JetBlue Airways is getting a whole lot bigger. The budget airline has reached a $3.8 billion deal to buy Spirit Airlines, according to Reuters. It’s a move that will create the country’s fifth-biggest airline, if approved by regulators.
The deal is the final chapter in a months-long bidding war for Spirit, and it came just hours after Spirit scrapped plans to combine with Frontier Airlines for $2.7 billion.
It’s not all good news for JetBlue though. It’s reported there is the potential this merger could start an ongoing fight with antitrust regulators.
JetBlue’s offer price of at least $33.50 per share is actually 38 percent higher than the last closing price of Spirit shares. The deal also includes a “ticking fee”, which is a small monthly payment to Spirit shareholders from January 2023 until the deal is complete. The offer can eventually go up to $34.15 per share.
JetBlue and Frontier had been locked in a bidding war for Spirit. In February, Spirit agreed to a $2.9 billion offer from Frontier before JetBlue stepped into the mix in April. But Spirit couldn’t get the investor support it needed to get the Frontier deal done. We recently reported that Spirit shareholders were expended to vote against the merger with Frontier – leaving a pathway for JetBlue open.
According to CNBC, JetBlue executives say buying Spirit will fast-track growth by giving the airline access to more Airbus jetliners and pilots. It’ll also help the company compete with the U.S.’s big four airliners, American, United, Delta and Southwest.
Those Spirit planes will be getting an upgrade too. The planes will be refurbished with upgraded JetBlue-style interiors with seatback screens and more legroom.
CNBC says that if the deal gets past regulators, Frontier would become the largest discount carrier in the U.S. It’s also the first major U.S. airline deal since 2016, when Alaska Airlines beat out JetBlue for Virgin America.
Don’t be surprised if we hear about more and more airline mergers, as analysts tell CNBC the deal could end up opening the door for even more consolation.