JetBlue offers $3.6 billion for Spirit, disrupting rival bid

JetBlue Airways Corp. offered to buy budget carrier Spirit Airlines Inc. for $3.6 billion, potentially spoiling a competing bid by rival Frontier Group Holdings Inc. and reshaping the landscape for ultra-low-cost air travel.

Spirit said Tuesday it received an unsolicited proposal from JetBlue to buy outstanding shares for $33 apiece in cash. Spirit will work with financial and legal advisers to evaluate the offer, according to a statement.

The surprise development comes about two months after Frontier reached an agreement to buy Spirit for $2.9 billion. Frontier criticized the competing offer, saying such a combination would raise fares and reduce flight options. It also questioned JetBlue’s effort in light of an unrelated federal lawsuit to block an alliance with American Airlines Group Inc.

“An acquisition of Spirit by JetBlue, a high-fare carrier, would lead to more expensive travel for consumers,” a Frontier spokesperson said, without specifying whether the company planned to increase its bid.

Spirit’s allure stems in part from an industry-wide turn toward domestic markets and leisure travelers—the bread-and-butter of ultra-low-cost airlines—to recover from a pandemic slump. Bigger carriers are moving more heavily onto that turf as business and overseas travel demand remain tepid.

A Spirit acquisition would give JetBlue the growth that it’s long sought, moving it closer to competing with larger carriers and assuring its spot as the fifth-largest airline in the U.S.

“Once you’ve created megacarriers with over 1,000 planes, then it’s fair game for the No. 5 to beef up,” said Samuel Engel, senior vice president of the aviation group at consultant ICF. “You look around and say, ‘If the next round of consolidation is now, I want to be in on it.’”

$700 Million Synergies

JetBlue said in a statement its offer isn’t subject to approval by its shareholders or to a financing contingency. The proposed deal would generate as much as $700 million in annual synergies, the carrier said.

Spirit shares jumped 22% in New York after the New York Times first reported on the proposal and were little changed in aftermarket trading. JetBlue fell 2.9% in the postmarket as of 5:34 p.m. in New York after a 7.1% drop at the close. Frontier fell 1.7% in the aftermarket after closing up 3.9%.

A Spirit deal would give JetBlue, hounded by Wall Street analysts for much of its 23-year history over cost creep, access to an organization and management team highly focused on keeping operating expenses in check. JetBlue lost out in its only other takeover attempt when it was outbid by Alaska Air Group Inc. for Virgin America in 2016.

JetBlue said its offer is superior to Frontier’s bid and “represents the most attractive opportunity for Spirit’s shareholders.” The combination of JetBlue and Spirit would position the buyer “as the most compelling national low-fare challenger to the four large dominant U.S. carriers,” it said.

It would also help JetBlue—with much of its capacity in New York and Boston—grow in markets where it has little or no presence. At the same time, the combined JetBlue and Spirit would have a larger presence in popular leisure markets in Florida and the Caribbean where both already operate. Disrupting Frontier’s bid, meanwhile, could blunt the growth ambitions of the Denver-based airline, which has expanded nationally in recent years.