It took a nearly four-month bidding war, but U.S. carrier JetBlue Airways has sealed a $3.8 billion deal with ultra-budget peer Spirit Airlines . Now, it must convince merger-wary regulators that the tie-up isn’t bad for competition. If it fails – and it might – the cost for JetBlue is dear.
that production will ramp up more slowly than expected this year. Even though JetBlue will incur big costs if the transaction closes from lifting Spirit pilots’ pay to match its own and overhauling the company’s airplanes, it might be the only way to get more of both.
Besides, JetBlue predicts big benefits from ramping up, to the tune of $700 million in extra annual profit. Taxed and capitalized, that’s $5.5 billion – roughly double the company’s current market capitalization. By sending Frontier packing, Spirit has taken a route that’s riskier, but more rewarding if all goes well. For JetBlue, that’s doubly true.JetBlue Airways on July 28 said that it had reached an agreement to acquire rival ultra-budget carrier Spirit Airlines in a $3.
Spirit had previously agreed to merge with Frontier, but on July 27 canceled its planned shareholder vote. Frontier’s offer was mostly denominated in its own stock, whereas JetBlue’s offer is all in cash.Editing by John Foley and Sharon Lam
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