2 Reasons JetBlue's Bid to Buy Spirit Airlines Could Be a Mistake
Last week, JetBlue Airways (NASDAQ: JBLU) shocked analysts and investors by offering to buy Spirit Airlines (NYSE: SAVE) for $33 per share. This proposal easily topped the implied value of Frontier Group's existing agreement to buy Spirit, even though Frontier Airlines is a far more natural merger partner for Spirit than JetBlue.
Yesterday, I highlighted two key reasons why JetBlue wants to buy Spirit despite the carriers' dramatically different business models. However, while bulking up could unlock substantial revenue and earnings growth potential for JetBlue, the acquisition plan could backfire in two key ways. Let's take a look.
The biggest potential pitfall for JetBlue Airways is that antitrust regulators will likely frown on its takeover proposal. First, JetBlue and Spirit Airlines are the two largest airlines in Fort Lauderdale. Combined, they carry over 50% of the airport's passengers, which could give JetBlue considerable market power if it acquired Spirit.
Source Fool.com
