Spirit Airlines on Monday rebuffed an acquisition offer from JetBlue Airways, saying that the proposal was unlikely to be approved by regulators.
In a letter to JetBlue, Spirit executives said that they’d determined that JetBlue’s acquisition offer, which was updated on Friday, could be unlikely to secure regulatory approval so long as that airline’s recently announced partnership with American Airlines was in effect. The Justice Department and a number of other states have sued to dam that alliance, arguing that it’s anticompetitive, and JetBlue has said that it can not abandon the partnership.
In a press release on Monday, the chairman of Spirit’s board, Mac Gardner, said that the corporate stood by its plan to merge with Frontier Airlines, a deal that predates JetBlue’s offer and which Spirit argued represents the perfect interests of long-term shareholders.
“After a radical review and extensive dialogue with JetBlue, the board determined that the JetBlue proposal involves an unacceptable level of closing risk that will be assumed by Spirit stockholders,” Mr. Gardner said. “We consider that our pending merger with Frontier will start an exciting recent chapter for Spirit and can deliver many advantages to Spirit shareholders, team members and guests.”
Spirit and Frontier, each low-fare airlines, had announced a plan to merge in February. Then, JetBlue stepped in with a much bigger offer for Spirit, surprising many airline industry analysts and experts. Each deals would face scrutiny from Biden administration regulators, who’ve expressed more skepticism about consolidation than their predecessors.
Some analysts contend that Spirit and Frontier are higher suited to merge because they operate under similar “ultra low-cost” business models but have more extensive flights in several parts of the US. A JetBlue-Spirit combination might be harder to drag off since the airlines’ business models are quite different. However the deal could allow JetBlue to more effectively compete against the nation’s 4 dominant airlines.
JetBlue’s updated offer added a handful of concessions to deal with Spirit’s concerns about regulatory approval, including a suggestion to divest some assets from each airlines. JetBlue also said it will commit to divesting Spirit assets in Recent York and Boston, markets at the center of JetBlue’s partnership with American, generally known as the Northeast Alliance, in an effort to win approval from the Justice Department. JetBlue also said it will pay Spirit a $200 million fee if antitrust regulators prevented the deal from going forward.
Spirit’s leadership responded in a letter to JetBlue’s chief executive on Monday, saying that they didn’t think that the updated offer had an affordable probability of succeeding. Regulators, Spirit said, would likely be “very concerned” with the prospect that JetBlue’s offer would lead to higher costs, and subsequently higher fares for consumers. Spirit said that converting its planes, that are densely full of seats, to JetBlue’s roomier configuration would lead to higher prices, for instance.
JetBlue said in response that each its offer and the Frontier deal shared “the same regulatory profile,” but that Frontier had not offered to divest assets or pay a breakup fee. JetBlue also said that the worth of Frontier’s cash-and-stock deal had faded due to that airline’s falling stock price.
“Spirit shareholders could be higher off with the understanding of our substantial money premium, regulatory commitments, and reverse breakup fee protection,” JetBlue’s chief executive, Robin Hayes, said in a press release on Monday.
JetBlue also accused Spirit of getting did not grant it sufficient access to data in regards to the low-cost carrier’s business while requesting “unprecedented commitments” from JetBlue.
For JetBlue, the American partnership and the Spirit offer represent opportunities to speed up a planned expansion. JetBlue, which has long maintained an enormous presence at Recent York’s Kennedy International Airport, has been limited by gate availability on the region’s busy airports. Of their partnership, JetBlue and American have agreed to sell one another’s flights, establish links between their frequent flier programs and pool takeoff and landing slots. It also allows JetBlue, which primarily flies inside the US, to sell more international tickets on American’s planes.
A trial within the Justice Department’s case against the alliance is scheduled for late September.
Representatives from American and Frontier declined to comment on Monday’s developments, but Stephen Johnson, a top American executive, said on a call with investor analysts and reporters last month that a JetBlue-Spirit deal would haven’t any effect on the Northeast Alliance. “It’s not going to vary one bit the worth that we create for consumers in Recent York and Boston,” he said.