Spirit accepts JetBlue's merger proposal

Photo (c) Angel Di Bilio - Getty Images

Experts say travelers may have to pay more for fares

Spirit Airlines has finally decided which of its two suitors it wants to partner up with. Early Thursday, the company’s board of directors announced that they have chosen JetBlue’s proposal as the winning pitch.

The companies have signed off on a definitive merger agreement that would create America's fifth-largest airline -- one that will now have a 10.2% market share of miles flown by passengers on domestic flights.

“We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes,” said JetBlue CEO Robin Hayes.“Spirit and JetBlue will continue to advance our shared goal of disrupting the industry to bring down fares from the Big Four airlines."

Frontier had Spirit’s attention for a long time, and Spirit honored its original commitment to become part of Frontier’s family after JetBlue pursued a hostile bid and offered a higher price. But, as JetBlue said in an SEC filing, it was fearful that a successful Frontier-Spirit merger would prove to be a larger competitor that could possibly affect its competitiveness. 

Spirit had its reservations too. It may have given in to JetBlue’s advances sooner, but it was concerned that regulators wouldn’t sign off on a deal because of the issues JetBlue was already facing with the “northeast alliance” that it had created with American Airlines.

What this will mean for travelers

It’s too early to tell how all of this will shake out, but airline experts aren't necessarily buying Hayes' comment about industry-disrupting fares.

One issue that could lead to higher fares is JetBlue’s cost of converting Spirit’s jets to its existing configuration – a schematic that has 10-15% fewer revenue-producing seats. “There is no way JetBlue can deliver profitable operations on fewer total seats flying without raising the prices on those seats,” wrote PAXEX.AERO’s Seth Miller.

“[JetBlue] will have to operate the legacy Spirit fleet at fares higher than what Spirit charges today. Plus, with a lower fare competitor eliminated JetBlue likely can afford to raise fares beyond what it charges today.”

You also have to factor in what the big four airlines – American, Delta, United, and Southwest – might do in their reaction to any change in JetBlue-Spirit fares.

"Spirit and Frontier play a big role in the fare you pay, even if you never fly either one," Scott Keyes, founder of discounted fare-finding website Scott's Cheap Flights, told ConsumerAffairs. "When Delta announced the basic economy fare in 2012, they described it to investors as a 'Spirit-matching fare,' because their lunch was getting eaten by the budget carriers of the world. I'm not a fan of either merger, but I like the JetBlue option even less."

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