💸 Sky-high Merger
After weeks of uncertainty and competition between JetBlue and Frontier Airlines over which company would purchase Spirit Airlines, shareholders have decided on JetBlue. The proposed merger — a cash buyout of Spirit at $33.50 per share, and a valuation of $3.8 billion — would create the nation's fifth-largest carrier behind United, American, Delta, and Southwest. According to The New York Times, should the deal be approved, JetBlue will have a 10% market share of the domestic airline industry.
JetBlue hopes the deal closes by the first half of '24, and that single-carrier operations will begin by '25.
Not everyone sees this merger as a good thing. Bill Baer, President Obama's antitrust head at the Justice Department, told The New York Times, “The airline industry is ridiculously concentrated, and has been and legitimately continues to be an area of focus for the Justice Department.”
He added that the details of the proposed merger suggest that JetBlue expects an uphill battle, including a premium on Spirit's share price to keep investors onboard.
A Bailout Debrief
During the depths of the pandemic, the US government bailed out the airline industry to the tune of $50 billion. JetBlue received just shy of $1 billion of taxpayer money, about a quarter of the price it's paying to buy Spirit. Yet, as of April, they were struggling to hire enough staff. According to John Samuelsen, president of the Transport Workers Union, the airline was losing 20 flight attendants a week as a result of “mental fatigue, physical exhaustion and stress,” notes WGBH.
JetBlue will of course be making the case for the foreseeable future that consolidation helps customers, but will the DOJ buy that claim? And will Spirit's shareholders stick around long enough to see that through?