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JetBlue Defends Bid for Spirit as Analysts Question Its Merit
Published by Jessica Weisman-Pitts
Posted on April 6, 2022
3 min readLast updated: February 8, 2026
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Company
Published by Jessica Weisman-Pitts
Posted on April 6, 2022
3 min readLast updated: February 8, 2026
Add as preferred source on GoogleBy Rajesh Kumar Singh and Nathan Gomes
(Reuters) -JetBlue Airways Corp on Wednesday mounted a vigorous defense of its unsolicited $3.6 billion bid to acquire ultra-low-cost carrier Spirit Airlines, saying the company is “highly confident” of securing regulatory approval for the deal.
The New York-based carrier on Tuesday surprised Wall Street with a $33 per share cash offer, potentially derailing a $2.7 billion merger plan between Spirit and Frontier Group Holdings Inc.
The proposed deal is widely expected to attract close antitrust scrutiny from President Joe Biden’s administration, which has taken a tough stance against mergers that may reduce competition and increase prices for consumers.
JetBlue said while it expects a lengthy regulatory process, it is counting on its track record of lowering fares and increasing competition to get the nod.
“We are convinced… that average fares come down more when JetBlue flies into a legacy market than when an ultra-low-cost carrier does,” Chief Executive Robin Hayes told investors on a call.
Some analysts, however, are not sure the administration will buy the argument that the acquisition would translate into lower consumer costs as JetBlue’s fares are higher than Spirit’s. JetBlue also has plans to remove some seats on Spirit’s planes.
White House National Economic Council Director Brian Deese on Wednesday declined to comment on JetBlue’s bid, but said the Biden administration takes “very seriously” the impact of industry consolidation.
JetBlue and American Airlines Group Inc are already facing a lawsuit from the U.S. Department of Justice over their Northeastern Alliance.
The partnership, announced in July 2020, allows the carriers to sell each other’s flights in their New York-area and Boston networks and link frequent flyer programs in a move aimed at helping them better compete with United Airlines and Delta Air Lines in the Northeast.
Hayes said the company would not sacrifice the Northeastern Alliance in order to secure regulatory approval for the Spirit deal.
COSTS & BENEFITS
Analysts are also questioning the benefits of JetBlue’s Spirit bid.
Raymond James downgraded the company’s stock, calling its offer for Spirit an “indecent proposal.”
While both carriers have fleets dominated by Airbus SE, any potential cost savings from the deal will be diluted by JetBlue’s need to bump up the pay of Spirit pilots, who are on a lower band, Raymond James analyst Savanthi Syth, said, adding that execution risk is higher in JetBlue’s proposed deal than for the potential Spirit-Frontier merger.
JetBlue does expect higher labor costs as a result of the deal. But it said the transaction would result in certain economies of scale, producing savings of $600 million to $700 million within three years. It also expects the transaction to be accretive to its earnings in the first year.
The company committed to maintain compensation and benefits for Spirit employees for at least 12 months.
Shares of Spirit were off 2.6% at $26.21 in mid-day trade, well below the offer, suggesting investors were skeptical of the deal going through. JetBlue stock was down 7%.
(Reporting by Rajesh Kumar Singh in Chicago, David Shepardson in Washington, Abhijith Ganapavaram and Nathan Gomes in Bengaluru; Editing by Krishna Chandra Eluri and Bill Berkrot)
An acquisition is a corporate action in which one company purchases another company. This can involve buying a controlling interest in the target company to gain its assets and operations.
Antitrust scrutiny refers to the examination of business practices to ensure they do not violate competition laws. This is often applied to mergers and acquisitions that may reduce market competition.
Labor costs are the expenses incurred by employers for employee wages, salaries, and benefits. These costs can significantly impact a company's financial performance.
A merger is a combination of two companies to form a new entity, often aimed at increasing market share, reducing costs, or enhancing operational efficiencies.
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