JetBlue goes hostile with tender offer for Spirit Airlines

May 16, 2022 6:06 AM ETJetBlue Airways Corporation (JBLU), SAVE, ULCCAAL, UAL, DAL, LUV, ALKBy: Yoel Minkoff, SA News Editor25 Comments

JetBlue land operations and boarding in Owen Roberts Intl. Airport in Grand Cayman Islands

LeoPatrizi/iStock Unreleased via Getty Images

JetBlue (NASDAQ:JBLU) is launching a hostile takeover attempt for discount carrier Spirit Airlines (NYSE:SAVE) after the latter rejected its $3.6B offer in favor of an existing deal with Frontier Airlines (NASDAQ:ULCC). The move will see JetBlue appeal directly to Spirit's shareholders by launching a $30 tender offer for their shares, but it would be willing to pay its initial bid of $33 if Spirit comes back to the negotiating table and provides key data that has been requested. SAVE is up 18% to $20/share on the news in premarket trading.

Bigger picture: Both companies have previously accused each other of acting in bad faith, which has held up the discussions. "I have wondered whether blocking our deal with Frontier is, in fact, their goal," Spirit CEO Ted Christie announced on the company's earnings call several weeks back, saying he can't imagine getting regulatory approval for the deal when JetBlue faces antitrust scrutiny over an agreement with American Airlines and overlaps in cities like Orlando and Fort Lauderdale. In response, JetBlue has called the concerns a "smokescreen" and pointed to historical relationships between top brass at Spirit and Frontier Airlines.

The tug of war comes amid a drive to consolidate in the budget airline sector. Any deal which would create the fifth-largest U.S. carrier after United Airlines (UAL), Delta (DAL), American (AAL) and Southwest (LUV). JetBlue also attempted to buy Virgin America in 2016, but lost a contest to Alaska Air Group (ALK).

Go deeper: A serious pilot shortage in the U.S. is prompting many airlines to clamber for solutions, and M&A may be one such answer. The COVID pandemic intensified the situation by slowing training and hiring, as well as triggering a wave of early retirements. Other ideas being considered are raising the mandatory airline pilot retirement age to 67, relaxing training programs, or reducing flight-hour requirements before joining a domestic carrier.

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