NEW YORK- JetBlue (B6) has announced the mutual decision with Spirit Airlines (NK) to terminate their merger agreement scheduled for July 2022.
Despite recognizing the procompetitive advantages of the merger, JetBlue and Spirit have jointly concluded that terminating the agreement is the most favorable course of action.
JetBlue and Spirit Terminates Merger
This decision stems from the likelihood that the required closing conditions, including obtaining necessary legal and regulatory approvals, would not be met by the merger agreement’s outside date of July 24, 2024.
Joanna Geraghty, Chief Executive Officer of JetBlue, expressed, “We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines. We are proud of our work with Spirit to lay out a vision to challenge the status quo. Still, given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently. We wish the very best going forward to the entire Spirit team.”
As per the agreement’s terms, JetBlue will compensate Spirit $69 million, and this termination settles all outstanding matters related to the transaction, with both parties mutually releasing any claims between them.
“JetBlue possesses a robust organic plan and distinctive competitive advantages, including a beloved brand, a unique value proposition, and strategic geographies. We have already initiated efforts to advance our plan for restoring profitability and anticipate sharing more about our progress in the coming months.”
Joanna Geraghty, Chief Executive Officer of JetBlue
“After consulting with our advisors and engaging with JetBlue, we have determined that existing regulatory impediments will hinder us from completing this transaction within the stipulated time frame under the merger agreement,” stated Ted Christie, President and Chief Executive Officer of Spirit. “We regret that we cannot proceed with a deal that had the potential to yield substantial savings for consumers and establish a formidable competitor to the dominant ‘Big 4’ U.S. airlines. Nevertheless, we maintain confidence in our future as a successful independent airline and extend our best wishes to the JetBlue team.”
“Throughout the transaction process, given the regulatory uncertainties, we have consistently contemplated the possibility of continuing operations as a standalone business. We have been assessing and implementing various initiatives to enhance profitability and the Guest experience. Moving forward, I am confident that our exceptional Spirit team will persist in delivering affordable fares and outstanding experiences to our Guests.”
Ted Christie, President and Chief Executive Officer of Spirit
JBLU Working on Increasing Revenue
As elucidated during the company’s fourth-quarter earnings call, JetBlue is taking decisive measures to achieve sustained profitability and enhance shareholder value.
In alignment with this initiative, the company is concentrating on its core strengths, deepening its network relevance in established geographies, and refining its product offerings to strengthen its competitive position. Simultaneously, JetBlue is working on achieving substantial cost savings.
JetBlue has identified several near-term revenue initiatives for 2024, encompassing increased distribution and partnerships, expanded functionality in its loyalty program, network enhancements, and ancillary initiatives, which are expected to yield over $300 million in revenue benefits.
The company is also on track to realize $175-200 million in cost savings from its structural cost program and $75 million in maintenance savings from its fleet modernization. Additionally, targeted reductions in fixed costs will contribute to positioning the company toward breakeven operating margins in 2024.
These initiatives serve as the initial steps as JetBlue restructures its long-term organic strategy with a renewed emphasis on achieving sustained profitability for its crewmembers and investors.
JetBlue is scheduled to host an Investor Day on Thursday, May 30, 2024, providing further insights into its long-term strategy and ongoing revenue and cost initiatives. Additional details regarding Investor Day will be communicated to analysts and investors in the forthcoming weeks.
Spirit Moving Towards Profitability
Spirit is assured of its capabilities and is dedicated to regaining profitability. The company has been implementing and will persist in taking judicious measures to fortify its balance sheet and sustain operations. This includes evaluating options for refinancing upcoming debt maturities.
In pursuit of this objective, Spirit has enlisted the services of Perella Weinberg & Partners L.P. and Davis Polk & Wardwell LLP as advisors. As a component of the termination, JetBlue will provide Spirit with $69 million.
During the existence of the merger agreement, Spirit stockholders received approximately $425 million in total prepayments.
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