JetBlue officially ends JetBlue-Spirit merger

[YorkRailFan]

JetBlue Airways and Spirit Airlines on Monday said they are ending their agreement to merge, weeks after losing a federal antitrust lawsuit that challenged the deal.

The CEOs of JetBlue and Spirit cited regulatory hurdles in ending their merger agreement. The carriers argued they needed to combine to better compete with large airlines that control most of the U.S. market.A federal judge in January sided with the Justice Department and blocked JetBlue's attempted takeover of budget carrier Spirit. In his ruling, Judge William Young said JetBlue's takeover of Spirit would "harm cost-conscious travelers who rely on Spirit's low fares."

JetBlue and Spirit had appealed the judge's decision, but JetBlue noted the appeal was required under the terms of the merger agreement. Analysts had expected little chance of a successful appeal.

Spirit shares were down about 9% in morning trading on Monday, while shares of JetBlue were up roughly 3%.

Almost two years ago, JetBlue swooped in with an unsolicited bid for Spirit Airlines, which had weeks earlier struck a merger agreement with fellow budget airline Frontier. JetBlue ultimately won Spirit shareholder approval to take over the discount carrier."It was a bold and courageous plan intended to shake up the industry status quo, and we were right to compete with Frontier and go for an opportunity that would have supercharged our growth and provided more opportunities for crewmembers," JetBlue CEO Joanna Geraghty said in a note to staff on Monday.


"However, with the ruling from the federal court and the Department of Justice's continued opposition, the probability of getting the green light to move forward with the merger anytime soon is extremely low," she said.

Geraghty took over as CEO from Robin Hayes last month, tasked with stopping JetBlue's losses, improving its operation, and trimming costs. Activist investor Carl Icahn disclosed a nearly 10% stake in the airline on her first day, and days later won two board seats at the New York-based airline.JetBlue's prospective purchase of Spirit would have been a buoy for the struggling discounter airline, which is facing the grounding of dozens of its Airbus planes for inspections stemming from a Pratt & Whitney engine defect. Spirit expects compensation from the engine-maker as a result of the flaw.

With the deal off the table, Spirit must confront its financial problems alone, something its leaders say it is equipped to do.

The company said it was working to refinance its debt, and last month said it was on a path back to profitability thanks to better-than-expected demand. It projected revenue for the first quarter above analysts' expectations."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," Spirit CEO Ted Christie said in a release.

He said Spirit shareholders received $425 million in prepayments from JetBlue during the agreement, and that JetBlue will pay Spirit $69 million related to the agreement's termination.

JetBlue, Spirit end $3.8 billion merger agreement after losing antitrust suit

JetBlue and Spirit Airlines had appealed a federal judge's decision to block their merger earlier in January.

www.cnbc.com

Makes sense for this to be the outcome, especially following the DOJ winning the Court case. Both airlines will have to go it alone.

For Spirit, they face liquidity in the coming years and strong competition, both from JetBlue and Frontier but also the Big 4 carriers. They are continually being squeezed out of markets by other carriers, mainly due to lower frequencies and service levels.

For JetBlue, this is the second failed merger attempt in under decade (the other one being with Virgin America who Alaska Airlines ended up buying). They now don't have Spirit or the North East Alliance with American Airlines. They have to find which market they want to focus on and which customer base. Low Cost? Full Service? Something in between? That'll be down to them.

 

[gabrielhj07]

Will be a huge own goal for the DOJ when Spirit go bust anyway. They keep pushing induction dates for new crew back and back.

 

[YorkRailFan]

Will be a huge own goal for the DOJ when Spirit go bust anyway. They keep pushing induction dates for new crew back and back.

Spirit has enough liquidity until 2025/2026 so they'll be around a few years more at least. But beyond 2028 is uncertain.

With the merger plans falling through, ALPA councils for JetBlue and Spirit make it clear that contract renegotiations will be initiated.

• JetBlue and Spirit pilot unions must refocus on negotiating competitive contracts post-merger withdrawal.
• Executives emphasize investing in pilots, with renegotiations needed for quality-of-life and compensation.
• Shortage and merger requirements drive necessary joint collective bargaining agreements, affecting attrition rates.

With the decision by JetBlue and Spirit Airlines to mutually withdraw from the merger agreement, pilot contract negotiations settled on the presumption that a merger would reopen, as both airlines’ unions announced in separate statements. Nonetheless, the two airlines’ executives say separately they believe in investing in their pilots.

Termination of the merger refocuses JetBlue and Spirit pilot unions​

In separate March 4 statements issued by the JetBlue and Spirit pilot unions – both part of the Air Lines Pilots Association, International (ALPA) family – the message was clear: Land a pilot contract competitive with other unions, now that interim contracts intended to help land a merger are not needed. One can review our breaking news coverage below:As Captatin Justin Houck, chair of the JetBlue ALPA Master Executive Council, shared,

“When the merger was initially proposed, we opted for a short-term extension rather than a full comprehensive contract, anticipating a joint collective bargaining agreement post-merger. However, the court decision in January and subsequent termination of the deal has altered the landscape significantly. Our attention must shift to attaining our contractual objectives as a single, unified pilot group.”

Captain Houck’s counterpart chairing Spirit ALPA Master Executive Council, Captain Ryan Muller, shared separately that day,

“Our union has been preparing for this possible outcome and is ready to write the next chapter for Spirit Airlines as a standalone company. Our current contract was negotiated under the assumption of a merger with JetBlue. Now we will be seeking a full suite of quality-of-life and compensation improvements for our pilots.”

