September 29, 2022

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JetBlue buying Spirit could lead to 40% ticket price inflation

Frontier Airlines CEO Barry Biffle issued a stern warning to travelers that use Spirit Airlines: Beware of soaring ticket prices should regulators approve the airline’s merger with JetBlue.

“If you are a Spirit customer, you will see the biggest inflation you have ever seen,” Biffle told Yahoo Finance Live (video above). “You’re going to see fares jump up over 40%. It’s going to be hundreds of dollars per family. And so that’s why I think it’s a challenge for their consumers. There are going to be millions of people that get priced out.”

Said a Jetblue spokesperson to Yahoo Finance, “Customers will continue to benefit from JetBlue’s unique combination of low fares and award-winning service. Importantly, our presence on new routes is proven to bring down legacy fares more than ultra-low-cost carriers, benefitting customers and stimulating demand. So this is a win for customers – whether you fly JetBlue or another airline.”

A JetBlue airliner lands past a Spirit Airlines jet on taxi way at Fort Lauderdale Hollywood International Airport on Monday, April 25, 2022. (Joe Cavaretta/Sun Sentinel/Tribune News Service via Getty Images)

A JetBlue airliner lands past a Spirit Airlines jet on taxi way at Fort Lauderdale Hollywood International Airport on Monday, April 25, 2022. (Joe Cavaretta/Sun Sentinel/Tribune News Service via Getty Images)

Spirit terminated Frontier’s cash-and-stock deal to acquire the low-cost airline late Wednesday after failing to garner enough support from shareholders. On Thursday, JetBlue stepped in and said it would look to buy Spirit for a total equity value of $3.8 billion.

Spirit shares rose nearly 6% as of the market close on Thursday while JetBlue shares edged lower on concerns about getting regulatory approval for its pricey deal.

As for Frontier, the budget carrier’s stock surged 20% as investors cheered the company’s disciplined approach to bidding and what the terminated deal potentially means for shareholder returns.

“It’s a great day for Frontier because we get to be the low-cost carrier of the United States,” Biffle said, adding that “shareholders are going to get a windfall from this.”

The buyout battle for Spirit has undergone several fits and starts over the past few months.

In early February, Frontier Airlines offered to buy Spirit for $2.9 billion. JetBlue countered with a higher bid of $3.6 billion in April, which Spirit rebuffed, citing the uncertainty around regulatory approval. The two bidding airlines exchanged unpleasantries (including Spirit CEO Ted Christie calling JetBlue management ‘childish’ on Yahoo Finance Live) and higher offer prices.

In late June, things escalated when JetBlue raised its reverse breakup fee to $400 million from $350 million. It also proposed paying $2.50 a share in advance compared to its previous offer of $1.50 a share and sweetened the deal by adding a $0.10 per share monthly payment to shareholders beginning in 2023 and lasting until the deal is completed or terminated.

Frontier also lifted its reverse breakup fee to $350 million and increased its upfront offer to $4.13 a share from $2.13 previously.

But now, Biffle said, Frontier is ready to go it alone.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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