JetBlue agrees to buy Spirit in $3.8 billion deal to create fifth-largest U.S. airline

JetBlue Airways has reached a $3.8 billion deal to buy Spirit Airlines in a takeover that would create the country’s fifth-largest airline and remove a fast-growing budget carrier from the market.

The deal, announced Thursday morning, caps a fierce, months-long bidding war for Spirit and came hours after Spirit scrapped plans to combine with fellow discounter Frontier Airlines. Spirit lacked the shareholder support to win approval for the Frontier merger, which was first unveiled in February.

If approved by regulators, JetBlue’s takeover of Spirit would leave Frontier as the largest discount carrier in the U.S. It would also be the first major U.S. airline deal since 2016, when Alaska Airlines beat out JetBlue for Virgin America. Analysts say the deal could also open the door for more consolidation among smaller carriers.

JetBlue executives say that buying Spirit would fast-track its growth by giving it access to more Airbus jetliners and pilots and help it compete with large carriers like American, Delta, United and Southwest, which control most of the U.S. market. The New York-based carrier plans to refurbish Spirit’s yellow planes with sparse interiors in JetBlue style, featuring seatback screens and more legroom.

JetBlue said it will pay $33.50 a share in cash for Spirit, including a $2.50 prepayment if Spirit shareholders approve the deal and a 10 cent ticking fee starting next year until the deal is approved.

JetBlue’s surprise, all-cash bid for Spirit in April threw Spirit’s plan to combine with Frontier into disarray. Frontier and JetBlue then competed for Spirit, each sweetening their offers, until the Frontier deal was terminated Wednesday.

The Miramar, Florida-based airline had repeatedly rebuffed JetBlue’s bids and said such the tie-up wasn’t likely to be approved by regulators, in part because JetBlue’s alliance with American in the Northeast, which the Justice Department sued to block last year.

The Justice Department and American Airlines didn’t immediately comment on the JetBlue-Spirit deal on Thursday.

The combined airline would be headquartered in New York City and led by JetBlue’s current CEO Robin Hayes, according to a JetBlue securities filing.

Spirit shares were up more than 3% in premarket trading after the deal was announced, while JetBlue was up 1%. Frontier was down 5%.