JetBlue's Acquisition of Spirit Takes a Significant Step Toward Reality

On Wednesday, Spirit Airlines shareholders voted to approve a $3.8 billion buyout from JetBlue Airways, although the deal may still encounter hurdles from federal antitrust regulators.

JetBlue triumphed in a bidding war against Frontier to secure the acquisition of Spirit, the largest budget airline in the country.

Spirit revealed the results following a brief online meeting, stating that a majority of shares supported the JetBlue deal, with a full tally promised within four business days.

Wall Street largely anticipated that shareholders would endorse the sale after compelling Spirit to abandon a proposed merger with Frontier Airlines in favor of JetBlue's more lucrative all-cash offer.

Spirit CEO Ted Christie remarked, "This is a significant advancement in our journey toward merging, which will establish a formidable low-fare competitor against the leading U.S. airlines," following the vote.

JetBlue hailed the vote as "a crucial milestone in our efforts to partner with Spirit to form a high-quality, low-fare national contender to the Big Four airlines"—referring to American, United, Delta, and Southwest. JetBlue committed to navigating the regulatory landscape.

JetBlue plans to repaint Spirit's aircraft and integrate its pilots and other staff into the JetBlue workforce. This merger would elevate New York-based JetBlue to the position of the nation’s fifth-largest airline, with over 450 planes and around 7,000 pilots, aiming to attract customers from larger carriers.

Nonetheless, this merger would eliminate Spirit, the largest budget airline in the country, which may raise concerns among regulators who seem to oppose further consolidation in the airline sector following several mergers between 2005 and 2016.

The Justice Department is currently challenging a partnership between JetBlue and American in New York and Boston, known as the Northeast alliance (NEA). Department attorneys argue that the alliance is anticompetitive and could lead to increased prices for consumers. A trial that commenced last month in federal court in Boston is set to resume on Monday.

The results of the NEA trial could significantly influence whether the Justice Department permits JetBlue to acquire Spirit or moves to block the transaction, according to Florian Ederer, an antitrust expert and economics professor at Yale University.

Ederer noted, "If [JetBlue and American] win the case, and the judge concludes that the NEA does not substantially harm consumers, it’s highly likely there will be an antitrust challenge to the Spirit acquisition."

JetBlue contends that its alliance with American should be approved since it does not constitute a merger. In contrast, acquiring Spirit would indeed result in the merging of two airlines.

JetBlue CEO Robin Hayes has expressed confidence in securing regulatory approval for the Spirit acquisition. The airlines aim to finalize the sale in the first half of 2024.

Spirit and Frontier announced their merger plans in February. Both airlines are classified as ultra-low-cost carriers, offering lower fares than their competitors while imposing additional fees to offset some of the fare difference.

After failing to acquire Virgin America in 2016 due to a bidding war with Alaska Airlines, JetBlue surpassed Frontier’s stock-and-cash proposal in April. JetBlue successfully countered the resistance from Spirit’s board and management to eliminate Frontier’s chances.

Despite the loss in the bidding war, Frontier stands to gain from the Spirit sale. If Spirit ceases to operate, Denver-based Frontier will rise to become the largest budget airline in the country, catering to the most cost-conscious travelers.