a yellow airplane on a runway
Photograph ©2024 by Brian Cohen.

Merger Agreement Officially Terminated Between JetBlue Airways and Spirit Airlines

This proposed acquisition became an expensive lesson for JetBlue Airways.

Instead of becoming the fifth largest airline in the United States, the merger agreement officially terminated between JetBlue Airways and Spirit Airlines was announced earlier today, Monday, March 4, 2024.

Merger Agreement Officially Terminated Between JetBlue Airways and Spirit Airlines

a jet plane parked in front of a building
Photograph ©2023 by Brian Cohen.

As part of the merger agreement of July of 2022, JetBlue Airways will pay Spirit Airlines a “breakup fee” of $69 million; and the termination resolves all outstanding matters related to the transaction and under which any claims between them will be mutually released. Stockholders of Spirit Airlines are also supposed to receive a reverse break-up fee of $400 million — less any amounts paid to stockholders of Spirit Airlines prior to termination.

“Although both companies continue to believe in the procompetitive benefits of the combination, JetBlue and Spirit mutually agreed that terminating is the best path forward for both companies as required closing conditions, including receiving necessary legal and regulatory approvals, were unlikely to be met by the merger agreement’s outside date of July 24, 2024”, according to this official press release from JetBlue Airways. “As outlined on the company’s fourth quarter earnings call, JetBlue is taking decisive action to return to sustained profitability and drive shareholder value. As part of this work, the company is refocusing on its core strengths — deepening its network relevance in proven geographies and better segmenting its product offerings to enhance its competitive position — while delivering meaningful cost savings.”

A similar announcement was also officially released from Spirit Airlines earlier today, Monday, March 4, 2024 as well.

The death knell for the deal was likely the civil antitrust lawsuit that was filed by the Department of Justice of the United States on Tuesday, March 7, 2023 — along with the attorneys general of the Commonwealth of Massachusetts, the state of New York, and the District of Columbia — to block the $3.8 billion acquisition of Spirit Airlines, Incorporated that was proposed by JetBlue Airways Corporation. The lawsuit alleged that the low-cost, no-frills flying option of Spirit Airlines has resulted in lower fares and more options to routes across the country and allowing for more Americans to travel; while citing that the result of the merger would harm travelers in the United States due to further concentration and consolidation of the commercial aviation industry, which would result in higher fares and fewer choices across the country for tens of millions of travelers.

Brief History of the Proposed Acquisition of Spirit Airlines

Frontier Airlines
Photograph ©2022 by Brian Cohen.

A definitive merger agreement between Frontier Group Holdings, Incorporated and Spirit Airlines, Incorporated — which are the respective parent companies of Frontier Airlines and Spirit Airlines — was announced on Monday, February 7, 2022; and it would have resulted in the creation of the fifth largest airline in the United States once the merger is completed. The agreement was not fulfilled because the board of directors at Spirit Airlines voted on terminating its merger with Frontier Airlines, as they apparently wanted what they considered to be a superior offer from JetBlue Airways.

In a surprise move on Tuesday, April 5, 2022, JetBlue Airways confirmed that a proposal has been submitted to the board of directors of Spirit Airlines with the intent to acquire the airline for $33.00 per share in cash, which implies a fully diluted equity value of $3.6 billion and providing full and certain value to the shareholders of Spirit Airlines. The stockholders of Spirit Airlines voted to approve the merger with JetBlue Airways on Wednesday, October 19, 2022.

In 2022:

  • JetBlue Airways flew greater than 39 million passengers to approximately 107 destinations around the world, earning approximately $9.1 billion in revenue.
  • Spirit Airlines flew greater than 38 million passengers to approximately 92 destinations in North America and South America, earning approximately $5 billion in revenue.

Final Boarding Call

JetBlue Airways
Photograph ©2015 by Brian Cohen.

The failure of the acquisition of Spirit Airlines by JetBlue Airways is not surprising — especially as other mergers and acquisitions in the significant consolidation of the commercial aviation industry in the United States has rarely led to initiatives that have been friendly to consumers. With few exceptions, airlines have increased fees; decreased or eliminated services; devalued their membership programs; and reduced the number of employees that worked for them.

Meanwhile, JetBlue Airways has significant financial issues of its own on which it needs to concentrate to successfully resolve…

All photographs ©2015, ©2022, ©2023, and ©2024 by Brian Cohen.

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