JetBlue goes hostile with tender offer for Spirit Airlines
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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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Comments (25)
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If you are a pilot, you would have qualified under the "250 hour rule" which was raised too 1,500 hours in 2013. In addition, pilots have to have supplemental certification and simulator training. The question of the "right" number of hours is debatable. 250 was too short and contributed to a crash while 1,500 places a large burden on potential new pilots and airlines.
As a SAVE stockholder, you should take the ULCC merger which is far more certain to close and do so much, much faster.
Agreed, the voices immediately discounting the acquisition of the #7 airline by the #6 airline are just pushing their own self interests. With depressed stock prices for all airlines and the airlines in this deal, a stock swap just does not make sense for the Spirit BOD to approve.Even on CNBC, the voices are immediately discounting the possibility acquisition of the relatively small airlines. The level of assuredness that the JetBlue deal will not happen is not in line with reality as the case is made that the two smaller airlines will be stronger competitors together. In any case, the business models for the low cost airlines are leading to continued growth at rates the big-3 simply cannot match. With growth, margins are compressed as markets develop, but as market share is achieved that difference will hurt the big-3.
Hiring skilled and experienced pilots doesn't seem to be a concern so why not add diversity-equity hiring to the mix, too?
