LONDON – On May 3, the United States-based ULCC (ultra-low-cost carrier), Spirit Airlines, released information showing that it has rejected JetBlue Airways’ takeover bid.
The bid itself…
Back in early April, Spirit Airlines had received a challenging bid for takeover from JetBlue Airways, only two months after Frontier Airlines also bid for Spirit’s takeover.
It all started off when Frontier decided to rock the American aviation sector by putting in a bid of $2.9 billion in order to create a much larger low-cost carrier to compete with America’s ‘big four’ legacy carriers on services to underserved small and mid-sized cities across the U.S.
In this case, the ‘big four’ carriers are American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines.
At the time of Frontier’s bid, William A. Franke, the Chair of Frontier’s Board of Directors said:
“We worked jointly with the Board of Directors and senior management team across both carriers to arrive at a combination of two complementary businesses that together will create America’s most competitive ultra-low fare airline for the benefit of consumers.”
Adding to Franke’s comments, the Chief Executive Officer and President of Spirit Airlines, Ted Christie said:
“We are thrilled to join forces with Frontier to further democratize air travel. The transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public.”
“We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent guest service.”
However, two months later from this announcement, both of the carrier’s rival airline JetBlue, decided to throw in a counteroffer for Spirit’s takeover for $3.6 billion.
At the time of the bid going in from JetBlue, their Chief Executive Officer Robin Hayes said:
“We look forward to engaging with the Spirit Board to finalize our combination, to create a national low-fare challenger to the four large dominant U.S. carriers that will result in lower fares and better service for customers.”
JetBlue’s Bid Rejection…
Fast forward to today, Spirit’s Directors released in a statement that after liaising with financial and legal advisors, JetBlue’s offer is “not reasonably capable of being consummated”, meaning that their bid was now off the table.
Spirit was also fearing that the JetBlue takeover offer would not be cleared by antitrust regulators. Spirit still supports Frontier’s original offer of $2.9 billion and is still proceeding to formulate a full plan on combining, which they hope should come to finalization by the latter end of this year.
Declining JetBlue’s offer, Spirit submitted a letter to their CEO, Robin Hayes, stating:
“We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue’s Northeast Alliance (NEA) with American Airlines remains in existence.”
However this story pans out, it will rock the entire American aviation sector and will definitely add a lot of pressure to their legacy carriers, with hopes that it may drive down fares across the board, making American air travel, much more affordable for many more people.