The Frontier/Spirit Merger is Dead… And Spirit’s Board Only Has One Good Option

Frontier, Mergers/Finance, Spirit

Everyone has been waiting for the results of the Spirit vote on the Frontier merger for weeks now. After multiple delays, this is done. Spirit shareholders have given a big middle finger to Frontier, wooed away by dreams of JetBlue’s money. The deal as it stands now is dead. Some may assume this means JetBlue will take over Spirit, but that is not necessarily the case. The saga will continue, though it might end very, very soon if reports are to be believed.

When Spirit announced the deal with Frontier, it seemed like it would pass easily. After all, you combine the two and you have a powerhouse of ultra low cost carrier (ULCC) muscle blanketing the US with no airline even a close second. Bill Franke, the money man behind the rise of both Spirit and Frontier in the ULCC space, was the architect of the deal, and he wouldn’t even announce a leadership team. He was in the left seat, had set auto-pilot, and was ready to go.

Then, another airplane t-boned his. JetBlue came in with a very rich offer, and it just kept increasing it. Spirit’s board and management team stuck steadfastly behind the Frontier deal. They never wavered even though the shareholders who actually get to make the final decision felt differently.

Spirit hung its hat on the Frontier deal saying that it was a sure thing. The airline anticipated no trouble getting through regulatory review, and it saw huge upside in the combined airline’s future share price. Since there is no such thing as a genie that can grant you a wish, this was a stretch. There’s no way to predict what a stock price will do.

Shareholders started grumbling early, and Spirit began scrambling. It miraculously got Frontier to up its bid, something I didn’t expect would happen. That seemed like it might seal the deal until JetBlue upped its bid again since it was hellbent on winning. Shareholder sentiment turned back against the Frontier deal, and after multiple delays and confirmation from Frontier that it would not up its offer again… the deal was finally shot down yesterday.

This, it should be clear, does not mean that the JetBlue deal is done by any stretch. Instead, it means the Frontier deal in its current form is dead. Now it goes back to the Spirit board to decide where to go next. It probably does not like its options.

The most obvious path forward is to merge with JetBlue. This is likely the best outcome for the airline, assuming JetBlue doesn’t pull one of these….

Frankly, I don’t see why JetBlue would pull this anyway. It doesn’t seem to have a future strategy other than “buy airline with lots of airplanes.” That will keep it busy for years instead of having to fix its own issues and create an organic growth strategy. Besides, if it backed off now, Frontier would probably just come right back in and have little trouble getting its original deal approved with no other credible offer on the table.

So then the question will come down to Spirit’s board once again. Does it go with JetBlue or does it decide to go it alone? I don’t even think there is an option. Spirit’s board and management has completely and totally backed the Frontier deal without wavering. The shareholders want none of that. How could these people keep their jobs when the owners of the company don’t think they have the best interests of the shareholders in mind? It could get ugly.

The easy out here is to sell to JetBlue, collect the money, and then go away completely as JetBlue absorbs the operation. Anything else would presumably result in the board being ousted.

It’s too early to say that the JetBlue acquisition will or will not happen for sure, but if it does, how will this play out? There are some clear winners and losers here. This is how I see it, in order.

Winners

  • Frontier, which becomes the largest ULCC and has its primary competitor taken out completely
  • Spirit shareholders, who get a boatload of money
  • Pretty much every other airline that had any overlap with Spirit and no longer will face those low costs
  • Lawyers and bankers because they always come out winning
  • JetBlue senior management, which no longer has to come up with an actual strategy for a few more years while they’re busy digesting the merger

Losers

  • Everyone else at JetBlue because it will now be able to continue floundering, burdened by a large merger
  • Travelers who like Spirit’s low fares… at least until Frontier moves into the routes Spirit will abandon
  • Spirit senior management and board because they are out of a job, but they’re richer
  • American because its Northeast Alliance with JetBlue is now in grave danger

I haven’t understood this JetBlue deal since the beginning, but it’s a lot of money and it saves the Spirit board from having to face a shareholder revolt. Now, we just have to wait and see if it gets done or if there is another path that unfolds.

52 comments on “The Frontier/Spirit Merger is Dead… And Spirit’s Board Only Has One Good Option

  1. Brett, I believe you meant to say “Spirit” in the first word of this sentence… Very easy mistake to inadvertently make, given how long this merger love triangle has gone on.

