A view of a JetBlue aircraft at Terminal 5 of John F. Kennedy International Airport on May 12, 2020 in New York, NY.
Pablo Monslave | beautiful pictures
JetBlue said on Wednesday its $3.6 billion all-cash bid for the ultra-low-cost airline Spirit Airlines will help it grow nationally and better compete with larger airlines.
The bid, which Spirit called “unsolicited”, cast doubt on a later planned relationship with Frontier Airlines. Shares of Spirit jumped more than 22% on Tuesday after news of the offer broke, but fell 3% in Wednesday’s pre-market trading. JetBlue and Frontier are also down more than 3%.
Discount carriers Frontier and Spirit offer similar products: cheap fares, sparse in-flight service, and fees for everything from hand luggage to seat selection.
JetBlue, on the other hand, has spent years building out its Mint business class offering, which includes bunk beds and full meals. On the same day that it announced its surprise bid for Spirit, JetBlue also announced the start date for its first flights from Boston to London.
But JetBlue is focused on domestic travel and said the acquisition of Spirit, if approved by the Biden administration’s Justice Department, would give it more ability to compete with larger carriers.
The bid has confounded some analysts.
UBS calls it a “head cutter”.
“Wait, what?” MKM Partners asked.
Bank of America said that while both JetBlue and Spirit have Airbus aircraft, “we struggled to find additional benefits for JBLU.”
Raymond James downgraded JetBlue to market after the announcement and said product and labor would be difficult to put together.
Raymond James Savanthi Syth writes: “This process also has the potential to distract or possibly stifle existing initiatives, particularly the Northeast alliance with the United States. “Moreover, the prospect of elevated debt, even if manageable, could be too much of a factor in investor sentiment.”
