JetBlue and Spirit announced a $3.8 billion merger after a deal between Spirit and Frontier broke down on Wednesday. The newly merged airline will become the fifth largest airline in the United States, posing a potential challenge to the dominance of the "big four" airlines.
Spirit Airlines shareholders rejected the deal and chose JetBlue's thicker offer. JetBlue and Frontier Airlines have been pursuing Spirit for months, hoping to create a larger economical airline that will result in lowering ticket prices.
However, today's announcement is a bumpy road. In February this year, Frontier Airlines announced its plan to acquire Elf Company in cash and stock transactions, with a transaction value of US$2.9 billion. But JetBlue has its own ideas for Spirit Airlines, and in April it proposed a $3.6 billion full cash acquisition of . The airline even offered to offer a $200 million breakup fee if antitrust issues hinder the transaction.
Still, Spirit Airlines rejected the deal and took JetBlue's North American Alliance (NEA) with American Airlines as its main focus. The board said antitrust issues and "unacceptable levels of closure risk" for its shareholders were the reasons for its rejection of JetBlue's bid. JetBlue then launched the hostile acquisition of by , reducing its bid to $30 per share, and still said it was open to a consensual deal of $33 per share.
Faced with the hostile acquisition, Spirit Airlines retreated and eventually withdrew from negotiations with Frontier Airlines. Today, Spirit Airlines and JetBlue announced that the board of directors of the two companies approved a new merger agreement of $33.50 per share, which would bring the combined airline's corporate value to $7.6 billion.
"Spirit Air and JetBlue will continue to advance our shared goal of disrupting the industry and bringing fares down for the four major airlines," JetBlue CEO Robin Hayes said in a statement.
Spirit Airlines is now in an awkward position and has to sell the deal it previously opposed to to shareholders, especially given the antitrust issue. "Over the past few months, it's clear that a lot has been said, always taking into account our stakeholders," Ted Christie, CEO of Spirit Airlines, said on CNBC this week. "We have been listening to people from JetBlue, who have a lot of good ideas on their plans in this regard."
This transaction still needs approval from shareholders and antitrust regulators. And it happened in a summer that was disrupted by flight delays and cancellations, causing customer complaints to rise sharply and attracted the attention of Washington .