    > JetBlue’s board and management has completely and totally backed the Frontier deal without wavering.

  2. That didn’t take long. They released this before we even had our coffee on the east coast (around 7am):

    JetBlue Airways on Thursday announced it would purchase Spirit Airlines, a combination that would create the nation’s fifth-largest airline,

    The announcement comes a day after Spirit pulled the plug on a deal to merge with Frontier.

    https://www.google.com/amp/s/amp.cnn.com/cnn/2022/07/28/investing/spirit-jetblue/index.html

    1. Also read the combined carrier will have the world’s 8th largest fleet!

      Most mergers make sense but I can’t help but think a domestic travel world with a merged JetBlue and Alaska along with a merged Spirit and Frontier would make a LOT more sense.

      Airplanes, airplanes, everywhere! Fly then where? I do not care! – Robin Hayes

        1. I think people always talk about AS+B6 because the networks are so complementary. JetBlue has a big presence in the east coast north-south market, while Alaska is predominantly north-south on the west coast (though they’ve had trouble establishing themselves in the intra-California market against Southwest). Both AS and B6 have limited transcon presence, mostly focused around their respective hubs. It’s actually not unlike the America West+US Airways merger in terms of the distinct geographic coverage each airline offered.

  3. Some context on the image used for Brett’s great illustration in this post…

    As I recall from the director or producer’s commentary for the movie “Airplane!” (and the movie is well worth watching twice, the second time with the commentary turned on), they were able to obtain cheap (or stock) footage showing runway and taxiway lights at an airport at night.
    Included in that footage was a moment where the lights went out. Rather than cutting that part out, however, the filmmakers decided to make it a gag out of it in their usual style, and the result was the famous “unplugged runway lights” bit near the climax of the movie.

    They also noted that the source they obtained the footage from was surprised and rather chagrined that they were able to make such a great bit out of that piece of footage (presumably the source wished that they had charged more for use of the footage), but that’s what great filmmakers do, especially when their creativity exceeds their budget.

    As a sad postscript, the actor in that scene, Stephen Stucker, was one of the first actors to publicly announce his AIDS diagnosis, and died at in 1986 at age 38.

  4. Brett, I don’t believe you’ve mentioned Ben Baldanza in your analysis. As the former head of Spirit and now JetBlue board member, I can’t help thinking that he has some role in putting this deal together.

    1. I didn’t realize this, thanks for pointing it out. I wonder to what degree he is responsible for this. He has stood up to bad ideas before, was an advisor or board member at WOW but publicly split with them over their A330 order. If Ben Baldanza thinks this is a good idea then I have a bit more confidence.

    2. DTW – I imagine he’s certainly advising JetBlue management a great deal on this. It doesn’t really change my opinion about it though.

  5. I wish JetBlue a lot of luck with a merger of this magnitude; most mergers are very challenging and I expect this one will follow suit. Perhaps with a little moxy, a breeze will carry Mr. Neeleman in to save the day and regain the throne in Long Island City. Or not.

  6. This is going to be a challenging merger than will undoubtedly leave B6 as America’s highest CASM airline with a high debt load and thus in a precarious position. Hopefully the DOJ applies sufficient scrutiny to protect the interests of the traveling public.

  7. Brett,

    You don’t understand the Spirit/ JetBlue deal? It’s easy to understand when you break it down to it’s base elements.

    1. JB wants to grow quickly & not be hemmed in the NE.
    2. Slow organic is usually the best option for growth, but do to outside factors i, e WN, AA, DL &UA they are required to grow rapidly to keep up with the jetliners as it were.
    3. Related to the others JB needs a Midwest base to fly easily to the rest of the country & DTW fits that like a glove.

    Will this work out in the end? Only time will tell & we’ll see how well integration goes. On the one hand you could have a DL/ NW or a UA/ CO nightmare.

    1. Not so sure about Detroit. Detroit is a one hour flight from New York, hardly a distinct Midwest hub. Then you’ve got DL to contend with, 70% share to NK’s 12%, with a dense schedule supported by huge connecting flows (and the local market isn’t that big to begin with). And B6 is something like 90% O&D nonstop traffic (good thing, given their sorry operation), so they can’t replicate the hub/spoke connecting flows that DL has.

