UPDATE: (11:15am July 28)The below text has appeared on JetBlue’s merger website:

Original article:

After a long soap opera that started in early February, the last 24 hours have been a whirlwind, where predictably, Spirit shareholders rejected the company’s board recommendation to merge with Frontier, and now the Broward County-based airline, will instead merge with New York-based jetBlue.

JetBlue operates a large hub in Fort Lauderdale (though the airline calls it a “base) and has a strong focus city in Orlando (though again the airline calls it a “base.”). Spirit is the largest airline at Fort Lauderdale and the second largest at both Orlando and Miami. JetBlue, has seen its market share in Orlando alarmingly erode the last five years, so at the very least this merger, reverses that negative trend (jetBlue fell from the 3rd largest carrier at MCO in 2016 to the 7th largest in the most recent data, from December 2021).

Let’s put aside the obvious antitrust concerns for now – AG Merrick Garland’s Department of Justice has been much more unfriendly to corporate consolidation than Bush, Obama or Trump’s DOJ’s were (in fact, IMO, many of the problems in this industry can be traced back to Bush and Obama’s DOJ’s rubber-stamping of mega-mergers, though in fairness the Obama DOJ did force divestment’s of slots on major northeastern airports that gave access to low cost carriers, but that in my opinion was not nearly enough). Let’s focus on the consolidation itself, if it happens and the DOJ loses its lawsuit against the ongoing JetBlue/American partnership, which it has contested.

Also, very obviously some Florida jobs will move to New York now, as JetBlue rejected the state’s overtures to relocate here last year, with Senator Chuck Schumer playing a decisive role in retaining the airline’s HQ in Queens. Though jetBlue is claiming publicly the merger allows it to open a large “Fort Lauderdale support center” to supplement the HQ in NYC, I personally don’t believe this will happen as advertised, especially after the airline has now twice rejected HQ relocation to either Fort Lauderdale or Orlando. Ask folks in Minnesota how the Northwest merger with Delta worked out in terms of white collar/ executive jobs locally.

I wrote this when JetBlue made its initial offer to Spirit months ago:

JetBlue’s two largest bases are New York-JFK and Boston. Both are congested airports that rely largely on business traffic. New York-JFK is a slot controlled airport and while Boston isn’t technically slot-controlled, it effectively is, as MassPort who administers Logan International has hard time keeping up with demand for gates and terminal space.

In spite of everything that has happened the last two years, and jetBlue’s own precarious finances, the airline has held its own in the Northeast and with business travel bound to rebound, in addition to the Northeast Alliance with American, B6 appears well-positioned there.

However, jetBlue’s own position in Florida has slipped. Pre-pandemic, jetBlue was the largest carrier in Fort Lauderdale (which was growing at a rate to rival it’s Boston and NYC bases), but now is a distant second as Spirt’s ULCC model feasted on discount travelers seeking Sunshine State vacations during the pandemic and jetBlue’s growth efforts in Florida basically flopped. Similarly, in Orlando, jetBlue has gone from competing for second in market share to being outside the top five at that airport. So winning back fare-conscious Florida travelers is critical to complimenting jetBlue’s strong position in the Northeast.

However, it’s difficult to completely get past the clashing corporate cultures of the airlines. JetBlue, despite being a Low cost-carrier, is a premium product, the generally the only domestic US carrier considered elite for in-flight service. Spirit has the opposite reputation (much of it unfairly earned IMO) and a MUCH lower cost structure.

So why would jetBlue, which has a unique corporate culture, and a reputation to protect want to jump in bed with Spirit? Spirit’s reputation for service is poor, but it has improved of late, and the biggest factor is that the airlines share a common fleet type (A320 family) which are both powered by similar engines. JetBlue is eliminating its non-Airbus fleet types and taking on the A220 family for shorter hops and long-thin routes, in the near future.

I am also no longer sure Florida really benefits from this merger. Fort Lauderdale will see a lot less competition unless someone fills the void, particularly on international routes they both fly from the airport, and I sense JetBlue may not be able to make a go of it on some of the routes Spirit has done well on from Orlando and Fort Lauderdale to price-sensitive markets in the Midwest like Louisville, St Louis, Milwaukee, Kansas City, Indianapolis, etc. In fact, this may open the door for Southwest to consolidate its leading position in Orlando and Tampa and return to the high market share it has largely ceded in Fort Lauderdale (though in theory, the combined JetBlue-Spirit entity would dominate Fort Lauderdale, mergers with lots of repetition create openings for potential competitors.)

It also relieves pressure on American in Miami, where Spirit’s combined strong presence in both Fort Lauderdale and Miami, with low costs were driving a very unhealthy AA closer to the brink. Now an airline they are aligned with takes over these ops (again leaving out potential DOJ intervention here). The fact AA has survived the pandemic at all, is remarkable in itself from where I sit, and this further relieves pressure on them.

Also, I can see Breeze and Avelo, two recent ultra low-cost startups really benefiting. Breeze, despite being led by jetBlue founder David Neeleman has not seemed sure-footed thus far, but now might get a huge assist from his former airline. Avelo, has looked smart in its growth so far, and just opened an Orlando base.

It also might be a big break for Frontier, who despite not gaining Spirit as a turnkey operation, can ramp up in markets where jetBlue might have trouble digesting the merger due to its won cost structure.

Here are some other takeaways from me :

• I believe Spirit could have gone it alone even after the rejection by shareholders of the Frontier deal, but the board feeling burnt and scared of ouster, pulled the trigger on the shareholders assumed preference to merge with jetBlue.
• Fort Lauderdale will see redundancies reduced, fares increase and less competition -potentially. In theory, the combined jetBlue/Spirit entity will control close to 50% of traffic from FLL, but DOJ has already been told, jetBlue plans to divest many of its Fort Lauderdale gates. This could open the door for someone else to move in, though RASM (revenue per available seat mile) has been notoriously bad at FLL of late as well as at Miami and Tampa. Florida isn’t as lucrative as it was a year or two ago. International flights from Lauderdale will need competition as the two airlines compete with each other on a half dozen routes to South America, and a dozen routes to the Caribbean and Central America. Most of these routes have no other airline competition, with the notable exceptions of Avianca to Colombia and Southwest to Montego Bay and Punta Cana (it might also be notable that while pulling down domestic routes from Fort Lauderdale in a big way, since the start of the pandemic, Southwest has restored most of its international flying from FLL).
• JetBlue after a merger will in theory be in a stronger position in Orlando, where its market share has been eroded now over a number of years – but are some of the routes they’ll inherit too thin in terms of RASM to fly with higher operating costs?
• The potential is there for the merged carrier to maintain a strong presence in markets with more business ties where Spirit was strong – most notably Dallas/Fort Worth, Houston and Baltimore. This could give Florida more reliable connections to all three, but again I believe routes to places like St Louis, Milwaukee, Louisville, etc will struggle with higher costs.
• In theory, JetBlue could reallocate the increased aircraft and staff to open new international destinations from Fort Lauderdale and perhaps Orlando and Miami also.
• The airline will be a major player in Florida, but will it be the dominant player, I foresaw a few months ago. I’m seriously having doubts about that.