Following the rejection of its $3.6 billion offer, JetBlue is going hostile in its attempted takeover of Spirit Airlines.

Potential concerns

The New York-based airline has been in an unrequited bidding war for Spirit, which has consistently favored a deal with Frontier Airlines due to concerns it would not be approved by antitrust regulators over JetBlue’s relationship with American Airlines. JetBlue is currently undergoing legal action with the Department of Justice regarding its partnership with the legacy carrier, known as the Northeast Alliance (NEA).

In a lengthy open letter to Spirit’s shareholders released on Monday, JetBlue CEO Robin Hayes has criticized Frontier’s offer as having similar regulatory risks with no shareholder protections.

JetBlue noted that it is offering $30 a share in its cash-up-front tender offer but is open to paying its original $33, a 60% premium on Frontier’s offer, if Spirit comes to the negotiating table and provides the diligence information it had supplied to Frontier before the rejection of JetBlue’s proposal. Hayes wrote,

“Ask yourself a simple question: why won’t the Spirit Board engage with us constructively? ​​The interests of Bill Franke’s IndiGo Partners and the long-standing relationships between the two companies is the obvious answer.”

Despite a comparatively lower offer of roughly $18.81 per share, Frontier’s bid would allow Spirit Shareholders to keep 48.5% of the airline, giving each 1.9125 shares of Frontier with an additional $2.13 in cash for each Spirit share.

JetBlue’s tender offer is set to run through to June 30, likely appealing to a potential rejection of a Frontier merger following Spirit's shareholders' vote on June 10.

Spirited away?

Frontier and JetBlue have placed interest in Spirit to expand their respective networks, with a merger set to create the fifth-largest airline in the United States, carrying around 7% of the total market share. Spirit heads have been vocal against a JetBlue acquisition, with a merger seen as being based on eliminating a key competitor.

The Spirit and Frontier venture has been a coordinated joint move, with plans to create 10,000 jobs over the next four years and build a comprehensive air-route map across the United States, providing shareholders with the opportunity to benefit from the growth potential of the combined airline.

Spirit CEO Ted Christie has questioned whether JetBlue has any serious intent to purchase JetBlue; speaking during the airline's Q1 earnings call on May 5, Christie noted,

“Despite clear concern from JetBlue's shareholders, JetBlue has continued to pursue disruption to the Spirit-Frontier combination. I have wondered whether blocking our deal with Frontier is, in fact, their goal.”

Christie also disputed JetBlue’s claims of a “superior proposal,” believing it does not provide any better economic benefits, with Spirit’s board of directors unable to evaluate whether JetBlue’s standalone offer was better than its deal with Frontier. Christie added,

“At its core, the JetBlue proposal is a high-cost, high-fare airline trying to buy a low-cost, low-fare airline. A JetBlue-Spirit merger would likely eliminate Spirit as a ULCC and half the expected synergies would come from reduced capacity and increased fares to consumers. In contrast, the Frontier deal creates a stronger combined ULCC and a much more formidable competitor against the Big 4 and JetBlue as well.”

Following the publication of Hayes' letter, Spirit saw a 15.49% jump in premarket trading shares, with an increase of 4.93% for Frontier and a 0.8% decrease in JetBlue.