JetBlue finally formally announced its long-anticipated service between Boston and London to launch this summer. And, in a twist no one really expected, that turns out to be the smaller news item for the carrier this week. The New York Times reports that JetBlue made a $3.6bn all-cash offer ($33/share) for Spirit Airlines, besting the deal announced by Frontier in February.
We can all agree that Spirit has a very different brand and product than JetBlue, and so a first glance you may not think we’d make a great pair. However, when you dig deeper, you’ll realize we could be a perfect match.-JetBlue memo to employees
Either deal would eliminate a sizable competitor from the market. In that context regulators are likely to take a very keen interest in whatever deal is settled upon. The JetBlue option comes with added complexity thanks to its Northeast Alliance with American Airlines. The Justice Department filed suit to have that partnership killed off. No doubt an approval to merge with Spirit would require that to disappear as a condition. JetBlue does not see it that way, however, suggesting that “a combination with Spirit as perfectly complementing the NEA.”
While JetBlue and Spirit present themselves as very different styles of airline, there are more similarities than they might choose to admit.
- Both focus primarily on leisure travel and on point-to-point passengers rather than those connecting at a hub.
- Both have developed a few core markets that can also serve business travelers, though neither has quite large enough a footprint to be the only option for most very frequent flyers.
- Both have seen success in the Caribbean and Latin America, mostly from their shared hub locations in Fort Lauderdale and Orlando.
- Both have lamented limited access to operating slots at the country’s busiest airports, though each has also managed to amass a small collection of those slots over the years. Combining those pools might just be enough to really compete, without another partner involved.
- Both are committed to providing in-flight WiFi across their entire fleet; Spirit is almost able to deliver on that, a few years after it started the process.
- Both will sell you extra leg room, for a price.
- Both have seen their share of reliability issues over the years, including just last weekend where each cancelled about a third of the operation on Sunday. This is probably not a compelling factor for a combination.
And then there are the differences.
JetBlue presents itself as a “value” carrier, still offering free snacks and drinks on board. But it also sells a basic economy fare with no baggage allowance, just like the Spirit “Bare Fares.”
Spirit offers the Big Front Seat on all its flights, often a great value as a buy up for passengers seeking a bit of additional space on board. JetBlue spent a long time avoiding a premium cabin before introducing its Mint business class option. Mint includes more than just the seat, with fancy meals and booze included. But it is only offered on a limited subset of routes.
In a memo to employees JetBlue indicates that all aircraft would be retrofit “to a common JetBlue experience.” That should mean in-seat entertainment, more legroom, no more Big Front Seat, and other tweaks to the product.
No word, however, on what the timeline for that retrofit would be. JetBlue faced serious challenges with its A320 interior restyling project. First announced in 2014 to start in 2016 and complete by 2019, the work
remains ongoing just completed, with a small number not receiving the upgrade. That was for 121 aircraft (130 in the fleet, 9 ultimately not converted)
The Spirit fleet is larger than that, suggesting a refresh would be an even more significant effort.
A serious offer?
Ultimately the differences between the operations would present a massive challenge for integrating the two airlines. Aligning product, loyalty, and other facets of the operation will not be easy. At least the fleet types are still a match.
The combined airline would have a fleet of 455 aircraft with 312 Airbus aircraft on order.
But eliminating a competitor, especially in the higher yielding Caribbean/LatAm market could be a nice win. It just might be enough to compete against Frontier’s massive growth plans in the region.
And the combined operation would immediately become large enough to compete beyond just the east coast and transcon markets. JetBlue does not have much of a chance to realize that sort of growth organically.
Besides, if a competitor is going to be eliminated, it is better to be doing the buying than sitting on the sidelines. Especially when the combined Spirit/Frontier would dwarf JetBlue by the end of the decade given the aircraft orders awaiting delivery.
Or this is all just a ploy to drive up the acquisition costs for Frontier. That worked very, very well against the Alaska Airlines/Virgin America merger.
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