The development, first reported by Reuters on Wednesday, came after Spirit four times pushed back a shareholder vote on the Frontier deal, hoping it could garner enough support. Spirit had previously argued that antitrust regulators were unlikely to clear JetBlue’s $3.7 billion bid. The result was a setback for Frontier and its chairman Bill Franke, who was instrumental in starting talks between the sides last year. Franke’s airline-focused buyout firm Indigo Partners is a major shareholder in Frontier. Sign up now for FREE unlimited access to Reuters.com Register “While we are disappointed that Spirit Airlines shareholders have failed to recognize the value and consumer potential inherent in our proposed combination, Frontier’s board of directors has taken a disciplined approach,” Franke said in a statement. A Frontier-Spirit combination would have reshaped the domestic travel landscape and marked the most substantial merger in the U.S. airline industry since Alaska Air Group bought Virgin America Inc for $2.6 billion in 2016. JetBlue sees Spirit as an opportunity to expand its domestic footprint at a time when the U.S. airline industry is suffering from labor and aircraft shortages. A sale of Spirit to Frontier or JetBlue would create the fifth largest US airline. Negotiations between JetBlue and Spirit are progressing favorably, and a deal is possible in the coming weeks, according to people familiar with the matter. “We are pleased that the merger agreement with Frontier has been terminated and are engaged in ongoing discussions with Spirit about a consensus agreement as soon as possible,” JetBlue said in a statement. But Spirit could also choose to remain independent.
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Spirit expressed concern over JetBlue Northeast Alliance’s ( NEA ) partnership with American Airlines ( AAL.O ). The US Justice Department filed a lawsuit against American and JetBlue in September seeking to end the alliance, saying it would lead to higher fares at busy airports in the US Northeast. JetBlue has so far refused to leave the alliance and has instead offered other sweeteners, such as a higher breakup fee and route divestments. Shares of Frontier rose 6.4% to close at $11.27 as investors expressed relief that the company was out of what had become a bidding war for Spirit. Spirit shares rose 4% to $24.30, while JetBlue shares rose 3.6% to $8.35. Upon termination of the proposed Spirit-Frontier engagement, Spirit will pay Frontier $25 million for merger-related expenses it has effected. Under the terms of the deal, Spirit would owe Frontier an additional $69 million if it ends up entering into a merger agreement with JetBlue or any other competitor within the next 12 months. “Now that Spirit Airlines has terminated the Frontier merger agreement, we hope that Frontier management will put aside the distraction of the merger and invest the same resources and focus on improving conditions at its own airline,” the pilots union said Frontier. subset of the Airline Pilots Association (ALPA). Sign up now for FREE unlimited access to Reuters.com Register Reporting by Anirban Sen and Greg Roumeliotis in New York, additional reporting by David Shepardson Editing by Chizu Nomiyama, Will Dunham, Matthew Lewis and David Gregorio Our Standards: The Thomson Reuters Trust Principles.
