LONDON – Following the news yesterday from JetBlue, we will go into more depth on this in this week’s edition of The Editor’s Corner.
The Editor’s Corner is going to be an op-ed series from AviationSource Editor-in-Chief James Field, who is going to give his thoughts (Maybe controversial) on all things going on in the aviation industry.
James will be starting things off with his next topic being: JetBlue’s Offer for Spirit Airlines Will Change The American Airline Dynamic.
JetBlue’s Offer for Spirit Airlines Will Change The American Airline Dynamic
It was quite a surprising bid yesterday, but also an unsolicited offer for Spirit Airlines at $33/share, which was substantially more than the fee agreed with Frontier Airlines.
For those in the industry, this is quite a surprise, which is going to open up a bidding way that may change the dynamic of the American airline industry for years to come.
Such interesting changes have no doubt been made out of the need to be adaptable to new challenges, especially post-pandemic.
Benefits for JetBlue…
The benefits for JetBlue acquiring Spirit like this would see combined revenues increase.
In 2019, the combined revenue for both carriers was $11.9 billion, which is based on 78 million passengers handled as well.
The fleet size would increase from 282 aircraft to 455, with daily flights increasing to over 1,700.
JetBlue would be able to diversify its network footprint as well as provide important infrastructure assets in key U.S cities as well as accelerate its organic growth plan out of the West Coast of the U.S.
Why Would JetBlue Want To Delve Into The Low-Fare Market Like This?
As Edward Russell of The Points Guy says, JetBlue isn’t really a low-fare airline, so this acquisition would be part of the airline’s strategy of creating a compelling national low-fare challenger.
This of course would benefit all of the stakeholders in the carrier and this would present the airline as a pro-competitive combinator in lowering legacy fares, which it has been doing on the transatlantic front.
JetBlue CEO Robin Hayes also mentioned that the majority of the combined carrier would remain based in New York, which is probably where it wants to begin such a low-cost strategy from.
This would be a smart move for the carrier, especially as it continues to take on other legacy carriers such as United, American, Delta & others.
It is understandable what the airline is trying to do, but would it be better if the original merger with Frontier continued as planned?
Frontier Airlines Have Been Awfully Quiet So Far…
Frontier Airlines have been awfully quiet so far following the news of this bid from JetBlue. There is no indication of what the thoughts are of the executive staff behind there.
It is probably likely that the airline will make a statement in due course, but it’s probably down to the case that they don’t want to be premature with their statements in order to make its stock fluctuate.
Something will have to be said eventually, it is of course the case of when.
On their side, they probably believe it is business as usual with the merger and that the arrangements will continue to be made up until Spirit says “Thanks, but no thanks”.
It would be unbelievable if Spirit declined JetBlue’s offer, but we will see what happens in due course.
Personal Opinion: The Two Business Models Won’t Blend That Well…
It is hard to see how these two business models will blend together. It is almost like in the UK when legacy carriers start out as low-cost carriers and don’t produce much success with it.
However, in the U.S, it is of course different, I can’t deny it. It could very well be a good decision as there aren’t that many prominent low-cost carriers in the country of that size.
If Spirit does accept the bid, then I can see there being some form of adjustments and restructuring needed on the JetBlue side to ensure that this new low-cost blend works.
Whether it is the fact that its pricing structures have to change or something like that, it is of course too hard to tell at this stage.
It can also be assumed that it will be up to the Department of Justice to decide whether these business models will blend or not, especially with there being questions over the Spirit-Frontier merger already.
Overall: This Will Change The American Airline Dynamic…
Regardless of which side Spirit chooses to go to, whether it’s Frontier or JetBlue, there will be a massive change in the dynamic of the American airline industry.
It will of course be interesting to see how all of this pans out, and subsequently, who Spirit chooses in the end. It is probably likely that it will be JetBlue as it’s a better offer.
However, like in the aviation industry, everything is so volatile, and everything could fall on its face quicker than a toddler taking its first steps.
All we can do is watch and let the chaos ensue.