JetBlue
JetBlue also increased the breakup fee to $400 million from $350 million, which would go to Spirit shareholders, in the event that regulators reject the deal. It also included a 'ticking fee' which would pya shareholder $0.10 per share per month from January 2023 until the deal is completed or terminated.
Last week, Frontier increased the cash portion of its bid by $2 per share to $4.13, and it increased its break-up fee to $350 million which matched JetBlue's previous offer.
Spirit's management continues to favor the Frontier deal and sees it as a better option. Regardless of who Spirit chooses to merge with, the combined entity would become the fifth-largest U.S. carrier and the dominant player in its niche of regional travel. Spirit's management doesn't see the JetBlue deal as being viable due to its alliance with American Airlines
The airline business is in a tough place. Near-term demand is strong due to people eager to travel following the pandemic. However, meeting this demand has been difficult with a shortage of pilots, staff, and planes, in addition to record-high jet fuel prices. Yet, it's not so simple to invest in new capacity and the higher costs it would bring, with many certain that a recession is imminent.
Currently, TSA travel data is showing that we have recovered about 95% of pre-COVID travel, and some believe that we would be above these levels if airlines were increasing capacity. However, increasing capacity is much more expensive now than it was 3 years ago due to inflation, a tighter labor market, and higher interest rates.
Instead of rallying based on this recovery in demand and strength in bookings, airline stocks have fallen by nearly 30% over the last 3 months. Even the recent decline in oil prices has failed to generate a bid for the sector.
