JetBlue + Spirit: What Could the Future Hold?
JetBlue(B6) and Spirit (NK) are far from similar. Some aviation commentators have hailed this as “the merger no one asked for.”
JetBlue(B6) and Spirit (NK) are far from similar. Some aviation commentators have hailed this as “the merger no one asked for.”
DALLAS - Frontier Airlines (F9) is officially no longer in the running for the winning bid for Spirit Airlines (NK). This leaves JetBlue (B6) as the sole winner for the acquisition of the American low-cost carrier.
The blue and yellow airlines announced their intention to merge, joining forces to become the fifth largest airline in the United States, after American Airlines (AA), Delta Air Lines (DL), Southwest Airlines (WN), and United Airlines (UA). But these two carriers are far from similar. Some aviation commentators have hailed this as “the merger no one asked for.”
So, what can this merger actually provide? First, let's do a high-level comparison of the carriers.
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At face value, B6 and NK are arguably polar opposites. While low fares and travel for the masses are at the core of both airlines’ interests, that is where most similarities end.
JetBlue is known industry-wide as having a focus on comfort, class, and style, with a touch of the boutique to go with it. They offer free wifi and inflight entertainment, as well as complimentary snacks, and even lie-flat seats in select business class products.
By contrast, NK has often been labeled as one of the worst airlines in America. Travel vloggers consistently leave bad reviews, vow to never fly them again, dissuade passengers from traveling with them, and more. NK, though, largely takes after the model Ryanair (FR) and EasyJet (EC) in Europe, ie passing as many additional costs onto the customers in order to have that ever enticing rock bottom fare.
Contrasting with B6, NK’s selling point is the convenience of air travel, rather than the style, luxury, and comfort of it.
The two carriers do have certain cosmetic similarities, such as fleet compatibility. Both airlines are major operators of the Airbus A320 and A320neo family of aircraft. At the time of writing, the two have a combined total of 394 A320 family airframes, with another 203 on order. Minor fleet conflicts may occur, with B6 operating the A220-300, and NK having the similarly sized, but less popular A319neo on order. However, these are kinks that will be ironed out in due course.
This is largely where the similarities end.
Another major difference between the two airlines is where they call home. B6 has been noted as an “East Coast Success,” calling New York and Boston its home. However, the same cannot be said regarding its West Coast, Californian operations. By contrast, NK has a significant customer base and a large presence in the American west, notably in Los Angeles.
JetBlue has tried to gain a foothold here after switching their LA hub from Long Beach to LAX in 2020, but this is presently understood to be not enough for B6. In addition to NK, B6 will be going head to head with the likes of Alaska Airlines (AS) and UA in a state they call home, and have controlling market shares in. Established as B6 is, it’s arguable that the odds are stacked against them. And this is where NK enters the frame.
In 2016, a similar situation occurred at the now defunct Virgin America. Both B6 and AS showed interest in the San Francisco-based carrier. However, B6 was soon outbid by AS when it bid US$2.6bn for Virgin America. The merger was completed in 2018 and left AS in a much stronger position on the American west coast.
JetBlue chose to back out of this deal as Virgin America was valued at the time at US$1.3bn, and AS' offer was simply too high above the list price to be competitive. A B6 executive at the time stated that “Virgin America was a nice to have but not worth $2.6 billion.” This goes to show that B6 does have a vested and historical interest in a Californian stronghold, and with ever fewer airlines left to absorb, the sale of NK is no longer a deal B6 can afford to let pass.
In California, NK currently has a decent presence at Oakland Airport (SFO) in the Bay Area, and an NK takeover would give a newly strengthened B6 enough of a boost to be a force to be reckoned with, concerning the likes of both WN, and AS.
In SoCal, NK's presence at LAX is unquestionably strong, serving 22 destinations. This, combined with B6's additional 21 destinations (that don’t directly compete with NK) will grant B6 43 destinations out of LAX, putting it on par with legacy carriers, and those more established, such as AS, UA, DL, and AA. Furthermore, B6 would enjoy a comfortable advantage in the US transcontinental market.
From LAX alone, NK operates as far afield as Raleigh-Durham, Baltimore, Newark, and more, as well as a comfortable presence in the Central states of America. B6 does operate transcontinental services from LAX but focuses on north-south services to destinations in Mexico and Washington state, among others. The addition of NK's network would only bolster the B6 brand in states it has previously seen less notable success.
While it’s true that a merger between B6 and NK may sooner or later generate an overall increase in average passenger comfort across the United States, there is a distinct possibility that it may push average prices up or flood markets that NK previously inhabited.
JetBlue focuses on comfort. Spirit focuses on “the bare fare,” meaning the price of the seat, and everything else is an optional extra. This highlights the previously mentioned lack of compatibility between the two companies. With this sudden lack of competition, B6 may seek an opportunity to bring prices on former NK services closer to the former's levels.
Another drawback could well be the opposite, and B6 may enter into a war with other low-cost carriers, such as WN, F9, and Avelo Airlines (XP), and eventually either lower its prices to remain competitive or be simply priced out of its new markets.
It is a fact that B6 and NK are not fully compatible. A marriage between them would be one of convenience and may be fraught with challenges that wouldn’t have occurred had no merger gone ahead.
This merger will no doubt change the American aviation sector for years to come, and only time will tell what may eventually happen. Until that time passes, all eyes are on blue and yellow airlines.
Stay tuned to Airways for another analysis on the regulatory and business side of the merger from Kellner Capital.
Feature image: Francesco Cecchetti/Keith Dreycott/Airways
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