WASHINGTON, April 5 (Reuters) – JetBlue Airways (JBLU.O) said on Tuesday it had made an unsolicited $3.6 billion offer for Spirit Airlines (SAVE.N), which could hamper merger plans between the ultra-low-cost airline and Frontier Group Holdings (CHLC.O). Read more

JetBlue chief executive Robin Hayes said the deal would make the New York-based airline a stronger competitor to the four traditional US airlines that control nearly 80% of the US passenger market.

“The number one complaint we get is why aren’t you flying to more places,” Hayes said in an interview with Reuters on Tuesday evening. “What we want to do is create a bigger JetBlue” that can serve more consumers.

JetBlue, the sixth-largest U.S. passenger carrier, would operate Spirit under the JetBlue brand and it doesn’t believe divestitures are necessary.

The move comes as airlines grapple with higher fuel and labor costs and strive to attract more leisure travellers, who have returned at a faster rate than business travellers. business since the easing of pandemic restrictions.

JetBlue offered $33 per share all in cash, about 33% more than Frontier’s offer of 1.9126 shares and $2.13 in cash, which would value Spirit at $24.93 per share during Tuesday closing.

Shares of Spirit closed 22% higher at $26.92, their highest level since mid-February. Sprit’s 52-week high is $39.19. Just before the COVID-19 lockdowns became widespread, Spirit shares were trading around $45.

Spirit declined to comment beyond a written statement that it would consider the offer.

Hayes said he expects a vigorous antitrust review from the U.S. Department of Justice that could last until 2023.

“We’ve had unprecedented amounts of consolidation, which the DOJ has approved and now it’s about how do we make sure the rest of us can continue to discipline legacy carriers and create that competition,” he said. said Hayes. “We think ultimately it’s the best deal that’s really going to drive competition.”

Andre Barlow of Doyle, Barlow and Mazard PLLC said the Biden administration “is concerned about consolidation which could lead to higher prices. This is having an impact on consumers, so I think it’s getting difficult.”

The Justice Department declined to comment.

The department filed an antitrust lawsuit last September against American Airlines and JetBlue over their partnership, alleging it would result in higher fares at busy airports in the northeastern United States. Hayes said JetBlue is “very committed” to its alliance with American, whether or not it was successful in acquiring Spirit.

Hayes said he expects litigation over the American Airlines alliance to be over before the Spirit deal review is complete. Read more

He speaks to analysts and reporters on a call Wednesday at 8 a.m. ET to tout the proposal, which he says would boost operations in key markets such as Florida and access to limited hub airports like Atlanta. , Detroit, Miami and Chicago.

Meanwhile, Frontier said it was “surprising that JetBlue would consider such a merger at this time given that the Department of Justice is currently suing to block their ongoing alliance with American Airlines.” American did not immediately comment.

JetBlue said the deal, if completed, is expected to generate between $600 million and $700 million in net annual synergies and the combined airline is expected to generate annual revenues of approximately $11.9 billion based on 2019 income.

Frontier said its Spirit offer “is in the best interests of consumers and shareholders and would save consumers $1 billion a year” and argued that a “significant overlap on the East Coast between JetBlue and Spirit would reduce competition and limit options for consumers”.

In February, Frontier and Spirit proposed a merger that would create America’s fifth-largest airline.

Spirit’s customer service has often been the subject of criticism and the airline canceled 35% of its flights on Monday due to weather concerns.

“We don’t believe customers should have to choose between a low fare and a good experience — they should have both,” Hayes said, noting that JetBlue’s presence in the markets typically prompts major airlines to lower prices. airfares in what he called “the JetBlue effect”. But the big carriers don’t always lower fares to match the prices of ultra-low-cost carriers like Spirit or Frontier.

The Spirit-Frontier deal has come under fire from some lawmakers and public interest groups warning in March that a merger between the carriers “would destroy competition in the only competitive market segment of the highly consolidated airline industry”.

Reporting by David Shepardson and Diane Bartz in Washington and Kannaki Deka in Bengaluru; Editing by Maju Samuel, Bernard Orr

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