Spirit Airlines and JetBlue merge in $3.8 billion deal: NPR

A line of Spirit Airlines jets sit on the tarmac at Orlando International Airport on May 20, 2020, in Orlando, Florida.

Chris O’Meara/AP

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Chris O’Meara/AP

A line of Spirit Airlines jets sit on the tarmac at Orlando International Airport on May 20, 2020, in Orlando, Florida.

Chris O’Meara/AP

JetBlue Airways has agreed to buy Spirit Airlines for $3.8 billion, creating the nation’s fifth largest airline if the deal can be approved by antitrust regulators.

The agreement on Thursday capped a months-long bidding war and came a day after Spirit tried to merge with fellow carrier Frontier Airlines. fell apart.

After strongly arguing against JetBlue, Spirit CEO Ted Christie is in the awkward position of defending the sale to JetBlue, saying antitrust regulators would never allow it to happen.

“Obviously a lot has been said over the last few months, always with our stakeholders in mind,” Christie said on CNBC. “We’re listening to the people at JetBlue, and they have some good thoughts on what their plans are for it.”

JetBlue CEO Robin Hayes has consistently argued that a larger JetBlue would create more competition for the four airlines that control about 80 percent of the U.S. market — American, United, Delta and Southwest.

Shares of Spirit, based in Miramar, Fla., rose 3.5 percent at the opening bell Thursday to $25.15, still below the price JetBlue is offering. Shares of JetBlue were essentially flat.

Fares are likely to increase after the deal

When airlines are ranked by the amount of consumer complaints, Spirit Airlines usually finishes as the worst or near the worst. However, some consumer advocates Worry about the increase in fares If it disappears

Spirit and competitors like Frontier and Allegiant charge lower fares that appeal to budget-conscious leisure travelers, though they charge higher fees that can add to the cost of flying.

“The spirit is disappearing, and with it the low-cost structure,” says William McGee of the anti-merger American Economic Freedom Project. Once Spirit is absorbed (into JetBlue), there is no doubt that fares will increase.

Others, however, say Frontier will grow — it has ordered several planes — and fill any gap Spirit has left in the cheapest segment of the air travel market.

If approved, the deal is expected to close in the first half of 2024

JetBlue and Spirit will continue to operate independently until the agreement is approved by regulators and Spirit’s shareholders with separate loyalty programs and customer accounts.

The companies said they expect to complete the regulatory process and close the deal by the first half of 2024 at the latest. If that happens, the combined airline would be based in JetBlue’s hometown of New York and led by Hayes. It will have a fleet of 458 aircraft.

JetBlue said Thursday it will pay $33.50 per share in cash for Spirit, including an upfront payment of $2.50 per share payable in cash upon approval by Spirit shareholders. Spirit shareholders will also be paid 10 cents per share from January 2023 through closing to compensate for any delay in receiving regulatory approval.

If the transaction does not close for antitrust reasons, JetBlue will pay Spirit $70 million in reverse fees and $400 million to Spirit shareholders, less any amounts paid to shareholders prior to termination.

Spirit and Frontier announced their plan to merge in February, and Spirit’s board stood by the deal even after JetBlue made a higher bid in April. However, Spirit’s board was never able to convince the airline’s shareholders to come along. The vote on the merger was postponed four times, then fell short on Wednesday when Spirit and Frontier announced Termination of their contractwhich made the Spirit-JetBlue pairing inevitable.

JetBlue anticipates annual savings of $600 million to $700 million upon completion of the transaction. Annual revenue for the combined company is expected to be approximately $11.9 billion based on 2019 revenues.

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