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(Reuters) -JetBlue Airways Corp on Wednesday mounted a vigorous defense of its unsolicited $3.6 billion bid to acquire ultra-low-cost carrier Spirit Airlines (NYSE:SAVE), saying the company is “highly confident” of securing regulatory approval for the deal.
The New York-based carrier on Tuesday surprised Wall Street with a $33 per share cash offer, potentially derailing a $2.7 billion merger plan between Spirit and Frontier Group Holdings Inc.
JetBlue said while it expects a lengthy regulatory process, it is counting on its track record of lowering fares and increasing competition to get the nod.
“We are convinced…that average fares come down more when JetBlue flies into a legacy market than when an ultra-low-cost carrier does,” Chief Executive Robin Hayes told investors on a call.
Analysts have questioned the benefits of JetBlue’s Spirit bid.
Though both carriers have fleets dominated by Airbus SE (OTC:EADSY), any potential cost savings from the deal will be diluted by JetBlue’s need to bump up the pay of Spirit pilots, who are on a lower band, Raymond James analyst Savanthi Syth said in a note to clients.
JetBlue expects the deal to inflate labor costs, but said it also would result in certain economies of scale, producing savings of $600 million to $700 million within three years. It also expects the transaction to be accretive to its earnings in the first year.
Shares of Spirit were off 2.5% at $26.23 in morning trade, well below the offer, suggesting investors were skeptical of the deal going through. JetBlue stock was down 6%.
The proposed deal is widely expected to attract close antitrust scrutiny from President Joe Biden’s administration, which has taken a tough stance against mergers that may reduce competition and increase prices for consumers.
JetBlue and American Airlines (NASDAQ:AAL) Group Inc are already facing a lawsuit from the U.S. Department of Justice over their Northeastern Alliance.
Hayes said the company would not sacrifice the Northeastern Alliance in order to secure regulatory approval for the Spirit deal.
The partnership, announced in July 2020, allows the carriers to sell each other’s flights in their New York-area and Boston networks and link frequent flyer programs in a move aimed at helping them to better compete with United Airlines and Delta Air Lines (NYSE:DAL) in the Northeast.
