JetBlue CEO Robin Hayes said the deal would be fruitful for investors and passengers.
“We are thrilled to deliver this compelling combination that fuels our strategic growth, enabling JetBlue to deliver our unique blend of low fares and exceptional service to more customers, on more routes,” he said in a statement. communicated.
But industry experts said the deal could lead to higher tariffs across the industry. A Frontier-Spirit deal, on the other hand, would have brought together two airlines that have very low base fares. Neither airline offers first class or business class seats.
For this reason, it is possible that the JetBlue deal for Spirit could face rigorous antitrust scrutiny from the U.S. Department of Justice, particularly if the Justice Department considers the acquisition harmful to consumers. .
But those doubts about a deal with JetBlue were nowhere to be found in Spirit’s comments on Thursday.
“We are thrilled to join forces with JetBlue through our enhanced agreement to create the most compelling low-cost domestic challenger for dominant US carriers,” CEO Ted Christie said.
While passengers might like the low fares offered on Spirit and Frontier, they generally didn’t like the service. Spirit had by far the highest number of passenger complaints in 2021, with 11.45 complaints per 100,000 passengers, according to the US Department of Transportation. JetBlue had the second highest number of complaints on this basis at 6.38, while Frontier came third at 5.78. Frontier had by far the worst complaint rate in 2020, when it recorded 49.31 complaints per 100,000 customers.
The deal announced Thursday would pay Spirit shareholders $33.50 per share in cash, including an advance payment of $2.50 per share in cash payable upon approval of the transaction by Spirit shareholders – even before the termination of the agreement.
JetBlue will pay Spirit shareholders an additional 10 cents per month for any late closings after December of this year, which could push the price up to $34.15 per share. And if regulators block the deal, JetBlue will pay Spirit $70 million, and its shareholders will receive an additional $400 million.
Spirit will have to pay Frontier $25 million to cover costs Frontier incurred during the merger talks. If JetBlue is able to complete its deal for Spirit within the next 12 months, Spirit will owe Frontier an additional $69 million.
On Wednesday night, when its deal with Spirit was terminated, Frontier expressed regret but promised it could grow even without a merger.
“With JetBlue seeking to convert Spirit Airlines into a high-cost airline, Frontier will be unrivaled as an ultra-low-cost leader,” he said.