Spirit airline (NYSE: SAVE) investors have agreed to sell the airline carrier to JetBlue Airways (NASDAQ: JBLU) at a price of about $3.8 billion. Although, the deal is still subject to scrutiny by federal antitrust regulators in the interest of consumers, as there are fears of rising prices if the deal goes through.
Frontier Airlines lost to JetBlue in the bid for Spirit Airlines because the majority of Spirit airline shareholders voted in favour of the JetBlue deal during a brief meeting held online. The actual figure of the shareholders involved in this voting process is said to be released soon.
However, to fully anticipate the result of the deal, let's take a brief look at the two companies.
Spirit airline (NYSE: SAVE)
Headquartered in Florida, Spirit airline is an ultra-low-cost carrier. It offers flights across the US, Mexico, the Caribbean and Latin America. Its fleet includes several models of Airbuses- Airbus A319-100, Airbus A320-200, Airbus A321-200, and Airbus A320neo.
Spirit Airlines' stock is currently priced at $20.30 with an EPS of -$2.95. The average price target by analysts was fixed at $27.38, a high of $30.00 and a low of $22.00 with a general ‘hold’ consensus.
JetBlue (NASDAQ: JBLU)
JetBlue (NASDAQ: JBLU) is an airline company that provides air transportation services for more than 30 million customers yearly across North America, the Caribbean and Latin America with an average of 850 flights daily. JetBlue is headquartered in New York City. The company offer flights to more than 82 destinations and provides free TV, free snacks and some other perks.
The current price of JetBlue stock is $7.16 and an EPS of -$1.38. Analyst ratings include an average price target of $8.85, a high 0f $10.00 and a low of $5.00. There’s a strong ‘hold’ consensus rating from analysts' reports.
What to expect from the merge
When the deal is successful, JetBlue (NASDAQ: JBLU) will be responsible for the airline management including transfer and recruitment of new employees, and maintenance and upgrade of existing aircraft. This deal would make JetBlue the fifth biggest airline in the US with 450 planes and about 7,000 pilots in their inventory.
JetBlue would also gain assets from Spirit Airlines Spirit airline (NYSE: SAVE) due to the transfer of ownership. The Airbus fleet, pilot staffing and infrastructure would now be owned and managed by JetBlue. These are in high demand as a lot of airlines face challenges of pilot shortages, delayed aircraft deliveries and inflation.
Although some disparities would need to be addressed first, for instance, JetBlue offers luxury and premium flight packages (like a first-class cabin, lie-flat seats, free snacks and seatback in-flight entertainment etc) while Spirit Airlines does not have a first-class cabin and other freebies and entertainment.
These are some of the issues that would possibly be addressed in order to provide optimum services for consumers. JetBlue would definitely inherit Spirit’s customer base which they could retain if, they continue to provide satisfactory services to customers.
It could take a while for the company to pick up financial gains due to the merger. But, the likelihood of an increase in the stock price, gains and revenue seem possible. There are concerns that consumer prices would inflate making the services less affordable. These concerns led to scrutiny and investigation by federal antitrust regulators. Nevertheless, the deal is likely to pull through making them a huge contender against the dominant big four. We should expect a positive outcome from the merger.
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