JetBlue (NASDAQ:JBLU) on Wednesday said its $3.6-billion all-cash bid for ultra-low cost carrier Spirit Airlines (NYSE:SAVE) would help it grow across the country and better compete against larger airlines.
The bid, which Spirit called “unsolicited,” casts doubt on the latter’s planned tie-up with Frontier Airlines. Spirit shares surged more than 22% on Tuesday after news of the offer broke, but were down 3% in premarket trading Wednesday. JetBlue and Frontier were each off more than 3% as well.
Discounters Frontier and Spirit offer similar products: low fares, sparse onboard service and fees for everything from hand baggage to seat selection.
JetBlue, on the other hand, has spent years building up its Mint business class service that includes lie-flat beds and full meals. The same day it announced its surprise bid for Spirit, JetBlue also announced start dates for its first flights from Boston to London.
But JetBlue is focused on domestic travel and says acquiring Spirit, if it is approved by the federal Justice Department, would give it more breadth and ability to compete with larger carriers.
The bid confounded some analysts, UBS calling it a “headscratcher.”
Raymond James downgraded JetBlue to market perform after the announcement and said product and labor would be tough to combine.
JBLU shares trudged lower 88 cents, or 6.4%, to $12.77, while those for Spirit came in for a landing, losing 70 cents, or 2.6%, to $26.22
Related Stories
