Spirit said JetBlue’s all-cash offer of $3.6 billion could be “superior” to the proposed cash-and-stock merger with low cost rival Frontier.
Spirit Airlines (SAVE) – Get Spirit Airlines, Inc. Report shares edged higher Friday trading after the low-cost airline agreed to talks with JetBlue Airways (JBLU) – Get JetBlue Airways Corporation Report on its unsolicited $3.6 billion takeover offer.
Spirit, which had been planning a $6.6 billion tie-up with low-cost rival Frontier Group Holdings (ULCC) – Get Frontier Group Holdings, Inc. Report, said JetBlue’s offer of $33 per share, which values the Miramar, Florida-based carrier at a 33% premium to the Frontier deal, could be a “superior proposal” that shareholders may need to consider.
JetBlue said its “looks forward to engaging with the Spirit Board to finalize our combination”, adding it will 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.”
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Spirit Airlines shares were marked 0.5% higher in pre-market trading to indicate an opening bell price of $26.65 each while JetBlue gained 2.5% % to $12.38 each. Frontier was marked 2.5% higher at $10.97 each.
Both Spirit’s tie-up with Frontier, first unveiled in early February, as well as any potential takeover by JetBlue would likely face significant regulatory hurdles and a close look from the Department of Justice on the grounds that it could raise fares and limit customer choice.
Last month, a group of lawmakers lead by Senators Elizabeth Warren and Bernie Sanders telling regulators the deal would “consolidate market power for the airlines and reduce choices for travelers.”
A merger with Frontier, or a takeover by JetBlue, would also come at a time when major American carriers are noting improved bookings and travel demand that has, for the moment at least, offset concerns linked to surging fuel prices.
United Airlines (UAL) – Get United Airlines Holdings, Inc. Report noted, however, that overall capacity this year would still be down in the “high single digits” when compared to 2019 levels, citing the recent surge in jet fuel costs linked to the ongoing volatility in global crude markets, as well as aircraft delivery delays tied to Boeing’s (BA) – Get Boeing Company Report issues with its 787 Dreamliner.
American Airlines (AAL) – Get American Airlines Group, Inc. Report trimmed its revenue decline forecast to around 17% from 2019 levels, compared to its prior forecast of between 20% and 22%, as part of its presentation to the J.P. Morgan Industrials Conference in New York, while Southwest (LUV) – Get Southwest Airlines Co. Report lowered its estimate for revenue declines from 2019 levels to around 8% to 10%. The group had previously forecast a fall of between 10% and 15%.
Delta Air Lines (DAL) – Get Delta Air Lines, Inc. Report boosted its current quarter revenue forecast to be about 78% of pre-pandemic levels, up from its prior estimate of between 72% and 76%, adding that its fuel costs would average $2.80 per gallon in the first quarter, up from its January forecast of between $2.35 and $2.50.
Carriers are also urging President Joe Biden to lift the pandemic-era mask mandate on planes and in airports, arguing the rules a ‘no longer aligned’ to the current post-Covid environment.
