JetBlue Airways is back with its second rate hike for checked bag fees in just a matter of months.
13.03.2024 - 06:49 / travelweekly.com / Justice Department / Airlines
In May 2022, Spirit chairman Mac Gardner made a blunt assessment as the airline's board explained to shareholders why it wanted to stay the course with original buyer Frontier instead of accepting a more lucrative offer from JetBlue.
"Based on our own research and the advice of antitrust and economic experts, our view is that the proposed combination of JetBlue and Spirit lacks any realistic likelihood of obtaining regulatory approval, while our company faces a long and bleak limbo period as we await resolution," he said.
Gardner's words turned out to be prescient: In January, a federal district court sided with the Justice Department, blocking JetBlue's planned acquisition of Spirit as anticompetitive.
On March 4, JetBlue and Spirit dropped their appeal of that ruling, leaving Spirit under a time crunch to turn around its loss-making business before it uses up the $1.3 billion in liquidity that it had as of Dec. 31.
In announcing that it had agreed to drop the appeal in exchange for a $69 million payment from JetBlue, Spirit echoed comments from JetBlue that it did not believe the deal could receive regulatory approval prior to the agreement's July 24 termination date, even though the appellate court had been slated to hear the case in June.
But JetBlue had signaled a reluctance to push forward in late January, when it stated that the agreement could be eligible for termination and that it was continuing to evaluate options. The purchase price of $3.8 billion, in particular, had likely become a source of regret at JetBlue with Spirit's value having dropped sharply since the purchase agreement was reached in July 2022.
"When you look at the combination of perhaps a little bit of cold feet, the adverse ruling, having to deal with the appeal and the uncertainty, you can see JetBlue especially making the judgement that they've had enough," said Scott Wagner, an antitrust attorney at Miami-based law firm Bilzin Sumberg. "That they want to walk away and focus their efforts on something else that might have a better chance of success."
Along with the $69 million, JetBlue had already doled out $425 million to Spirit shareholders in prepayments for the planned acquisition under terms that Spirit negotiated as JetBlue fought during the spring and early summer of 2022 to outbid Frontier.
Still, the deal's ultimate demise is surely a source of frustration in Spirit's executive offices in Miramar, Fla., where Gardner, CEO Ted Christie and the board of directors had attempted to cajole shareholders to accept the Frontier offer instead.
Investors, however, demurred, lured by JetBlue's purchase price of $33.50 per share compared with Frontier's cash-and-stock offer that was
JetBlue Airways is back with its second rate hike for checked bag fees in just a matter of months.
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