JetBlue on Tuesday made an unsolicited $ 3.6 billion offer to rival low-cost Spirit Airlines in an effort to pave the way for a proposed deal between Spirit and Frontier Airlines.
JetBlue’s cash offer is about 33% higher than the value of Frontier’s Spirit stock and cash offer. Such a deal would prevent United Frontier and Spirit from becoming the country’s fifth-largest airline behind the four airlines JetBlue – American (AAL), United (UAL), Delta (DAL) and Southwest (LUV) – which account for more than 80% of the country’s air traffic. Air transport.
“The combination of the two airlines will accelerate JetBlow’s growth, making it one of the most lucrative national low-fare challenges for the four major US carriers,” JetBlue said in a statement.
Spirit said it would “work with its financial and legal advisers to evaluate JetBlue’s proposal and pursue action in the best interests of Spirit and its stockholders.”
For its part, Frontier defended its offer as an excellent deal for travelers and stakeholders.
“Combined Spirit and Frontier will deliver बचत 1 billion in annual savings to customers and offer even more ultra-low fares to more locations across the country, creating the most competitive ultra-low-fare airline in the United States,” Frontier said. As a result of the merger coordination, there is a significant increase in potential for the combined company. “
Spirit and Frontier are both recognized in the industry as low-cost carriers, with very low base fares and extra charges for anything else passengers need, even carry-on baggage.
They rely heavily on bargain-hunting leisure travelers and carry fewer business travelers than their larger competitors. While business travel has returned much more slowly from leprosy than leisure travel, Spirit and Frontier have returned faster than their larger competitors.
Passengers may like lower fare spirits and frontier offers, but they generally give airlines poor customer satisfaction grades.
According to figures kept by the U.S. Department of Transportation, Spirit had the highest number of passenger complaints in 2021, with 11.5 complaints per 100,000 passengers. JetBlue had the second highest number of complaints with 6.4 on that basis, but that was 43% lower than a year earlier. Frontier was third in the industry with 5.8. In 2020, Frontier had the worst rate of complaints when it reported 49.3 complaints per 100,000 customers.
Frontier and Spirit also had the industry’s worst consumer satisfaction rating for 2021 according to the US Consumer Satisfaction Index, while JetBlue was ranked third for the best ratings on that index.
“Customers should not have to choose between low fares and great experiences, and JetBlue has shown that it is possible to have both,” said Robin Hayes, CEO of JetBlue.
The US airline industry has changed over the last 25 years with mergers. The four largest airlines of today are formed from a series of mergers between 10 airlines. If either JetBlue or Frontier ended up with Spirit, it would be the first airline merger in the United States since Alaska Air bought Virgin America in 2016.
However, the Biden administration has taken a very hard line on the distrustful consequences of corporate mergers and the need to protect competition for the benefit of consumers. The alliance between JetBlue and American also claims to have stopped, allowing airlines to book passengers on each other’s flights, even if it is not a complete merger.
Frontier commented on the issue, saying that since only 18% of the routes used by Frontier or Spirit were flown by both carriers, its contract would be better for airline competition. He argued that the JetBlue-Spirit combination would reduce competition and increase fares.
“It’s amazing that JetBlue will consider such a merger this time around because the Department of Justice is currently suing to block their pending alliance with American Airlines,” Frontier said.
Shares of JetBlue, Spirit (Save) and Frontier (FRNT) traded slightly lower in the hours following the announcement.