JetBlue said it’s planned takeover of Spirit would allow it to challenge larger rivals, but regulators may have questions over its impact on consumer choice.
Spirit Airlines (SAVE) – Get Spirit Airlines, Inc. Report shares slumped lower in pre-market trading after the low-cost carrier received an unsolicited $3.6 billion takeover bid from JetBlue Airways (JBLU) – Get JetBlue Airways Corporation Report that could potentially upend its planned merger with Frontier Group (ULCC) – Get Frontier Group Holdings, Inc. Report.
JetBlue’s cash offer of $33 per share for Spirit, which it says will help the New York-based carrier compete with larger rivals such as American Airlines (AAL) – Get American Airlines Group, Inc. Report, Delta (DAL) – Get Delta Air Lines, Inc. Report and United (UAL) – Get United Airlines Holdings, Inc. Report, is around 33% higher than Frontiers cash-and-stock bid from earlier this year, but 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.
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Spirit’s $6.6 billion tie-up with low-cost specialist Frontier, first unveiled in early February, is also facing criticism for its potential impact on consumers, with 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.”
Spirit said it would review the Spirit Airlines offer.
“We’ve had unprecedented amounts of consolidation, which the DOJ has approved and now it’s about how do we make sure the rest of us can continue to discipline the legacy carriers and create that competition,” JetBlue CEO Robin Hayes told Reuters. “We believe ultimately this is the best deal out there that is going to really drive more competition.”
Spirit Airlines shares were marked 3.1% lower in pre-market trading to indicate an opening bell price of $26.07 each while JetBlue fell 3.5% to $13.16 each. Frontier was marked 4% lower at $11.45 each.
