JetBlue to Buy Spirit in $3.8 Billion Deal

(CapitalWatch, July 29, New York) JetBlue Airways and Spirit Airlines have reached a $3.8 billion agreement to create what would be the fifth largest airline in the United States.

The deal was announced just one day after the budget airline canceled its merger agreement with Frontier Airlines. JetBlue's (Nasdaq: JBLU) purchase of Spirit (NYSE: SAVE) would make the largest discount airline in the market.

JetBlue plans to pay $33.50 per share for the deal. Spirit stock closed up 5.6% Thursday, trading at $25.66. JetBlue fell less than a percent, trading at $8.37.

Although Spirit doesn't have the reputation of flight giants like American (Nasdaq: AAL) or Delta (NYSE: DAL), JetBlue hopes to boost its competitiveness against major airlines.

JetBlue CEO Robin Hayes said the two companies 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," Hayes added.

Under the new structure, JetBlue and Spirit would offer a combined 77 million customers more options with JetBlue's "unique combination of low fares and award-winning service to more customers."

The acquisition would move up JetBlue's plan to reach more than 1,700 daily flights to more than 125 destinations in 30 countries based on its December schedules. The deal would also increase JetBlue's relevance in key cities such as Fort Lauderdale, Orlando, San Juan, and Los Angeles.

Altogether, JetBlue and Spirit's combination would give the company a fleet of almost 460 aircraft and an order book of over 300 Airbus aircraft with new fuel-efficient, lower-carbon engine options. JetBlue said it also plans to refurbish Spirit's planes in JetBlue style, including seatback screens and more legroom.

The purchase still has some hurdles to get through before completion. Spirit must pay Frontier $25 million in merger-related costs after backing out of their agreement.

 Airline consolidation has been the trend that resulted in the "big four" formation: American, Eastern, TWA, and United, dominating the market. Due to this trend, the Biden Justice Department has committed to taking strong action in response to deals it considers anti-competitive.

If the deal gets through these challenges, it will position JetBlue to be a major threat to the market's current leaders.