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JetBlue boosts its deal for Spirit by $100m

written by Isabella Richards | June 7, 2022

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On 4 May, JetBlue passengers will be required to wear a mask at all times. (JetBlue)

JetBlue has slapped on an additional US$100 million into its bid for Spirit Airlines in opposition to its merger with Frontier Airlines, as the heated battle between the low-cost carriers continues.

In a statement on Monday, the Long Island-based airline said it was enhancing its reverse-breakup fee that will be paid to Spirit shareholders in case the deal falls through and fails to win regulatory approval to US$350 million – US$3.20 per Spirit share – up from its original price of US$200 million.

The latest three-way saga was sparked from ultra-low-cost airlines Frontier and Spirit announcing in February they were joining forces to compete against the “big four”, including American Airlines, United Airlines, Southwest Airlines and Delta Air Lines.

But in April, JetBlue announced it was competing against Frontier with a “superior” deal, and despite the merger between Spirit and Frontier making more sense to industry analysts, such as their similar low-cost ambitions and regional routes, JetBlue has the potential to strengthen Spirit’s foothold in Florida.

Spirit officially rejected JetBlue’s offer in early May over fears regulators would not approve of the deal due to the controversial Northeast Alliance (NEA) with American Airlines, and the lack of similarities between the companies.

The partnership, which allows the airlines to sell each other’s flights and provide benefits to loyal members, began in 2020. But the Department of Justice in September last year sued the NEA because it eliminates competition in New York and Boston by diminishing JetBlue’s cheaper prices against American.

JetBlue, however, disputed those fears and said that the NEA litigation, which is slated for September, would “not be an obstacle” of the acquisition of Spirit, and would not “impact” shareholders in any way, even if the company lost the trial.

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On 2 June, Frontier and Spirit further strengthened their merger deal under a reverse fee of US$250 million, but in response, JetBlue said “Spirit’s board only went back to Frontier under pressure, when it became increasingly clear their shareholders would decisively reject the Spirit board’s flawed process and Frontier’s inferior transaction”.

But now, JetBlue’s sweetened offer reflects the “seriousness” of the company’s commitment to acquiring Spirit, CEO Robin Hayes said.

“Given the similar regulatory risks of the two transactions and the increased reverse breakup fee we are prepared to provide, we believe our improved proposal remains a superior proposal by any measure,” Hayes said.

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In this new bid, JetBlue will also give shareholders US$31.50 per share in cash, up from the original US$30 per share. While the airline has previously accused Spirit of not acting in “good faith” during the negotiations, subject to “necessary diligence”, JetBlue is willing to increase the transaction up to US$33 per share.

This latest move comes days before Spirit shareholders are scheduled to meet on 10 June to cast their votes on the Frontier merger, after JetBlue urged them to reject the deal in May.

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