New York-based airline, JetBlue, today announced that it has terminated its merger agreement with Florida-based ultra-low cost-carrier, Spirit Airlines.
In official statements, both companies said that they continue to believe in the “procompetitive benefits” of the merger plan, announced in July 2022, but have mutually agreed that the termination of the plan is the best path forward for both companies. This is because the required closing conditions for the merger, including receiving all necessary legal and regulatory approvals, were unlikely to be met by the merger agreement’s outside date of 24th July, 2024.
“We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said Joanna Geraghty, chief executive officer at JetBlue, referring to American Airlines, Southwest Airlines, Delta Airlines and United Airlines.
“We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently,” Geraghty added.
Under the terms of the agreement, JetBlue will pay Spirit US$69 million, and the termination resolves all outstanding matters related to the transaction and under which any claims between the airlines will be mutually released.
Ted Christie, Spirit’s president and chief executive officer, echoed Geraghty’s sentiment, stating: “After discussing our options with our advisors and JetBlue, we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion under the merger agreement. We are disappointed we cannot move forward with a deal that would save hundreds of millions for consumers and create a real challenger to the dominant ‘Big 4’ US airlines. However, we remain confident in our future as a successful independent airline.”
Christie continued, “Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the guest experience.
As outlined on the company’s fourth quarter earnings call, JetBlue is taking action to return to sustained profitability and drive shareholder value. As part of this work, the airline is refocusing on its core strengths, which it says are the deepening of its network relevance in proven geographies, and better segmenting its product offerings to enhance its competitive position – while delivering meaningful cost savings.
Joanna Geraghty continued: “JetBlue has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition, and high-value geographies. We have already begun to advance our plan to restore profitability. We look forward to sharing more on our progress in the coming months.”
To date, JetBlue has identified multiple near-term revenue initiatives for 2024, including increased distribution and partnerships, expanded loyalty programme functionality, network initiatives, and ancillary initiatives, which are expected to deliver over US$300 million in revenue benefits.
JetBlue says it also remains on track to deliver US$175-200 million in cost savings from its structural cost programme, and US$75 million in maintenance savings from its fleet modernisation plan, as well as incremental savings from targeted fixed-cost-base reductions, which the company believes will position itself to approach breakeven operating margins in 2024. JetBlue says these initiatives are just the starting point as the company rebuilds its long-term organic strategy, with a renewed focus on driving sustained profitability for its crew members and investors.
JetBlue will hold an Investor Day on Thursday, 30th May, 2024, to provide additional detail on its long-term strategy and ongoing revenue and cost initiatives. Further information regarding the day will be shared with analysts and investors in the coming weeks.
