It's been a tale of will-they-or-wont-they for months as rival budget airlines Frontier and JetBlue bid for the purchase of a third budget airline: Spirit. The bidding war has meant delayed shareholder votes and shifting timelines, but now, an end could be in sight. Institutional Shareholder Services (or ISS), a shareholder advisory firm, recently changed its recommendation in favor of the JetBlue bid rather than the Frontier bid. Prior, ISS believed that JetBlue's bid, though larger, would be rejected by federal regulators, and thus supported the Frontier bid.

• Now, however, The New York Times says that “after taking into account the potential effect of a regulatory delay, ISS estimated that JetBlue’s offer was still worth 11.5 percent to 19 percent more than Frontier’s.” 

• “We remain confident that Spirit shareholders continue to overwhelmingly recognize the clear superiority of our proposal,” JetBlue said in a statement last week, notes CNBC.

• Spirit shareholders will vote on the bid on July 27.

A Slow Recovery

This battle over discount airlines plays against a backdrop of an industry still very much recovering from two years of a pandemic, high fuel prices, and a worker shortage. “Come the fall, the impact of cost inflation on consumers’ and corporate travelers’ discretionary income and budgets could lead to softening aggregate demand for air travel,” a Moody's analyst said in June, reports CNBC. “However, the current capacity constraints would protect the airlines from having too much capacity, should this occur.” Meanwhile, this year's July 4th weekend, one of the busiest travel periods of the year, saw pilot and steward shortages, and a slew of increased flight cancelations. “While we have over 95% of the employees needed to fully restore capacity, we have thousands in some phase of hiring and training process,” Delta's CEO recently said on a quarterly earnings call.

The Verdict

It seems like ISS is telling Spirit shareholders two interesting things here: first, to not worry about the DOJ and antitrust regulations. The second is that the whole industry is in a slow recovery, so maybe the wait isn't such a terrible thing after all.