On Monday, JetBlue Airways (JBLU) officially announced the termination of its $3.8 billion merger with Spirit Airlines (SAVE). The airline operator ended its merger pursuit after a federal judge initially blocked the deal in January, claiming it would've ended up hurting consumers.
Boyd Group International President Mike Boyd joins Yahoo Finance to discuss what the scrapped JetBlue-Spirit deal means for the two airline companies.
Boyd explains how Spirit, which was hoping to be absorbed by JetBlue, can prosper going forward: "They understand markets. You know, the idea of just expand for the sake of expansion, they're out of Denver. They pulled out of Manchester, New Hampshire, they have added other routes, they're looking at places where they can make money. Remember these... ultra-low-cost carriers are no longer chasing Florida traffic. They're chasing traffic from Grand Rapids to Dallas, places like that, where they're really trying to provide a lot more competition than they did before. I think Spirit's going to do very well there..."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
AKIKO FUJITA: Well, JetBlue and Spirit officially calling off that $3.8 billion merger. A federal judge initially blocking the attempt back in January saying it would have too big an impact on the competition in the airline space. Let's bring in Mike Boyd, Boyd Group International president.
Mike, it did seem inevitable after we saw the federal judge block that merger in January. Given where things are right now, I mean, what does this mean, ultimately, for the airline space but more importantly, a company like Spirit, which has really struggled?
MIKE BOYD: Yeah, listen, the judge was wrong. He didn't know what he was talking about. This would have freed up a lot of airplanes, so JetBlue could have competed a lot more aggressively, and anything that was lost with Spirit would have been filled in. The judge just didn't know that.
But, like, going forward, we have a situation. This might be somewhat ameliorated by the fact that you have United Airlines they're going to be about 100 airplanes short this summer. We're going to have other airlines with airplanes and maintenance like Spirit and whatnot. So it's not going to kill anything. I think long term, it would have been a better deal. But both carriers are going to be able to prosper very well going forward. The consumer is really the one that loses here.
AKIKO FUJITA: Yeah, so let's talk about Spirit Airlines here. That stock down roughly 14% right now. How do they prosper, as you say, moving forward?
MIKE BOYD: Well, keep in mind it's a very well-run company today, number one. Number two, they understand markets. The idea of just expand for the sake of expansion. They're out of Denver. They pulled out of Manchester, New Hampshire. They've added other routes. They're looking at places where they can make money.
Remember, these low-cost carriers, these ultra-low-cost carriers are no longer chasing Florida traffic. They're chasing traffic, like, from Grand Rapids to Dallas, places like that where they're really trying to provide a lot more competition than they did before. I think Spirit IS going to do very well there. Again, the consumer would have been done better if its 200 and something airplanes became JetBlue and started to compete a little heavier with the top four.
AKIKO FUJITA: If you look at somebody like JetBlue, they were certainly hoping to use this merger as a way to compete on a bigger scale. Now they're back to being sort of in the second tier, if you will, of airlines behind the Uniteds, Deltas, and the Americans. Where do you think that they push this strategy forward? This merger is now out of the picture. Certainly doesn't look like-- there's other assets they can look to buy given the regulatory environment. How do they move forward?
MIKE BOYD: Well, you know, this would have leapfrogged the problem. They weren't getting Spirit. Spirit's roots are getting airplanes equipped with pilots, if you will, which is really great. They can go ahead, but they have to go ahead a lot more slowly.
They've got a great plan across the Atlantic. I mean, they have a mint product. They're going after a wider range of the population. They're very, very conservative in terms of, like, adding stuff into low-fare or highly competitive, you know, leisure markets.
So I think they can go ahead. They would have been better with this. But right now, arguments that both they and Spirit are in trouble just really don't hold water. They're not in the rosiest of conditions right now, but neither is in really dire straits.