      All of this speaks to the bigger problem. NK wins by either jumping into big markets (LAS, FL, CHI) and skimming off the cheapest traffic with a flight or two a day and very low fares. Or they go into smaller markets, again with low fares and a single flight and they stimulate a bit of extra demand (ACY, MYR).

      B6? B6 doesn’t do this. They’re higher cost, higher fare without the unbundled upsells, so they depend on a denser schedule in markets like NYC, BOS and Florida. NK can spread thin and make any market work, B6 can’t.

      Which leads to the ultimate question: congrats JetBlue on having all these planes and this extra network (that doesn’t fit your business) — now what the hell are you going to do with it?

      1. I completely agree. People fly Spirit because they are cheap. When the flights are no longer cheap, there will be no passenger base for these flights.

      2. The ULCC carriers are facing headwinds of their own i, e fuel prices that aren’t sustainable long-term for them. You are also assuming that no new carriers won’t enter the fold if Spirit is devoured by JetBlue.

        As for my DTW example above, who knows – perhaps JetBlue will set up shop at AUS instead. It’s going to need to expand as it is & it’s not a mega-hub like ATL or DFW & the city currently has the cool hip vibe of NYC or LA.

  8. The Spirit Animal is dead with Blue winning Yellow. JetBlue has beat Frontier in winning the hearts of Spirit shareholders for the takeover, but there’s been a lot of focus on cutting capacity on the Spirit fleet post JetBlue takeover -raising costs, fares, and making the case tougher for JetBlue with the DOJ as an ULCC competitor disappears.

    But what about this LOPA scenario bringing some ULCC real estate to the combined airline? Spirit and JetBlue aircraft are reconfigured with 2 more rows for Blue plane & 1 less row on Yellow planes: What could this look like?

    Big Front Seat product comes out of Spirit. JetBlue Even More Room seats stays same, keeping at least 4 rows of standard Core economy product and legroom, the rest of the seats at 29” pitch. Everyone gets free TV, Wi-Fi, & same catering. Blue Basic pax get all of that except the tighter seats towards the back. Reduces CASM, keeps ULCC fares on the plane, & helps DOJ approval.

    There’s still a long way to go. Next steps include a Spirit shareholder vote, and the DOJ horse-wrangling with the looming American / JetBlue NEA NorthEast Alliance probably getting rolled into this.

    1. I like your idea on the plane seating. A good compromise between the two.

  9. I’m not sure that this tentative merger automatically dooms the NEA. That trial date is currently set for September 26th of this year, so that issue may be resolved well before this proposed transaction closes. I know I sound a bit like a broken record (I’m dating myself with that reference) but I really don’t think this merger will have much impact on the NEA one way or another. With the full knowledge that I could be wrong, I fully expect the issue to be settled before it goes to trial. I will also go out on a limb and predict that the NEA will probably be scaled back to a relatively conventional codeshare/alliance type of arrangement while keeping most of the “slot swap” components at LaGuardia and JFK, but that’s strictly a guess. I don’t see the NEA being thrown out completely as it has given Delta and United some enhanced competition in New York.

    I found it rather interesting that Spirit and Frontier overlap on more routes than Spirit and JetBlue, and as I understand these things, that’s a bigger factor than the aviation geek definition of an ultra-low-cost carrier to the DOT and DOJ. Another point that was raised is Spirit and Frontier’s different business models regarding the frequency of service, Spirit and JetBlue seem more aligned than Spirit and Frontier in that area.

    1. Yeah, I don’t know what happens to the NEA, either. Let’s face it: it’s ALL political. So far, it’s been pretty obvious consumers are actually HELPED by the NEA. Materially, I might add — competition in NYC and BOS has been enhanced by new flights by American and JetBlue made possible by the alliance. Spirit has a modest presence in both NYC and BOS. Under normal circumstances, the Antitrust Gods would likely be satisfied by the token offering of a few airport slots. And Chuck Schumer would likely to be able to assist with this. Can anyone credibly argue that the NEA would now START suppressing competition in NYC and BOS because JetBlue has just bought Spirit? C’mon man!

      1. I think the suit will be settled. I’ve speculated about what that settlement could be elsewhere, but that’s all it is. I have no insight as to the ultimate outcome of the lawsuit.

  10. The biggest winner of them all: Frontier. If they can get their hands on enough airplanes, they can easily scoop up the most profitable routes that Spirit will leave behind. JetBlue can’t compete with them on price. At least: for now.

