JetBlue Ups Hostile Offer for Spirit Airlines to $3.4 Billion

JetBlue Airways has been spurned not once but twice by Spirit Airlines but it remains undeterred in its attempt to take over the largest U.S. ultra-low-cost-carrier.

The New York-based airline upped its offer Monday for Spirit to $31.50 per share — $1.50 per share more than before — in a deal now worth $3.4 billion. JetBlue's pitch now includes a $350 million reverse break-up fee if the deal falls though and an upfront payment of $1.50 per share to shareholders.

The improved proposal, which JetBlue is pitching directly to Spirit shareholder's after the Florida-based discounter's board twice rejected its overtures, comes four days after Frontier Airlines added a $250 million reverse break-up fee to its offer for Spirit. The Spirit board has repeatedly backed a merger with Frontier in its recommendation to the airline's shareholders.

Raymond James analyst Savanthi Syth wrote Monday that JetBlue's new offer is "likely to appease time value of money concerns from the likely longer closing timeline of a JetBlue-Spirit merger relative to Frontier-Spirit." She added that unless Frontier counters again, Institutional Shareholder Services is unlikely to revise its view in favor of a JetBlue-Spirit deal.

The back-and-forth among Frontier, JetBlue, and Spirit is becoming fevered as Spirit shareholders prepare to vote on June 10. Spirit leadership and its board recommend a yes vote for a merger with Frontier, while JetBlue is pushing a no vote that would allow its competing proposal to move forward.

Spirit's main objection to JetBlue is the latter's repeated refusal to consider dropping its alliance with American Airlines in exchange for regulatory approval of a JetBlue-Spirit combination. "JetBlue’s regulatory case is weak and defies common sense," Spirit CEO Ted Christie said in May.

JetBlue CEO Robin Hayes repeated his refrain on June 6 that a JetBlue-Spirit merger is necessary to create a competitor at scale to the four largest U.S. airlines, American, Delta Air Lines, Southwest Airlines, and United Airlines. The carrier has said it will divest all Spirit assets in Boston and New York — the airports covered by the American partnership — as well as five gates at the Fort Lauderdale airport where JetBlue and Spirit both operate bases.

"Combining JetBlue and Spirit would create a true national competitor to the dominant legacy carriers, delivering low fares and a great experience for more customers, more opportunities and good paying jobs for crewmembers and team members, and more value for stockholders," Hayes said. "This offer reflects the seriousness of our commitment and underscores our confidence in completing this transaction."

JetBlue's latest offer is its third. The airline first submitted an unsolicited proposal worth $3.6 billion, or $33 per share, in April. It made the $30 per share offer directly to shareholders after the Spirit board's second rejection.

Labor unions are largely against a JetBlue takeover. The Transport Workers Union, which represents flight attendants at JetBlue and passenger service agents at Spirit, has come out against the deal. While the Association of Flight Attendants-CWA (AFA) backs a Frontier and Spirit merger, it has not officially come out against JetBlue's offer. The Air Line Pilots Association (ALPA), which represents pilots at all three airlines, is agnostic.