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JetBlue Buys Spirit to Create Fifth Largest US Airline – How Will The Merger Impact You?

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Ending months of back and forth, JetBlue acquired Spirit on July 28, which had terminated the deal with Frontier a few hours earlier. The acquisition creates the nation’s fifth largest airline. JetBlue will acquire Spirit for $33.50 per share in cash, for an aggregate fully diluted equity value of $3.8 billion.

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“We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes,” Robin Hayes JetBlue CEO said in a press release. “We look forward to welcoming Spirit’s outstanding Team Members to JetBlue and together creating a customer-centric, fifth-largest carrier in the United States. Spirit and JetBlue will continue to advance our shared goal of disrupting the industry to bring down fares from the Big Four airlines. This combination is an exciting opportunity to diversify and expand our network, add jobs and new possibilities for Crewmembers, and expand our platform for profitable growth.”

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Shares of JetBlue were up 1.2% in pre-market trading on July 28, while shares of Spirit were up 4.2%. Meanwhile, Frontier was down 1%. 

The airlines will continue to operate independently until after the transaction closes and their loyalty programs remain unchanged and customer accounts will not be affected in any way, the companies said in the release. 

The new combined airline will be based in New York and Hayes will be at the helm. 

The companies said in the release that the four largest carriers control more than 80% of the market, and by “creating a low-fare, customer-centric challenger with size and scale is the best opportunity to disrupt legacy carrier pricing in the current landscape.” In addition, the acquisition “will increase relevance for JetBlue” in certain key focus cities, such as Fort Lauderdale, Orlando, San Juan, and Los Angeles, as well as Big Four airline hubs, Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta and Miami, according to the release. 

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“We believe we can uniquely be a solution to the lack of competition in the U.S. airline industry and the continued dominance of the Big Four,” Hayes said in the release. “By enabling JetBlue to grow faster, we can go head-to-head with the legacies in more places to lower fares and improve service for everyone. Even combined with Spirit, JetBlue will still be significantly smaller than the Big Four, but we’ll be much better positioned to bring the proven JetBlue Effect to many more routes and locations.”

Christopher Raite, senior analyst at Third Bridge, said in a note sent to GOBankingRates that “this integration adds additional complications to a deal that will come under significant regulatory scrutiny.”

“While several questions have been raised about the merits of adding financial leverage, regulatory risk, and a more complex business model through this deal, one of our experts believes that the acquisition of Spirit affords JetBlue a way to address its need for more Airbus A320 aircraft in the near term,” Raite said. “Ultimately our experts see American Airlines as the carrier most vulnerable to the new entity, considering a reduced footprint in the Northeast as well as increased competition in popular leisure markets, such as Miami.”

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In April, JetBlue made the $3.6 billion bid to buy Spirit Airlines, in what the company believed “constitutes a superior proposal under Spirit’s merger agreement with Frontier and represents the most attractive opportunity for Spirit’s shareholders,” according to a press release at the time.

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The proposal came two months after Spirit Airlines and Frontier Group announced a definitive merger agreement on Feb. 7, under which the companies would have combined in a deal valued at $6.6 billion, “creating America’s most competitive ultra-low fare airline,” as GOBankingRates previously reported.

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