  11. As much as some people want to believe otherwise, the biggest winner will be Delta which is JetBlue’s largest direct competitor. JetBlue will be much more indebted, higher cost, and struggle even more with product as it tries to merge a very different product. The NEA will be scaled back with or without a B6/NK merger; the DOT already noted that AA/B6 have the largest amount of combined capacity in the NYC area which makes it highly unlikely the JV and slot swap parts of the NEA will survive. American will lose as it is forced to either use its slots, lease them and face DOJ scrutiny, or walk away from them. And then they will be forced to return to markets they did not do well in before. Of course, they could go to a simple codeshare like AA has with AS.
    The real issue is not NYC -where B6 will be weaker after likely divestitures – but S. Florida where the overlap between AA/B6/NK is too large; and as much as some argue that the NEA does not include S. Florida, it does include some of the largest markets from S. Florida- NYC and BOS.
    And all of this happens as the US technically is in a recession as of today.

    1. Tim,

      How much is Delta paying you to say these things. Do you have inside information that the rest of us don’t?

      Asking for a friend.

      1. He might be a broken clock but Tim Dunn’s right on this. The winners are everyone else, including DL (ok, maybe not AA). Mergers are hell, Murphy’s Law reigns supreme — and B6 is particularly skilled at locating and stepping on rakes. DL’s biggest competitor in BOS and NYC is going to be in a world of pain for the next half-decade unless the DOJ saves them by successfully blocking this merger (in which case they’ll only be distracted for two years).

        1. I ‘m most certain that Delta is NOT the biggest winner from this, as JetBlue will continue to grow at JFK from it. Will JetBlue make money? Probably not. But they also are extremely unlikely to go out of business. Having a larger competitor at your hub airport, even one that’s basically a walking zombie, will NOT make your own operation more profitable.
          We don’t know how this will impact AA. It kind of depends on what the gov’t does, and the politics are a bit hard to predict. Even if the gov’t insists on a break-up of the NEA, AA (like WN and UA) probably benefits OVERALL from the demise of Spirit, whose existence obviously tends to lower nationwide airfares.

    2. Gee, what a shock response from you Tim! The way you describe Delta is as if the Hubble telescope found a red widget in the center of the universe! Everything revolves around Delta! Not to sound offensive but you really seem to have no self reflection on how childishly protective you are of your Delta fetish. So every other airline merges and walks away years later and much more stronger financial position, but JetBlue operates in a alternate vacuum that they are going to be “crushed by debt “. The debt will be paid by the extra cash flow from being a larger airline plus the liquidity that they will absorb that spirit currently has. They still have a much larger credit line than the debt they are taking upon. Look at the fair premiums that JetBlue has over a Delta in the New York City and Boston area and you come across saying that JetBlue is not going to have a chance against delta if they do a small focus city in Detroit? The way you describe JetBlue sometimes I wonder how they even made it this far competing with not only Delta but united and American as well. Everybody in the US is rushing to put on lie-flatbeds in business class and now Delta wants to copy JetBlue adding free Wi-Fi. But JetBlue is “rudderless”? Seems to me they are the tail wagging the dog with industry trends. And yet you’ve been silent of how Delta fell short on their latest earnings and their operations have been falling apart even further more than JetBlue on many days. I know I’ve traveled out of New York and been seeing the delta cancellation board mount day in and out more than it’s competition.

    3. Also,
      You make further statements about South Florida and the NEA hilighting even more of your hubris of understanding the NEA. The position of JetBlue in the northeast is not going to change at all by acquiring spirit, spirit is very small in the northeast and JetBlue already committed to divesting their assets there so how is this going to affect them in the northeast? As far south Florida they gonna have just shy of 50% meanwhile you’re precious Delta gets to sit nicely and places like Minneapolis in Atlanta with over 80% market share and that’s OK? The position of JetBlue in the northeast is not going to change at all by acquiring spirit, spirit is very small in the northeast and JetBlue already committed to divesting their assets there so how is this going to affect them in the northeast? As far south Florida they gonna have just shy of 50% meanwhile you’re precious Delta gets to sit nicely and places like Minneapolis via mergers and in Atlanta with over 80% market share and that’s OK? The NEA has zero effect in the South Florida market with American and your coupling south Florida under the control as if AA/B6/NK are like one company?? I can’t even wrap my head around that! And again, the NEA will be resolved well before any of the merger regulatory overview is settled. I am sorry to say that the NEA has put a nice little challenge to your precious Delta but that’s just the way it is, and Delta still has majority of marketshare in the New York City metro area. That’s the way healthy free competitive environment works.

