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JetBlue Makes a Play For Spirit, Sparking Possible Bidding War With Frontier

A new suitor appears in what was a foregone merger proposal.

The possible merger between Frontier Airlines and Spirit hit a major snag Tuesday, when Spirit announced that JetBlue has made a $3.6 billion offer for it — out pricing Frontier's $2.9 billion cash and stock bid.

JetBlue's approach of Spirit would pay 40% more than Frontier's offer, with a cash per share offer of $33. 

The company confirmed the news to TheStreet.

The deal between Spirit  (SAVE) - Get Free Report and Frontier  (ULCC) - Get Free Report had been a foregone conclusion, with both budget airlines saying they would do what they could to keep as much staff as possible. 

A Frontier spokesperson said Tuesday that its deal was is in the "best interest" of shareholders and consumers. 

"A combined Spirit and Frontier will deliver $1 billion in annual savings for consumers and offer even more ultra-low fares to more places nationwide, creating America’s most competitive ultra-low fare airline," they said. 

Spirit Airlines Lead

Why Buy Spirit At All?

When combined, Spirit and Frontier would make the world's fifth largest airline and would put up a competitive front in an industry still recovering from two years of whipsawing pandemic restrictions.

They had announced the deal in February and Frontier's bid has since lost some firepower, as Spirit's stock has wobbled.

But a marriage to JetBlue  (JBLU) - Get Free Report would also boost Spirit's reach and competitiveness, and news of the possible deal briefly lifted Spirit's share price before close of trade Tuesday.

Spirit's board has not yet decided which offer to accept.

But a spokesperson for the company said a merger with JetBlue would push consumer pricing higher.

“Unlike the compelling Spirit-Frontier combination, an acquisition of Spirit by JetBlue, a high-fare carrier, would lead to more expensive travel for consumers," they said. 

"In particular, the significant East Coast overlap between JetBlue and Spirit would reduce competition and limit options for consumers. It is surprising that JetBlue would consider such a merger at this time given that the Department of Justice is currently suing to block their pending alliance with American Airlines.”

What Will Regulators Say?

Either deal would likely draw fire from anti-trust regulators, who have been eyeing the aviation industry for possible monopolies or strategic mergers that make the market less fair.

JetBlue and Frontier did not return requests for comment.