Spirit Airlines shareholders voted Wednesday to accept a $3.8 billion buyout of JetBlue Airways, but the deal could still be challenged by federal antitrust authorities.
JetBlue emerged victorious from a bidding war with Frontier to acquire Spirit, the country’s largest low-cost airline.
Spirit announced the result after a short online meeting. Spirit only said that the JetBlue deal was supported by a majority of stocks; it promised an accurate count within four business days.
Wall Street widely expected shareholders to approve the sale after forcing Spirit to drop a proposed merger with Frontier Airlines in favor of JetBlue’s richer all-cash offering.
“This is an important step in our journey to completing a combination that will create the most compelling domestic low-fare challenger to the dominant US carriers,” said Ted Christie, CEO of Spirit, following the vote.
JetBlue issued a statement calling the vote “an important milestone in our plan to partner with Spirit to create a high-quality, national challenger to the big four low-fare airlines” — a nod to American, United, Delta and Southwest. JetBlue promised to go through the regulatory process.
JetBlue is expected to repaint Spirit aircraft and integrate its pilots and other employees into the JetBlue workforce. The deal would make New York-based JetBlue the fifth-largest airline in the country, with more than 450 aircraft and about 7,000 pilots, and – it is hoped – help attract customers from the larger airlines.
However, it would also eliminate Spirit, the country’s largest low-cost airline, which may not sit well with regulators who appear to be opposed to further consolidation in the airline industry following a round of mergers between 2005 and 2016.
The Justice Department is currently fighting to destroy a partnership in New York and Boston between JetBlue and American, which the airlines call the Northeast Alliance, or NEA. Department lawyers say the alliance is anti-competitive and will drive up prices for consumers. A trial that began last month in a Boston federal court will resume on Monday.
The outcome of the NEA trial could have a big impact on whether the Justice Department allows JetBlue to buy Spirit or blocks its sale, according to Florian Ederer, an antitrust expert and economics professor at Yale University.
“If (JetBlue and American) win the case and the judge finds that the NEA isn’t doing enough harm to consumers, it’s almost guaranteed that there will be an antitrust challenge to the Spirit acquisition,” Ederer said.
JetBlue argues that the alliance with American should be allowed since it is not a merger. However, Spirit’s acquisition would merge two airlines.
JetBlue CEO Robin Hayes said he is confident of receiving regulatory approval to purchase Spirit. The airlines hope to complete the sale in the first half of 2024.
Spirit and Frontier announced their proposed merger in February. Both are so-called ultra-low-cost carriers, charging lower fares than other airlines but charging higher fees to make up some of the difference.
JetBlue, which tried to buy Virgin America in 2016 but lost a bidding war with Alaska Airlines, outperformed Frontier’s stock and cash offer in April. JetBlue overcame opposition from Spirit’s board and management to evict Frontier.
JetBlue’s offer provides that Spirit shareholders will receive $33.50 per share in cash, including an advance of $2.50 per share upon Spirit shareholder approval of the deal, plus a 10 cent ticking fee per share per month while regulators review the matter.
If regulators halt the sale, JetBlue would pay $70 million to Miramar, Fla.-based Spirit and $400 million to Spirit shareholders.
Even after losing the bidding war, Frontier will likely benefit from the Spirit sale. With Spirit gone, Denver-based Frontier will become the nation’s largest low-cost airline, catering to the most budget-conscious traveler.
Copyright © 2022 by The Associated Press. All rights reserved.
https://6abc.com/spirit-airlines-jetblue-airways-shareholders-approval/12346947/ Spirit Airlines shareholders approve $3.8B sale to JetBlue