JetBlue-Spirit aims to close their deal but as it drags on and without a deal with the Department of Justice, the question as to whether it will happen at all arises.
If you are considering booking travel or signing up for a new credit card please click here. Both support LiveAndLetsFly.com.
If you haven’t followed us on Facebook or Instagram, add us today.
Rumors Of A Closed Deal Popped Up
A few weeks ago, rumors of a deal shortly after Labor Day cropped up. The notion was that following Labor Day, concessions would be announced from JetBlue Airways and those concessions combined with losing the battle for Northeast Alliance (NEA) with American Airlines would be enough to push the deal through.
Typically, when two airlines combine, they must give up slots and/or gates to competitors to ensure that one carrier doesn’t have an unfair advantage. It will limit the ability for a newly combined airline to raise fares.
Labor Day came and went and it seems that the deal is no closer to closing.
Why It Continues To Drag On
Ongoing litigation from both the Department of Justice and a private group has stalled the progress of JetBlue’s acquisition of Spirit. The latter group suggested that it found text that JetBlue attorneys failed to properly redact certain information that JetBlue plans to increase fares on aircraft it flies significantly. That statement suggested that when the deal closes, air travel price increases would increase on flights operated by Spirit by at least 24% but up to 40%.
In reality, that was not a statement made by JetBlue management with the airline saying that without “context creates a completely inaccurate picture” and that it was actually made by the consumer group suing to block the merger. JetBlue has said of its merger with Spirit Airlines that it will provide a boost to airline competition by creating higher quality service for customers by keeping low fares and higher quality experiences.
While JetBlue didn’t say it, the DOJ may still feel they have more to look at first to see if that is the intention of management.
The Department of Justice succeeded in breaking up the prior approved NEA and has not been supportive of mergers or acquisitions. While prior administrations have been more likely to seek trades and concessions to approve mergers that may not be the case here. Unlike other combinations, the concern is that it’s not a true merger but rather JetBlue expanding the airline by gaining pilots, and the aircraft it acquires in the deal but not truly combining the businesses. What the JetBlue filing misses, is that it removes a competitor that is unique in the markets it serves. Spirit has been more likely to fly into large, major airports than Allegiant and more regular frequency than Frontier – Spirit’s two competitors in the ULCC space.
There aren’t concessions JetBlue can offer equal to removing a discount carrier from the market.
Is the Jetblue-Spirit Merger Likely To Close?
The longer the deal goes without a verdict, the more likely it seems to me that it may not close at all. It gets more expensive for JetBlue as the deal drags on not just with committed capital, but legal fees, and a special monthly dividend of $0.10/share for Spirit investors.
Just because we are a week after the supposed announcement event doesn’t mean it won’t be approved at all. However, the DOJ may be suggesting that JetBlue has not yet sufficiently overcome the objections it has to its effect on the market.
There is still about 10 months on the deal as agreed by JetBlue and Spirit’s boards and that’s plenty of time to close if a deal is possible, but these deals are large, lengthy, and expensive. Even if the deal were projected to close quickly, that would be months away and at a certain point it would become impossible to combine quickly enough.
Conclusion
Rumors swirled around the JetBlue-Spirit deal in recent weeks. While some have been proven false (JetBlue lawyers missing a detail management never wrote), we could still see a deal in the coming weeks. I don’t think it’s possible to get a deal through if the cases linger on and the government doesn’t strike a deal. If we don’t see a deal before the end of the year, it seems unlikely they will have time to wrap the deal before it expires.
What do you think?
What a novel concept. Every other blogger out there is blogging about something. You’re the first one to blog about absolutely nothing.
I’ve experienced several consolidations and rarely do the proposed synergies ever materialize. Also, there’s no need for a 5th nation wide carrier. The fares offered by B6 will be determined by the competition, not the new airline.
Yet, the way the Biden administration works, they could easily rationalize any reason for a merger while still claiming victory over the NEA pact. Stranger things have happen in Washington.
This is not a merger. Jet blue is buying Spirit Airlines for its routes. I’m all for it because I love jet blue services and would love to get more opportunities to use it with more routes to choose from. Never flown Spirit and don’t plan on it. I hope the buy out goes though.
Really now – the DOJ and independent group say this merger would increase fares and create a monopoly on certain routes. I think before they even consider the irrational concept look at who basically owns and runs Newark, Atlanta, Dallas, Houston, Chicago, Minneapolis, Miami, and Salt Lake City!!!! The Big 3 own/run those airports. Guess where the biggest hassles not to mention most delays happen. This merger isn’t about fares increasing it is all about the
Big 3 not wanting competition. I’m not going to say money talks; but, when it comes to the airlines money talks – look at what happened in JFK Pan Am’s Worldport demolished to park planes. We tried to get Worldport a Historical site like the former TWA Terminal; but, $$$ talked.
This is a bad deal for consumers. May it never happen!
As a former retired international flight attendant and now a international travel agent every single client I have booked on Spirit Airlines has come back to me and said they would never fly them again. Nothing could be better for Spirit than be absorbed by JetBlue and have the JetBlue awesome service and reputation expanded to all the Spirit destinations . It won’t take too long for JetBlue’s good image to replace Spirits tarnished image in all these cities. Most of my clients say that they would rather pay more and have better service and it’s a win-win for everyone because it will put the cheap seat seekers (yet still wanting everything), back on buses and trains, so everyone gets what they pay for. And there’s still plenty of low-cost carriers that have started flying within the last year and let’s hope they have better service than Spirit and Frontier Airlines, these carriers like Avelo and Breeze Airlines. Still lots of choices but let this take over go through so we all get to experience JetBlue’s great service throughout North America and say bye-bye to Spirit Airlines.
I’m wondering if there is a Plan B for merger, where they agree to operate as a bigger Spirit-like ULCC. Is Spirit actually the more profitable carrier?