JetBlue wins the bidding war for Spirit Airlines
JUANA SUMMERS, HOST:
The bidding war for Spirit Airlines is over, and JetBlue is the winner. The Boston-based airline will pay $3.8 billion for the ultra-low-cost carrier Spirit. And if the deal is approved by antitrust regulators, the new JetBlue would become the nation's fifth largest airline. But consumer advocates worry that the merger might actually lead to higher fares and less competition, as NPR's David Schaper reports.
DAVID SCHAPER, BYLINE: Spirit and JetBlue are very different airlines. JetBlue offers moderately low fares while providing free Wi-Fi, free entertainment on seatback video screens and free snacks. Oh, and their seats are bigger and further apart, providing what they say is the industry's most legroom in coach. There's none of that on Spirit. Their seats are among the most cramped in the industry. And while the basic fares are super-low, Spirit charges extra fees for just about everything, even assigned seats and carry-on bags. But in an industry dominated by the Big Four - American, Delta, United and Southwest, which control about 80% of the market share - JetBlue CEO Robin Hayes told CNBC today that combining his airline with Spirit creates a strong new challenger.
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ROBIN HAYES: The best thing that we can do to create a more vibrant, a more competitive industry is to really empower this new, larger JetBlue that can bring low fares and great service together.
SCHAPER: JetBlue launched a hostile takeover bid in April after Spirit had already agreed to merge with fellow low-cost carrier Frontier. JetBlue offered shareholders a lot more money in an all-cash deal and then kept upping the offer until shareholders voted to reject the Frontier agreement yesterday. Acquiring Spirit would nearly double JetBlue in size, giving it 458 airplanes at more than 1,700 daily flights to more than 125 destinations.
DAVID SLOTNICK: What this merger is going to mean, assuming it gets cleared by regulators, is that Spirit's going away, and a lot of those bottom cheapest fares that we see aren't going to exist anymore.
SCHAPER: David Slotnick is senior airline reporter for The Points Guy travel website.
SLOTNICK: At the same time, there's going to be a real, true competitor to the big airlines in a way that we haven't seen in years, really.
SCHAPER: And he says that could be especially true to certain destinations.
SLOTNICK: JetBlue and Spirit are both very heavily focused in Florida. JetBlue obviously has the Northeast pretty well. And, you know, those are pretty big leisure routes - people visiting family, people going on vacation.
SCHAPER: But travel consumer advocate Bill McGee of the American Economic Liberties Project doesn't think this merger will be good for consumers.
BILL MCGEE: No. I mean, I can't put it more simply than that. There's no way that this will increase competition. It will diminish competition. And that is what every airline merger in the last 30 years has done.
SCHAPER: McGee says while Spirit draws among the most customer service complaints in the industry, it does benefit consumers in one way.
MCGEE: When an ultra-low-cost carrier like Spirit is in a market, the fares go down. Even if you're flying American or United, if Spirit's on that route, you're paying less. You're not going to pay as little as Spirit charges, but the big guys will have to bring down their fares.
SCHAPER: So McGee predicts that if the deal is approved and Spirit is absorbed by JetBlue, airfares will rise across the board. He and other consumer advocates are urging the Justice Department to thoroughly review this proposed airline merger. David Schaper, NPR News.
(SOUNDBITE OF JACOB MANN BIG BAND'S "DON'T FLY SPIRIT") Transcript provided by NPR, Copyright NPR.