JetBlue and Spirit Airlines announce plan to merge, creating fifth-largest U.S. carrier.

JetBlue Airways on Thursday reached a deal to buy Spirit Airlines, a merger that could reshape the airline industry by putting pressure on the nation’s four dominant airlines.

The deal, which values Spirit at $3.8 billion, would create the nation’s fifth-largest airline, with a combined share of more than 10 percent of the market, behind United Airlines, which has a nearly 14 percent share. Delta Air Lines and Southwest Airlines control more than 17 percent each, while American Airlines, the largest U.S. carrier, has more than 18 percent.

The merger is likely to face a thorough investigation from the Biden administration’s antitrust regulators, who have taken an aggressive stand against corporate consolidation, especially in industries already dominated by a few businesses. Given that reality, JetBlue’s top executive sought to cast the Spirit deal as a way to make his industry more competitive, rather than less.

“Our argument is clear: The best thing we can do in the U.S. to create a more competitive industry is to allow JetBlue to grow,” Robin Hayes, the company’s chief executive, said in an interview.

The agreement is a victory for JetBlue, which successfully spoiled a rival offer: Frontier Airlines and Spirit called off a merger deal on Wednesday after Spirit struggled to persuade its shareholders to back the offer, which fell short of JetBlue’s by about $1 billion.

JetBlue and Spirit said they expected to seek approval for the deal from Spirit’s shareholders this fall and from regulators by early 2024. The airlines said they expected to close the transaction no later than the first half of 2024, with plans to begin operating as a single carrier by the first half of 2025.

But the merger could be hard to complete. Regulators have already sued JetBlue and American Airlines over a partnership at airports in Boston and New York. And on Wednesday, the Federal Trade Commission filed a lawsuit to block the social media giant Meta’s acquisition of a small virtual reality company, Within.

To address regulatory scrutiny, JetBlue has said it would preemptively divest from certain airports where the company and Spirit together have a big presence. One of the biggest concerns in airline mergers is that they can make one company dominant at certain airports or flight routes, giving it the ability to squelch competition and raise fares for some travelers. If regulators ultimately prevent the acquisition from going through, JetBlue would pay Spirit $70 million and Spirit’s shareholders $400 million.

“The airline industry is ridiculously concentrated and has been and legitimately continues to be an area of focus for the Justice Department,” said Bill Baer, a visiting fellow at the Brookings Institution who headed the department’s antitrust division in the Obama administration.

Mr. Baer said that companies involved in mergers with direct competitors generally argue that the combinations will boost competition and benefit consumers, but it doesn’t typically work out that way. The terms of the JetBlue-Spirit deal suggest that the airlines are preparing for an uphill battle, he said.

Under the merger agreement, JetBlue would acquire Spirit for at least $33.50 per share in cash, significantly more than Spirit’s closing price of $24.30 on Wednesday. Spirit’s shares were trading only slightly higher on Thursday, reflecting skepticism about the deal.

JetBlue said it would pay shareholders $2.50 per share upfront on approval of the deal and the equivalent of ten cents per share per month next year — an incentive to keep them on board during what could be a protracted process. If the deal is not completed by 2024, its value could rise to as much as $34.15 a share.

The combined airline would be based in New York and led by Mr. Hayes. It will have 458 aircraft, employ 34,000 employees and serve an estimated 77 million customers, the airlines said.

JetBlue said it expected $600 to $700 million in annual savings from spreading fixed costs over a larger business. Based on 2019 revenues, the combined airline is projected to have annual revenues of about $11.9 billion.

After years of bankruptcies and consolidation, the airline industry had mostly stabilized by the early 2010s with the four large airlines controlling most of the market. In 2016, JetBlue lost a bidding war to Alaska Airlines for Virgin America.

The Spirit acquisition would help JetBlue to expand its presence in cities like Fort Lauderdale, Orlando, San Juan and Los Angeles. The airline also said it expected to grow at the hub airports of the four largest carriers, such as Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta, and Miami — a strategy devised in part to try and win over antitrust regulators who are eager to see more competition at airports where one or two airlines control most gates and flights.

But even if the deal closes successfully, airline mergers are notoriously difficult, requiring the melding of unions, sometimes antiquated and incompatible computer systems, mismatched fleets of aircraft and disparate company cultures.

“The merger will be a case study of the winner’s curse,” Erik Gordon, a business professor at the University of Michigan, said. “JetBlue will face years of nightmares trying to integrate aircraft, systems, and cultures that are from different planets.”

When American Airlines and US Airways merged about a decade ago, it took 4.5 years to negotiate a single contract for mechanics, ramp workers and other employees represented by the Transport Workers Union of America, according to Gary Peterson, the director of the union’s air division.

“Combining work groups is like combining the Mets and the Yankees into an organization,” he said.

Mr. Peterson said that passengers and workers generally lose out in such combinations but that the union would fight to protect workers as the merger proceeds.

Sara Nelson, the president of the Association of Flight Attendants-CWA, which represents flight attendants at 19 airlines, including Spirit, said her union would only support the deal if flight attendants share in its benefits. “Our job is to improve conditions for workers and to be strategic about how we do that,” she said in a statement.

The JetBlue-Spirit deal comes amid widespread dissatisfaction with the airline industry, which has struggled to keep up with recovering travel demand over the past year.

The Transportation Department said recently that it had received more than twice as many complaints about airline refunds, delays, cancellations and other problems in May of this year than in the same month in 2019, despite fewer people traveling. In April, the department received more than three times as many complaints as it did before the pandemic.

While JetBlue ranks highly in customer satisfaction, Spirit has fewer fans. And both airlines have struggled to run smoothly during the recent recovery. About 68 percent of Spirit’s flights arrived on time this year through May, while just over 62 percent of JetBlue’s flights were on time, according to the Transportation Department. Spirit ranked seventh among U.S. carriers over that period, while JetBlue ranked 10th. Spirit’s performance has improved significantly in recent months, while JetBlue has only improved slightly, according to FlightAware, an aviation data provider.

Some experts have questioned the assertion by the airlines that the deal would benefit consumers, arguing that JetBlue will be unable to keep costs as low as Spirit, which is known in the industry as an ultra low-cost carrier.

“We have yet to see an airline merger in the United States in the last 30 years that has been good for consumers, good for labor and good even for the cities and regions in which they operate,” said William J. McGee, a senior fellow for aviation and travel at the American Economic Liberties Project, which pushes for stronger antitrust policies and enforcement.

The airlines said they would operate independently, with loyalty programs and customer accounts unchanged, until the merger is complete.

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