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JetBlue offering to buy Spirit for $3.6B in Cash

JetBlue offering to buy Spirit for $3.6B in Cash

Old Apr 6, 22, 12:42 pm
  #46  
 
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With the smaller cities, I hope JetBlue can keep ACY, as it seems to do well with Spirit. Maybe we'd even see an ACY-BOS go year-round with JetBlue. JetBlue is minor in PHL and the alternative merger, a combined Frontier/Spirit, would have consolidated the two large ULCCs there. With a JetBlue/Spirit deal, I could see a scale back of Spirit's flights from PHL that ultimately don't convert over to B6.

Small cities outside the NE like CAK, IAG and LBE seem less likely a fit in the B6's network but F9 or G4 could pick them up.

Southwest might indirectly benefit at BWI. I don't think B6 would keep all the NK routes there.

In the West, I kind of wonder if JetBlue will give OAK another chance or close shop again, and try to build a bigger presence in SFO.
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Old Apr 6, 22, 1:06 pm
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Originally Posted by BearX220 View Post
Ask yourself what benefits the public has realized from any of the big mergers since US + America West in 2005. They have all been about consolidating pricing power, reducing choices and competition, and generating better returns for shareholders. Whatever happens to NK now that it's in play will be no different.

And whatever happens it will leave the remaining small and mid-tier players -- JetBlue or Frontier, Alaska, Hawaiian, Sun Country, Breeze, and Avelo -- feeling smaller still and vulnerable, and desperately seeking dance partners.

These deals are always sold as pro-consumer and they always turn out precisely the opposite.

30-35 years ago this country had 10 or so network carriers, good service levels, and robust competition. Now we've got three network carriers plus Southwest and... just look at service levels.
Originally Posted by NewtonsLaw View Post
You also got an average US domestic roundtrip fare some 30% lower in real terms - it's not all bad.
Average airfare was $538 inflation adjusted in 1995, was $314 as of 3Q21

https://www.bts.gov/content/national...ge-fare-series

Many more people fly today versus thirty years ago, with cheaper airfare, even among the airlines that merged. Mergers may not have been "pro consumer" in a traditional sense but the airline industry as a whole offers more flights and more choice at cheaper prices to many, many more people than it did 30 years ago
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Old Apr 6, 22, 1:19 pm
  #48  
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Originally Posted by beyondhere View Post
I would have preferred if it was JetBlue buying Frontier, and Spirit remaining as the leading ULCC. I think there is less route overlap as well.
Network-wise and brand-wise, that would have made more sense I think. However JetBlue wants Spirit's assets (their IAE/PW-powered planes and maintenance, their gates and routes out of MCO and FLL, their office space in Florida). Frontier planes are CFM-powered, though that hasn't stopped JetBlue before (VX was also a CFM-powered airline).

-J.
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Old Apr 6, 22, 3:44 pm
  #49  
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Originally Posted by GW McLintock View Post
Network-wise and brand-wise, that would have made more sense I think. However JetBlue wants Spirit's assets (their IAE/PW-powered planes and maintenance, their gates and routes out of MCO and FLL, their office space in Florida). Frontier planes are CFM-powered, though that hasn't stopped JetBlue before (VX was also a CFM-powered airline).

