JetBlue is paying a high price for Spirit in this deal, $33.50 per share in cash, including a prepayment of $2.50 per share in cash payable upon Spirit stockholders’ approval of the transaction and a ticking fee of $0.10 per month starting in January 2023 through closing, for an aggregate fully diluted equity value of $3.8 billion1 and an adjusted enterprise value of $7.6 billion, more than double Spirits value.
Robin Hayes, the chief executive officer of JetBlue whose future at the airline had been in doubt had the deal not gone ahead, said today: “We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes. We look forward to welcoming Spirit’s outstanding Team Members to JetBlue and together creating a customer-centric, fifth-largest carrier in the United States. Spirit and JetBlue will continue to advance our shared goal of disrupting the industry to bring down fares from the Big Four airlines. This combination is an exciting opportunity to diversify and expand our network, add jobs and new possibilities for Crewmembers, and expand our platform for profitable growth.”
“Combining with Spirit will give JetBlue an even larger platform to deliver on our mission to inspire humanity,” said Peter Boneparth, chair of the board, JetBlue.
Ted Christie, president and chief executive officer, Spirit, said, “We are thrilled to unite with JetBlue through our improved agreement to create the most compelling national low-fare challenger to the dominant U.S. carriers, and we look forward to working with JetBlue to complete the transaction. Bringing our two airlines together will be a game changer, and we are confident that JetBlue will deliver opportunities for our Guests and Team Members with JetBlue’s unique blend of low fares and award-winning service. We especially appreciate the commitment of our Spirit Family throughout this process. Today’s exciting announcement reflects JetBlue’s admiration for Spirit and a shared belief in what the combined airline can bring for our Guests.”
Mac Gardner, chairman of the board, Spirit said: “We are pleased that the Spirit Board of Directors’ robust and diligent process has delivered additional value to our stockholders. - This is a compelling combination that provides meaningful protections for stockholders against an adverse regulatory outcome with a significant cash premium that reflects the continued hard work and dedication of the Spirit Family.”
JetBlue says it now plans to introduce the JetBlue Experience to all aircraft and the joint airlines would offer offering 1,700+ daily flights to more than 125 destinations in 30 countries based on December 2022 schedules. The merged fleet will consist of 458 aircraft on a pro forma basis and an order book of over 300 Airbus aircraft with fuel-efficient, lower-carbon new engine option, or neo, engines.
Once the takeover is complete and has approval from authorities, JetBlue will have an employee head-count of 34,000, including planned insourcing of Spirit’s outsourced operations in cities where JetBlue has its own staff.
Path to regulatory approval
The completion of the acquisition is subject to customary closing conditions, including receipt of required regulatory approvals and approval of Spirit’s stockholders. The companies expect to conclude the regulatory process and close the transaction no later than the first half of 2024.
“We believe we can uniquely be a solution to the lack of competition in the U.S. airline industry and the continued dominance of the Big Four,” Hayes continued. “By enabling JetBlue to grow faster, we can go head-to-head with the legacies in more places to lower fares and improve service for everyone. Even combined with Spirit, JetBlue will still be significantly smaller than the Big Four, but we’ll be much better positioned to bring the proven JetBlue Effect to many more routes and locations.”
The joint JetBlue and Spirit would become the 5th largest in the U.S. and would have around 9% market share, compared to 13% for the fourth-largest airline and 23% for the largest carrier.
JetBlue’s acquisition of Spirit will give U.S. travellers the best of both worlds with a hefty boost in competition and choices as JetBlue accelerates its expansion and ultra-low-fare carriers continue to expand rapidly in number and routes, the carrier said in a press release today.
The Northeast Alliance (“NEA”) with American Airlines is accelerating growth of JetBlue’s low-fare service in the Northeast where Delta Air Lines and United Airlines previously had limited competition, and where JetBlue was locked out of future growth in slot-constrained and congested airports. In connection with the agreement, JetBlue has made the upfront commitment to divest Spirit’s holdings at the NEA airports to allow for allocation to other ultra-low-cost carriers.
JetBlue has also committed to divesting Spirit assets up to a material adverse effect on the combined JetBlue-Spirit, with a limited carve-out to this divestiture obligation for actions that would be reasonably likely to materially and adversely affect the anticipated benefits under JetBlue’s NEA. In the unlikely event the proposed agreement is not consummated for antitrust reasons, JetBlue will pay (i) Spirit a reverse break-up fee of $70 million and (ii) stockholders of Spirit a reverse break-up fee of $400 million less any amounts paid to stockholders of Spirit prior to termination.
JetBlue and Spirit will continue operating independently until closing
The airlines will continue to operate independently until after the transaction closes and their respective loyalty programs remain unchanged and customer accounts will not be affected in any way.
Following completion of the acquisition, the combined airline will be based in New York and be led by Robin Hayes.
As previously announced, Spirit has terminated its prior merger agreement with Frontier. JetBlue has terminated its previously announced all-cash tender offer to acquire Spirit common stock.
