Capital Calls

2 May 2022 By Breakingviews columnists


– JetBlue/Spirit

What price turbulence? Shares of budget U.S. carrier Spirit Airlines fell 8% on Monday after it rejected a hostile offer from midmarket rival JetBlue Airways. Spirit is sticking with friendly suitor Frontier’s $2.4 billion offer, even though JetBlue’s all-cash offer is now worth 50% more than Frontier’s largely stock-based proposal.

Spirit’s position assumes that Washington’s anti-merger stance is essentially immovable, dooming JetBlue’s hostile pursuit to failure. At some point, though, Spirit shareholders might start to find the bet appealing. If JetBlue’s bid succeeded, they would get a much higher price; if not, Spirit could pocket a break fee from JetBlue worth over 8% of Spirit’s current market capitalization and still potentially go back to Frontier.

The question is whether that short-term calculus is enough to outweigh longer-term disruptions that could haunt a broken deal, including the risk that Frontier’s offer will no longer be on the table. (By Jonathan Guilford)


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