JetBlue announces $3.8bn acquisition of Spirit

Merger would create fifth largest US airline

A Spirit plane is prepared for flight as it sits by a gate at Miami International Airport in Florida. AFP

JetBlue Airways plans to acquire low-price airline Spirit Airlines for $3.8 billion, the companies announced on Thursday, in what would establish the fifth largest US airline.

The proposed takeover, which requires regulatory approval, comes a day after Spirit terminated a combination with the Frontier Group following JetBlue's competing bid challenging the transaction.

By combining, the companies will be able to challenge major US airlines American, Delta, United and Southwest. They expect between $600 million and $700m in annual savings by joining forces, said a joint press release from Spirit and JetBlue.

The companies plan to argue the deal will help consumers.

"We believe we can uniquely be a solution to the lack of competition in the US airline industry and the continued dominance of the Big Four," said JetBlue chief executive Robin Hayes.

"By enabling JetBlue to grow faster, we can go head-to-head with the legacies in more places to lower fares and improve service for everyone. Even combined with Spirit, JetBlue will still be significantly smaller than the Big Four."

But some aviation watchers think the transaction could draw criticism in Washington, where antitrust regulators sued to block an alliance of American Airlines and JetBlue.

The all-cash transaction adjusts the price if the deal is delayed because of regulatory challenges. The price will be $33.50 per share if the transaction is completed by December 2023.

But the price would increase to $34.15 per share if the transaction is consummated in July 2024.

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  JetBlue’s transatlantic Mint seats offer socially-distanced flying, with 24 individual suites each with a lie-flat bed, aisle access and a sliding door. All images courtesy JetBlue.

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  JetBlue has introduced it's redesigned business class cabins ahead of starting flights to London this year. Fares in the premium cabin called Mint will be competitively priced by the low-cost US airline.

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  All seats have mood lighting designed to enhance the inflight experience and fast, free WiFi is available on board.

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  JetBlue's new Mint studios come with an additional seat, a table and the largest bed from any US airline, based on total reclined bed surface area.

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  Meals are designed by the team behind popular New York restaurant Charlie Bird.

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  Mint travellers can order Barista-style coffees including cold brews and non-dairy options.

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  All suites and studios come with a convertible blanket with a built-in foot pocket, a memory foam lined pillow and pillowcase, and a snooze kit with matching eye mask and earplugs.

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  Noise-cancelling headphones are provided for travellers on JetBlue's Mint.

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  The all-new Mint Studio offers the most space in a premium experience from any US airline, by Based on personal square footage per passenger seat.

JetBlue also agreed to a pay Spirit a fee of $70m and Spirit shareholders $400m "in the unlikely event the proposed agreement is not consummated for antitrust reasons", the press release said.

Following JetBlue's challenge to the Spirit-Frontier deal, Spirit leaders, including chief executive Ted Christie, had depicted the JetBlue transaction as a risky bet in light of antitrust concerns, as they continued to advocate the Frontier tie-up.

But on Thursday, Mr Christie told CNBC that at the time he was "actively soliciting" for the Frontier deal, but that there is "a lot of reason to be excited about where we landed".

"We've been listening to the folks at JetBlue and they have a lot of good thoughts on their plans," Mr Christie said.

Although Spirit leaders continued to back the Frontier transaction, they ran into trouble with Spirit shareholders who wanted the richer JetBlue premium. Spirit was repeatedly forced to postpone an investor vote on the Frontier agreement before finally pulling the plug on the transaction on Thursday.