      1. first, Delta does not have a majority market share in NYC.
        second, the NEA does combine AA and B6 from S. Florida to Boston and NYC; that was problematic even before the NK merger acceptance.

        and third, Delta will be paying down debt and growing its network in the NE while JetBlue will be taking on debt and trying to integrate operations. Every airline merger has huge rough spots and this one will be no different.
        There is no room for B6 to grow in the NE. If they are forced to carve out even more of the NE or abandon the NEA altogether, AA and B6 BOTH will be weaker than they are now.

        and Frontier stock is the winner in all of this – up 20% so far today. Southwest stock fell after guidance that mirrors what other airlines said. Every airline that has reported so far has had a big drop in their stock price.

        Delta and United stock is flat right now while everyone else is down. Wall Street can figure out what is going to happen.

        1. That’s funny. I recently saw a telecast on MLB Network where a Delta advertising sign behind home plate at Citi Field touted it as being the number one airline in New York (of course, the definition of “number one” is subject to interpretation and is dependent on how one measures these things). The NEA combines American and JetBlue’s Florida service only in your extremely biased mind (and of course, you’re entitled to your biases). Let’s see what the outcome of the trial is – if there even is one. Trials and appeals can last for years. US Airways/American’s lawsuit against Sabre lasted 11 years. And the only real winners were the lawyers. Does anyone really think the DOT, JetBlue, or American want to drag out litigation over the NEA for years on end? There could be 2 changes in administrations in that time, to say nothing about possible changes in the makeup of Congress.

          One can’t judge a company’s value only by its stock price.

          1. The DOJ, not the DOT, will decide on the merger. There is no way the merger will move forward until the NEA is settled. B6 has every reason to negotiate down the NEA to keep the merger given that every month the merger drags out costs B6 money.

            Do you realize that Delta gained more incremental slots at LGA and JFK by organically growing and adding flights when slot controls were lifted at LGA and JFK than they did in any other transaction other than receiving the gifted slots that Parker and Kirby gave Delta when they were at USAirways since the DCA slots were divested as part of the AA/US merger?

            B6 could have organically grown at both LGA and JFK at the same time but didn’t.

            DL became as large as it did in ATL by taking over one and one-half concourses after Eastern folded. They didn’t buy anyone and no one else bid for those assets.

            You and JetBlue want to believe that B6 should be allowed to violate proven antitrust policies because legacy carriers got bigger -even though they followed the same antitrust rules. And the notion that further mergers can be solved by divestitures has probably passed. If you have 2 or more children, you didn’t or don’t treat them the same. You learn and do better the 2nd and 3rd time around. The DOJ doesn’t have to repeat what it did with the legacies if there aren’t sufficient competitors.

            It is not the DOJ’s responsibility to allow B6 to harm consumers because B6 didn’t realize that it operated in heavily competitive markets and its competitors have grown aggressively on top of B6 and offer larger networks beyond those competitive hubs.

            You and others do realize that Florida joined the DOJ case against the NEA and they are certain to be as opposed to the merger for the same reason of reduced competition?

            Yes, we all get opinions and it will be interesting to see what happens over the next few months.

            1. It’s not at all certain that the legal issues around the NEA have to be settled before DOJ could sign off on the merger – if anything, if the DOJ can be satisfied that the asset divestures (especially the LGA slots) are sufficient to maintain the current level of competition they might sign off on the merger first, since if anything that would strengthen their case against the NEA. And with the merger in place, JetBlue can consider just dropping the NEA back to an AA/AS-style codeshare (possibly even joining OneWorld, as AS did) and putting an end to the DOJ lawsuit before it goes to trial.

              There would still be the issue of slots at JFK, but if AA wound up releasing slots JetBlue would wind up getting a lot (possibly even most) of them. Some international carriers might want some, and Delta might too (if they have the terminal space to use them), but no other domestic carrier is likely to want them.

            2. Doj doesn’t decide a thing. DOJ decides whether to sue. The courts decide. The DOJ has a pretty lousy record in stopping airline mergers.

