JetBlue Airways plans to acquire low-cost airline Spirit Airlines for $3.8 billion, the companies announced Thursday, to create the fifth-largest US carrier.
The proposed acquisition, which is subject to regulatory approval, comes a day after Spirit ended a merger with Frontier Group after JetBlue’s competing bid challenged the transaction.
By combining, the companies will be able to challenge major US airlines American, Delta, United and Southwest. They expect annual savings of $600 million to $700 million by joining forces, according to a joint release by Spirit and JetBlue.
The companies want to argue that the deal will help consumers.
“We believe we have a unique ability to be a solution to the lack of competition in the US airline industry and the continued dominance of the Big Four,” said Robin Hayes, JetBlue Chief Executive.
“By enabling JetBlue to grow faster, we can match the legacies in more places to lower fares and improve service for everyone. Even combined with Spirit, JetBlue will still be significantly smaller than the Big Four.”
However, some aviation watchers believe the deal could draw criticism in Washington, where antitrust authorities blocked an alliance between American Airlines and JetBlue.
The all-cash transaction will adjust the price if the deal is delayed due to regulatory challenges. The price is $33.50 per share if the transaction closes by December 2023.
But the price would rise to $34.15 per share if the deal closes in July 2024.
JetBlue also agreed to pay Spirit a fee of $70 million and Spirit shareholders $400 million “in the unlikely event that the proposed agreement is not consummated for antitrust reasons,” the release said.
Spirit’s shares are up 4.1 percent to $25.29 in premarket trading, while JetBlue is up 0.7 percent to $8.46.
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