A months-long effort by Frontier Airlines to acquire Spirit Airlines came to an abrupt end on Wednesday when the companies rejected their proposal, sparking a competitive bid for Spirit by JetBlue Airways.
The announcement came shortly before Spirit was due to announce the results of a shareholder vote on Frontier’s takeover bid. Spirit had repeatedly postponed the vote as it tried to convince shareholders to support the deal and ignore the appeal of the more valuable JetBlue offering.
“While we are disappointed to have had to end our proposed merger with Frontier, we are proud of our team members’ dedicated work on the transaction over the past few months,” said Ted Christie, Spirit’s chief executive, in a statement. “Going forward, Spirit’s board of directors will continue our ongoing discussions with JetBlue as we pursue the best way forward for Spirit and our shareholders.”
Frontier’s cash-and-stock deal was worth about $2.8 billion, based on Wednesday’s closing price. JetBlue’s cash offer is worth $3.6 billion.
Frontier said it was disappointed that Spirit shareholders had not backed the deal. The airline, which has since expanded aggressively, went to the stock market last yearsaid it was ready for growth.
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A Frontier-Spirit merger would have created a national budget airline. The two airlines complement each other and share an advantageous business model with different geographic strengths.
Spirit executives had previously questioned JetBlue’s intentions, suggesting that the offering may have been just to spoil the combination with Frontier. Spirit also said antitrust regulators would likely get in the way of a JetBlue merger, though experts said both deals would be subject to intense federal oversight.
Frontier and Spirit’s decision does not mean that JetBlue’s offer will be accepted. It’s not clear whether a majority of Spirit’s shareholders would support JetBlue’s latest offer. And even if they did, regulators could derail the combination or demand stiff concessions that the airlines wouldn’t want to make.
The Justice Department is already suing JetBlue and American Airlines to prevent a collaboration between those airlines at Boston and New York airports, with a lawsuit slated to begin this fall.
The Spirit acquisition would accelerate JetBlue’s expansion plans and create the nation’s fifth largest airline. Together, the airlines would hold 10.2 percent of the market, still behind the country’s four dominant airlines. United Airlines, the fourth largest airline, has a market share of 13.9 percent.
Frontier reported quarterly financial results around the same time that the Spirit deal was called off. The airline reported profits of $13 million on revenue of $909 million in the three months ended June. That was a 65 percent increase in sales and a 32 percent drop in profits compared to a year earlier.
Six years ago, JetBlue found itself in a similar bidding war for Virgin America, but Alaska Airlines won it and completed the acquisition in 2018. Since then, JetBlue has struggled to grow as fast as it had hoped.
Buying Spirit could change that, but airline mergers are notoriously difficult and require the integration of unions, sometimes outdated and incompatible computer systems, mismatched aircraft fleets, and diverse corporate cultures.
The Transport Workers Union, which represents flight attendants, reservation agents and other employees at JetBlue, said it opposed a takeover of Spirit.
“We believe workers and airline passengers should be concerned,” union president John Samuelsen said in a statement. “If a JetBlue-Spirit deal comes along, we hope regulators will step in and recognize that combining these airlines could lead to job losses and fewer choices for consumers.”
Spirit, a budget airline with a mediocre reputation for service, keeps costs and fares low by charging extra for everything from seat selection to carry-on luggage. JetBlue ranks high in customer satisfaction and offers more premium options and free extras, such as brand-name snacks and wireless Internet.
JetBlue has said the acquisition would deliver lower fares with a better customer experience, pointing to its history of cutting costs for travelers as it enters new markets. The Justice Department cited that reputation in its lawsuit to prevent the company from working with American, saying that JetBlue’s presence in Boston delivered “significant savings for consumers” and the airline had a similar effect in New York.
But some aviation experts have wondered how JetBlue could cut fares below Spirit’s already low prices. These folks argued that some of JetBlue’s plans, such as removing some seats from Spirit’s planes to increase legroom and selling larger, premium seats, would almost certainly increase costs.
Speaking to analysts and reporters on Wednesday, Frontier’s chief executive, Barry Biffle, said his airline would benefit from purchasing JetBlue Spirit.
“In the event that they merge, you take a carrier that’s probably one of the most similar to us, you impose 40 percent more costs, and that creates a lot of runway for us,” he said.
Peter Eavis reporting contributed.