            3. The DOJ does not decide on mergers. It’s not the CAB. All it can do is sue to block them, and there’s always a possibility it can lose the case.

        2. Every airline is paying down debt and taking on debt. Have you forgotten the billions delta just lost in its interest in Aeromexico and Latam that filed for ch11 and all that money they owed delta has been liquidated via debt restructuring? yet JetBlue will only be sooo bogged down, but spirit brings in over 1 billion in revenues, that cash helps pay down debt. Also AK bought VA for even a little more, and they are about the same size of JetBlue, and yet they operated fine and paid down debt. You think JetBlue would go through all this trouble to incur debt and not think of how to pay it down especially how frugal they are with their business acumen over the years?
          I always love the double standard people have to attack JetBlue but with other airlines it’s pay for the course.
          And yes delta has most slot portfolio in lga/jfk. Especially lga by far. You are being disingenuous saying otherwise

    4. BTW not a recession per Secretary Yellen. I think I’ll take her word for it. But whatever floats your boat!

      1. Two consecutive quarters of economic contraction* is the traditional definition of a recession, but the reality is more complicated than that.

        The official recession declarations come from the National Bureau of Economic Research, and they have confirmed their finding that we are not in a recession at this point. There’s some unusual factors right now, many retailers have reduced their purchases of new inventory because they’re overstocked because spending flipped from home goods to eating out/travel so quickly as the pandemic rules changed. Consumer spending is generally strong and businesses are still hiring, although at a less frantic pace. The only real downturn so far is in housing, the most interest-rate sensitive sector of the economy.

        I think this week’s 75 basis point increase may have been a bit overly aggressive, if only because in the housing market we need more construction of apartment buildings in the lower-middle and middle parts of the market to dampen rent increases in faster-growing cities.

        * It always cracks me up when Wall Street analysts say “two quarters of negative growth” instead of “contraction” or something like that, as of “growth” is some magic word that must always be spoken. It’s even better than airplane safety announcements that say “water landing” – if a 737 comes down on water, that’s not a “landing”, that’s a “crash”.

        1. Agreed on all points. But since nuance is lost on the poster to which I replied, I was trying to keep it simple.

          The language stuff is hilarious. Where is George Carlin when we need him? He was all over that decades ago and it’s only become worse. “Nobody ever dies, they just incur a negative patient care outcome.”

          George Carlin on “soft language” (rated R for, you guessed it, language)

          https://youtu.be/h67k9eEw9AY

  12. So I’m flying Spirit’s big front Seat on Saturday, does this mean I should expect free Blue chips and softdrinks (or a meal like the Mint service)?

    RIP the Big Front Seat.

  13. Brett, how do you think this news is playing in Angle Lake? Does AS seek a deal of its own or just stick to its knitting? If it seeks a deal, does it do so now so that DOJ looks at both deals at once, or wait and see how the JetBlue-Spirit deal fares before doing anything public? Appreciate your thoughts.

  14. Y’all are so busy bashing JetBlue for their operation and cost that you are missing the point of it.

    JetBlue is completely hemmed in in the Northeast. And as a result, their costs are much higher than what they would be another areas, both in terms of labor and supplies. There is also only so much business demand you can have in a highly competitive market like that.

    With the state of aviation right now, it is very difficult to expand significantly without buying someone. It is hard to find pilots, and it is hard to find planes that have any energy efficiency to them.

    This is pretty much JetBlue pushing their chips into the middle of the table. They realize that we can either be a niche player in the Northeast forever, or we can try to establish ourselves outside of there.

    Will it work? I don’t know. All this means is that now they will have at least the tools to grow out of their northeast box. My guess is since they are really the closest other airline to Southwest, they follow more of the southwest strategy of focus cities rather than full on hubs.

    But the bottom line is they felt this was their best option to get out of their box.

    1. “But the bottom line is they felt this was their best option to get out of their box.”

      Exactly. That’s the point in a nutshell.

  15. Are Frontier and United the only two with ample aircraft coming online in next 12 months to quickly capture any slot/gate divestures?

    I recall United’s sizeable 737M new arrival count but thought Frontier was about to get a good bit from Airbus as well.

    1. David – No way will the feds allow divestitures to the big guys. It’ll have to be Frontier, Allegiant, Sun Country… and maybe Breeze or Avelo?
      I guess it’s possible Alaska could get something. Slim pickings these days.

