Spirit Airlines Faces a Tough Future After JetBlue’s Failed Acquisition

(CTN News) – JetBlue Airways’ $3.8 billion takeover of Spirit Airlines was blocked by a federal judge this week.

Watchers say the carrier might have to cut fares even more. Analysts say the discount carrier could restructure, if not go under.

On Thursday, Spirit Airlines shares hit a record low of $5.19 a share, down 64% so far this week. At Wednesday’s close, JetBlue’s market capitalization was $612 million, just a fifth of itss. Airbus narrow-body jets were grounded due to Pratt & Whitney engine problems before the ruling because of softer-than-expected demand.

In her analysis for TD Cowen, Helane Becker predicts a Chapter 11 filing. The company can only restructure in a few scenarios.” If the airline goes bankrupt, they might have to slash fares more, because they’re known for their low fares.

The carrier will probably try to bring in as much cash as possible on major Spirit routes, Becker writes. Increasing salaries and other costs have forced airlines like Spirit Airlines to reduce fares, especially off-peak. Consumers may like that, but airlines with big cash needs may not.

There’s a squeeze from both sides because demand is softening and costs are going up, said Samuel Engel, a lecturer at Boston University’s Questrom School of Business. It’s going to hurt fares.”

According to a Spirit spokesperson, “we’re confident in our strengths and strategy.”.

In addition to providing great service and affordable fares to guests, they’re maintaining a healthy balance sheet.

Spirit Airlines said in a filing earlier this month that it had leased back 25 Airbus planes, allowing the company to pay down $465 million in debt.

Growing up

JetBlue’s acquisition of Spirit Airlines was blocked by former President Reagan’s appointee Judge William Young because of its impact on consumers who care about prices.

Spirit Airlines seats will be rebranded as JetBlue’s,

Which have more creature comforts and legroom.  In its 25th year of flying, JetBlue is going through a quarter-life crisis and says it needs Spirit’s fleet, pilots, and routes to grow and compete better.

The four airlines control about 80% of U.S. domestic traffic, and they’ve been merging for years with former regulators’ approval. The big four airline oligopoly does not benefit consumers, Engel argues. Organic growth takes time in this country. Banning mergers entrenches the big four.”

Since JetBlue started offering seat-back entertainment about a decade ago, larger airlines have had to overhaul their premium cabins, Engel said. Spirit and JetBlue said Tuesday they disagreed with the ruling and are evaluating their options.

In light of the ruling, the carriers said, “We continue to believe that by bringing low fares and great service to more customers in more markets, we’ll be able to compete with the dominant U.S. carriers.”

JetBlue didn’t respond to a comment request on Wednesday. Geraghty will become JetBlue’s CEO to grow and profit the airline. Flights cannot be added due to congested airspace.

In April 2022, weeks after Spirit announced a merger agreement with Frontier Airlines, the airline launched a hostile takeover bid. JetBlue made a $3.8 billion all-cash offer instead of Frontier’s cash-and-stock deal. Getting Frontier and Spirit together might have been easier.

‘If JetBlue hadn’t gotten involved, Frontier-Spirit could have merged already,’ he said.

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