The JetBlue+Spirit Acquisition: A new direction in the US Aviation Industry
Photo Credit: Wilfredo Lee (Associated Press)
You all may know that I work for JetBlue Airways as an Airport Operations Crewmember. One of the most prominent hot topics since joining the New York-based airline was our recent Acquisition of Florida Base - Spirit Airlines. Even though we all know the back story, earlier this year, Denver Based Frontier Airlines and Spirit Airlines proposed a merger to become the United States Largest Ultra Low-Cost Carrier (ULCC). Then the so-called “hostile takeovers,” which were dubbed by the public, occurred with a bidding war between both JetBlue and Frontier.
Lots of people have known that I have ambitions to be an airline executive in the future. I have made a number of thoughts about possibly being in the C-Suite of JetBlue in the future (one step at a time). And the funny part is I already thought of a “Plan” for JetBlue buy-out Spirit long before it actually happened. To be honest, I was deeply shocked at how reality took its part. I was never part of any discussion about this acquisition, and I have no links with our HQ in Long Island City. But the same excuse JetBlue made for why a combined JetBlue and Spirit is better than a combined Frontier and Spirit, but with more stats that airline executives have access to. My evidence was just based on public information via the airline’s website, reading new’s articles (maybe reading Wikipedia - even though I remember in school never to use it as evidence in any school project). So let’s talk about the future of JetBlue.
We all know 1+1=2, but in the airline industry, when buying out a competitor, the math is always equal to ONE. But going straight to the point of the future is the airline stats. Airlines will always make a big excuse about double fleet size, employee headcount, annual customers, etc. And it is true airlines that merge will always see a more significant jump via acquisition and merger than organically growing the company. Since 1999 (4 years before I was born), JetBlue grew from a small carrier based out of JFK to a recognized US carrier that had 20+ successful years even though events of 9/11, the 2008 market crash, the COVID19 Pandemic, etc. Currently, today the airline has 200+ aircraft with 100+ on order. Owning to leasing an aircraft is not cheap. Plus, getting more frequent flights is getting harder due to airports being at capacity or slot restricted.
Photo Credit: JetBlue Airways (Access to slides)
I want to talk about the picture above. When my CEO and COO/President sent out a joint letter to my colleagues about the proposed bid to buy out Spirit, they showcased this chart, which is publicly available on the airline website and in multiple proposal presentations. So don’t think I am leaking any internal communications; I'm not the type of employee who wants to risk their job. I already know that if JetBlue wants to have 500+ aircraft (combining what is already owned/leased by both airlines and what is on order by both airlines), it would cost trillions of dollars and 2 more decades. But a $3.8 billion plan that would include ownership (including lease agreements on Spirits leased aircraft) is like the biggest deal any airline would make. And to be real, it already has a proven point. How do you think the US big four airlines (American, United, Delta, and Southwest) got their aircraft? By acquiring and merging.
The same proven fact is also with employee headcount. Companies would never want to throw people in the street after acquiring and merging two companies. They actually benefit from more support to the operations; yes payroll department will need gallons of coffee for a couple of months after the companies are merged. And the airline got to set its payroll financials straight. But they can manage with the continuation of providing the “simplest” service of transporting people from Point A to B (and when acceptable, C to D to E to F and so on - depending on the customer) with allow the airline to grow revenue.
Ok, we are going to sidetrack a little just to review some background about the US aviation industry. Since 2010, US airlines have been so-called “Stable”. Until we saw yet another airline bidding war and acquisition/merger - which was JetBlue Airways and Virgin America. (Whacked - I get slapped by Father Time) … Ok sorry, I lied. It was Alaska Airlines and Virgin America. That was the stupidest acquisition/merger, and the best argument for that is when Alaska (the airline based in Seattle, Washington, not the state of Alaska) they are passing out the Airbus A320 family they inherited from the Virgin America deal. Like … I don’t understand what the purpose of buying out an all-airbus airline was, then years later, due to a pandemic, you want to go back to being all Boeing again? Uhh, let’s go back to what we are talking about … Alaska and Virgin America was the last airline to be in the headlines of acquisition and merger before the pandemic hit 2 years after the merger was complete in April 2018.
Now, why do I bring up these two airlines if we are talking about JetBlue and Spirit? Remember what I said about JetBlue and Virgin America? Well, JetBlue was bidding for them too. The same case was for the Spirit deal, but the idea was also focused on improving West Coast operations. Remember, JetBlue had a big presence on the East Coast. Trans-continental service is crucial for any Domestic part of any US carrier. Back in 2013, JetBlue launched Mint, the premium class of its main “core” product (aka business class for JetBlue). If JetBlue and Virgin America were a done deal, the same case with Spirit (fleet/people/revenue) but also a big chunk of the market share would increase for JetBlue on the west coast.
So the overall context of why JetBlue did all this talk and acquisition … it’s about market share. Like I said before, JetBlue started its operations in 1999 (2 years before 9/11). Then we had airlines like TWA, Continental, Northwest, and AirTran. Those airlines helped build the airlines we see today, in the same successful order, TWA -> American Airlines, Continental -> United, Northwest -> Delta, AirTran -> Southwest (Note: American Airlines’ success also includes US Airways as well and PanAm for Delta). For JetBlue, all this consolidation made the airline the 6th largest airline in the United States. If Spirit and Frontier merge well, JetBlue would still be number 6 or probably number 7 due to market share and fleet size. Alaska had a small bump, but JetBlue is trying to avoid any faith of dropping its share.
JetBlue today makes its vision by being an alternative to the Big Four; offers premium perks at a reduced cost - more affordable than the leading carriers. The carrier will experience lots of improvements, as the video above from the Wall Street Journal discusses. To highlight, the increase of pilots due to JetBlue and Spirit having the same type of pilots that are trained for the A320/A321 transition is seamless; JetBlue will bump upwards over Southwest with the number of destinations it flies to; the airline will become the largest carrier in Fort Lauderdale (already a JetBlue Focus city).
However, how I see the boost for JetBlue is also in other forms that JetBlue already made the case in its recent presentation when the airline reached a deal with Spirit. JetBlue will see a big boost in airports like Atlanta, Las Vegas, and Chicago. This would allow the airline to challenge the market share with Delta in Atlanta, United in Chicago, and any ULC in Las Vegas. The carrier would also improve with more destinations in the Midwest of the United States and expand through all corners of the United States and the Latin American/Caribbean destinations.
Now regulatory approval is questionable, but the airline made a number of points and promised to the shareholders and regulators. JetBlue will divest spirit shares in the Northeast that covers JetBlue and American Airlines - Northeast Alliance (NEA). How I see is we can expect airports like New York LaGuardia; the slots Spirit operates will be given back to the Port Authority of NY and NJ (Airport operator of LGA). This would also probably see Terminal A will no longer have a carrier operating in the Terminal. Another case point is the factor that JetBlue is shutting down an Ultra Low-Cost Carrier. JetBlue’s point is that we already see multiple new start-up airlines going in the ULLC module like Breeze Airliners (Founded by JetBlue and Azul founder David Neeleman) and Avelo Airlines, who recently joined the industry. Other airlines like Frontier, Allegiant, and Sun Country are already in operation.
Overall, the industry is very bipolar; one day it’s smooth sailing, then the other day it’s like a hot mess due to weather or ATC issue. I agree with the Acquisition of JetBlue and Spirit. Not saying this due to JetBlue is my employer; I'm saying this as someone who is studying the airline industry and who also understand how this industry can be. Without a doubt, this is going to be one rebound for the airline industry after the pandemic impacted the industry.
