JetBlue bids for Spirit Airlines, potentially spoiling Spirit’s merger with Denver-based Frontier

By Lauren Hirsch, Anupreeta Das and Niraj Chokshi, The New York Times

JetBlue Airways has made an offer to acquire Spirit Airlines for roughly $3.6 billion, three people with knowledge of the matter said, throwing a wrench into Spirit’s plan to merge with Frontier Airlines.

Spirit and Frontier, two budget carriers that largely operate domestically, had agreed to merge in early February in a deal the companies said would bring about $1 billion in annual savings for consumers. JetBlue has offered $33 a share in cash, one of the people said. That price is a roughly 40% premium to Frontier’s cash and share offer for Spirit, which has an implied value of about $23 a share at current prices.

Shares of Frontier have fallen by more than 10% since shortly before the two airlines announced the deal, reducing the value of its original offer. The board of Spirit has not made a decision yet on which deal to pursue, one of the people said, but plans to review JetBlue’s bid thoroughly.

Spirit and Frontier have said that by merging, they would make the aviation industry more competitive. The combined entity would become the nation’s fifth-largest airline by market share, making it a stronger competitor to the four biggest airlines, which control about two-thirds of the domestic market, they said. JetBlue is the sixth-largest airline in the United States.

A merger of Spirit and Frontier makes sense given their overlapping business models and different regional strengths, industry analysts say. Both were shaped by Indigo Partners, a private equity firm that invests in what are known as “ultra low-cost carriers” — airlines that are sharply focused on the bottom line — and has been involved with both carriers.