Frontier Airlines CEO Barry Biffle thinks his airline’s outlook is better than ever after JetBlue Airways beat it in a bidding war for budget competitor Spirit Airlines.
“Ninety-five percent of U.S. capacity will be 30 to 80 percent higher cost than us,” Biffle said in an interview Thursday. One of his main focuses at Frontier is using low costs as a competitive advantage and, by JetBlue buying Spirit and bringing it up to the former’s cost levels, many see the deal as an elimination of Frontier’s main low-cost competitor in the U.S.
Airlines compare their expenses using the metric unit costs — measured by costs per available seat mile — excluding fuel. In the second quarter, Frontier’s unit costs excluding fuel were 7.24 cents, Spirit’s were 6.96 cents, and JetBlue’s were 9.68 cents. Put another way, JetBlue’s costs are 33 percent higher than those at Frontier. The combination of JetBlue and Spirit will leave Frontier as one of the only airlines serving major markets with very low costs in the U.S.
Asked about potential cost pressure from new pilot pay deals at certain U.S. regional airlines, Biffle was unconcerned and said Frontier can offer cockpit crew members better pay over their career, as well as a better work-life balance than the regionals can. Frontier, he added, is in “good shape” when it comes to a supply of pilots.
With low costs in mind, Frontier is moving ahead with aggressive expansion plans. The airline intends to grow capacity by double digits annually through the end of the decade, Biffle said. Frontier aims to triple in size by 2030.
Air travelers in the U.S. now have a one-stop shop when it comes to knowing what airlines will provide them with in the event of a lengthy flight delay or cancellation.
The new Airline Customer Service Dashboard by the Department of Transportation is designed to “ensure the traveling public has easy access” to airline commitments in the event of a disrupted trip, the regulator said Thursday. The commitments, which are largely a list of existing airline policies compiled together in one place, only apply to “controllable” events, or one where the airline is at fault, for example staff shortages.
“Passengers deserve transparency and clarity on what to expect from an airline when there is a cancelation or disruption,” U.S. Transportation Secretary Pete Buttigieg said. “This dashboard collects that information in one place so travelers can easily understand their rights, compare airline practices, and make informed decisions.”
For example, if a travelers flight is delayed more than three hours due to a mechanical problem with the aircraft, the dashboard shows that they are guaranteed a meal voucher on almost all major airlines except Allegiant Air. However, if their flight is cancelled, only American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, and United Airlines will rebook them on another carrier.
“Carriers welcome opportunities to simplify travel policies, clarify existing practices and increase transparency for travelers,” a spokesperson for trade group Airlines for America said.
Spirit, while it continues discussions with both Frontier and JetBlue, has repeatedly backed a merger with Frontier citing lower regulatory approval risk. The main concern is JetBlue’s unwillingness to offer to end its alliance with American Airlines in the northeast in exchange for antitrust approval. JetBlue has offered to divest all of Spirit’s assets in Boston and New York — the two markets covered by the American alliance — as well as gates at the Fort Lauderdale airport.
In a letter to staff Wednesday, Spirit CEO Ted Christie acknowledged that the delay was in response to Frontier’s request. “There has been no change to our position at this time — the Spirit board has reiterated its commitment to the Frontier transaction and strongly recommends stockholders vote for the merger,” he said. Christie added that discussions continue with both Frontier and JetBlue.
JetBlue has wooed Spirit shareholders with its larger upfront cash offer for Spirit. The New York-based airline is offering a total of nearly $3.8 billion in cash for the carrier, whereas Frontier’s cash-and-stock offer totaled roughly $2.4 billion on June 27, according to a recent Raymond James analysis. Biffle, in his July 7 letter, said the airline does not intend to up its offer.
Frontier Airlines CEO Barry Biffle wants to make a deal for Spirit Airlines. But, in a letter sent to the CEO of Spirit Sunday, is concerned about the lack of support from both Spirit management and its shareholders.
“We still remain very far from obtaining approval from Spirit stockholders,” Biffle said in his letter to Spirit CEO Ted Christie and General Counsel and Secretary Thomas Canfield. He noted Spirit’s decision on July 7 to delay — again — a key shareholder vote on the Frontier deal by a week to July 15. Biffle requested an additional postponement of the vote to July 27.
Frontier, and its primary shareholder private equity firm Indigo Partners, does not intend to modify its latest offer that was made on June 24, Biffle added. The cash and stock deal is valued at roughly $2.4 billion, whereas JetBlue’s all-cash offer at nearly $3.8 billion, according to a Raymond James analysis.
“We also believe that the proxy solicitation process would unquestionably benefit from the board of directors of Spirit expressly reaffirming its recommendation of the pending merger with Frontier,” Biffle said. He asked that Spirit publicly back Frontier’s offer again within 10 days, or by July 20.
“Our proposed combination is not only pro-competitive — making it possible to bring ultra-low fares to more routes in competition with larger, high-cost, high-fare airlines — our offer delivers significantly greater value to Spirit stockholders,” Biffle reiterated in the letter.
