JetBlue Airways executives explained to Wall Street on Wednesday why they are offering to pay $3.6 billion for Spirit Airlines, a combination proposal that has received a cool reception from investors.
Also, they said that JetBlue doesn’t want Spirit’s ultra-low-cost business modeland it certainly doesn’t want Spirit’s last place in government-collected customer complaints.
But does want Spirit’s fleet of Airbus planes and, above all, its large order pile for more planes.
They also indicated that JetBlue, based in New York, needs more planes. to compete more evenly with the four largest US airlines: American, Delta, United and Southwest.
But planemakers Airbus and rival Boeing are long behind schedule, making it difficult to grow as fast as JetBlue would like.
“When I think about what the main benefits of this transaction are … first of all, between Spirit and JetBlue, we have a really compelling order book,” JetBlue CEO Robin Hayes said on a call with analysts. “The supply of new aircraft in the next few years is very challenging.”
Spirit’s Purchase “It’s accelerating what would take us years to do” alone, Hayes said.
JetBlue has more than 280 planes. Spirit had 173 at the beginning of 2022, and has orders to receive another 120 from Airbus through 2027, according to regulatory filings.
JetBlue said late Tuesday that will try to nullify a $2.9 billion offer from Frontier Airlines which was endorsed by Spirit’s CEO when that deal was announced in February.
There could be a bidding war: Frontier declined to say Wednesday whether it will sweeten its offer now that JetBlue has gotten into it.
Spirit said its board of directors is studying JetBlue’s unsolicited offer.
For now, investors are disappointed by JetBlue’s offer. JetBlue shares fell nearly 9% on Wednesday and more than 15% since the offer became known.
JPMorgan analyst Jamie Baker said the merits of a merger between JetBlue and Spirit are not as clear as those of other potential US airline combinations, though it would allow JetBlue to expand faster than it could in growth markets like South Florida and Los Angeles.
Raymond James analyst Savanthi Syth downgraded her rating on JetBlue stock to “market perform” (a neutral assessment).
Said “Airline mergers are never easy”that combining templates will be difficult, that JetBlue will add debt and that the whole exercise could distract from JetBlue’s fledgling partnership with American Airlines in the Northeast.
The Justice Department sued to block that deal with American — a trial is scheduled for this fall — and antitrust regulators could challenge the overlap between JetBlue and Spirit on the East Coast, especially in Florida.
Hayes said JetBlue is confident regulators will allow his airline to buy Spirit, but acknowledged “it’s going to be a pretty long regulatory process.”