By DAVID KOENIG, AP Airlines Editor
JetBlue Airways executives explained to Wall Street on Wednesday why they were offering to pay $3.6 billion for Spirit Airlines, a combination proposal that received a chilling reception from investors.
JetBlue doesn’t want Spirit’s ultra-low-cost business model, and certainly not Spirit’s bottom spot in government-compiled customer complaints. But he wants Spirit’s Airbus fleet, and especially his big pile of orders for more planes.
New York-based JetBlue needs more planes to compete more fairly with the four biggest US airlines – American, Delta, United and Southwest. But planemakers Airbus and rival Boeing have long backlogs that make it difficult to grow as fast as JetBlue would like.
“When I think about the main benefits of this transaction…first of all, between Spirit and JetBlue, we have a really compelling backlog,” JetBlue CEO Robin Hayes said in a call with analysts. “The supply of new aircraft over the next few years is very difficult.”
Buying Spirit “accelerates what would take us years to do” alone, Hayes said.
JetBlue has over 280 aircraft. Spirit had 173 at the start of 2022 and has received orders to receive another 120 from Airbus through 2027, according to regulatory documents.
JetBlue said late Tuesday that it would seek to overturn a $2.9 billion bid from Frontier Airlines that was backed by Spirit’s CEO when that deal was announced in February. There could be a bidding war — Frontier declined to say Wednesday whether it would sweeten its offer now that JetBlue has stepped in.
Spirit said its board of directors was considering JetBlue’s unsolicited bid.
So far, investors are disappointed with JetBlue’s move. They have sent shares of JetBlue down nearly 9% on Wednesday and more than 15% since the bid was announced.
JPMorgan analyst Jamie Baker said the merits of a JetBlue-Spirit merger are not as clear as other possible US airline combinations, even though it would allow JetBlue to grow faster than it couldn’t do it any other way in growing markets like South Florida and Los Angeles.
Raymond James analyst Savanthi Syth lowered his rating on JetBlue shares to “market performance”. She said ‘airline mergers are never easy’, combining headcount will be difficult, JetBlue will add debt and the whole exercise could distract from JetBlue’s budding partnership with American Airlines in the Northeast. .
The Justice Department has filed a lawsuit to block that deal with American — a trial is expected this fall — and antitrust regulators may object to the overlap between JetBlue and Spirit on the East Coast, particularly in Florida.
Hayes said JetBlue was confident regulators would let his airline buy Spirit, but acknowledged “it’s going to be quite a lengthy regulatory process.”
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