JetBlue Airways stepped up bidding war against rival Frontier for Spirit Airlines as the race for the ultra-low-cost carrier intensified.
Both bidders see Spirit as an opportunity to expand their domestic footprints at a time when the US airline industry is dogged by labour and aircraft shortages.
Either of the deals would create the fifth-largest airline in the US.
Under the new offer, JetBlue offered a “ticking fee,” which would give Spirit shareholders a monthly prepayment of 10 cents per share between January 2023 and the closing of the deal, raising the overall value of the offer to $34.15 per share.
The New York-based carrier also increased the break-up fee to Spirit by $50 million for a total of $400 million if the deal fails to get regulatory approval.
It will also prepay $2.50 per share as a cash dividend to Spirit stockholders following approval of the transaction.
JetBlue chief executive Robin Hayes said: “After the Spirit board’s failure to recognise our decisively superior offer, we’ve discussed our offer directly with Spirit shareholders and are now modifying our proposal in response to shareholders’ expressed interest, to include a monthly payment for shareholders, with the certainty of a significant cash premium at closing.
“Spirit shareholders should not be misled by Spirit and Frontier’s rosy projections of a potential future stock price, which are based on highly flawed assumptions that fail to account for the actual market conditions, including the need for pilot pay increases and elevated fuel costs.
“The entrenched Spirit board has approved a revised deal that is ultimately better for Frontier and its controlling shareholder than it is for Spirit shareholders,” he claimed.
The latest offer came after Frontier raised its bid for Spirit last Friday.
Frontier’s revised offer persuaded shareholder advisory firm Institutional Shareholder Services (ISS) to reverse its position and recommend Spirit shareholders back a merger with the Denver-based budget carrier.
Glass Lewis, another proxy firm, has also recommended the Frontier deal.
Spirit shareholders are due to vote on the merger deal with Frontier on June 30.