JetBlue Outbids Frontier For Spirit - But There Are Other Issues

JetBlue has reportedly made an offer of "roughly $3.6 billion" to acquire Spirit Airlines, outbidding Frontier and potentially spoiling plans for a merger, three people with knowledge of the negotiations confirmed to the New York Times.

Spirit and Frontier, both domestic budget airlines, had previously agreed to merge in February as part of a deal that reportedly would've created about $1 billion in annual savings for consumers.

JetBlue offered $33 per share in cash as part of the reported bid, which is equivalent to about 40% premium to Frontier's cash and share offer for Spirit.

The New York Times reports Spirit has an implied value of about $23 per share at current prices and CNBC reports shares of Spirit "surged more than 22%" following JetBlue's reported bid on Tuesday (April 5).

The reported bid made by JetBlue faces some uncertainty as both airlines are heavily focused on Eastern United States flight routes, however, Spirit offers low fares combined with additional charges for carry-on bags and seat selection, while JetBlue offers premium options and free in-flight benefits.

The reported Spirit-Frontier agreement would move company ahead of JetBlue and Alaska Air in total miles flown by paying passengers, ranking fifth among major airlines behind American, Delta, United and Southwest Airlines, according to 2021 statistics via CNN.

Either deal could also be challenged by President Joe Biden's administration, which has aimed to take stricter stances on mergers.

Last month, several progressive lawmakers expressed criticism of the Frontier-Spirit merger, noting the potential for the company to raise ticket prices and lower customer service.

JetBlue has also faced antitrust scrutiny, with the Justice Department suing to prevent the airline company from forming a domestic alliance with American Airlines, also making the argument that the merger would raise prices, as well as reduce competition.