JetBlue’s Bid for Spirit Airlines Might Be Bigger, But Is It Better?

There’s a great scene in the Kevin Costner movie “Draft Day” where the actor, playing the general manager of the Cleveland Browns football team, is wheeling and dealing on the phone with a fellow GM on the day of the National Football League Draft.

Costner makes an offer. Less than a minute later, he tells the other GM he wants it to include one more player in a trade. The other GM is incredulous at the sudden added request and asks what happened to the original deal they were just discussing.

Costner, smirking, says, “That deal’s off the table. We live in a different world than we did just 30 seconds ago.”

Welcome to the aviation industry.

Since February we have lived in a world where the two premier low-budget U.S carriers were in the midst of working out an agreed-upon $2.9 billion merger that would make Spirit and Frontier airlines the fifth-largest airline in the country. It seemed like a natural connection of two companies who knew exactly who they were and what they could offer.

This morning we woke up in a different world after the news broke late yesterday afternoon that JetBlue Airways had made an unsolicited offer to acquire Spirit.

Whoa. Talk about a shocker that sent metaphorical turbulence through the industry. The JetBlue offer was for $3.6 billion, bigger by nearly three-quarters of a billion dollars.

But the question looms – it might be bigger, but is it better?

A Spirit and Frontier merger would work because they understood each other’s culture. They are bare-bones, low-budget carriers. You want to buy a seat? Here it is. You want a soda, some pretzels, any other amenities? Here’s what it costs.

JetBlue CEO Robin Hayes is a learned man and spent the bulk of late Tuesday explaining why this would work for his airline, as TravelPulse’s Janeen Christoff outlined in her story.

But throughout the history of airline mergers, the one factor that has pulled two sides together has been compatibility. JetBlue has its new trans-Atlantic routes, its Northeast Alliance with American Airlines (routes that are under scrutiny by the Justice Department, by the way), its onboard foods and amenities, and its MINT suites. JetBlue strives to be – and is pretty darn close to being – on par with its bigger rivals such as American, Delta and United.

That’s a culture clash right there not to mention a costly one as JetBlue would have to absorb the cost of retrofitting Spirit equipment over time.

Moreover, Spirit and Frontier complemented each other’s routes. Spirit is based in Florida; Frontier in Denver. One is strong on the east coast, the other on the west coast. JetBlue and Spirit are both based on the east coast, something Frontier pointed out in a statement.

“Unlike the compelling Spirit-Frontier combination, an acquisition of Spirit by JetBlue, a high-fare carrier, would lead to more expensive travel for consumers,” Frontier said. “In particular, the significant East Coast overlap between JetBlue and Spirit would reduce competition and limit options for consumers. It is surprising that JetBlue would consider such a merger at this time given that the Department of Justice is currently suing to block their pending (northeast) alliance with American Airlines.”

Oh yeah. It’s on.

It will be interesting to see what Spirit decides after conducting its due diligence, as it should. But, for now, this bid by JetBlue remains a bit on the mind-boggling side.