Days ago, it was finally announced that JetBlue Airways would buy Spirit Airlines for $3.8 billion, just hours after the latter terminated its merger agreement with competitor Frontier Airlines, a proposal that apparently failed to win the support of enough of the shareholders.
This appears to signal the end of a long and drawn-out battle between the two budget carriers that sought to acquire ultra-cost carrier Spirit, but the deal has yet to be finalized. It still needs to get regulatory approval from the government, which some in the industry speculate simply won’t happen.
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That’s because the Justice Department has already launched an antitrust lawsuit against the existing JetBlue-American Airlines Northeast Alliance, saying it creates an anti-competitive monopoly on Northeast routes and could cause airfares to rise.
But assuming JetBlue’s takeover of Spirit goes ahead, it could spell some big changes for U.S. air travelers.
JetBlue’s plans for Spirit
Once merged, the airlines would form the fifth largest carrier in the US, coming in just behind the “big four” – American, Delta, United and Southwest. However, the two carriers will continue to operate separately until the acquisition is finalized.
According to CNBC, JetBlue’s main ambition is to get bigger, and Spirit could supply the extra planes and pilots to help it do just that.
JetBlue reportedly plans to overhaul Spirit’s existing fleet, removing the cramped seats and refurbishing the cabins to match its style. But until the repairs are complete, passengers may find their JetBlue flights flying aboard Spirit’s bright yellow aircraft.
In addition to growth, JetBlue CEO Robin Hayes has said that improving reliability will be a priority for the company, an area in which Spirit has recently outperformed its buyer.
What about cheap prices?
President Biden’s administration has vowed to shut down any acquisition deals that could harm healthy competition, so the JetBlue-Spirit merger could still fall apart.
Hayes believes combining the two carriers would put the resulting airline in a better position to compete with the big four, which currently control three-quarters of the US market. He argues that JetBlue’s growth would result in more reasonable fares to more destinations.
JetBlue doesn’t offer the kinds of low fares that Spirit does, which also translates to stripped-down service. While still considered a low-cost airline, it offers more amenities than Spirit, including better legroom, in-seat media screens, live TV, free Wi-Fi and free meals; as well as offering a business class option with lie-flat seats.
Meanwhile, Frontier Airlines, after being rebuffed in its bid to buy Spirit, is looking on the bright side. The carrier has said it would gladly take most of the low-cost market that Spirit leaves behind.
If JetBlue is ultimately successful in merging with Spirit, Frontier will indeed become the nation’s largest discount carrier, ahead of others like Allegiant, Avelo and Breeze.
“It just gives us a lot of breathing room for growth,” Frontier CEO Barry Biffle said. “That’s why this is a windfall for our employees and our shareholders.”
Frontier has already predicted the company will grow by 30 percent next year and has launched a fare sale, offering a total of one million seats for just $19 each.
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