JetBlue Airways Says 'Spirit Deal Is Solution To Lack Of Competition,' Contests Regulatory Overhang
- The Department of Transportation and Department of Justice are reportedly looking to block the prospective merger between JetBlue Airways Corporation (NASDAQ: JBLU) and Spirit Airlines Incorporated (NYSE: SAVE) on the grounds that the merger would be anti-competitive.
- Robin Hayes, CEO of JetBlue, said the U.S. government's antitrust regulators had seemed intent on stopping the merger from the outset.
- The airlines have argued that merging will increase, rather than undermine, competition.
- "My sense is they came to the table with their minds made up," Mr. Hayes said in a Wall Street Journal report. He said JetBlue was prepared to contest a Justice Department lawsuit in court.
- In July last year, JetBlue Airways agreed to acquire Spirit Airlines for $33.50 per share in cash, implying an equity value of approximately $3.8 billion and an adjusted enterprise value of $7.6 billion.
- JetBlue released updated data to support further the airline's role among the dominant, higher-price legacy carriers and the pro-competitive impact of the merger with Spirit on the industry.
- The data showed that JetBlue is over three times more effective at lowering legacy fares than Spirit.
- JetBlue and Spirit have little overlap, and the combination will increase competition.
- The Big Four airlines, including American Airlines Group Inc (NASDAQ: AAL), United Airlines Holdings Inc (NASDAQ: UAL), Delta Air Lines Inc (NYSE: DAL), and Southwest Airlines Co (NYSE: LUV), lock on about 80% of the market.
- Combined, JetBlue and Spirit will have only about 9% market share, compared to about 16-24% for each of the four largest airlines. The added scale and ability to grow further will result in meaningful competition.
- Price Action: SAVE shares are up 2.51% at $16.77, and JBLU shares are up 0.71% at $8.46 during the premarket session on the last check Tuesday.
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