Clearly, negotiations have only begun, and any strike authorization vote – much less a strike, is some time in the future.

Contracts were presented as necessary for a merger​

For balance, Simple Flying reviewed what JetBlue and Spirit airline executives said when the interim contracts were resolved. Spirit CEO Ted Christie said on the Q4 2022 earnings call on February 7, 2023;

“While our new pilot contract does add unit cost and margin pressure, we do expect the new contract to have a favorable impact on our attrition rates.”

Indeed, there has been a pilot shortage, and airlines that do not pay competitive compensation have found themselves hemorrhaging pilots. Plus, any merger of two airlines requires a joint collective bargaining agreement or JBA before final approval, and regulators want to see some evidence that a JCBA is possible before approving critical steps of an airline merger.However, while JetBlue management and newsroom did not substantially comment on the ratification of their pilots’ contract, JetBlue is now paying pilots not to fly this spring. Carl Icahn, blamed for taking down Trans World Airways (TWA) by selling off profitable TWA assets and a special ticket purchasing discount deal, has now taken a near 10% stake in JetBlue. Although JetBlue’s troubles go beyond a substantial pay increase for its pilots, a career in a global market, it’s worth noting.

Bottom line​

The pilots’ contracts negotiated between JetBlue and Spirit vis a vis the applicable ALPA councils were based on an endeavor to merge the two airlines. Now that the endeavor has been called off, contracts must be renegotiated in a new financial situation.

JetBlue And Spirit Airlines Pilots To Proceed With Respective Pilot Contract Negotiations

With the merger plans falling through, ALPA councils for JetBlue and Spirit make it clear that contract renegotiations will be initiated.

simpleflying.com

Makes sense, both airlines will be eager to settle with ALPA so they don't have to deal with the chaos of a strike.

 

[GRALISTAIR]

I think this was unfair.

Delta and Northwest merged
Continental and United merged
US Airways and American merged
Frontier and Midwest merged
Southwest and Airtran merged
Alaska and Virgin America merged

Why all of a sudden is this merger not allowed?

 

[YorkRailFan]

Why all of a sudden is this merger not allowed?

DOJ has had a change in heart after allowing all these mergers. As fares continue to rise, DOJ believes Spirit being merged into JetBlue would eradicate these low fares. Although the argument is, those fares will disappear if Spirit goes out of business.

However, the contract between the Air Line Pilots Association (ALPA) chapter representing JetBlue pilots and JetBlue management was for two years. As per an ALPA April 3 statement, Capt. Justin Houck, head of the JetBlue ALPA Master Executive Council, shared these expectations,Nearly 5,000 pilots represented by the Air Line Pilots Association (ALPA) served a notice to JetBlue Airways to open negotiations for a new collective bargaining agreement, the union said on Wednesday.

The pilots had negotiated a contract extension with the company at the time it was pursuing the now called-off merger with Spirit Airlines, the union said.

"We now expect the company to come to the bargaining table prepared to negotiate terms on pay and working conditions in line with the standards and direction of the industry," said Justin Houck, head of the JetBlue ALPA master executive council.

JetBlue did not immediately respond to a request for comment.

JetBlue pilots open negotiations over new labor deal

The pilots had negotiated a contract extension with the company at the time it was pursuing the now called-off merger with Spirit Airlines, the union said. "We now expect the company to come to the bargaining table prepared to negotiate terms on pay and working conditions in line with the...

finance.yahoo.com

Makes sense, now that the merger has been canned, the pilots want a new deal. Spirit is also going through this process with ALPA.

Spirit Airlines said on Monday it has reached a deal with Airbus to delay all aircraft deliveries scheduled from the second quarter of 2025 through 2026 and intends to furlough about 260 pilots, as the U.S. carrier looks to save cash.


The low-cost airline said it would defer the scheduled deliveries to 2030-2031. As a result of the deferrals, along with quality issues with engines made by supplier Pratt & Whitney, Spirit is furloughing pilots effective Sept. 1.

A snag with Pratt & Whitney Geared Turbofan (GTF) engines has forced Spirit to ground some of its A320neo aircraft, pinching the company at a time when it is already grappling with a cash crunch.

The agreement with Airbus would improve Spirit's liquidity by about $340 million over the next two years, the carrier said, adding that there were no changes to its orders scheduled to be delivered during 2027-2029.

"(The) aircraft deferrals and pilot furloughs look positive, in terms of helping the carrier to reduce (or) defer some costs. However, among other factors, the carrier now potentially also reduces its revenue generation opportunities," Citi Research analyst Stephen Trent wrote in a note.

Spirit Airlines to defer Airbus deliveries, furlough 260 pilots to save cash

(Reuters) -Spirit Airlines said on Monday it has reached a deal with Airbus to delay all aircraft deliveries scheduled from the second quarter of 2025 through 2026 and intends to furlough about 260 pilots, as the U.S. carrier looks to save cash. As a result of the deferrals, along with quality...

finance.yahoo.com

Spirit has reached an agreement with P&W for compensation for the grounding of several A320neo family aircraft powered by the PW1100G aircraft which will increase their liquidity. Spirit has also decided to furlough 260 pilots who will not be needed due to the grounding of several A320neos which P&W is compensating Spirit for.