JetBlue is offering to buy Spirit Airlines at a huge premium while giving them stock options
This could strip Spirit of its low-cost status, but also be beneficial as JetBlue can leverage the expertise of the CEO and his team.
The surprise, unsolicited bid from JetBlue Airways for Spirit got a boost late Thursday when Spirit said it would talk to the New York-based airline.
Spirit Airlines said in a statement that its board of directors has determined to “engage in discussions” with JetBlue.
The airline announced a merger with another airline in February to create a bigger entity. This is how they are following the terms of their merger agreement.
JetBlue’s offer to purchase all outstanding shares of Spirit was referred to as “superior” to that of Frontier Airlines earlier this week. This improved financial performance was attributed to the many benefits that come with adding an airline, such as protection from a completely new competitive landscape. Though no confirmation on potential JetBlue and Frontier legal language has been given by either company, the Super Bowl advertisement did state that both airlines would “build on each other’s strengths.
“Additionally, United Airlines released a statement on its website yesterday announcing that it had closed the transaction to acquire Frontier Airlines with a total purchase cost of $10.24 per share. United also stated that Frontier shareholders were offered a cash premium of $9.75 per share. Shareholders offered a cash premium of $9.75 per share. The statement continued, “With the transaction closed, United will assume all of Frontier’s operating certificates — including its certificate issued by the U.S. Department of Transportation — in addition to entering into an interline agreement with Frontier.”
Despite initiating talks with JetBlue, Spirit said its board has made no change to its recommendation that Spirit shareholders adopt the merger agreement with Frontier.
JetBlue welcomes the announcement that they are going to be valued more by the Spirit Airlines Board of Directors. Their CEO stated that “We are pleased the Spirit board recognizes the compelling value for all stakeholders that JetBlue has offered,” and their statement ends with Robin Hayes, CEO of JetBlue stating in a statement, “JetBlue is excited about how this will benefit our guests and our community.” “We believe that JetBlue is the best partner for Spirit and we look forward to engaging with the Spirit board to finalize our combination, creating a national low-fare challenger to the four large dominant U.S. carriers that will result in lower fares for all customers.”
USA TODAY reached out to Frontier Communications for comment.
Spirit and Frontier have similar business models, offering cheap tickets and charging extra for everything from seat assignments to boarding pass printing at the airport. Neither airline says which company will win this round between them, but Spirit Airlines tends to paint its plane’s primary colors while Frontier Airlines typically paints its planes in earth tones.
Spirit and JetBlue have some elements in common – they pride themselves on offering free in-flight options. They both charge for their on-ground services, which include secure self-parking, free wifi, and lots of legroom too! JetBlue plans for their jet to be roomier as well. The deal would allow JetBlue to absorb Spirit’s planes and make them roomier for its customers.
Analysts believe that costly plane conversions can’t be done without increasing fares. Already, JetBlue’s prices are higher than Spirit’s on some competing routers. Spirit Airlines is cheaper but lacks many of the amenities of JetBlue. The latter is for a JetBlue basic economy ticket and the former is for any other ticket. JetBlue is more service-oriented, while Frontier has more policies and fees. JetBlue has a higher average price point as well.
“Our goal is to offer fares that are equally competitive with what Spirit offers,” JetBlue President.
JetBlue and Frontier share some hopes that their cooperation would result in a national low-fare airline competing with the country’s largest four airlines: American, Delta, United & Southwest.
Frontier Airlines criticized JetBlue’s acquisition of Spirit Airlines in a press release and called the deal an “impossibility” due to the differing business models. Frontier believes that consumers would be hurt by the deal because it would result in more expensive flights.