JetBlue Offers $3.6 Billion for Spirit Airlines

(Reuters) - JetBlue Airways has made an unsolicited $3.6 billion bid for Spirit Airlines, potentially snarling merger plans between the ultra-low-cost carrier and Frontier Group Holdings.

JetBlue Chief Executive Officer Robin Hayes said the deal would make the New York-based airline a stronger competitor to the so-called four legacy U.S. airlines that control nearly 80% of the U.S. passenger market.

"The number one complaint we get is why don't you fly to more places," Hayes said in a Reuters interview late Tuesday. "What we want to do is create a bigger JetBlue" that can serve more consumers.

JetBlue, the sixth largest U.S. passenger carrier, would operate Spirit under the JetBlue brand and he does not think any divestitures are needed.

The move comes as airlines face higher fuel and labor costs, and work to attract more leisure travelers, who have returned at a faster rate than business travelers since pandemic restrictions were relaxed.

JetBlue offered $33 a share all cash, about 33% higher than Frontier's offer of 1.9126 shares of stock and $2.13 in cash, which would value Spirit at $24.93 per share as of Tuesday's closing price.

Shares of Spirit closed up 22% at $26.92, their highest level since mid-February. Spirit's 52-week high is $39.19. Just before COVID-19 lockdowns became widespread, Spirit shares traded around $45.

Spirit declined to comment beyond a written statement that it would review the offer. Hayes said he expects a vigorous antitrust review from the U.S. Justice Department that could last into 2023.

JetBlue said the deal, if completed, is expected to deliver $600 million-$700 million in net annual synergies and that the combined airline is projected to have annual revenue of about $11.9 billion based on 2019 revenue.

Frontier said its Spirit offer "is in the best interest of consumers and shareholders and would deliver $1 billion in annual savings for consumers" and argued "significant East Coast overlap between JetBlue and Spirit would reduce competition and limit options for consumers."

In February, Frontier and Spirit proposed a merger that would create the fifth-largest U.S. airline.