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Mon, Feb 20, 2023

Biden DOJ Seeks to Block JetBlue-Spirit Merger

In Defense of Free Markets

After a protracted and acrimonious bidding-war with Frontier Airlines that included Capitol Hill-esque mud-slinging and an attempted hostile-takeover, JetBlue Airways announced in July 2022 that it would merge with Spirit Airlines. The $3.8-billion deal, if approved by the U.S. Department of Justice (DOJ) would give rise to America’s fifth-largest air-carrier.

Notwithstanding the proposed deal’s heft and the degree to which it stands to enrich savvy airline shareholders, powerful groups and those individuals who have vehemently and vociferously opposed the Spirit-JetBlue merger, arguing the amalgamation of the two leading budget airlines will lead to higher ticket prices for consumers and threaten the security of multitudes of airline jobs.

The White House and the Justice Department are making ready to jointly assert their opposition to such by dint of an antitrust action to be brought by the Biden administration. The suit is the latest action taken by Democrat lawmakers against America’s free-market airline industry, and has prompted concerns over the Biden administration’s growing interest in regulating air-travel.    

Sources within the DOJ have intimated the department may sue as early as March, but tempered their predictions with reminders that the federal government’s investigation of the merger’s provisions remains underway, and that a definitive decision to proceed with the suit has yet to be made. Contrariwise, reports have surfaced alleging disagreement within the DOJ’s antitrust division over whether to bring the case at all.

Factions within the DOJ contend the merger, if enacted, would afford JetBlue a virtual monopoly over the low-cost airline market. JetBlue, however, asserts the merger would stimulate competition among the U.S.’s top four air-carriers.

JetBlue’s pursuit of a merger with Spirit Airlines has been characterized by tenacity and involved carryings-on. In May 2022, after two failed attempts to acquire the Florida-based budget carrier, JetBlue made a direct appeal to Spirit shareholders to accept its buyout offer and reject a reasonable, all-but-done deal with Frontier Airlines. JetBlue’s attempted end run was rejected on account of shareholder fears that federal anti-trust regulators would withhold their blessing of the merger—a concern validated by the passage of time.

The crux of the JetBlue’s offer is a stock value of $33.50-per share [cash] including a prepayment of $2.50-per share [cash] payable upon Spirit stockholders’ approval of the transaction and a ticking fee of $0.10-per month starting in January 2023 through closing. All told, the transaction represents an aggregate fully diluted equity value of $3.8-billion and an adjusted enterprise value of $7.6-billion.

Both carriers state they expect the deal to close no later than the first half of 2024.

If the deal closes, JetBlue states it will expand its fleet and pilot cadre, and retrofit the entirety of Spirit’s extant aircraft with additional legroom and improved in-flight entertainment systems.

JetBlue CEO Robin Hayes said of the agreement: “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. 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.”

Spirit Airlines president and CEO Ted Christie remarked: “We are thrilled to unite with JetBlue through our improved agreement to create the most compelling national low-fare challenger to the dominant U.S. carriers, and we look forward to working with JetBlue to complete the transaction. Bringing our two airlines together will be a game changer, and we are confident that JetBlue will deliver opportunities for our Guests and Team Members with JetBlue’s unique blend of low fares and award-winning service. We especially appreciate the commitment of our Spirit Family throughout this process.”

In the event the JetBlue-Spirit Airlines merger survives the Biden administration’s overreaching regulatory predilections, the composite airline will be based in New York and led by JetBlue CEO Robin Hayes.

FMI: www.jetblue.com

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