A deal has gone down that is shaking up the airline industry.
JetBlue Airways has agreed to purchase Spirit Airlines for $3.8 billion.
If the deal wins approval from antitrust regulators, it will create the fifth-largest airline in the nation.
The deal was reached one day after Spirit Airlines’ effort to merge with fellow low-cost airline Frontier Airlines failed, capping a months-long bidding war.
They expect to complete the regulatory process and close their acquisition by the first half of 2024.
Upon acceptance, the combined airlines will have a fleet of 458 planes, will be based in New York, and is expected to have a significant presence in Florida.
Based on December 2022 timetables, JetBlue claimed the acquisition accelerates its expansion goal with over 1,700 daily flights traveling to over 125 destinations in 30 countries.
The acquisition increases relevance for JetBlue in key focus cities, like Fort Lauderdale, Orlando, San Juan, and Los Angeles.
It also grows its presence in the Big Four airline hubs in Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta, and Miami.
The airlines will operate independently until after the transaction closes.
If the merger agreement doesn’t close due to antitrust reasons, JetBlue will pay Spirit Airlines a reverse break-up fee of $70 million and Spirit stockholders a “reverse $400 million less any amounts paid to stockholders of Spirit before termination.”
Spirit CEO Ted Christie has the awkward task of defending a sale to JetBlue after arguing vehemently against it.
The Spirit CEO had initially stated that antitrust regulators would not allow it.
Christie stated on CNBC, “A lot has been said over the last few months obviously, always with our stakeholders in mind…We have been listening to the folks at JetBlue, and they have a lot of good thoughts on their plans for that.”
The CEO of JetBlue, Robin Hayes, has argued all along that a larger JetBlue creates more competition for the four airlines that control about 80% of the U.S. market — American Airlines, United Airlines, Delta Airlines, and Southwest Airlines.
However, many worry that knocking out Spirit, America’s largest ultra-low-cost carrier, eliminates an essential option for the country’s budget-conscious travelers.
Spirit has helped many people fly who would never have been able to otherwise.
Experts worry that if Spirit disappears, so will its low-cost structure.
Once Spirit is absorbed into JetBlue, travelers should be prepared for the chance of fares going up.
Even though Spirit doesn’t offer the same perks as the more expensive carriers, like free snacks or in-flight entertainment, they allow you to fly across the country for $99.
Many people depend on that price, and they don’t want to lose that super-low-cost option.
However, others are optimistic that Frontier will grow because it has a large number of planes on order.
If Frontier does grow, it could fill any gap left by Spirit in the budget airline segment of the air-travel market.
Losing Spirit would drastically alter the travel industry, particularly for low-income travelers, said Henry Harteveldt, president of the travel consultant Atmosphere Research.
He added that the U.S. Department of Justice, which has the power to examine mergers and bring legal action to stop them, would probably demand concessions from JetBlue to guarantee that the airline will continue to provide affordable options to Spirit customers after the merger.
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