Spirit flies away from Frontier in JetBlue/Spirit deal

Jul. 29—CHEYENNE — Spirit Airlines Inc. flew away from a major Denver-based discount air carrier, into the waiting hands of another corporate marriage partner.

This is perhaps the culmination of months of high-profile corporate fighting over the fate of the low-cost purveyor of flights. Industry officials suggested the impact on Cheyenne may be limited, though the deal moves bear watching for any possible future impacts on consumers.

In what was a signal of things to quickly come, Spirit had announced Wednesday it ended its agreement to combine with Frontier Group Holdings Inc. At that time, the takeover target said its board would "continue our ongoing discussions with JetBlue."

Early Thursday morning, JetBlue Airways Corp. and Spirit disclosed their boards of directors approved a transaction worth some $3.8 billion. This would form the fifth-largest U.S. airline, although there may be some delay in the combination going through.

"The companies expect to conclude the regulatory process and close the transaction no later than the first half of 2024," they wrote.

Back in February, Spirit and Frontier had said they agreed to combine in a deal worth some $2.9 billion. In April, Spirit said it got a higher, unsolicited bid from JetBlue. In May, Spirit said its board wanted to stick with its original merger partner. Ensuing months saw additional corporate jockeying, including the delay of some investor meetings.

"Needless to say, it's been an interesting few months since our last earnings call," the CEO of Frontier, Barry Biffle, told analysts on the latest such call. "Our public intention was largely centered on the merger. Behind the scenes," business has been good, he added late Wednesday.

For air travelers in Cheyenne, Frontier offers one option for trips, albeit from Denver. There may not be a direct local impact from this merger at Cheyenne's own small airport, comments from industry officials, including to the Wyoming Tribune Eagle, indicate.

Cheyenne airport

Some want to see more flights, at lower cost, into and out of Cheyenne's own airport. That may not happen right away, and possibly not as a direct result of the new merger.

This is the right market for a carrier to fly smaller planes to daily, as does United, or to fly bigger planes into with a little less frequency, said the airport's general manager. Another scenario the official, Tim Bradshaw, mentioned is if an airline could add traffic to his airport by offering competition to flying from Denver.

Some 97% of potential fliers from Cheyenne instead go to Denver's airport, said Bradshaw from the Cheyenne Regional Airport. "We do have the traffic" in terms of potential passengers, he said by phone Thursday night. "But most people chose to drive" to Denver instead of flying from here.

"We have the market, we just have to make the business case to the airlines," Bradshaw said. He described Frontier as "like a hub (and spoke) carrier" flying into Denver's large facility. "Their business model doesn't work for us because they need 150 a day, every day, going through their system," he said of the number of passengers the firm might want to immediately attract.

United Express offers service from Denver to both Cheyenne and Laramie "through our partner SkyWest," wrote United's representative, Christine Salamone. "Both routes have up to two flights per day using 50-seat CRJ-200 aircraft. At this time, no changes are planned for these markets."

As for the two smaller facilities in Wyoming, "it does not appear that Frontier is currently offering service from Cheyenne or Laramie," wrote Jennifer de la Cruz, Frontier's senior director of corporate communications. In addition to not providing service itself to the two locations, "we do not have any domestic codeshare partners," de la Cruz added.

DIA

The discount airline serves about 80 destinations from Denver International Airport, the Frontier spokesperson wrote in an email to the WTE.

DIA has many more flights and sometimes at lower fares than at local airports in this state.

Frontier is the No. 3 carrier by number of daily flights at DIA, an airport spokesperson noted. Southwest Airlines Co. is No. 2 and United Airlines Inc. is in first place, according to the spokesperson.

"Denver is one of United's fastest growing hubs, and the airline remains on target to average 700 departures a day by 2025," the spokesperson for the company wrote in her own email to the WTE. "United currently has 70 gates, and we are underway with an $825 million investment to add new gates at DEN — four of which have opened."

Laramie Regional Airport did not comment.

Stock

Although it was not immediately clear how Wyomingites might be affected in the longer run by JetBlue/Spirit, it seems from the stock reaction that investors in Frontier were happy with how things are working out.

Late Thursday afternoon on Wall Street, shares of Frontier closed up 21% at $13.58, while Spirit gained 5.6% to $25.66. JetBlue's publicly traded equity was little changed for the day.

In a sign that some investors do not think it is certain that JetBlue/Spirit will fully take flight, stock in Spirit was trading at a roughly 25% discount to the per-share takeover price. There have been some concerns that regulatory OK is not a slam dunk for JetBlue/Spirit. For its part, JetBlue plans to sell Spirit's holdings at airports where JetBlue has an alliance with American Airlines.

In a note to investors Wednesday, before JetBlue/Spirit was announced, JPMorgan Chase analyst Jamie Baker said the "merger drama is dragging out further than expected." He noted "repeated delays, not to mention disclosures from Frontier, certain Spirit shareholders and independent proxy firms."

The analyst pointed out "there are 25 cities Spirit serves that Frontier doesn't, suggesting said cities may move up Frontier's priority list." That may not much affect local air travelers, however. Although Spirit did not answer requests for comment, Cheyenne and Laramie are not listed as among the cities where the ultra low-cost airline flies.

A photograph accompanying this story may have incorrectly identified an airline executive. The WTE has asked the companies involved for clarification, and will run a correction to the photo as necessary.

Jonathan Make is the Wyoming Tribune Eagle's assistant managing editor and editor of the Wyoming Business Report. He can be reached at jmake@wyomingnews.com or 307-633-3129. Follow him on Twitter @makejdm.