-J.
I don't think a HQ building is anything so special ... I also thought B6+VX would've made a lot of sense (more than AS and more than this deal). B6 is an 'upmarket' airline - so even if they did just ditch the Spirit brand, they'd have to be able to attract enough passengers to their model.
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Old Apr 6, 22, 4:38 pm
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Originally Posted by entropy View Post
I don't think a HQ building is anything so special ... I also thought B6+VX would've made a lot of sense (more than AS and more than this deal). B6 is an 'upmarket' airline - so even if they did just ditch the Spirit brand, they'd have to be able to attract enough passengers to their model.
This is an important point. JetBlue will feel expensive to the ULCC crowd, who are used to bargain basement prices. B6 likely doesn't care and have priced the loss of the low end into their bid. As others have mentioned, they likely just want the planes, routes and slots and don't really care about the customers.
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Old Apr 6, 22, 5:50 pm
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Keep in mind that JetBlue costs are too high to operate the ulccs model. So they will have to convert the nk planes to less dense in order to get the higher fares they need to cover their costs. I think the likelihood of it going through is not too high. But there are a lot of things for them to gain from network, airport resources, staffing and aircraft resources point of view.
It's not about getting nk customers but rather using those nk assets to quickly expand their existing focus cities.
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Old Apr 6, 22, 6:55 pm
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Originally Posted by tphuang View Post
Keep in mind that JetBlue costs are too high to operate the ulccs model. So they will have to convert the nk planes to less dense in order to get the higher fares they need to cover their costs. I think the likelihood of it going through is not too high. But there are a lot of things for them to gain from network, airport resources, staffing and aircraft resources point of view.
It's not about getting nk customers but rather using those nk assets to quickly expand their existing focus cities.
i agree. I think this may just be designed to run up the price.
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Old Apr 6, 22, 8:38 pm
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Wouldn't it be less time-consuming for jetBlue just to set a pile of cash on fire instead? This seems more of an effort to tank the ability for F9 and NK to merge, or to at least burden them with higher acquisition costs. Even if one wants to use the "this gives B6 access to a bunch of Airbus aircraft" case, so what? They will have to spend hundreds of millions of dollars alone in upgrading NK's cabin interiors to B6's standards. And does B6 really want to be courting NK's customer base in the first place?
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Old Apr 6, 22, 8:47 pm
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Originally Posted by tphuang View Post
Keep in mind that JetBlue costs are too high to operate the ulccs model. So they will have to convert the nk planes to less dense in order to get the higher fares they need to cover their costs. I think the likelihood of it going through is not too high. But there are a lot of things for them to gain from network, airport resources, staffing and aircraft resources point of view.
It's not about getting nk customers but rather using those nk assets to quickly expand their existing focus cities.
Would B6 need to convert all the NK planes to make them less dense?

A high dense format perhaps under a special brand could be beneficial on north-south leisure routes, e.g. PVD-MCO, BUF-MCO, BUF-FLL, PHL-FLL, along with the NK routes it chooses to keep, I assume PHL-MCO, DTW-MCO, DTW-FLL, etc and it could sell more seats, keep fare low on those route and help with regulatory approval.
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Old Apr 6, 22, 9:01 pm
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Originally Posted by Fanjet View Post
Wouldn't it be less time-consuming for jetBlue just to set a pile of cash on fire instead? This seems more of an effort to tank the ability for F9 and NK to merge, or to at least burden them with higher acquisition costs. Even if one wants to use the "this gives B6 access to a bunch of Airbus aircraft" case, so what? They will have to spend hundreds of millions of dollars alone in upgrading NK's cabin interiors to B6's standards. And does B6 really want to be courting NK's customer base in the first place?

I am not completely up on Spirit's network. Are their gates, slots etc. really worth $3.6 billion? Surely there is enough excess aircraft in existence to lease more planes.
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Old Apr 7, 22, 2:18 am
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Originally Posted by AsiaTravel2019 View Post
I am not completely up on Spirit's network. Are their gates, slots etc. really worth $3.6 billion? Surely there is enough excess aircraft in existence to lease more planes.
The assets imo are worth a lot more than vx assets at that merger.

You are looking at about 12 to 14 gates at fll, 4 to 5 gates at lax, close to 30 departure times at ewr, 10 to 15 pairs of lga slots, 3 bos gates and gates at constrained airports like ord.

It's also really hard to get near term aircraft deliveries and leases. It's really hard to staff operate those aircraft. There is no question there is a lot of real value here. Although, I haven't looked into how many of nk aircraft are owned vs leased.
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Old Apr 7, 22, 6:21 am
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Originally Posted by BearX220 View Post
Ask yourself what benefits the public has realized from any of the big mergers since US + America West in 2005. They have all been about consolidating pricing power, reducing choices and competition, and generating better returns for shareholders. Whatever happens to NK now that it's in play will be no different.

