JetBlue has inked a deal to acquire Spirit Airlines for US$3.8 billion, a transaction that would create the U.S.'s fifth largest airline – if it’s approved by U.S. regulators.
The two airlines announced the acquisition on Thursday (July 28), ending months of back-and-forth negotiations.
Spirit was also looking at merging with Frontier, but this latest development now clears the air.
In a Thursday morning post on Twitter, JetBlue wrote that the two airlines will "come together to create a bigger, better JetBlue," with more than 1,700 daily flights to more than 125 destinations.”
It also promised to be a "low-fare challenger" to the "Big Four" airlines, assuming regulators green light the transaction by 2024.
“This combination is an exciting opportunity to diversify and expand our network, add jobs and new possibilities for crewmembers, and expand our platform for profitable growth.” JetBlue CEO Robin Hayes said in a statement.
The combined airline, which will be based in New York and led by Hayes, would have a fleet of 458 aircraft.
The airlines will continue to operate independently until after the transaction closes.
As well, their respective loyalty programs remain unchanged and customer accounts will not be affected.
JetBlue said Thursday that it would pay US$33.50 per share in cash for Spirit, including a prepayment of US$2.50 per share in cash payable once Spirit stockholders approve the transaction.
A ticking fee of 10 cents per month starting in January 2023 through closing also applies.
If the deal doesn’t pass for antitrust reasons, JetBlue will pay Spirit a reverse break-up fee of US$70 million and stockholders of Spirit a reverse break-up fee of US$400 million less any amounts paid to stockholders of Spirit prior to termination.
JetBlue is anticipating US$600 million to US$700 million in annual savings once the transaction is complete, reports the Associated Press.
JetBlue hasn't exactly said that it will keep the ultra-low-cost Spirit model alive.
Instead, the airline is saying that overall airfare prices will come down because JetBlue can now challenge other carriers.
The airline has launched a whole website to explain the deal, and according to a disclaimer, everything on the site is based on JetBlue's "beliefs and assumptions concerning future events."
Which means it's possible that things could change.