The sixth and seventh largest airlines are teaming up to take on the four biggest carriers in the United States in a deal valued at $3.8 billion. On Wednesday, October 19, shareholders voted to approve the sale of Spirit Airlines
The buyout would represent a major shake-up in the United States airline industry, which is currently dominated by the four largest carriers, American
"This is an important step forward on our path to closing a combination that will create the most compelling national low-fare challenger to the dominant U.S. carriers," Spirit Airlines' CEO Ted Christie said in a statement.
According to data from Statista, the four biggest carriers accounted for more than 66% of the U.S. market in 2021. With 5.3% of the market, New York-based JetBlue was the sixth-largest airline, behind Alaska Airlines
JetBlue said in a statement that this vote is "a major milestone in our plan to join with Spirit to create a high-quality, low-fare national challenger to the Big Four airlines"
Following the completed merger, the resulting airline, still called JetBlue, would be the fifth largest in the U.S with a majority foothold in areas where neither carrier is currently able to compete, particularly in Florida. The combined airline would be the only option for some flights.
However, the buyout still needs to get regulator approval, and there's no real guarantee that will happen. Regulators have been cracking down on mergers, especially in markets dominated by a few companies, according to The New York Times. Spirit is also the country's largest budget airline, making it more likely that regulators will disapprove of the sale.
"We look forward to continuing our ongoing discussions with regulators as we work toward completing the transaction and delivering value to team members, guests and stockholders," Christie said.
The Spirit acquisition is already under review by regulators, and JetBlue carrier is also facing an antitrust lawsuit from the Department of Justice (DOJ) regarding its alliance with American Airlines in New York and Boston. The DOJ says the partnership would result in higher prices for consumers.
"There is ample evidence that yet another huge airline merger would likely harm American consumers," Elizabeth Warren wrote in a letter to Transportation Secretary Pete Buttigieg earlier this year.
In February of this year, Spirit and ninth-place carrier Frontier Airlines
Spirit initially resisted the deal, arguing that JetBlue was just trying to disrupt its merger with Frontier, but JetBlue outbid the smaller airline by about $1 billion. Shareholders were also swayed by JetBlue's promise to pay them for approving the buyout.
JetBlue pledged to pay $2.50 per share for approval, and another 10 cents per share for every month starting in January. If regulators block the sale, Spirit's shareholders still profit: including the monthly payments, JetBlue has agreed to pay $400 million to shareholders and $70 million to the airline.
If the two airlines get approval, the resulting airline would keep the name JetBlue, and Spirit aircraft would be redesigned to match JetBlue's existing fleet. However, combining the two systems and work forces is likely to present significant challenges.
