Fate of Spirit Airlines‘merger with other budget service provider Frontier Airlines is getting darker and darker.
Spirit this week postponed its shareholder meeting because third timeopens the door to more negotiations from both Frontier and rival suitors JetBlue Airways. Two delays followed, each arriving just hours before Spirit shareholders voted on the tie-up of Frontier, a $2.6 billion cash and stock combination after Frontier just sweetened proposed in an attempt to halt JetBlue’s advances. JetBlue is offering about $3.7 billion in an all-cash acquisition.
Before the most recent scheduled vote, scheduled for Friday morning, it appeared that Spirit did not have enough votes for the Frontier deal to pass, according to people familiar with the matter.
Spirit would be willing to pay Frontier a more than $94 million breakup fee if it deems JetBlue’s offer higher and rescinds the original deal.
“We are working hard to bring this process to a conclusion while remaining focused on the well-being of our Spirit Family,” Spirit CEO Ted Christie said in a note to employees. members late on Thursday after the vote was adjourned again. Spirit declined to comment further on Friday.
For its part, JetBlue cheered the delay. Chief Executive Officer Robin Hayes said in a statement late on Thursday: “We are encouraged by our discussions with Spirit and hope they now recognize that Spirit shareholders have demonstrate their clear and overwhelming preference for a deal with JetBlue.”
Neither JetBlue nor Frontier were available for comment further on Friday.
At stake is a chance to become the country’s fifth largest airline, after the giants American, Delta, United and Southwest. A Spirit-Frontier fusion can create a huge budget airlinewhile JetBlue said its acquisition offer will “accelerate” growth at the airline, it has a service that includes more amenities and Mint business class on some planes.
“Spirit’s board is very upset with the Frontier deal. They have never wavered,” said Brett Snyder, a former airline executive who now runs travel website Cranky Flier. “Their challenge is how do they get votes?”
If the Frontier deal comes to a vote, Spirit shareholders will decide cash and stock transactions. Bank shares can benefit shareholders in the future if the recovery of tourism stock price increase. But they run the opposite risk in the event of an economic downturn or travel slowdown, although low-cost carriers like Spirit and Frontier are less sensitive to the ups and downs of their business than airlines. not greater than.
JetBlue’s cash-in offer avoids the gamble.
“With the Frontier deal, you’re putting your faith in what happens after the merger to make your money. With JetBlue, it’s: Here’s the money, take the money, go away,” Snyder said.
JetBlue has repeatedly made offers for Spirit, including raising the reverse breakup fee if regulators block the deal. The airline’s persistence has put pressure on Frontier, which recently increased its own offer to match JetBlue’s reverse parting fee.
Spirit’s board rejected each of JetBlue’s proposals, arguing that the takeover would not go through the Department of Justice, which is event to block JetBlue’s own regional alliance with American Airlines in the Northeastern United States
The Biden administration’s Justice Department has vowed to take a hard line against transactions that threaten competition, even presumptive sell-offs. JetBlue, for example, has promised to divest Spirit’s assets in the Northeast to make the proposed Spirit takeover more palatable.
But that’s only a concern if the Frontier deal ends up – and although the shareholder vote is delayed, that may not be the case, according to Bob Mann, an aviation analyst and former chief executive officer. airline travel.
“I find it more like Spirit’s case than just listening carefully and seeing clearly. [JetBlue’s offer] and they may end up concluding for themselves that it doesn’t make sense,” he said.
If the Frontier deal is cut short in a shareholder vote and opens the way for JetBlue, Frontier could still end up ahead: JetBlue’s plan is to convert Airbus planes that are tightly packed and no-frills Spirit’s suite to its own, including a reclining screen, more legroom, and free wifi.
Whatever JetBlue pays Spirit “is an upfront payment,” Mann said. “Integrating costs will run into the billions and take years.”
That would make Frontier the largest and most prominent low-cost airline in the US at a time when almost everything is getting more expensive.