  16. I’ll say this and then be done.
    For those that want to diminish the power of the DOJ, please let us know what airline mergers got through against DOJ objections. The DOJ exists to maintain competition in all industries and, while they don’t win every case, few airlines have the resources to fight the DOJ.
    The NEA lawsuit exists primarily because the DOT approved the NEA which the DOJ says contains elements which are only permitted between merged companies – over which the DOJ has jurisdiction.
    It is possible that AA and B6 could downgrade their relationship to not include revenue sharing or the ability to swap slots (which the DOJ objects to) but even AA had to put some space between AS for a period after the AA/US merger.
    Delta’s losses were on equity – stock ownership – not debt. B6′ debt will soar; AS was more profitable than B6 and has been more profitable than B6 while AS paid down its debt. B6 and NK are not expected to make money for the 2nd quarter and perhaps for the entire year.
    Nobody said DL isn’t the largest slot holder not just at LGA and JFK; they are the largest holder of federal slots in the US. I still think B6 is spending too much effort trying to divest slots and gates in the NE when the real issue will be the huge loss of competition in Florida. and the biggest overlap is between AA/B6/NK between BOS and NYC to S. Florida.

    CF will have plenty to write about for the next 18 plus months.

    1. Tim,

      To answer your first question, American/US Airways is one merger that comes immediately to mind. The DOJ sued to stop it, but it ultimately went through. My point was (and is) that DOJ can’t totally block or reject a merger on its own the same way as the CAB (Civil Aeronautics Board) could prior to deregulation. It has to sue. And there’s always a chance that it’ll lose the lawsuit. That’s why the suits tend to get settled. No one knows what a judge will rule, and neither side usually wants to go through protracted litigation. In the case of United/US Airways in 2001 (when both of those airlines were a fair bit bigger), the DOJ didn’t reject that merger outright. It stated it would sue to stop it. The parties voluntarily ended the transaction because they didn’t want to fight the lawsuit. So in a way, that threat had the same net effect as an outright rejection.

      But American and JetBlue seem to be more than ready to go to the mat with the DOJ. I’ll repeat myself and write that I think the suit will be settled. The exact nature of that settlement is something people will speculate about as the trial date gets closer.

      I don’t think American and JetBlue share any revenue. They don’t even fully coordinate schedules. It’s not an immunized joint venture. I tend to think that a settlement will include an agreement to reduce the level of cooperation to a simple code share. Although I do think the slot share/swap arrangement will probably stay in place, but it could be limited. That’s just an opinion, and sheer speculation on my part. Spirt’s slot holdings in New York are minuscule, so JetBlue really isn’t giving up much there. Florida will be much more interesting to watch.

      But ultimately, you’re totally right about one thing, Tim. There’ll be plenty to write about and no shortage of opinions about any of it.

      1. I think we are alot closer to being on the same page, Ghost.
        I don’t think I have ever said that JBLU couldn’t make some type of deal to acquire SAVE – but I don’t think the way JBLU proposes – holding onto the NEA, giving up some NE assets, and still acquiring SAVE – will work.

        AA/US gave up the most concessions of any of the big 4 mergers (DL/NW, UA/CO, WN/FL) and didn’t propose all that they ended up giving up.

        I think JBLU should settle with the DOJ now to reduce the NEA down to the same type of arrangement that AA has with AS as long as AA agrees. AA’s biggest benefit is international feed and that could be retained. The DOJ still might limit how much of AA’s route system JBLU can codeshare on but both will end up with more than if the NEA is pulled in entirety.
        In return, I think B6 should not offer to give up BOS and NYC slots. NK plus B6 is still smaller than other carriers in NYC which is where the real problem is as far as slots. If B6 can keep all of NK’s new EWR “slots” plus B6 and NK at LGA as well as what B6 has at JFK, they would have a nice NYC route system – but just probably need to do it on their own plus NK.

        The DOT’s agreement with AA and B6 to swap slots was basically to keep AA from having to give up slots at LGA and JFK that it has not been fully using. if AA can’t figure out how to use the slots it has, then they need to lease them out – which will result in an antitrust review if it is large enough or involves a large carrier – or let them return to the pool for reassignment which could allow the FAA to reduce the number of slots at LGA to improve operations, perhaps in return for more or no slots at JFK which has the best operational track record of the big 3 NYC airports.

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Cranky Flier