PEMBROKE PARK, Fla. – Miramar-based Spirit Airlines will have to decide between Jet Blue Airways or Frontier.
JetBlue Airways, the sixth-largest airline in the country, is bidding to merge with Spirit Airlines in a $3.6 billion deal, the New York Times reported on Tuesday.
The three low-cost carriers operate out of Fort Lauderdale-Hollywood International Airport.
JetBlue could spark bid war
The Associated Press
JetBlue Airways has offered to buy Spirit Airlines for about $3.6 billion and break up a plan for Spirit to merge with rival budget carrier Frontier Airlines.
Spirit said Tuesday that its board will evaluate the JetBlue bid and decide what’s best for its shareholders.
JetBlue offered $33 per share in cash, which would be about 40% higher than Frontier would pay for Spirit under terms of a deal announced in February. Frontier’s offer in cash and stock was worth $2.9 billion when it was announced, but Frontier’s shares have fallen since then, reducing the value of the deal to Spirit shareholders.
Shares of Florida-based Spirit soared 22% after The New York Times first reported the JetBlue bid Tuesday.
In a statement, New York-based JetBlue said combining with Spirit would lead to lower fares by creating “the most compelling national low-fare challenger” to the nation’s four biggest airlines: American, Delta, United and Southwest.
Denver-based Frontier used that same argument to support its acquisition of Spirit.
A Frontier-Spirit tie-up would combine Frontier’s route map in the western United States with Spirit’s network along the East Coast and the Caribbean. Both are discount airlines that offer rock-bottom fares and make up some of the difference by charging extra for many things that bigger airlines include in the ticket price, including carry-on bags and soft drinks.
JetBlue is not the same kind of so-called ultra-low-cost-carrier, and its base fares are often slightly higher than Frontier and Spirit. JetBlue’s strength on the East Coast, including Florida, would mean much more overlap with Spirit.
Moreover, Frontier and Spirit are small enough that their deal might not get close scrutiny from antitrust regulators. Those same regulators already weighed in last year to try to block a much more limited partnership between JetBlue and American Airlines — that challenge is pending.
One area where all three are similar: consumer complaints. Spirit had the highest rate of complaints to the U.S. Transportation Department last year, followed by JetBlue and Frontier.
Democrats: Spirit-Frontier merger could boost airfares
The Associated Press
Several congressional Democrats are warning that the proposed combination of Frontier Airlines and Spirit Airlines would reduce competition among low-cost carriers and drive up fares during a time of inflation.
The lawmakers said previous mergers have hurt consumers and workers, and if Frontier and Spirit ever drop their budget-carrier business model, the industry “would lose an important check on prices.”
Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, D-Vt., along with Rep. Alexandria Ocasio-Cortez, D-N.Y., and five others urged Transportation Secretary Pete Buttigieg and the head of the Justice Department’s antitrust division to review the merger closely for potential violations of antitrust law, and consider acting to stop it.
The federal agencies declined to comment Friday beyond saying they had received the letter.
The Biden administration has signaled that it will scrutinize mergers more closely to promote competition. In September, the Justice Department sued to block a partnership in which American Airlines and JetBlue Airways agreed to work together in the Northeast. The Trump administration had allowed that deal to go through.
Frontier and Spirit announced last month that they would combine in a $2.9 billion deal to create the nation’s fifth-largest airline by passenger-carrying capacity. Denver-based Frontier would have a controlling share.
They say their deal would help consumers by creating a more powerful low-cost competitor to American, Delta, United and Southwest, which together control about 80% of the U.S. air-travel market.
The lawmakers, however, said “Spirit and Frontier are already the two least-liked airlines in America,” and a merger could make the customer experience worse because travelers who get mistreated would have no close alternatives among discount carriers.