The largest ultra low cost carrier in the United States will be formed by the acquisition of Spirit Airlines by Frontier Airlines. The offer to acquire Spirit Airlines has been submitted by JetBlue, seemingly out of nowhere.
At a rate of $33 per share, JetBlue has submitted an all-cash $3.6 billion offer to acquire Spirit Airlines. The Frontier takeover bid represents a 50% premium to the share price of Spirit, which was announced on April 4.
The ultra low cost carrier, Spirit Airlines, has a fleet of 180 planes and charges for everything, while the full service carrier, JetBlue, has a fleet of over 300 planes and charges for everything.
The biggest weakness of JetBlue is that it can't compete with the big four US carriers in terms of network. It would be the most compelling low-fare challenger.
The JetBlue Effect is where fares are brought down in many markets that JetBlue enters, without offering an inferior experience. Travelers shouldn't have to choose between a low fare and a great experience, so the expectation is that the JetBlue experience sticks around, rather than the Spirit Airlines experience.
Los Angeles, Fort Lauderdale, Orlando, and San Juan are some of the focus cities where the airline would be able to grow.
JetBlue is promising job growth and opportunities for employees, while it is promising accelerated revenue growth and profitability with operational synergies of $600- 700 million in the first year.
There is no guarantee that this will happen, even though JetBlue says that this is a superior proposal to what Frontier Airlines submitted.
I think it's safe to say that nearly everyone was stunned by the news of the acquisition. It almost seems like a joke on the surface.
The airlines have similar business models, fleets and networks, so it makes sense for Frontier to acquire Spirit.
Is it possible to acquire JetBlue Spirit? There are a lot of reasons it doesn't make sense.
There are other reasons it makes sense.
Two months after Frontier Airlines announced plans to acquire Spirit, JetBlue submitted a bid. It will be interesting to see how this plays out, as JetBlue believes it has a better proposal.
I don't think a lot of us saw this coming. The airlines have very different business models and cabins on the surface. On the other hand, the airlines have fleets that complement each other, and this would allow them to compete more fiercely against the other major carriers in the United States.
What do you think about the attempt to buy Spirit Airlines?