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JetBlue Airlines has agreed to buy Spirit Airlines for $ 3.8 billion after bidding on the war

New York -Based in Long Island City Jetblue Airlines Agreed to buy Spirit Airlines for $ 3.8 billion and establish the fifth largest airline in the country if approved by antitrust regulators.

Thursday’s agreement ended the month-long bidding war and arrived the day after Spirit tried to merge with low-cost carrier Frontier Airlines.

Spirit CEO Ted Christie has been put in a pesky position to defend the sale to JetBlue after violently arguing that antitrust regulators will never cause it.

“In the last few months, a lot has been clearly said with stakeholders in mind,” Christie told CNBC. “We’ve heard about the JetBlue people. They have a lot of good ideas about the plan.”

JetBlue’s regulatory approval claims are based on two main arguments. Also, have already volunteered to abandon spirit gates and takeoff and landing slots at major airports in New York, Boston and Florida.

JetBlue CEO Robin Hayes said these concessions will make other low-cost carriers, including Frontier, stronger and more competitive.

“But the real question here is clearly what we can do in the United States to create a more competitive aviation industry for the four largest airlines,” Hayes said in an interview. Told. “We believe that the most destructive and most effective thing we can do is build a bigger JetBlue faster than any other way.”

JetBlue and Spirit together make up about 9% of the US air travel market. Including international flights, American Airlines, United Airlines, Delta Air Lines and Southwest Airlines dominate about 80%.

According to Hayes, the Spirit aircraft will be converted to a JetBlue configuration, which will provide more legroom and fewer seats for each flight. JetBlue will increase the salaries of Spirit employees, he said.

JetBlue and Spirit have been discussing over the past few weeks, primarily on how Spirit can retain key employees while their destiny is in the air. The financial terms of the contract have not changed since early July.

Miramar, Florida-based Spirit shares rose 4% to $ 25.31 on Thursday noon trading, but still below the price offered by JetBlue. JetBlue’s share price fell 2% and Frontier (which is expected to benefit if Spirit disappears as a discount competitor) soared 19%.

Spirit Airlines will regularly be the worst or near worst if the airline is ranked by the percentage of consumer complaints. Still, some consumer advocates are worried that fares will go up when they disappear.

Spirit-like rivals Frontier and Allegiant charge solid fares that appeal to the most budget-conscious leisure travelers, but are working on more fares that can increase flight costs.

“The spirit will disappear, and its low-cost structure will disappear,” said William Maggie of the US Economic Freedom Project to prevent mergers. “There is no doubt that fares will go up when the spirit is absorbed (by JetBlue).”

However, some say that the frontier has grown and a large number of planes have been ordered, filling the gap left by the spirit in the cheapest segment of the air travel market.

JetBlue and Spirit will operate independently using separate loyalty programs and customer accounts until the agreement is approved by the regulatory agency and Spirit’s shareholders.

The two companies said they would complete the regulatory process and close the transaction by the first half of 2024. In that case, the integrated airline will be based in JetBlue’s hometown of New York and led by Hayes. It will have a fleet of 458 aircraft.

JetBlue said Thursday that it would pay $ 33.50 per share in Spirit cash, including an upfront payment of $ 2.50 per share in cash after Spirit shareholders approve the transaction. Also, from January 2023 to the end, there will be a monthly dime of 10 cents per share to indemnify Spirit shareholders in the event of a delay in obtaining regulatory approval.

If the transaction fails due to antitrust reasons, JetBlue will pay Spirit a $ 70 million reverse split fee, $ 400 million to Spirit shareholders minus the amount paid to shareholders prior to cancellation. Pay.

Spirit and Frontier announced plans to merge in February, and even after JetBlue made a big offer in April, Spirit’s board of directors supported the deal. However, Spirit’s board of directors could not convince the airline’s shareholders. The merger vote was postponed four times, and the combination of Spirit and JetBlue was unavoidable as Spirit and Frontier announced on Wednesday that the agreement would end.

JetBlue expects to save between $ 600 million and $ 700 million annually when the transaction is completed. The merged company’s annual revenue is expected to be approximately $ 11.9 billion, based on 2019 revenue.

JetBlue Airlines has agreed to buy Spirit Airlines for $ 3.8 billion after bidding on the war

Source link JetBlue Airlines has agreed to buy Spirit Airlines for $ 3.8 billion after bidding on the war

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