And whatever happens it will leave the remaining small and mid-tier players -- JetBlue or Frontier, Alaska, Hawaiian, Sun Country, Breeze, and Avelo -- feeling smaller still and vulnerable, and desperately seeking dance partners.

These deals are always sold as pro-consumer and they always turn out precisely the opposite.

30-35 years ago this country had 10 or so network carriers, good service levels, and robust competition. Now we've got three network carriers plus Southwest and... just look at service levels.
I partially agree with you and do often wish I could pay a little more for better service.

On the other hand, mergers have benefited some frequent flyers at many small airports by giving more options on the airline they have status with. I personally benefit from and am grateful for route network created by the AA/US merger even though I really miss the meal quality and service standards American offered 15 years ago.

Mergers have not resulted in out of control pricing. In the first quarter of 1996, the average domestic airline ticket cost $284, according to the Transportation Departments Bureau of Transportation Statistics. That is $482 in 2021 dollars. $482 is around what people are having to pay now with surging demand driven airfare prices.
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Old Apr 7, 22, 6:29 am
  #58  
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Originally Posted by beyondhere View Post
Would B6 need to convert all the NK planes to make them less dense?

A high dense format perhaps under a special brand could be beneficial on north-south leisure routes, e.g. PVD-MCO, BUF-MCO, BUF-FLL, PHL-FLL, along with the NK routes it chooses to keep, I assume PHL-MCO, DTW-MCO, DTW-FLL, etc and it could sell more seats, keep fare low on those route and help with regulatory approval.
A lot of those passengers [say they] fly JB on those routes because it is nicer than the competition. Of course if a not-so-nice option at a significant discount was available, I'm sure many would be happy to switch. The classic line is, "I'm never flying Spirit again!" (until they're the cheapest)

-J.
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Old Apr 7, 22, 7:59 am
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How many of Spirit's routes are monopoly?

From MHT to Florida, Southwest offers a couple nonstop routes and Spirit offers several. If flying to FLL from where I live, for example, the options include:
- Connect on WN, AA, UA
- Fly nonstop on Spirit
- Drive ~40 minutes further to Boston Logan to fly JetBlue or Delta nonstop, giving up close parking and walk to the terminal (also parking costs a lot more BOS vs MHT)

I don't like Spirit but will sometimes choose them when they have the only convenient non-stop. I include the extra for their "big front seat" and a checked bag when comparing options and Spirit has often seemed like the best choice when they offer the only nonstop.

If Jetblue were to retain these routes, they would win the same bookings from us. Nonstop from the most convenient airport is often more important than price or airline quality. Are there a lot of routes like this where Spirit is the only nonstop?
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Old Apr 7, 22, 8:44 am
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Originally Posted by GW McLintock View Post
W/R/T the NEA, I can't see how the DOJ would let that stick around should JB+NK actually happen.
Originally Posted by GW McLintock View Post
I also wouldn't expect a lot of Spirit's customers to go to JB -- some will be willing to pay more, but I expect most to jump ship to Frontier, Allegiant, and Southwest (and perhaps smaller airlines like Avelo, Sun Country, and Breeze).
Originally Posted by entropy View Post
B6 is an 'upmarket' airline - so even if they did just ditch the Spirit brand, they'd have to be able to attract enough passengers to their model.
Originally Posted by AsiaTravel2019 View Post
This is an important point. JetBlue will feel expensive to the ULCC crowd, who are used to bargain basement prices.
Originally Posted by GW McLintock View Post
A lot of those passengers [say they] fly JB on those routes because it is nicer than the competition. Of course if a not-so-nice option at a significant discount was available, I'm sure many would be happy to switch.
IMHO, we shouldn't underestimate the fluidity/overlap of the NK/B6 (and NK/any carrier) "target" customer base. For the most part the FT perspective is stuck in the loyalty clouds. Most customers are shopping on schedule and price--they understand the freebies/extras of the various options and decide accordingly.

I concede that some smaller stations may necessitate rock-bottom pricing to stimulate the market sufficiently to even offer nonstop service. But, where a merged B6/NK recedes, new entrants will pounce. The success of Allegiant, and the capital available to startups like Avelo and Breeze suggest that viable markets will not be ignored.
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