Welcome to another edition of the BetterPitch newsletter, where we dive deep into the pitch decks you never knew you needed.

Minor Turbulence

The seatbelt sign is ON: The proposed $3.8 billion merger between JetBlue and Spirit Airlines was supposed to be a “can’t miss home run” – well that’s at least what all the Twitter M&A gurus were saying. Blocked by a federal judge, the merger between ultra-low-cost in exchange for zero no-leg room carrier Spirit Airlines and JetBlue Airways came to a crashing halt last week.

The unraveling of the blocked merger highlights JetBlue’s struggles to chart a path forward, as their CEO Robin Hayes announced he’ll step down in February after having failed to move into the no-leg room segment with Spirit.

Spirit Airlines hasn’t fared any better, with the stock reaching 52 week lows, and down as much as -70% this week as news of restructuring could be on the horizon. The stock however seems to have recovered from the slaughtering, ending Friday up +17% thanks to Barstool Stoolies following Dave Portnoy’s latest stock obsession.

The airline's market cap, which hovered at $6 billion in 2014, was sitting just under $730 million on Friday💀

So how did this all come about? Let’s dive into the proposal merger pitch deck…

The Pitch Deck

Frontier was set to buy Spirit — that is of course, before JetBlue came in with an offer they simply could not resist. An all-cash offer of $3.6 billion plus additional payments for a fully diluted EV of $3.8 billion, not too bad huh?

The JetBlue shareholder pitch focused heavily on comparing themselves head to head against Frontier.

With emphasis on a 60% premium over Frontier and a 38% premium to Spirit’s undisturbed share price, it’s not hard to see why this deal was accepted by Spirit shareholders.

Shareholder Roller Coaster

• April 2022: JetBlue Submits $3.6 Billion Bid For Spirit

• May 2022: Spirit Turns Down JetBlue Bid For Frontier Merger

• June 2022: JetBlue Continues to Pursue Deal With Spirit

• July 2022: Spirit Repeatedly Delays Shareholder Votes; Rejects Frontier

• October 2022: Spirit Shareholders Approve JetBlue Merger

• March 2023: U.S. Sues to Block Merger

• May 2023: Federal Court Rules Against JetBlue-American Northeast Alliance

• July 2023: JetBlue Drops Fight For American Alliance to Focus on Spirit

• August 2023: JetBlue Plans to Raise Spirit Airfares as Much as 40%

• September 2023: JetBlue Pilots Support Spirit Merger

• January 2024: Judge Blocks the Merger

What’s Next?

For the first time in 20 years, the federal government has rejected an airline merger. The ruling is seen as a major blow for JetBlue, which had been looking for ways to become more competitive against the big four U.S. airlines (United Airlines, Delta Air Lines, American Airlines and Southwest Airlines).

However, the judge ruled that it would be the “large category of consumers, those who must rely on Spirit (for discounted prices and no-leg room), that this merger would harm.”

JetBlue and Spirit have announced they would appeal the judge’s decision although it’s unclear when or if the First Circuit Court of Appeals would take up the case.

With Spirit Airlines’ continued financial difficulties ($263M in reported losses in the first three quarters of 2023), and now without JetBlue coming to its rescue, Spirit may have to raise prices to survive…which makes the ruling that “protects consumers” that much more, shall we call it — interesting.

Without a big increase in consumer demand, Spirit may be forced to consider other options. That could mean another buyer, or a potential Chapter 11 filing — we’ll have to wait and see.

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