JetBlue outbids Frontier with a $3.6B offer for Spirit, because both airlines need gates to grow

Flight costs $40… carry-on + sandwich costs $400. This week JetBlue made a $3.6B offer to buy budget airline Spirit, topping the $2.9B bid made by rival Frontier in February. Awkward, since Spirit and Frontier had already agreed to a merger that would’ve created a budget behemoth. Spirit said its board would discuss the offer before accepting either bid.

• JetBlue says its offer is best for investors, at a 37% premium over Frontier’s. JB wants to spruce up Spirit planes and add ’em to its fleet, not run a separate carrier.
• Frontier says a JB merger would boost flight prices and reduce options for fliers, since the airlines have similar routes.
• Odd couple: Analysts called the bid a “headscratcher” because JetBlue is known for perks like free Terra chips while Spirit is known for free nothing. JB also offers a business-class tier, while Spirit… doesn’t.

Spirit in the sky… needs a companion. Four carriers dominate the US airline industry: American, Delta, Southwest, and United control 80% of domestic flights. But headwinds are now forcing smaller airlines to merge to survive:

• Not enough pilots: A shortage has caused costs to soar for smaller airlines and resulted in hundreds of canceled flights.
• Not enough gates: Gates at major hubs like ATL are often reserved for the Big Four, which makes it hard for smaller airlines to add new routes.
• FYI: President Biden’s antitrust crackdown is targeting airlines, and that could ground either merger.