Frontier and Spirit unveiled plans to merge in February, but the mutually agreed to deal was disrupted by an unsolicited bid from JetBlue Airways in April. The result has been a bidding war where, despite Spirit’s repeated support for the Frontier deal, JetBlue’s greater cash offer — regardless of regulatory approval risks — has repeatedly appeared to have the support from Spirit shareholders.
For all who hoped for some resolution to the months-long saga over the future of Spirit Airlines on June 30, no go. The carrier has postponed a shareholder vote on a merger with Frontier Airlines to July 8.
Spirit will immediately open and close the June 30 meeting with no vote in order for its board to “continue discussions” with both preferred suitor Frontier and hostile bidder JetBlue Airways, the Florida-based discounter said late Wednesday. This is the second time Spirit has delayed a shareholder vote, which was first scheduled for June 10.
Frontier is offering shareholders $4.13 plus 1.91 of its own shares for each Spirit share plus a $350 million reverse break-up fee, while JetBlue is offering at least $33.50 per share to up to $34.15 a share based on certain conditions and a $400 million break-up fee. All in, Frontier’s offer is worth $2.4 billion and JetBlue’s nearly $3.8 billion, according to an analysis by Raymond James.
The resulting airline from either a Spirit-Frontier or Spirit-JetBlue merger will be the fifth largest in the U.S. with a roughly 8 percent share of the market.
JetBlue Airways is not done yet trying to acquire Spirit Airlines. With just three days until shareholders vote, the New York-based carrier has upped its offer again, raising its reverse breakup fee to $400 million to beat rival bidder Frontier Airlines.
JetBlue’s latest offer — its fourth for Spirit — also includes a prepayment of $2.50 per share of the breakup fee, and a “ticking fee mechanism” where the airline would pay Spirit shareholders an additional $0.10 per share monthly from January 2023 until the deal closed, JetBlue said Monday. The ticking fee could increase JetBlue’s overall offer to as much as $34.15 per share. Its last offer was for $33.50 per share plus a $350 million breakup fee.
“We’ve discussed our offer directly with Spirit shareholders and are now modifying our proposal in response to shareholders’ expressed interest, to include a monthly payment for shareholders, with the certainty of a significant cash premium at closing,” JetBlue CEO Robin Hayes said Monday.
And, in a letter directly to Spirit shareholders, Hayes said the airline’s board has “never negotiated with us and have now favored a transaction that better serves Frontier’s controlling shareholder than Spirit’s shareholders.”
Frontier’s latest offer, unveiled on June 24, included an additional $2 per share for a total of $4.13 a share, plus a $350 million reverse break up fee. The offer was valued at $2.7 billion based on closing stock prices that day.
Spirit shareholders will vote to accept or reject Frontier’s offer on June 30.
With the likelihood improving of a successful bid for Spirit Airlines, JetBlue Airways has raised its offer for the discounter a second time in as many weeks.
The New York-based airline is now offering Spirit shareholders $33.50 per share, or a total of $3.7 billion, JetBlue said Monday. That is a $2 per share improvement over its last offer of $31.50 a share that it made on June 6, and $0.50 more than it initial offer in April of $33 per share.
“After discussions with the Spirit team last week and further due diligence review, we are more convinced than ever that a JetBlue-Spirit transaction would create a true national competitor to the Big Four and deliver value to all of our stakeholders,” JetBlue CEO Robin Hayes said.
“Our previous proposal was met with an extremely positive reaction from Spirit stockholders, and we believe they will be even more pleased with these improved terms, including additional regulatory commitments that reflect our confidence in our ability to obtain antitrust approval and are a direct result of our diligence,” Hayes added.
With regulatory approval the top of concern of Spirit’s leadership team, JetBlue reiterated its commitment to divest all of Spirit’s assets in Boston and New York, as well as gates at the Fort Lauderdale airport where both airlines have bases. The airline told Spirit’s board Monday that it would “not increase its presence in the airports covered by our Northeast Alliance” with American Airlines if the deal occurs.
Spirit has twice rejected JetBlue favoring, instead, its preferred merger partner Frontier Airlines. However, after JetBlue’s last offer, Spirit gave the carrier the same level of access to due diligence data that it had granted Frontier — something JetBlue had been seeking for months.
Denver-based Frontier declined to improve its offer, which totals roughly $2.9 billion in cash and stock, after JetBlue raised its bid on June 6.
A JetBlue-Spirit merger would create the fifth largest U.S. airline.
The board was also continuing to work with Frontier under the terms of the existing merger agreement with Frontier, Spirit president and CEO Ted Christie said Tuesday.
“As part of this process, Frontier and JetBlue are being given access to the same due diligence information, on the same terms. The board expects to bring the process to a conclusion and provide an update to stockholders ahead of the special meeting of Spirit stockholders scheduled for Thursday, June 30, 2022,” it said in a statement.
Spirit had previously delayed that key shareholder vote on a merger — either with Frontier Airlines or JetBlue — by three weeks.
“Spirit continues to be bound by the terms of its merger agreement with Frontier, under which a ‘Superior Proposal’ is defined as being both reasonably capable of being consummated and more favorable to Spirit’s stockholders from a financial point of view,” the statement added.