The marriage proposal that Spirit Airlines originally rejected from JetBlue Airways was approved by the South Florida carrier’s shareholders on Wednesday.
Spirit announced the outcome after a brief meeting, which was held online Wednesday. Spirit said only that the JetBlue deal was supported by a majority of shares voted; it promised an exact count within four business days.
Two shareholder advisory services, Institutional Shareholder Services and Glass, Lewis & Co. had recommended that investors accept JetBlue’s $3.8 billion offer.
“I would be very surprised if the majority of Spirit stockholders vote to reject,” said Henry Harteveldt of Atmosphere Research, an industry consulting firm in San Francisco. “Spirit stockholders have some form of financial protection if for some reason the [Department of Justice] does not approve the merger.”
Indeed, it is Uncle Sam who is destined to have the final say on whether the deal moves forward as Biden Administration regulators vet the proposed union for its impact on competitive pricing for consumers and how it might affect the national spectrum of commercial air service.
Thus far, there has not been an outpouring of public objections from communities served by Spirit or from other interested parties outside the industry.
“Once the airline formally submits their request to merge to the DOJ there will be some period of time for comment,” Harteveldt said. “That’s when it will be interesting to see who comes forward saying what.”
The time it will take for the regulatory process to run its course is likely to keep Spirit as an independent hometown airline in South Florida at least into 2024, analysts say. It means the more than 3,000 people employed in the region still will be Spirit employees while the busiest airline at Fort Lauderdale-Hollywood International Airport operates its bright yellow jetliners to dozens of destinations daily in the U.S., Caribbean and Latin America.
“This is an important step forward on our path to closing a combination that will create the most compelling national low-fare challenger to the dominant U.S. carriers,” Spirit CEO Ted Christie said after the vote.
JetBlue issued a statement calling the Wednesday vote “a major milestone in our plan to join with Spirit to create a high-quality, low-fare national challenger to the Big Four airlines” — a reference to American, United, Delta and Southwest. JetBlue vowed to work through the regulatory process.
Already, the two airlines, which are still flying independently of each other, are paving the way for public acceptance with a joint message about what the deal would entail upon approval.
“A combined JetBlue-Spirit will bring together the best of both airlines to create a customer-centric, low-fare alternative to the dominant ‘Big Four’ airlines,” the companies declare in a statement on a web domain called lowfaresgreatservice.com.
“Customers will benefit from access to more routes, greater connectivity, and better onboard experiences — while the JetBlue Effect triggers lower fares from legacy airlines and brings more choices to more customers,” the statement says.
The “Big Four” airlines are American Airlines, Delta Air Lines, Southwest Airlines and United Airlines, which combine for slightly more than 80% of the market. Once fused, JetBlue and Spirit would be the nation’s fifth-largest carrier.
The “JetBlue Effect” is a term coined by the New York carrier that alludes to how its very presence in a market invariably forces rival airlines to cut their fares to JetBlue levels.
JetBlue has vowed it will maintain a major presence at Fort Lauderdale, with more than 140 flights daily. Both airlines also serve Miami International Airport and Palm Beach International Airport.
Elsewhere in the nation, however, the Justice Department is fighting to kill 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 federal court in Boston resumes Monday.
The outcome of the NEA trial could have a huge impact on whether the Justice Department lets JetBlue buy Spirit or sues to block the sale, according to Florian Ederer, an antitrust expert and economics professor at Yale University.
“If [JetBlue and American] win the case, and the judge thinks the NEA does not harm consumers enough, it’s almost guaranteed that there will be an antitrust challenge to the Spirit acquisition,” Ederer said.
JetBlue argues the alliance with American should be allowed because it’s not a merger. The acquisition of Spirit, however, would merge two airlines.
Rough courtship
JetBlue was not Spirit’s preferred partner. The Miramar-based discount airline, also known in the industry as the nation’s predominant “ultra low cost carrier,’ initially hitched its fortunes with Frontier Airlines of Denver, another ultra low cost outfit that made its initial merger pitch last February.
But the Frontier deal came under attack from a hostile and ultimately superior cash bid by JetBlue, which saw Spirit as a quick ticket to rapid expansion.
Spirit insisted JetBlue’s offer would never pass muster with federal regulators.
But throughout the spring and into July, JetBlue sweetened the pot for Spirit shareholders, and the South Florida airline’s board ultimately agreed to accept a $33.50 a share bid worth $3.8 billion. The per share price would increase over time up to $34.15, depending on the timing of the closing, the companies say.
The profile of the bigger combined airline, which would fly under the JetBlue name and be headquartered in New York, would look this way, according to the two companies:
Annual revenues: $11.9 billion
Annual number of customers: 77 million
Daily flights: More than 1,700
Unique destinations: 127
Fleet size: 458 planes with more than 300 on order.
Opportunities knock
Harteveldt believes other airlines including Frontier, which already has a significant presence in South Florida, as well as recent startups and less prominent carriers, could raise their service levels for Florida-bound consumers and offer low fares after the dust settles from the takeover.
“I think that Frontier will be eyeing South Florida for opportunities,” he said. “I wouldn’t be surprised if we see Breeze eyeing the area. Avelo has announced a base in Orlando.”
Breeze Airways, based near Salt Lake City, and Avelo, a Houston-based carrier that started out as a charter airline, fly to and from so-called underserved U.S. cities at discount prices.
In the meantime, Allegiant, whose parent firm is building a condo resort on the Gulf coast, already maintains a strong presence in Florida.
“Allegiant, if it detects there are opportunities for expansion in Florida may choose to add service,” Harteveldt said.
This report was supplemented by information from the Associated Press.
Staff writer David Lyons can be reached at dvlyons@SunSentinel.com
