After two previous offers being denied, jetBlue announced it came to an agreement to merge with Spirit for a price of $3.8 billion This new deal, will see jetBlue acquiring Spirit for $32.50 per share and create the fifth-largest airline in America.
Kyle’s Thoughts
To me, I find this deal quite interesting. For one, jetBlue announced that it will be bringing its service to Spirit’s fleet. Thus, Spirit will no longer be an Ultra Low Cost Carrier (ULCC) and instead become an extension of jetBlue’s brand. This will lead to Spirit’s brand being resigned and the two loyalty programs becoming combined.
Second, I wonder what will happen to jetBlue’s Northeast Alliance with American. As there has already been anti-trust issues around this partnership, jetBlue might have to discontinue its alliance with American as a term of their merger with Spirit. If this happens, I wonder if we could see jetBlue joining Oneworld to keep its relationship with American and please regulators at the same time by discontinuing its Northeast Alliance.
Finally, I wonder how this will impact the ULCC market in the United States. While ULCCs are common in Europe and other parts of the world, they have just been starting to grow in the United States with Spirit being a leader in this space. Now with Spirit leaving the market, I am curious to see if we could see some consolidation in this space. One potential I could see is Frontier and allegiant merging. Frontier has already shown its willingness to merge with another ULCC in Spirit, and allegiant would give it another strong expansion opportunity. This would help Frontier compete against the new jetBlue and build a stronger financial base with a new partner in allegiant.
Summary
With this new merger agreement in place, the airline industry will definitely be changing again. While it has been some years since Alaska & Virgin America merged, it will be interesting to see how the new jetBlue will further change the market. As the merger advances, please stay tuned as we provide you with more insight on this merger and the changing airline industry!
