In an all-out war between JetBlue Airways and Frontier Airlines, where the two carriers were fighting to acquire Spirit Airlines last month, the low-cost carrier has finally made its choice between the two eligible candidates – and it’s sticking with Frontier.
Spirit Airlines has spoken and will stick with its deal to be purchased by Frontier Airlines, rejecting the more lucrative competing offer of 3.6 billion all-cash bid from JetBlue Airways all in the same process.
What was their reasoning to turn down such an enticing offer? The JetBlue deal probably won’t get done and Frontier’s $2.9 billion one will, Barrons reported.
“We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue’s Northeast Alliance with American Airlines remains in existence,” Spirit wrote in a letter to JetBlue released early Monday. “Given this substantial completion risk, we believe JetBlue’s economic offer is illusory, and Spirit’s board has not found it necessary to consider it.”
But according to Travel Pulse, JetBlue responded by telling Spirit it would add a divestiture commitment to the offer, a $200 million reverse break-up fee, and enhanced structures to “remedy” any concerns about NEA with American Airlines but declined to get rid of its alliance with American Airlines and did not enhance its cash offer of $33 a share. But the airline boasts that it still was a better offer than Frontier’s offer.
But Spirit was not moved and stood its ground.
“We struggle to understand how JetBlue can believe DOJ, or a court, will be persuaded that JetBlue should be allowed to form an anticompetitive alliance that aligns its interests with a legacy carrier and then undertake an acquisition that will eliminate the largest ULCC carrier,” Spirit wrote in its letter. “JetBlue is unwilling to terminate the NEA – or to agree to any other remedies that might materially decrease the expected benefits to JetBlue from the NEA – to obtain clearance for an acquisition of Spirit.”
According to CNN, 2021 statistics have shown that if Frontier’s purchase of Spirit goes through, the merged company would leapfrog JetBlue and Alaska Air, based on the number of miles flown by paying passengers. The move would make it the fifth-largest carrier.
“Spirit believes that merging with Frontier will enable the combined ultra-low-cost carrier business to achieve scale, improve operational reliability, have increased relevance to consumers, and do an even better job of delivering ultra-low fares to more consumers and competing more effectively against the Big Four carriers, as well as against JetBlue,” Spirit’s letter said.
The announcement saw Spirit shares falling to 7 percent in premarket trading, while Frontier shares fell to about 2 percent. But shares of JetBlue have risen slightly higher, CNN reported.
Read more via CNN.
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