Another vote delay leaves Spirit’s merger with Frontier in question as JetBlue circles

The fate of Spirit Airlines’ merger with budget-friendly Frontier Airlines is getting more uncertain.

Spirit this week postponed its shareholder meeting for the third time, opening the door to more talks from Frontier and rival JetBlue Airways. The last two delays came just hours before Spirit shareholders voted on the Frontier agreement, which is now a $2.6 billion cash and stock mix after Frontier recently improved the offering in an effort to stave off JetBlue’s advance. JetBlue is offering about $3.7 billion in an all-cash acquisition.

Before the most recently decided vote, which was scheduled for Friday morning, Spirit did not appear to have enough votes to get the border deal approved, according to people familiar with the matter.

Spirit would be on the verge of paying Frontier a breakup fee of more than $94 million if it deemed JetBlue’s bid superior and canceled its original deal.

“We are working hard to conclude this process while remaining focused on the well-being of our Spirit family,” Spirit CEO Ted Christie said in a note to employees late Thursday after the vote was again postponed. Spirit declined to comment on Friday.

JetBlue, for its part, cheered the delay. “We are encouraged by our discussions with Spirit and hope that they now recognize that Spirit shareholders have indicated their clear and charming preference for an agreement with JetBlue,” CEO Robin Hayes said in a statement late Thursday.

Neither JetBlue nor Frontier made any further comment on Friday.

At stake is a chance to become the fifth largest airline in the country, after American giants, Delta, United and Southwest. The Spirit-Frontier merger could create a low-cost airline giant, while JetBlue says its takeover offer will encourage growth at the airline, whose service includes more amenities and Mint business class on some planes.

“The Spirit board is very determined on the Frontier deal. They never wavered,” said Brett Snyder, a former airline manager who now runs travel website Cranky Flier. “The challenge they face is how do they get the votes?”

If the Frontier deal is voted on, Spirit shareholders will decide Cash and stock transaction. Bank stocks could mean a future benefit to shareholders if the travel rebound boosts the stock price. But they risk the opposite in the event of a travel slump or slowdown, even though budget airlines like Spirit and Frontier are less sensitive to business flight fluctuations than larger airlines.

JetBlue’s cash-on offer avoids the adventurous.

“With the Frontier deal, you put your trust in what happens after the merger to make money,” Snyder said. “With JetBlue, it’s: Here’s the money, take the money, go.”

JetBlue has repeatedly improved its offer to Spirit, including increasing its reverse breakup fee if regulators block the deal. The airline’s insistence put pressure on Frontier, which recently raised its own bid to match JetBlue’s reverse crash fees.

Spirit’s board of directors rejected both JetBlue’s proposals, arguing that the acquisition would not go through with the Department of Justice, which is suing to block JetBlue’s own regional alliance with American Airlines in the northeastern United States.

The Biden administration’s Justice Department has vowed to take a hard line against deals that threaten competition, even assuming divestment. JetBlue, for example, has promised to relinquish Spirit’s assets in the Northeast to make its proposed control of Spirit more palatable.

But that’s only a concern if the Frontier deal dies — and despite shareholder voting delays, it may not be, according to Bob Mann, an aviation analyst and former airline CEO.

“I see it as more of a case of Spirit being undoubtedly careful about listening and reviewing [JetBlue’s offer] They may eventually conclude that this does not make sense.”

If the Frontier deal fails with a shareholder vote and clears the way for JetBlue, Frontier could still end up: JetBlue’s plan is to turn Airbus’ tightly packed, no-frills planes into its own, which includes seat-back screens, more legroom and free Wi-Fi.

All JetBlue pays for Spirit “is a down payment,” Mann said. “The costs of the merger will be in the billions on top of that and it will take years.”

This would make Frontier the largest premium budget airline in the US at a time when almost everything is getting more expensive.