Spirit Airlines Shareholders Approve Takeover by JetBlue

Key Takeaways:

  • Shareholders give JetBlue and Spirit the go-ahead to merge into one airline.
  • The Justice Department is suing JetBlue because of a partnership with American Airlines.
  • JetBlue believes a merger will give them a competitive advantage to keep fares lower for passengers against the “Big Four” airlines.
Spirit Airlines Shareholders Approve Takeover by JetBlue
Blagnac Airport, Toulouse / France – 12.15.2018. Airbus Plant. Yellow passenger aircraft Airbus A320 of Spirit Airlines.

WISCONSIN (CoinChapter.com) — JetBlue Airways tried for six months to merge with Spirit Airlines. Finally, shareholders approved the creation of the fifth-largest air carrier. Last April, JetBlue offered Spirit $3.8 billion in cash.

The multi-billion dollar offer wiped out a cash and stock deal Frontier Airlines made $2.6 billion.

Both airlines said they would like to close the deal in early 2024, but federal regulators already stand in the way. Airlines generally face a lot of scrutiny from the Justice Department whenever takeover bids occur.

Federal regulators want to ensure that any agreement will not harm competitors or raise passenger airfares. President Biden and top antitrust official Jonathan Kanter do not like corporate mergers – there is a big hurdle to overcome. Some airline analysts said antitrust regulators would have given a Frontier-Spirit merger an easier green light than with JetBlue involved because both of those airlines are smaller, to begin with.

The Justice Department is suing JetBlue because of a partnership with American Airlines. The two carriers agreed on a deal called the Northeast Alliance. They share revenue and gate access. In addition, customers are allowed to buy tickets and share loyalty programs.

The Justice Department said the case is straightforward. They believe American and JetBlue are eliminating competition, thus denying customers an opportunity to choose fair ticket prices.

Airline Experts Believe A Merger Is Bad For Travelers

As a whole, experts feel the JetBlue-Spirit merger is bad for travelers. Analysts maintain that creating one larger airline will mean higher ticket prices. When there is competition, one has options to choose between multiple cheap flights on any given route. Airlines have enough business sense to know when there is competition for routes. Therefore, airlines should drop fares to get more customers.

JetBlue Says A Merger Will Result In Lower Fares

Big Four airlines: American, Delta, Southwest, and United. Credit: Bloomberg Law

JetBlue’s CEO, Robin Hayes, does not agree that fewer airlines will result in higher fares. Instead, Mr. Hayes said the merger would pressure the “Big Four” airlines to bring down ticket prices. The “Big Four” airlines are American, Delta, Southwest, and United; these four control about 80% of domestic passenger traffic.

A merger will give JetBlue about 9% of the market share, resulting “in annual savings of $600 million to $700 million.”

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