Spirit Airlines shareholders to vote on JetBlue merger


Spirit Airlines shareholders are expected to vote on Tuesday on whether to approve a merger with JetBlue Airways, a deal that would create the nation’s fifth-largest carrier but would face intense scrutiny from federal regulators.

Analysts expect Spirit shareholders to vote to approve the merger. Executives from both airlines said they hoped to complete the regulatory process and close the deal in the first half of 2024.

Winning shareholder approval may be the easy part for airline executives, who will have to persuade the Biden administration and some lawmakers that the deal is a win for consumers. The Justice Department has taken an aggressive role in fighting deals it says will reduce competition and hurt consumers, including an alliance set in a Boston courtroom that also involves JetBlue.

The merger deal, announced in July, follows months of back-and-forth between the two carriers and Frontier Airlines, which announced plans to merge with Spirit in February. This proposed deal between two carriers known for low fares seemed likely to win approval from Spirit shareholders until JetBlue made its surprise offer in April.

Frontier and Spirit end merger talks

Spirit initially resisted JetBlue’s overtures, arguing that a merger with the New York-based carrier was unlikely to gain regulatory approval. But ultimately, the ultra-low-cost carrier was unable to convince enough of its shareholders to support a merger with Frontier.

Under the terms of the agreement, JetBlue would pay Spirit shareholders $33.50 per share in cash. The deal also includes an upfront payment of $2.50 once shareholders approve the transaction, plus a “listing fee” of 10 cents per month beginning in January 2023.

JetBlue agrees to acquire Spirit Airlines

The proposed merger comes as there are fewer players in the airline industry than years ago, the result of mergers and bankruptcies. According to the Justice Department, the four major airlines held 55% of the domestic air transport market in 2000, with a dozen smaller carriers vying for the rest. In 2020, the top four accounted for 81% of the market, with the number of smaller competitors decreasing.

JetBlue is embroiled in an antitrust lawsuit filed by the Justice Department and attorneys general of six states and the District of Columbia over a partnership it launched in 2021 with American Airlines. The arrangement, known as the Northeast Alliance, allows the two carriers to share jets and revenue on certain routes in the Boston and New York areas.

The carriers argue that the partnership allows them to better compete with larger players, such as Delta Air Lines and United Airlines, which operate more flights in those markets. But the Justice Department argues the arrangement reduces competition and could drive up prices in one of the country’s busiest air corridors. The trial, which began late last month, is proceeding in the US District Court in Massachusetts.

Biden administration challenges Northeastern alliance of American Airlines and JetBlue Airways

JetBlue executives argued that a merger with Spirit would create an airline better equipped to compete with American, Delta, United and Southwest Airlines, which dominate the industry. Analysts say JetBlue’s aggressive pursuit of Spirit could help accelerate its growth and potentially prevent it from becoming a takeover target itself.

At a time when airlines are struggling to hire and train employees — especially pilots — a merger would give JetBlue access to experienced aviators and also allow it to expand into key markets, including Chicago. , Dallas-Fort Worth and Houston, where it does not have a strong presence.

JetBlue was the fifth-busiest carrier before the pandemic, with 43 million passengers in 2019, while Spirit ranked eighth, according to Transportation Department data. Frontier was the ninth largest airline. Frontier and Spirit combined would have eclipsed JetBlue to become the fifth largest carrier.

If regulators block JetBlue and Spirit from merging, their agreement says JetBlue would have to pay Spirit $70 million in fees, plus an additional $400 million in shareholder fees. As additional protection, the agreement includes the unusual provision on listing fees.

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