Why is JetBlue trying to purchase Spirit Airlines?
Frontier Airlines and Spirit Airlines announced their merger in February. Now JetBlue plans to take Frontier Airlines out of that deal by pursuing their bid for Spirit Airlines.
In February, there was major news that Frontier Airlines and Spirit Airlines were merging to create a massive budget carrier line. However, last week, JetBlue decided to disrupt the acquisition by entering the chat with an offer to purchase Spirit at a far higher price than Frontier. The new proposal is causing major chaos in the aviation industry for various reasons, including the fact that JetBlue and Spirit have different business models, and are therefore not natural fits — this is not a seamless merge. So why is JetBlue bidding to buy Spirit Airlines all of a sudden?
JetBlue has officially offered to buy Spirit Airlines at $3.6 billion, $33 dollars per share in cash, while Frontier’s offer to Spirit Airlines was quoted at $2.9 billion back in February. In an interview, JetBlue’s CEO Robin Hayes stated: “This is about really allowing a bigger JetBlue to compete against four large legacy airlines, bringing the JetBlue experience to more customers, bringing more JetBlue flights into high-fare legacy hub airports and offering real competition.” But some aren’t convinced.
JetBlue is currently the sixth largest airline in the U.S., competing against carriers like American Airlines, Delta, United Airlines, Southwest, and Alaska. Spirit is known as an ultra-low-cost carrier, competing with airlines that hold an entirely separate business model from that of JetBlue, focusing on low-cost flights, while charging fees for different amenities. JetBlue offers premium flight experiences with free branded snacks and inflight wifi. What makes sense here is that if Frontier and Spirit were to continue their merge, they would become, by some measures, the United States’ fifth-largest carrier, possibly bumping JetBlue further down on the list. In this context, it makes sense for JetBlue to disrupt the Frontier acquisition by bidding for Spirit as both a prevention play and to further grow their brand.
Currently, JetBlue and Spirit are the two largest airlines in Fort Lauderdale. A merger would mean the combined airline would potentially carry over 50 percent of the airport’s passengers, possibly bumping them up on the list of top airlines in the U.S. A big hurdle in JetBlue’s bid for Spirit is that antitrust regulators may not approve. JetBlue’s current average fare is more than 50 percent higher than Spirit’s, leaving regulators to assume that taking such a low-cost carrier out of the equation would only benefit JetBlue and ultimately drive airfare market prices up for all.
JetBlue execs argue this is not the case—in fact, they posit the opposite. They believe their competitors often disregard lower-cost airlines when setting their prices. But since JetBlue is direct competition, if it creates lower prices through this new merger, it would then lead to lower fares on average for all, due to the market’s price-matching behavior.
Noel Cymone Walker is an NYC-based writer specializing in beauty, fashion, music, travel, and cultural anthropology. She has written and produced visuals for several notable publications such as The Recording Academy/ the Grammys, The Fader, Billboard, OkayPlayer, Marie Claire, Glamour, Allure, Essence, Ebony, and more.
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