Spirit Airlines and Frontier Airlines agreed Wednesday to abandon their merger proposal, opening the way for JetBlue Airways to acquire Spirit.
Spirit, the largest budget carrier in the United States, said it was still in discussions with JetBlue “and expects to provide a further update in the near future.”
The decision by Spirit and Frontier to terminate their deal was announced while Spirit shareholders were still voting on the proposal. It was apparent that despite the support of Spirit’s board, shareholders were prepared to reject the Frontier deal.
The Frontier offer was worth more than $2.6 billion in cash and stock, far short of JetBlue’s all-cash bid of $3.7 billion.
Before the decision, shareholders appeared to lean against the bid preferred by Spirit’s board, an offer from Frontier Airlines that was worth more than $2.6 billion. Four previous votes have been postponed for lack of support.
A meeting of Spirit shareholders opened Wednesday morning and was quickly recessed for five hours, when voting was scheduled to end at 4:15 p.m. Eastern time. Spirit expects to announce the results shortly after the polls closed.
A combination of Spirit with either Frontier or JetBlue would create the nation’s fifth-largest airline, although it would be still quite a bit smaller than American, United, Delta and Southwest.
Competing with JetBlue’s richer cash offer, the Spirit board and Frontier argue that antitrust regulators will block JetBlue from buying Spirit, making the JetBlue bid an illusory one. JetBlue, of course, disagrees.
The Biden administration was always likely to take a close look at either deal. The president and his top antitrust official in the Justice Department have both indicated a dislike for corporate mergers.
Some analysts said that the small size of Frontier and Spirit would have earned them a pass from antitrust regulators in previous administrations, but not any more. Still, the JetBlue deal did appear more problematic, in part because the Justice Department was already suing to break up a regional partnership in the Northeast between JetBlue and American Airlines.
Frontier and Spirit announced their deal on Feb. 7, saying they would create a huge discount airline that would save consumers $1 billion a year in airfares by creating a powerful new competitor to American, United, Delta and Southwest.
The proposal would bring together two very similar airlines — both tempt travelers with rock-bottom fares but tack on fees for some things that bigger carriers include with most tickets, from soft drinks to room for a bag in the overhead bin.
They even share financial roots: Bill Franke’s Indigo Partners private equity firm invested in Spirit before taking an 82% stake in Frontier and investing in budget carriers in Mexico, Chile and Hungary.