What’s Going On Here?US carrier JetBlue made a $3.6 billion offer to buy Spirit Airlines this week, in hopes its head can be turned from another eligible admirer. What Does This Mean?Domestic travel has bounced back from the pandemic much more quickly than long-haul flights, and Spirit – which specializes in cheap, largely US-based travel – has been reaping the rewards of that shift in momentum. That caught the eye of Frontier Group, which offered to buy the airline for $2.9 billion in February – a bid Spirit was happy to accept.
But a deal’s not done till it’s done, and JetBlue’s now swooped in with a $3.6 billion offer of its own. If Spirit decides to take it, the deal would make JetBlue the fifth-biggest airline in the US, and could allow it to offer more flights in more parts of the country. It’ll shore up the airline’s bottom line too: JetBlue reckons the sales boost and cost savings combined could be worth about $700 million a year. Why Should I Care?Zooming in: No cheaper tickets for you.
Fuel costs are putting a lot of pressure on airlines at the moment, but a bigger carrier should have the financial flexibility to better absorb those costs and offer cheaper tickets anyway. Trouble is, ticket prices haven’t tended to drop following mergers in the industry, but instead risen toward those of the more expensive carrier. And since that would undermine Spirit’s whole “budget airline” schtick, analysts think regulators might end up stepping in.
The bigger picture: Little old JetBlue.
That wouldn’t be JetBlue's first regulation rodeo: it’s already dealing with a lawsuit after teaming up with American Airlines to coordinate flight times in the north-east of the US. Regulators say that it’s hurting customers by dint of fewer choices of flights, but JetBlue is arguing the opposite: that the move helps it better compete with the biggest airlines, who are otherwise blocking it out of the region. | 