Spirit Airlines rejected a takeover offer from JetBlue Airways on Monday, saying the proposal was unlikely to be approved by regulators.
In a letter to JetBlue, Spirit’s executives said they had determined it is unlikely that JetBlue’s takeover offer will be approved as long as that airline’s recently announced partnership with American Airlines was in effect. A recent communication from JetBlue “makes it clear” that the airline is not willing to end that partnership, known as the Northeast Alliance, Spirit said in the letter. The Justice Department and several states have filed a lawsuit to block the JetBlue-US partnership, arguing it is anti-competitive.
In a statement, Spirit’s chairman of the board, Mac Gardner, said the company was sticking to its plan to merge with Frontier Airlines.
“After a thorough review and extensive dialogue with JetBlue, the board of directors determined that the JetBlue proposal poses an unacceptable level of foreclosure risk that would be accepted by Spirit’s shareholders,” said Mr. Gardner. “We believe that our upcoming merger with Frontier will open an exciting new chapter for Spirit and bring many benefits to Spirit’s shareholders, team members and guests.”
Spirit and Frontier, both low-cost carriers, announced a plan to merge in February. Then last month JetBlue came out with a bigger offer for Spirit. Both deals would come under scrutiny from regulators of the Biden administration, who have expressed more skepticism about consolidation than their predecessors.
Some analysts argue that Spirit and Frontier are better suited to merge, as they operate under a similar “ultra-low-cost” business model, but have more extensive flights in different parts of the United States. A JetBlue-Spirit combination can be more difficult to achieve because the airlines’ business models are very different. But the deal will allow JetBlue to compete more effectively with the country’s four dominant airlines.
Spirit said regulators would likely be “very concerned” about the prospect of JetBlue’s offerings leading to higher costs and subsequently higher tariffs for consumers. For example, Spirit said that converting Spirit’s planes, which are densely packed with seats, to JetBlue’s more spacious configuration would result in higher prices.
In its response on Monday, JetBlue said it would offer to sell Spirit’s assets in New York and Boston, two markets over which regulators have expressed concerns in their lawsuit to bring down the Northeast Alliance. JetBlue also argued that both its offering and the Frontier deal shared “a similar regulatory profile,” but that Frontier has not offered to divest any assets or pay a termination fee. JetBlue also said the value of Frontier’s cash-and-stock deal has faded because of that airline’s declining stock price.
“Spirit shareholders would be better off with the assurance of our substantial cash premium, regulatory obligations and reverse termination fee protection,” JetBlue’s chief executive, Robin Hayes, said in a statement on Monday.
JetBlue accused Spirit of not providing sufficient access to data on the low-cost carrier’s operations, while asking for “unprecedented commitments” from JetBlue.