Spirit Airlines shareholders could pick a preferred buyer for their airline Wednesday, when they are scheduled to vote on one of the offers for the budget carrier.
Shareholders appear to be leaning against the bid preferred by Spirit’s board, a merger offer from Frontier Airlines that is currently worth more than $2.6 billion. Four previous votes have been postponed for lack of support.
If shareholders reject the Frontier bid it would push Spirit to reach an agreement with JetBlue Airways, which made an all-cash offer of about $3.7 billion.
Either combination is expected to create the nation’s fifth-largest airline, although still quite a bit smaller than American, United, Delta and Southwest.
Competing with JetBlue's richer cash offer, the Spirit board and Frontier argue that antitrust regulators will block JetBlue from buying Spirit, making the JetBlue bid an illusory one. JetBlue, of course, disagrees.
The Biden administration was always likely to take a close look at either deal. The president and his top antitrust official in the Justice Department have both indicated a dislike for corporate mergers.
Some analysts said that the small size of Frontier and Spirit would have earned them a pass from antitrust regulators in previous administrations, but not any more. Still, the JetBlue deal did appear more problematic, in part because the Justice Department was already suing to break up a regional partnership in the Northeast between JetBlue and American Airlines.
Frontier and Spirit announced their deal on Feb. 7, saying they would create a huge discount airline that would save consumers $1 billion a year in airfares by creating a powerful new competitor to American, United, Delta and Southwest.
The proposal would bring together two very similar airlines — both tempt travelers with rock-bottom fares but tack on fees for some things that bigger carriers include with most tickets, from soft drinks to room for a bag in the overhead bin.
They even share financial roots: Bill Franke's Indigo Partners private equity firm invested in Spirit before taking an 82% stake in Frontier and investing in budget carriers in Mexico, Chile and Hungary.
Frontier and Spirit said that together they would have enough planes to fly many new routes that aren’t yet served by a discount airline, and they would create 10,000 new jobs by 2026 in the process.
A merger would also address one of the biggest complaints consumers have about Frontier and Spirit: They are so small, with such limited schedules, that when they cancel a flight, it can take days to find seats for all the passengers on later flights.
JetBlue CEO Robin Hayes decided that he could not sit back and watch Frontier and Spirit become bigger than his airline. On April 5, JetBlue started a bidding war by announcing its own plan to take over Spirit.
JetBlue figured that buying Spirit was the best way it could quickly add planes and pilots and break out of the second tier of U.S. airlines. JetBlue argued that it would help consumers too, by driving down fares more effectively than Frontier and Spirit.
New York-based JetBlue mounted a furious campaign to convince Spirit shareholders to reject the Frontier offer. It worked — forcing Spirit’s board to postpone a vote on the Frontier proposal four times. In July, Frontier CEO Barry Biffle admitted his side was losing badly .
Both Frontier and JetBlue raised their bids, including and increasing break-up fees for Spirit shareholders.
At the end, Frontier offered $4.13 in cash plus 1.9126 shares of its stock for each share of Spirit. That was worth about $2.65 billion at Frontier's closing price on Tuesday, and Spirit shareholders would own 48.5% of the combined company.
JetBlue's bid was more straightforward — $33.50 per share, plus a ticking fee to cover any delay in regulatory review, which would push the value of the offer to $3.7 billion, all in cash.
JetBlue investors seem unimpressed with the airline's pursuit of Spirit. Since JetBlue entered the bidding, its shares have fallen 45%, more than other U.S. airline except regional carrier Mesa.
Once Spirit's fate is settled, analysts believe that more mergers are possible among the smaller airlines — but not likely any deals involving American, United, Delta or Southwest, because of antitrust issues.
JetBlue and Alaska Airlines fought a bidding war over Virgin America in 2016, which Seattle-based Alaska won. Alaska's strength on the West Coast and JetBlue's network on the East Coast and the Caribbean have long made them the subject of merger speculation.