Spirit Airlines terminated its merger agreement with Frontier Airlines on Wednesday, months after rival suitor JetBlue Airways‘ all-cash bid threw the planned tie-up into disarray.
Shareholders on Wednesday were set to vote only on the Spirit-Frontier combination, not a JetBlue takeover, though the New York-based airline spent weeks urging shareholders to turn the deal down.
Frontier’s CEO and other people familiar with the matter have said Spirit lacked the shareholder support for the Frontier combination.
Spirit said it would continue its “ongoing discussions with JetBlue as we pursue the best path forward for Spirit and our stockholders.”
A JetBlue takeover of Spirit or a Spirit-Frontier combination would create the country’s fifth-largest carrier.
The termination of the Frontier deal is a blow to the discount carriers that planned to combine forces into a budget behemoth. Spirit had postponed the shareholder vote on the merger four times as it struggled to drum up enough shareholder support. In a July 10 letter to his Spirit counterpart, Frontier CEO Barry Biffle had called its latest sweetened offer its “best and final” and said: “We still remain very far from obtaining approval from Spirit stockholders.”
The termination of the Spirit-Frontier deal makes it easier to get to a takeover deal done with JetBlue, which is seeking to buy the budget airline outright for about $3.7 billion and refurbish its planes in JetBlue style, featuring seatback screens and legroom. Ongoing talks for a JetBlue takeover could still fall apart.
“While we are disappointed that Spirit Airlines shareholders failed to recognize the value and consumer potential inherent in our proposed combination, the Frontier Board took a disciplined approach throughout the course of its negotiations with Spirit,” said William Franke, chair of Frontier’s board and managing partner of Indigo Partners, Frontier’s majority shareholder in a release.
Spirit’s has board repeatedly rebuffed JetBlue’s increasingly sweetened offers, arguing that it was unlikely that regulators would approve the takeover.
It is possible that no deal gets done. Both transactions faced a high hurdle for the Justice Department’s blessing because the Biden administration has vowed to crack down on consolidation.
Executives for all three airlines said their preferred deal would help them compete better with the top four U.S. carriers — American, Delta, United and Southwest — which control about three-quarters of the domestic market.
Spirit, however, has raised concerns about a JetBlue takeover because of that airline’s alliance with American in the Northeast, a partnership the Justice Department last year sued to undo.
Also on Wednesday, Frontier Airlines reported a $13 million profit for the second-quarter, a drop from last year and 2019. The carrier said higher costs offset a surge in revenue, which came in at $909 million, 43% higher than the same quarter of 2019, before the pandemic.