diligence.
JetBlue’s offer is for substantially more money. It does not provide greater certainty, as they claim, though. There is more regulatory risk though it’s difficult to evaluate exactly how much. There should be a path to solve this though through negotiation if JetBlue is as confident in closing the transaction as they claim: a higher breakup fee.
We hear about stories of passengers beating up flight attendants, flight attendants having disputes with their airline or union, and flight attendants scolding customers. Maybe they’re kicking off passengers for their attire or – for much of the pandemic – over mask violations.
Most of the time, though, interactions between customers and cabin crew are genuine and human. We just don’t hear about it.
Spirit’s rejection was a gift to JetBlue which was already offering to overpay for Spirit. The “winner’s curse” was in effect, Since the market knows what Spirit is worth, in order to ‘win’ JetBlue was having to overpay. And indeed, Spirit is worth less to JetBlue than it is to Frontier.
JetBlue’s revised offer, unfortunately for their shareholders, was the same amount of money while extracting less value from the deal.
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.
With JetBlue looking to acquire Spirit Airlines, trumping Frontier’s offer, many observers have pointed out how different their business model, product, and cultures are – wondering if his acquisition could make any sense. Others disagree, suggesting that JetBlue buying Spirit ‘for parts’ – planes, gates, pilots, – will allow for more rapid expansion.
But are the products really that different? JetBlue has Mint business class, but in the premium category Spirit has more than just the Big Front Seat.
The Justice Department’s case against American-JetBlue was weak. A Spirit acquisition could make it stronger. But it’s still not a slam dunk. The Justice Department might say to JetBlue ‘drop the American Airlines alliance as a condition of our approval of the Spirit acquisition.’
Two months ago Frontier announced a deal to acquire Spirit Airlines creating a powerhouse ultra low cost airline.
Spirit Airlines and Frontier Airlines have announced that they are merging. Combined they’ll offer 1000 daily flights and serve 145 destinations in the U.S., Caribbean, and Latin America and the transaction is expected to close in the second half of 2022.
This is effectively Frontier taking over Spirit for three reasons.
Spirit is launching service to Delta hub Salt Lake City starting May 26, 2022 with flights to Las Vegas, Los Angeles, and Orlando.
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 »
