JetBlue launches hostile takeover bid for Spirit Airlines
“It is unlikely that the DOJ or a court would be persuaded that JetBlue should be allowed to form an anti-competitive alliance that aligns its interests with an incumbent carrier, and then also undertake an acquisition that would eliminate the largest carrier ULCC,” the report said. Spirit’s managing director, Ted Christie. , told investor analysts on a call this month, referring to its airline’s position as an ultra-low-cost carrier.
JetBlue disagreed with that finding and said it would also preemptively divest some airports to address regulatory concerns. Frontier has not agreed to similar concessions, nor has it offered to pay a severance fee if the merger fails due to antitrust concerns. JetBlue would pay Spirit $200 million if a deal fell through for this reason.
“JetBlue delivers more value – a significant cash bonus – more certainty and more benefits for all stakeholders,” Jetblue chief executive Robin Hayes said in a letter to Spirit shareholders on Monday. “Frontier offers less value, more risk, no surrender commitments and no reverse break fees.”
The proposed merger between Spirit and Frontier has also raised concerns. In March, several progressive lawmakers, including Senators Elizabeth Warren, Democrat of Massachusetts, and Bernie Sanders, Independent of Vermont, expressed doubts, warning that the merger could raise ticket prices and hurt customer service. Last month, the Justice Department sent the two airlines “second requests” for information about their merger, a process that effectively binds the case until companies answer the agency’s long list of questions.
JetBlue said Monday that Frontier and Spirit overlapped on 104 nonstop routes, twice as many as those shared between JetBlue and Spirit.
A Spirit-Frontier merger would combine two low-cost carriers with strengths on opposite coasts. JetBlue’s bid could accelerate its plans to compete with the Big Four U.S. carriers – American Airlines, Delta Air Lines, United Airlines and Southwest Airlines – which have a combined share of 66% of the internal market. A combined border and mind would control more than 8% of the market; JetBlue and Spirit would together command more than 10%.
JetBlue also accused Spirit’s management of being blinded to the benefits of its offer by their relationship with Frontier’s management. Indigo Partners, a private equity firm that invests in low-cost airlines, held a majority stake in Spirit from 2006 to 2013, the same year it bought Frontier.