Spirit Airlines is now part of a $3.8 billion purchase deal after JetBlue Airways announced on Thursday that it plans to combine the low-fare air carrier to create the fifth-largest airline in the United States.
“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,” said JetBlue’s chief executive officer Robin Hayes in a joint statementannouncing the merger.
Spirit and JetBlue are expected to conclude the regulatory process and complete the transaction no later than the first half of 2024.
This comes after Spirit Airlines on Wednesday withdraw from a $3 billion deal to merge with Frontier Airlines.
The merger with Frontier, which was announced in February, was meant to provide more low-cost flying fares to more travelers in destinations across the United States, Latin America, and the Caribbean. However, Spirit terminated that deal as it lacked the shareholder support needed to approve merging with Frontier, CNBC reported.
Still, Frontier vowed growth even without the merger with Spirit, according to CNN Business, saying “with JetBlue seeking to convert Spirit Airlines into a high-cost airline, Frontier will be unmatched as the ultra-low cost leader.”
Meanwhile, Spirit Airlines CEO Ted Christie said in the joint statement on Thursday that both carriers aim to create “the most compelling national low-fare challenger to the dominant US carriers.”
No details were revealed about new travel costs, however, some experts pointed out that this deal could raise flight prices across the industry, given that JetBlue might argue that its airfares are lower than larger carriers, even though they are higher than prices by Frontier and Spirit. JetBlue also plans to adjust Spirit planes to add first class seating if the acquisition is complete, according to CNN Business.
In contrast, the Frontier-Spirit deal featured two airlines that already have low base fares and don’t have first class or business class seats.
“Spirit and Frontier play a big role in the fare you pay, even if you never fly either one,” said Scott Keyes, founder of Scott’s Cheap Flights, a website that helps finding cheaper fares, according to CNN Business. “When Delta announced the basic economy fare in 2012, they described it to investors as a ‘Spirit-matching fare,’ because their lunch was getting eaten by the budget carriers of the world. I’m not a fan of either merger, but I like the JetBlue option even less.”
The JetBlue deal might face antitrust scrutiny for this reason, especially if the US Department of Justice determines that the acquisition could harm consumers.
Additionally, William McGee, a senior fellow at the American Economic Liberties Project, said that Spirit and its low-cost structure will “disappear” if the merger with JetBlue is completed, the Associated Press reported.
“Once Spirit is absorbed [into JetBlue]there is no question that fares are going to go up,” McGee said.
These airlines’ combined customer base of 77 million travelers is expected to have more options and choices if the deal is completed. Additionally, JetBlue said in the statement that it plans to bring its experience “to all aircraft, offering JetBlue’s unique combination of low fares and award-winning service to more customers.”
Newsweek reached out to JetBlue Airways, Spirit Airlines and airline industry experts, including Douglas Reid, a business strategy professor at Queen’s University, Peter Belobaba, a professor at the Massachusetts Institute of Technology, for comments.
Credit: www.newsweek.com /