Terminal A of LaGuardia International Airport for JetBlue and Spirit Airlines in New York.

Leslie Josephs CNBC

JetBlue Airways launched a hostile bid to take over Spirit Airlines on Monday and called on shareholders to vote against the existing deal with Frontier Airlines after Spirit rejected JetBlue’s offer of $ 33 per share earlier this month.

JetBlue said the acquisition of Spirit would give it access to a large fleet of Airbus aircraft trained by pilots and the opportunity to better compete with US Big Four airlines, which control much of the US market. Spirit has turned down an offer to stick to a planned $ 2.9 billion cash and stock deal to merge with fellow discounter Frontier Airlines. The two airlines say the merger will allow them to grow and compete more easily.

On Monday, JetBlue offered Spirit shareholders $ 30 a share and urged them to vote against the Frontier deal during Spirit’s June 10 shareholders meeting. The company also said its previous offer of $ 33 per share is still on the table if Spirit decides to negotiate. Shares of Spirit closed at $ 16.98 on Friday.

“If Spirit’s shareholders vote against the deal with Frontier and force the Spirit Board to negotiate with us in good faith, we will work on a consensual deal at $ 33 per share, subject to information in support,” JetBlue said.

Any combination for Spirit will create the country’s fifth largest carrier.

“We are also offering to buy back their shares, now at a price slightly lower than our original offer, because the Spirit Board did not follow a fair process and did not allow us to look ‘under the hood’ as they allowed Frontier,” JetBlue CEO Robin Hayes said. notes for employees on Monday.

Spirit said it would “carefully consider JetBlue’s tender offer to determine a course of action that it believes is in the interests of Spirit and its shareholders.”

“Spirit shareholders are urged not to take any action on JetBlue’s bid until the Board evaluates the bid,” the statement said.

Spirit and Frontier run a similar model of tighter seats, ultra-low fares and fees for everything else, while JetBlue operates as an airline with a fuller range of services with free Wi-Fi, a TV with backrest and business class on multiple routes.

“Despite the slight differences between SAVE and Frontier, the working models between them are similar enough to increase efficiency,” Jefferies aviation analyst Sheila Kahiaoglu said on Monday. “JBLU is a more direct competitor to obsolete network operators, especially in premium markets where network operators have shifted attention.”

She added that Frontier and Spirit are likely to expand at the same rate, whether combined or separate, “with the combination only improving operational efficiency and cost-effectiveness with scale.”

Bill Franke, chairman of Frontier and a longtime investor in budget airlines, was previously chairman of Spirit. He left in 2013, and his investment company Indigo Partners bought Frontier.

Hayes of JetBlue suggested that Spirit and Frontier’s earlier plans harmed Spirit’s shareholders.

“Spirit Board’s bondage rejection of our offer is a worrying sign that they don’t mean the best interests of their shareholders. So what does the Spirit Board think?” Hayes said in his staff note. “Our assumption is that there are many historical ties and personal relationships between the owner of a controlling stake in Frontier and some board members who have agreed to a Frontier deal.”

JetBlue at the crossroads

Spirit’s rejection of JetBlue’s $ 3.6 billion cash offer it made last month has put the New York airline at a crossroads. Hayes said the acquisition of Spirit would “boost” its growth at a time when demand for new narrow-body aircraft is high and pilots are in short supply.

Earlier this month, Spirit said it turned down JetBlue’s offer because it did not believe the deal would be approved by regulators. It says part of that rationale was JetBlue’s partnership in the Northeast with American Airlines, which the Justice Department sued to block last year. Earlier, the CEO of Spirit said that during a call about earnings earlier this month he said he was “wondering if blocking our deal with Frontier is actually their goal”.

Spirit further declined additional terms from JetBlue that could alleviate regulatory issues, including a proposal to strip Spirit of some assets in Florida, New York and Boston. JetBlue has also offered to pay a $ 200 million fee for the reversal if the deal is not approved by antitrust regulators.

Transport Minister Pete Butigic declined to comment on Monday’s deal, saying DOT would help support any analysis of the Justice Department’s deal.

“The most important thing is to make sure that the American people are well served by a healthy airline sector, and part of a healthy airline sector, part of any healthy sector in our economy, is healthy competition,” he told CNBC. Squawk Box ».

Shares of Spirit rose more than 12% in trading on Monday, while JetBlue fell more than 4%. Shares of Frontier rose about 6%, while the S&P 500 rose only 0.1%. Frontier did not immediately comment.

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