Reality Check

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What's going on?

US carrier JetBlue made a $3.6 billion offer to buy Spirit Airlines this week, in hopes its head can be turned from another eligible admirer.

What does this mean?

Domestic travel has bounced back from the pandemic much more quickly than long-haul flights, and Spirit which specializes in cheap, largely US-based travel has been reaping the rewards of that shift in momentum. That caught the eye of Frontier Group, which offered to buy the airline for $2.9 billion in February a bid Spirit was happy to accept.

But a deals not done till its done, and JetBlues now swooped in with a $3.6 billion offer of its own. If Spirit decides to take it, the deal would make JetBlue the fifth-biggest airline in the US, and could allow it to offer more flights in more parts of the country. Itll shore up the airlines bottom line too: JetBlue reckons the sales boost and cost savings combined could be worth about $700 million a year.

Why should I care?

Zooming in: No cheaper tickets for you.
Fuel costs are putting a lot of pressure on airlines at the moment, but a bigger carrier should have the financial flexibility to better absorb those costs and offer cheaper tickets anyway. Trouble is, ticket prices havent tended to drop following mergers in the industry, but instead risen toward those of the more expensive carrier. And since that would undermine Spirits whole budget airline schtick, analysts think regulators might end up stepping in.

The bigger picture: Little old JetBlue.
That wouldnt be JetBlue’s first regulation rodeo: its already dealing with a lawsuit after teaming up with American Airlines to coordinate flight times in the north-east of the US. Regulators say that its hurting customers by dint of fewer choices of flights, but JetBlue is arguing the opposite: that the move helps it better compete with the biggest airlines, who are otherwise blocking it out of the region.

Originally posted as part of the Finimize daily email.

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